<PAGE>
MENTOR
VARIABLE INVESTMENT PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
TABLE OF CONTENTS
Letter to Shareholders ...................................................... 1
Mentor VIP Capital Growth Portfolio
Portfolio at a Glance .................................................... 2
Portfolio Manager Interview .............................................. 3
Mentor VIP Growth Portfolio
Portfolio at a Glance .................................................... 5
Portfolio Manager Interview .............................................. 6
Mentor VIP Perpetual International Portfolio
Portfolio at a Glance .................................................... 8
Portfolio Manager Interview .............................................. 9
Financial Highlights
Mentor VIP Capital Growth Portfolio ...................................... 11
Mentor VIP Growth Portfolio .............................................. 12
Mentor VIP Perpetual International Portfolio ............................. 13
Schedules of Investments
Mentor VIP Capital Growth Portfolio ...................................... 14
Mentor VIP Growth Portfolio .............................................. 15
Mentor VIP Perpetual International Portfolio ............................. 17
Statements of Assets and Liabilities ........................................ 21
Statements of Operations .................................................... 22
Statements of Changes in Net Assets ......................................... 23
Combined Notes to Financial Statements ...................................... 25
Independent Auditors' Report ................................................ 30
Additional Information ...................................................... 31
<PAGE>
Letter to Shareholders
----------------------
February 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Mentor VIP Shareholders,
We are pleased to provide you with the Mentor Variable Investment Portfolios
annual report for the period ended December 31, 1999.
We would like to take the opportunity to welcome you to the Evergreen Funds
family. Evergreen Funds is one of the nation's fastest growing investment
companies with over $80 billion in assets under management. We are dedicated to
providing shareholders the highest quality service and excellence in investment
management.
Effective February 1, 2000, the Mentor VIP Portfolios officially became part of
the Evergreen Variable Annuity Trust. This will be the final report referring to
Mentor VIP Portfolios you will receive. Please note that while the investment
objectives and policies of the portfolios remain the same as they were under the
Mentor Trust, the names will change to reflect the following:
Old Name
- --------
Mentor VIP Capital Growth Portfolio
Mentor VIP Growth Portfolio
Mentor VIP Perpetual International Portfolio
New Name
- --------
Evergreen VA Capital Growth Fund
Evergreen VA Growth Fund
Evergreen VA Perpetual International Fund
We believe that being part of the Evergreen Variable Annuity Trust will offer
you many advantages, including continued expert portfolio management, the
benefit of association with a leading investment management company, and
professional and courteous service.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
1999 tax information, an investment education center, interactive calculators to
assist your investment planning needs and general information about Evergreen
Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should make it simple for you to choose the most
appropriate for your portfolio.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
1
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Capital Growth Portfolio
Portfolio at a Glance as of December 31, 1999
Over the longer term, we believe the discipline of balancing strong fundamentals
with reasonable valuations will produce rewarding investment results.
Portfolio
Management
------------------
[PHOTO] [PHOTO]
John Richard
Davenport, CFA Skeppstrom
Tenure: March 1998 Tenure: March 1998
[PHOTO] [PHOTO]
Steve Certo Craig Dauer
Tenure: March 1998 Tenure: June 1998
[PHOTO]
Jay Jordan, CFA
Tenure: June 1998
PERFORMANCE AND RETURNS1
Portfolio Inception Date: 3/3/1998
Average Annual Returns
1 year 6.50%
Since Portfolio Inception 8.29%
12-month income dividends
per share $0.02
12-month capital gain
distributions per share $0.02
LONG TERM GROWTH
[CHART]
CPI S & P 500 VIP Capital Growth
2/28/98 10,000 10,000 10,000
6/30/98 10,068 10,859 10,200
12/31/98 10,124 11,861 10,862
6/30/99 10,266 13,332 11,885
12/31/99 10,401 14,359 11,567
Comparison of a $10,000 investment in a Mentor VIP Capital Growth Portfolio1
versus a similar investment in the Standard and Poor's 500 Index (S&P 500) and
the Consumer Price Index (CPI).
The S&P 500 is an unmanaged market index which does not include transaction
costs associated with buying and selling securities nor any mutual fund fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
1Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
2
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Capital Growth Portfolio
Portfolio Manager Interview
How did the Portfolio perform?
For the twelve-month period ended December 31, 1999, the VIP Capital Growth
Portfolio had a return of 6.50% compared to a 21.04% return from the S&P 500,
the Portfolio's benchmark. Equity markets closed out the twentieth century in
roaring fashion with yet another record performance for major indices. It was a
year that should be remembered not only for index records, but also for the
narrow list of stocks that produced those records.
Portfolio
Characteristics
---------------
(as of 12/31/1999)
Total Net Assets: $28,376,650
Number of Holdings: 28
What was the investment environment like during the twelve-month period?
The relentless concentration of stock strength into one group reflects the
willingness of an increasing number of professional and individual investors to
totally ignore valuation extremes and simply march to the "growth at any price"
mantra--"growth" being defined as anything having to do with "new economy"
technology. The technology-heavy NASDAQ Composite Index, up an amazing 85.6% for
the year, achieved one-half of its gain after November 3rd. In the S&P 500,
eight technology stocks (Microsoft, Cisco Systems, Oracle, Nortel Networks, Sun
Microsystems, Intel, EMC Corp., and Lucent Technologies) accounted for one-half
of the index's gain for the year.
Valuation extremes have been even more pronounced in internet stocks,
particularly initial public offerings (IPOs), where the lack of earnings in the
foreseeable future in most cases forces the conclusion that valuation is
irrelevant.
Top 5 Industries
----------------
(as a percentage of 12/31/1999 net assets)
Business Equipment & Services 16.8%
Healthcare Products & Services 12.7%
Food & Beverage Products 11.0%
Finance & Insurance 10.4%
Information Services & Technology 8.4%
How has the Portfolio benefited from the technology boom?
Despite our lack of high P/E tech exposure, over one quarter of our holdings
benefit directly from technology spending, i.e., Automatic Data Processing,
Computer Associates, Computer Sciences, First Data, Intel, MCI Worldcom, and
Sungard Data Systems. We believe these technology companies, like other holdings
in the Portfolio, have substantial businesses, impressive operating records, and
have demonstrated above-average earnings growth. They trade, however, at about
half the valuation of the technology sector. The Portfolio as a whole trades at
about a 25% discount to the S&P 500. Over the longer term, we believe the
discipline of balancing strong fundamentals with reasonable valuations should
produce rewarding investment results.
3
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Capital Growth Portfolio
Portfolio Manager Interview
Top 10 Holdings
---------------
(as a percentage of 12/31/1999 net assets)
Tyco International Ltd. 5.9%
Computer Sciences Corp. 4.8%
Automatic Data Processing, Inc. 4.6%
First Data Corp. 4.4%
SYSCO Corp. 4.4%
American Express Co. 4.3%
Tenet Healthcare Corp. 4.3%
Interpublic Group of Companies, Inc. 4.2%
Intel Corp. 4.2%
Computer Associates International, Inc. 4.2%
What is your outlook?
Following a year in which global economies strengthened to a degree few
anticipated last January, we have entered the new millennium with a remarkably
balanced, strong economy. Inflationary pressures have been contained, so far, by
high productivity and the absence of capacity constraints. However, as the bond
market and Alan Greenspan have been signaling for several months, the Fed is
concerned about labor market shortages and the gradual buildup of inflationary
pressures, particularly in light of the wealth effect created by the soaring
1990's bull market. We believe earnings comparisons are likely to become
significantly more difficult over the next several quarters as we move beyond
the effects of the late 1998 global slowdown. Earnings estimate revisions will
probably test the high expectations built into today's extreme valuations for
many "new economy" stocks.
So, the stage appears to be set for a more volatile year. We believe this is a
good time for investors to take a moment and objectively reflect on their
comfort level holding the beneficiaries of last year's high-tech boom versus
holding a diversified group of fundamentally solid, but neglected, companies
with attractive growth prospects. We remain very comfortable with the Fund's
relative positioning.
4
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Growth Portfolio
Portfolio at a Glance as of December 31, 1999
We believe the companies we own throughout this diversified portfolio are at the
forefront of a number of important investment themes.
Portfolio
Management
------------------
[PHOTO] [PHOTO]
Ted Price, CFA Linda Ziglar, CFA
Tenure: March 1998 Tenure: March 1998
[PHOTO]
Jeff Drummond, CFA
Tenure: March 1998
PERFORMANCE AND RETURNS1
Portfolio Inception Date: 3/3/1998
Average Annual Returns
1 year 21.21%
Since Portfolio Inception 5.93%
12-month income dividends
per share $0.02
LONG TERM GROWTH
[GRAPH]
CPI Russell 2000 VIP Growth
2/28/98 10,000 10,000 10,000
6/30/98 10,068 9,927 9,288
12/31/98 10,124 9,220 9,168
6/30/99 10,266 10,075 8,664
12/31/99 10,401 11,149 11,114
Comparison of a $10,000 investment in Mentor VIP Growth Portfolio1 versus a
similar investment in the Russell 2000 Index (Russell 2000) and the Consumer
Price Index (CPI).
The Russell 2000 is an unmanaged market index which does not include transaction
costs associated with buying and selling securities nor any mutual fund fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
Smaller capitalization stock investing may offer the potential for greater long
term results; however, it is also generally associated with greater price
volatility due to the higher risk of failure.
1 Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
5
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Growth Portfolio
Portfolio Manager Interview
How did the Portfolio perform?
For the twelve-month period ended December 31, 1999, the VIP Growth Portfolio
returned 21.21%. This compared competitively to the 21.26% return for the
Russell 2000 Index, the Portfolio's benchmark. Our small capitalization
investment style made a strong recovery during the final quarter of 1999 to end
the year in line with the Russell 2000. After trailing that benchmark
dramatically earlier in the year, since mid-May we have outperformed the Russell
2000 by more than 15%. Our returns, however, could not compete during 1999 with
portfolios that were heavily overweighted in technology or that had heavy
internet exposure.
Portfolio
Characteristics
---------------
(as of 12/31/1999)
Total Net Assets $15,888,200
Number of Holdings 125
What was the investment environment like during the twelve-month period?
1999 was one of the most unusual periods in our memory, marked by extreme
narrowness in the markets. 55% of the 2000 stocks in the Russell index ended the
year in negative territory while only three industries actually outperformed the
index for the year. The outperformance of those three industries was also
skewed, with technology gaining 110.3% while the next two sectors,
telecommunications/utilities and energy gained just slightly over 24%.
Top 5 Industries
----------------
(as a percentage of 12/31/1999 net assets)
Information Services & Technology 14.9%
Healthcare Products & Services 9.8%
Electrical Equipment & Services 8.2%
Business Equipment & Services 8.2%
Telecommunication Services & Equipment 7.3%
Describe your basic investment style?
Our same team continues to manage the Portfolio using the investment philosophy
and processes they have used in the past. If anything, we are more convinced
given the unusual nature of today's markets that our
growth-at-a-reasonable-price methodology will bear increasing fruit. We will be
focusing more closely in the coming year on the Russell 2000 when benchmarking
our performance and sector allocations.
Top 10 Holdings
---------------
(as a percentage of 12/31/1999 net assets)
Copart, Inc. 1.7%
Advanced Fibre Communications, Inc. 1.4%
Emmis Broadcasting Corp., Cl. A 1.3%
ITC DeltaCom, Inc. 1.3%
Medicis Pharmaceutical Corp. 1.3%
Cox Radio, Inc., Cl. A 1.3%
Visual Networks, Inc. 1.2%
Parlex Corp. 1.2%
Black Box Corp. 1.2%
Heidrick & Struggles International, Inc. 1.2%
6
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Growth Portfolio
Portfolio Manager Interview
What is your outlook?
We believe the companies we own throughout this diversified portfolio are at the
forefront of a number of important investment themes. Technology is the heaviest
weighted sector, not to mention the fastest-growing sector weighting within the
portfolio. This is followed by healthcare, in which we also increased our
position within the portfolio. This increase is in recognition of the fact that
these companies have continued to produce strong earnings growth while their
multiples have contracted. We are overweighted in the healthcare sector, with
the exception of biotech companies. The balance of the portfolio is spread among
a number of industries with overweighted positions in consumer staples, mainly
radio broadcasting, consumer cyclicals, transportation and energy. We are
underweighted in capital goods, basic materials and utilities. The portfolio
continues to be driven by very strong earnings growth and an average
price-to-earnings ratio, which is at a discount to this growth.
7
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Portfolio at a Glance as of December 31, 1999
In looking at the big picture, we believe the single most important influence on
the performance of international markets relative to the U.S. over the next year
will be further recovery in Japan.
Portfolio
Management
------------------
Kathyrn Scott
Langridge McGlashan
Tenure: May 1996 Tenure: May 1996
Margaret Roddan Robert Yerbury
Tenure: May 1996 Tenure: May 1996
Stephen
Whittaker
Tenure: May 1996
PERFORMANCE AND RETURNS1
Portfolio Inception Date: 3/3/1998
Average Annual Returns
1 year 39.99%
Since Portfolio Inception 27.90%
12-month capital gain
distributions per share $0.01
LONG TERM GROWTH
[CHART]
VIP Perpetual
CPI MSCI EAFE International
2/28/98 10,000 10,000 10,000
6/30/98 10,068 10,427 11,009
12/31/98 10,124 10,808 11,208
6/30/99 10,266 11,253 12,519
12/31/99 10,401 13,759 15,687
Comparison of a $10,000 investment in Mentor VIP Perpetual International
Portfolio1 versus a similar investment in the Morgan Stanley Capital
International Europe, Australasia, and Far East Index (MSCI EAFE) and the
Consumer Price Index (CPI).
The MSCI EAFE is an unmanaged market index which does not include transaction
costs associated with buying and selling securities nor any mutual fund fees.
The CPI is a commonly used measure of inflation and does not represent an
investment return. It is not possible to invest directly in an index.
Foreign investments may contain more risk due to the inherent risks associated
with changing political climates, foreign market instability and foreign
currency fluctuations.
1Past performance is no guarantee of future results. The investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than original cost.
8
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Portfolio Manager Interview
How did the Portfolio perform?
For the twelve-month period ended December 31, 1999, the Portfolio returned
39.99%, outperforming the 26.96% return of its benchmark, the MSCI EAFE Index.
An asset allocation approach based on moving assets out of European markets and
into Japan and other Asian markets led to excellent performance during the
period.
Portfolio
Characteristics
---------------
(as of 12/31/1999)
Total Net Assets $24,815,890
Number of Holdings 224
What were the principal strategies that supported the Portfolio's performance?
Early in the period, we began increasing the Portfolio's commitment to Asia. As
a result, by the end of the twelve months, assets in Japan accounted for about
26% of the portfolio, up from 18% at the beginning of the period. Japan was the
largest individual country weighting in the portfolio and Japanese investments
were the most important contributors to performance. Why? Japan had been in
recession for nine years, and from our perspective in the last quarter of 1998
two conditions prevailed. First, investor sentiment was so negative that stocks
were extremely cheap; and second, fiscal, monetary and business reforms were
being put in place to address Japan's economic problems. These included changes
in banking and interest rate policy, large public works expenditures, an
infusion of capital investment into the banks, and an unprecedented level of
corporate restructuring. There was also increased merger and acquisition
activity, particularly in the banking sector. In October 1999, new regulations
allowed corporate takeovers in Japan to be financed by issuing
shares--previously, only cash could be used. We expect this change to uncover
more hidden value in the market.
Top 5 Industries
----------------
(as a percentage of 12/31/1999 net assets)
Telecommunications 10.8%
Electronic Components 6.9%
Chemicals 5.6%
Banking 5.5%
Technology 5.4%
Portfolio assets in other parts of Asia increased from 8% to 12%. What was
attractive about the region?
For more than a year, Asia had been in turmoil. High levels of corporate and
government debt, weak currencies, high interest rates and political instability
had eroded investor confidence in the region. As a result, Asian stock markets
declined precipitously. In the fourth quarter of 1998, the economic outlook for
Asia began to brighten. Central banks began injecting huge amounts of liquidity
into the economy by systematically lowering interest rates. Lower interest rates
led to business expansion and corporate restructuring. During this time, Asian
stocks were selling at what we believe to be extremely low prices, and we began
selectively adding them to the portfolio. We concentrated investments in Hong
Kong and Singapore, where we invested primarily in financial stocks. Most
recently, consumer demand for goods and services has picked up in Asia. We
believe this should lead to significant earnings recovery in the months ahead.
9
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Portfolio Manager Interview
How did the European stocks in the Portfolio perform?
Slower economic growth and overstated benefits of the euro, Europe's new single
currency, restrained European markets over most of the year. In general, stocks
in this region produced lackluster performance, with the important exception of
the cellular telephone sector. Several months ago, we began seeing signs of a
cyclical recovery in European economies, and we have positioned the portfolio to
take advantage of this situation. As a result, we emphasized industrial
cyclicals, such as oil, steel, paper and pulp, chemicals and engineering stocks.
While we reduced the Portfolio's exposure to Europe from 60% to 45% of assets,
we continue to find opportunities in individual stocks, as recovery from
recession begins. France and Germany are the Portfolio's biggest country
weightings in this region.
We reduced exposure to the United Kingdom (UK) from 23% to 14% of assets over
the year. Our reluctance to own what we perceive to be overpriced stocks in the
telecommunications and pharmaceutical sectors had an impact on our relative
performance in this market.
Top 10 Holdings
---------------
(as a percentage of 12/31/1999 net assets)
Kyocera Corp. 4.2%
Nippon Telegraph & Telephone Corp. 2.2%
SOFTBANK CORP 1.9%
Ericsson LM Telephone, Ser B 1.6%
The Tokyo Electric Power Co., Inc. 1.4%
Toyota Motor Corp. 1.4%
Philips Electronics NV 1.3%
Nokia AB Oyj 1.3%
DSM NV 1.3%
Siemens AG 1.2%
Did you make any changes in the emerging markets portion of the Portfolio?
We raised the Portfolio's exposure to Latin America from 1% to 2% of net assets
toward the end of the year. Mexico and Brazil accounted for most of the
Portfolio's Latin American investments. We also added 2% to East European
emerging markets, primarily Hungary. We also invested in Israel.
Top 10 Countries
----------------
(as a percentage of 12/31/1999 net assets)
Japan 25.9%
United Kingdom 14.0%
Germany 9.2%
France 8.8%
Netherlands 6.1%
Hong Kong 5.2%
United States 5.2%
Finland 4.6%
Ireland 3.0%
Switzerland 1.7%
What is your outlook?
Our outlook is dominated by our perspective on Japan. We expect there will be
further monetary easing in Japan possibly accompanied by weakness in the yen. We
view this as a positive situation, because the current level of the yen
threatens to stifle the still fragile economic recovery. In looking at the big
picture, we believe the single most important influence on the performance of
international markets relative to the U.S. over the next year will be further
recovery in Japan. Japan's economic turnaround should result in greater demand
for goods and services produced in other Asian markets. We believe this may
diminish Asia's reliance on the U.S. as a market for its goods and services.
10
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Capital Growth Portfolio
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 (a)
<S> <C> <C>
Net asset value, beginning of period $ 13.58 $ 12.50
----------- -----------
Income from investment operations
Net investment income 0.01 0.03
Net realized and unrealized gains on securities 0.87 1.05
----------- -----------
Total from investment operations 0.88 1.08
----------- -----------
Distributions to shareholders from
Net investment income (0.02) 0
Net realized gains (0.02) 0
----------- -----------
Total distributions (0.04) 0
----------- -----------
Net asset value, end of period $ 14.42 $ 13.58
----------- -----------
Total return* 6.50% 8.64%
Ratios and supplemental data
Net assets, end of period (thousands) $ 28,377 $ 20,142
Ratios to average net assets
Expenses** 1.18% 1.05%+
Net investment income 0.06% 0.50%+
Portfolio turnover rate 87% 54%
</TABLE>
(a) For the period from March 3, 1998 (commencement of operations) to Decem-
ber 31, 1998.
* Total return does not reflect charges attributable to your insurance
company's separate account.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
11
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Growth Portfolio
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 (a)
<S> <C> <C>
Net asset value, beginning of period $ 11.46 $ 12.50
----------- -----------
Income from investment operations
Net investment income or loss (0.07) 0.02
Net realized and unrealized gains or losses on
securities 2.50 (1.06)
----------- -----------
Total from investment operations 2.43 (1.04)
----------- -----------
Distributions to shareholders from
Net investment income (0.02) 0
----------- -----------
Total distributions (0.02) 0
----------- -----------
Net asset value, end of period $ 13.87 $ 11.46
----------- -----------
Total return* 21.21% (8.32%)
Ratios and supplemental data
Net assets, end of period (thousands) $ 15,888 $ 11,064
Ratios to average net assets
Expenses** 1.33% 0.97%+
Net investment income or loss (0.67%) 0.44%+
Portfolio turnover rate 143% 62%
</TABLE>
(a) For the period from March 3, 1998 (commencement of operations) to December
31, 1998.
* Total return does not reflect charges attributable to your insurance
company's separate account.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
12
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 (a)
<S> <C> <C>
Net asset value, beginning of period $ 14.01 $ 12.50
----------- -----------
Income from investment operations
Net investment income 0.02 0.02
Net realized and unrealized gains on securities
and foreign currency related transactions 5.58 1.49
----------- -----------
Total from investment operations 5.60 1.51
----------- -----------
Distributions to shareholders from
Net realized gains (0.01) 0
----------- -----------
Total distributions (0.01) 0
----------- -----------
Net asset value, end of period $ 19.60 $ 14.01
----------- -----------
Total return* 39.99% 12.08%
Ratios and supplemental data
Net assets, end of period (thousands) $ 24,816 $ 11,821
Ratios to average net assets
Expenses** 1.96% 1.60%+
Net investment income 0.13% 0.34%+
Portfolio turnover rate 113% 95%
</TABLE>
(a) For the period from March 3, 1998 (commencement of operations) to December
31, 1998.
* Total return does not reflect charges attributable to your insurance
company's separate account.
** Ratio of expenses to average net assets includes fee waivers and excludes
expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
13
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Capital Growth Portfolio
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 92.6%
Advertising & Related
Services - 4.2%
20,820 Interpublic Group of Companies, Inc. ................. $ 1,201,054
-----------
Banks - 6.6%
24,050 SouthTrust Corp. ..................................... 909,391
24,080 Wells Fargo Co. ...................................... 973,735
-----------
1,883,126
-----------
Building, Construction & Furnishings - 4.1%
15,500 Masco Corp. .......................................... 393,313
36,700 Sherwin Williams Co. ................................. 770,700
-----------
1,164,013
-----------
Business Equipment &
Services - 16.8%
24,100 Automatic Data Processing, Inc. ...................... 1,298,387
14,320 * Computer Sciences Corp. ............................ 1,355,030
25,550 First Data Corp. ..................................... 1,259,934
35,650 * SunGard Data Systems, Inc. ......................... 846,688
-----------
4,760,039
-----------
Communication Systems & Services - 3.2%
16,935 * MCI WorldCom, Inc. ................................. 898,613
-----------
Diversified Companies - 5.9%
43,180 Tyco International, Ltd. ............................. 1,678,622
-----------
Finance & Insurance - 10.4%
7,370 American Express Co. ................................. 1,225,263
17,310 Federal National Mortgage Assoc. ..................... 1,080,793
25,148 Washington Mutual, Inc. .............................. 653,848
-----------
2,959,904
-----------
Food & Beverage Products - 11.0%
28,300 Albertsons, Inc. ..................................... 912,675
41,250 Philip Morris Companies, Inc. ........................ 956,484
31,790 SYSCO Corp. .......................................... 1,257,692
-----------
3,126,851
-----------
Healthcare Products &
Services - 12.7%
23,000 American Home Products Corp. ......................... 907,062
7,960 Bristol-Myers Squibb Co. ............................. 510,933
10,380 Johnson & Johnson..................................... 966,637
52,010 * Tenet Healthcare Corp. ............................. 1,222,235
-----------
3,606,867
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Industrial Specialty Products & Services - 4.8%
6,750 Danaher Corp. ....................................... $ 325,688
15,160 Illinois Tool Works, Inc. ........................... 1,024,247
-----------
1,349,935
-----------
Information Services &
Technology - 8.4%
17,000 Computer Associates International, Inc. ............. 1,188,937
14,550 Intel Corp. ......................................... 1,197,647
-----------
2,386,584
-----------
Paper & Packaging - 3.5%
15,100 Kimberly-Clark Corp. ................................ 985,275
-----------
Transportation - 1.0%
19,000 Werner Enterprises, Inc. ............................ 267,188
-----------
Total Common Stocks
(cost $23,715,773).................................. 26,268,071
-----------
UNIT INVESTMENT TRUST - 2.3%
4,500 S&P 500 Depositary Receipt (Spiders) (cost
$596,571)........................................... 660,938
-----------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 7.3%
Repurchase Agreement - 7.3%
$2,078,499 State Street Bank & Trust Co., purchased 12/31/1999,
3.25%, maturing 1/3/2000, maturity value $2,079,062
(cost $2,078,499) (a)............................... $ 2,078,499
-----------
Total Short-Term Investments
(cost $2,078,499)................................... 2,078,499
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $26,390,843)........................... 102.2% 29,007,508
Other Assets and Liabilities - net............ (2.2) (630,858)
----- -----------
Net Assets.................................... 100.0% $28,376,650
===== ===========
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices plus accrued interest at
December 31, 1999.
* Non-income producing security.
See Combined Notes to Financial Statements.
14
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Growth Portfolio
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 91.1%
Advertising & Related
Services - 0.6%
1,500 * Lamar Advertising Co., Cl. A........................ $ 90,844
-----------
Banks - 2.2%
2,100 * Commerce Bancorp, Inc............................... 84,919
7,200 * National Commerce Bancorp........................... 163,350
1,350 U.S. Trust Corp....................................... 108,253
-----------
356,522
-----------
Building, Construction & Furnishings - 1.5%
2,350 Dycom Industries, Inc. ............................... 103,547
5,500 * Shaw Group, Inc..................................... 139,219
-----------
242,766
-----------
Business Equipment &
Services - 8.2%
3,450 C&D Technologies...................................... 146,625
5,100 * Circle International Group, Inc..................... 113,475
6,587 Concord EFS, Inc...................................... 169,615
900 * Corporate Executive Board Co........................ 50,287
4,450 * Heidrick & Struggles International, Inc. ........... 188,012
5,250 * Imax Corp........................................... 143,719
5,866 * Nova Corp........................................... 185,146
2,100 * Polycom, Inc........................................ 133,744
10,050 Sensormatic Electronics Corp.......................... 175,247
-----------
1,305,870
-----------
Communication Systems & Services - 5.8%
1,700 * CTC Communications Group, Inc....................... 66,327
2,400 * Exar Corp. ......................................... 141,300
3,050 * Kemet Corp. ........................................ 137,441
4,150 * Pinnacle Holdings, Inc. ............................ 175,856
2,150 * Powerwave Technologies, Inc......................... 125,506
2,450 True North Communications, Inc........................ 109,484
2,150 * Westwood One, Inc................................... 163,400
-----------
919,314
-----------
Consumer Products &
Services - 3.1%
3,900 * Chattem, Inc. ...................................... 74,100
2,950 * CSG System International, Inc....................... 117,631
5,175 * Jakks Pacific, Inc.................................. 96,708
5,750 * RentWay, Inc........................................ 107,453
3,650 * SCP Pool Corp....................................... 94,672
-----------
490,564
-----------
Electrical Equipment &
Services - 8.2%
1,950 * Asyst Technologies, Inc............................. 127,847
6,200 * Atmel Corp.......................................... 183,287
3,400 * Atmi, Inc........................................... 112,412
2,850 * Black Box Corp. .................................... 190,950
4,600 * Cypress Semiconductor Corp.......................... 148,925
7,500 * Parlex Corp......................................... 197,344
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electrical Equipment &
Services - continued
2,250 * Power One, Inc...................................... $ 103,078
2,150 * PRI Automation, Inc................................. 144,319
1,950 * Radisys Corp. ...................................... 99,450
-----------
1,307,612
-----------
Electronic Equipment &
Services - 4.7%
2,000 * Alpha Industries, Inc............................... 114,625
8,950 * Cerprobe Corp....................................... 66,006
2,500 * Cohu Inc............................................ 77,500
1,400 * Elantec Semiconductor, Inc.......................... 46,200
6,350 * International Rectifier Corp........................ 165,100
3,650 * Kent Electronics Corp............................... 83,038
1,900 Micrel, Inc........................................... 108,181
2,450 * MKS Instruments, Inc................................ 88,506
-----------
749,156
-----------
Finance & Insurance - 0.7%
700 * Markel Corp......................................... 108,500
-----------
Food & Beverage Products - 1.4%
7,500 * United States Food Service.......................... 125,625
4,550 * Wild Oats Markets, Inc. ............................ 100,953
-----------
226,578
-----------
Healthcare Products &
Services - 9.8%
5,616 * Bindley Western Industries, Inc..................... 84,591
5,050 * Brookdale Living Communities, Inc. ................. 62,494
1,850 * Chirex, Inc......................................... 27,056
1,300 * Cytyc Corp.......................................... 79,381
5,300 * Dendrite International, Inc......................... 179,537
3,450 Hooper Holmes, Inc.................................... 88,838
3,100 * Infocure Corp....................................... 96,681
3,700 * MedQuist, Inc. ..................................... 95,506
3,500 * Molecular Devices Corp.............................. 182,000
3,500 * Pharmaceutical Product Development, Inc............. 41,563
940 Priority Healthcare Corp., Cl. A...................... 19,740
5,250 Priority Healthcare Corp., Cl. B...................... 151,922
8,700 * Province Healthcare Co.............................. 165,300
6,200 United Payors & United Providers, Inc................. 102,688
2,600 * Wesley Jessen Visioncare, Inc....................... 98,475
2,050 * Zoll Med Corp....................................... 78,284
-----------
1,554,056
-----------
Industrial Specialty Products & Services - 0.3%
1,150 * Dionex Corp......................................... 47,366
-----------
Information Services &
Technology - 14.9%
2,550 * Acxiom Corp......................................... 61,200
1,100 * Applied Micro Circuits Corp......................... 139,975
1,900 * Aspect Development, Inc. ........................... 130,150
</TABLE>
15
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Growth Portfolio
Schedule of Investments(continued)
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Information Services &
Technology - continued
1,400 * Braun Consulting, Inc.............................. $ 100,100
3,525 * Burr-Brown Corp.................................... 127,341
12,450 * Corsair Communications, Inc. ...................... 101,156
2,850 * Datastream Systems, Inc. .......................... 70,003
4,800 * Edwards (J.D.) & Co................................ 143,400
450 Factset Research Systems, Inc........................ 35,831
1,550 * Forrester Research, Inc............................ 106,756
3,750 * Manugistics Group, Inc. ........................... 121,172
4,250 * Mecon, Inc......................................... 45,953
4,550 * Metron Tech........................................ 73,084
1,150 * Netratings, Inc.................................... 55,344
700 * Network Appliance, Inc............................. 58,144
3,150 * New Era of Networks, Inc. ......................... 150,019
8,300 * Newgen Results Corp. .............................. 87,669
3,500 * Remedy Corp........................................ 165,812
1,550 * Sandisk Corp. ..................................... 149,187
2,750 * Telemate Net Software, Inc......................... 44,688
2,150 * Trizetto Group, Inc. .............................. 100,244
2,500 * Visual Networks, Inc............................... 198,125
1,950 * Whittman Hart, Inc................................. 104,569
-----------
2,369,922
-----------
Metal Products & Services - 1.0%
6,200 * Maverick Tube Corp................................. 153,062
-----------
Oil/Energy - 2.1%
6,450 * Basin Exploration, Inc............................. 113,681
5,500 * Chieftain International, Inc....................... 94,875
5,100 * Precision Drilling Corp. .......................... 131,006
-----------
339,562
-----------
Oil Field Services - 2.9%
6,850 * Core Laboratories NV............................... 137,428
6,400 * Gulf Islands Fabrication, Inc. .................... 60,000
3,800 * Hanover Compressor Co.............................. 143,450
7,600 * Pride International, Inc........................... 111,150
-----------
452,028
-----------
Pharmaceuticals - 2.3%
2,825 * King Pharmaceuticals, Inc.......................... 158,376
4,750 * Medicis Pharmaceutical Corp........................ 202,172
-----------
360,548
-----------
Printing, Publishing, Broadcasting & Entertainment -
4.3%
2,400 * Acme Communications, Inc........................... 79,800
950 * Citadel Communications Corp. ...................... 61,631
2,000 * Cox Radio, Inc. Cl. A.............................. 199,500
1,700 * Emmis Broadcasting Corp., Cl. A.................... 211,889
1,100 * Entercom Communications Corp....................... 72,600
2,200 * Hearst-Argyle Television, Inc...................... 58,575
-----------
683,995
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Retailing & Wholesale - 5.8%
6,350 Copart, Inc. ........................................ $ 276,225
3,650 * Dollar Tree Stores, Inc............................ 176,797
8,500 Family Dollar Stores, Inc. .......................... 138,656
4,100 * Men's Wearhouse, Inc............................... 120,438
4,300 * Papa John's International, Inc..................... 112,069
5,650 Ruby Tuesday, Inc.................................... 102,759
-----------
926,944
-----------
Telecommunication Services & Equipment - 7.3%
5,050 * Advanced Fibre
Communications, Inc................................. 225,672
1,700 Commonwealth Telephone Enterprises................... 89,888
7,800 * Digital Microwave Corp............................. 182,812
7,350 * ITC DeltaCom, Inc.................................. 203,044
1,400 * Management Network Group, Inc...................... 45,675
1,100 Netoptix Corp. ...................................... 73,425
4,250 * Precision Response Corp. .......................... 103,063
3,000 * Time Warner Telecom, Inc........................... 149,812
1,200 * Winstar Communications, Inc. ...................... 90,300
-----------
1,163,691
-----------
Transportation - 3.2%
3,800 * Carey International, Inc. ......................... 92,625
1,200 CH Robinson Worldwide................................ 47,700
1,700 Expeditores International Washington, Inc. .......... 74,481
3,700 * Forward Air Corp................................... 160,488
3,675 Mesaba Holdings, Inc................................. 42,033
3,100 * Skywest, Inc....................................... 86,800
-----------
504,127
-----------
Utilities - Telephone - 0.8%
3,350 * Primus Telecomm Group, Inc......................... 128,138
-----------
Total Common Stocks
(cost $10,575,384).................................. 14,481,165
-----------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 8.8%
Repurchase Agreement - 8.8%
$1,397,554 State Street Bank & Trust Co., purchased 12/31/1999,
3.25%, maturing 1/3/2000, maturity value $1,397,933
(cost $1,397,554) (a)............................... $ 1,397,554
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $11,972,938)........................... 99.9% 15,878,719
Other Assets and Liabilities - net............ 0.1 9,481
----- -----------
Net Assets.................................... 100.0% $15,888,200
===== ===========
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. govern-
ment and/or agency obligations based on market prices plus ac-
crued interest at December 31, 1999.
* Non-income producing security.
See Combined Notes to Financial Statements.
16
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Schedule of Investments
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - 93.0%
Aerospace & Military
Technology - 0.5%
9,500 British Aerospace Plc................................. $ 62,455
20,820 Rolls-Royce Plc....................................... 72,306
-----------
134,761
-----------
Automobiles - 2.6%
20,000 Brilliance China Automotive Holdings, Ltd............. 63,750
30,000 Fuji Heavy Industries, Ltd............................ 205,540
4,000 Mahindra & Mahindra, Ltd.............................. 43,000
7,000 Toyota Motor Corp..................................... 339,140
-----------
651,430
-----------
Banking - 5.3%
4,825 Abbey National Bank Plc............................... 77,354
2,271 Bank Austria AG....................................... 128,111
4,000 Bank of Scotland...................................... 46,456
3,449 Barclays Bank Plc..................................... 99,111
6,000 Hang Seng Bank........................................ 68,502
6,259 HSBC Holdings Plc..................................... 87,763
11,500 Lloyds TSB Group Plc.................................. 142,849
4,500 National Westminster Bank Plc......................... 96,676
5,000 Overseas Chinese Bank Ltd. ........................... 45,932
8,000 Overseas Union Bank, Ltd.............................. 46,833
5,700 Standard Chartered Bank Ltd. ......................... 90,691
40,000 Sumitomo Trust & Banking Co., Ltd. ................... 270,138
1,400 Uniao de Bancos Brasileiros SA, GDR ("Unibanco")...... 42,175
8,448 United Overseas Bank.................................. 74,563
-----------
1,317,154
-----------
Beverages & Tobacco - 1.9%
4,500 Allied Domecq Plc..................................... 22,243
4,677 Bass Plc.............................................. 58,851
10,175 British America Tobacco Industries Plc................ 57,525
2,580 Coca-Cola Co. Femsa SA, ADR........................... 45,311
6,000 Diageo Plc............................................ 47,877
6,000 Gallaher Group Plc.................................... 25,199
8,680 Oyj Hartwall Abp...................................... 125,911
22,000 PT HM Sampoerna....................................... 55,964
4,500 Scot & Newcastle...................................... 31,256
-----------
470,137
-----------
Broadcasting & Publishing - 4.8%
4,000 BEC World Public Co., Ltd............................. 28,249
300 Daily Mail & General Trust............................ 20,837
3,160 EMAP Plc.............................................. 65,336
900 * Grupo Televisa SA, ADR.............................. 61,425
22,835 Gruppo Editoriale L'Espresso.......................... 264,303
20,000 Resorts World Berhad.................................. 57,368
2,000 Singapore Press Holdings, Ltd......................... 43,350
178 Societe Television Francaise 1........................ 93,240
25,000 Toppan Printing Co., Ltd.............................. 249,584
3,300 Trinity Mirror Plc.................................... 35,235
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Broadcasting &
Publishing - continued
5,210 VNU NV............................................... $ 273,856
-----------
1,192,783
-----------
Building Materials &
Components - 2.9%
13,875 Carillion Plc........................................ 25,270
12,424 CRH Plc, London Exchange............................. 268,453
381 Geberit International AG............................. 130,406
1,660 Imerys SA............................................ 247,486
5,000 Meyer International Plc.............................. 31,014
3,707 Wolseley Plc......................................... 28,442
-----------
731,071
-----------
Business & Public Services - 2.3%
510 Cap Gemini NV........................................ 129,465
2,250 Pearson Publishing Plc............................... 73,234
11,570 Prosegur, CIA de Seguridad SA........................ 103,613
14,000 Ricoh Co., Ltd....................................... 263,913
-----------
570,225
-----------
Chemicals - 5.6%
3,350 Akzo Nobel NV........................................ 168,056
3,847 BASF AG.............................................. 197,639
4,125 Burmah Castrol Plc................................... 72,895
20,000 Chugai Pharmaceutical Co., Ltd....................... 216,306
8,219 DSM NV............................................... 329,520
1,573 Henkel KGaA.......................................... 103,789
7,000 Shin Etsu Chemical Co., Ltd.......................... 301,458
-----------
1,389,663
-----------
Construction - 1.3%
80,000 Okumura Corp......................................... 270,138
30,000 Shui On Construction & Materials, Ltd................ 44,575
-----------
314,713
-----------
Data Processing &
Reproduction - 1.1%
1,666 * Atos SA............................................ 276,239
-----------
Electrical & Electronics - 2.7%
10,000 Electricity Generating Public Co..................... 12,412
2,570 Entrelec Groupe SA................................... 145,754
5,000 GP Batteries International, Ltd...................... 6,575
2,442 Philips Electronics NV............................... 332,093
80 Samsung Electronics, Ltd., GDR, 144A................. 9,700
825 * Samsung Electronics, Ltd., GDR, 144A, non-voting
shares.............................................. 65,175
1,338 Schneider Electric SA................................ 105,064
-----------
676,773
-----------
Electronic Components - 6.9%
4,576 ELMOS Semiconductor AG............................... 188,995
3,500 Epcos AG............................................. 262,666
10,000 Johnson Electric Holdings, Ltd....................... 64,192
4,000 Kyocera Corp......................................... 1,037,487
</TABLE>
17
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Schedule of Investments(continued)
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Electronic Components - continued
2,728 Smiths Industries Plc................................. $ 40,761
5,000 * Winbond Electronics Corp............................ 115,625
-----------
1,709,726
-----------
Energy Equipment &
Services - 0.2%
4,888 BG Group Plc.......................................... 31,563
2,000 BSES, Ltd............................................. 25,300
-----------
56,863
-----------
Energy Sources - 3.5%
8,000 British-Borneo Oil & Gas Plc.......................... 17,575
775 Coflexip SA........................................... 56,327
6,960 Enterprise Oil........................................ 47,218
2,640 Petroleo Brasileiro SA, ADR ("Petrobras")............. 67,711
6,530 Petroleum Geo-Services................................ 116,614
3,200 Royal Dutch Petroleum Co.............................. 196,151
14,750 Shell Transportation & Trading Co., Plc............... 122,583
1,909 Total Fina SA, Cl. B.................................. 254,802
-----------
878,981
-----------
Financial Services - 3.9%
44,000 Aeon Credit Service Co., Ltd.......................... 18,113
18,405 BPI-SGPS, SA.......................................... 78,425
3,031 Dah Sing Financial Group.............................. 12,087
20,000 Hong Leong Finance.................................... 39,628
1,400 III Group Plc......................................... 24,989
5,834 Invesco English and International
Trust Plc............................................ 24,572
13,210 Irish Life & Permanent Plc............................ 124,478
20,000 Jardine Strategic Holdings, Ltd....................... 39,800
14,000 Kokusai Securities Co., Ltd........................... 219,380
5,250 Konecranes International Plc.......................... 201,918
15,000 Medeva Plc............................................ 42,159
2,400 P & O Finance BV...................................... 39,814
3,510 Prudential Corp. Plc.................................. 68,490
2,000 Taiwan Opportunities Fund LT.......................... 26,800
7,658 The Throgmorton Trust Plc............................. 11,164
-----------
971,817
-----------
Food & Household
Products - 2.2%
30,000 Asahi Glass Co., Ltd.................................. 232,260
60,000 Cafe De Coral Holdings, Ltd........................... 24,313
1,160 Huhtamaki Van Leer Oyj................................ 39,263
5,900 Iceland Group Plc..................................... 23,730
8,900 Northern Foods Plc.................................... 14,376
2,700 Reckitt Berckiser Plc................................. 25,557
4,000 Safeway Plc........................................... 13,875
6,200 Sainsbury (J.) Plc.................................... 35,027
3,610 Tate & Lyle Plc....................................... 23,121
20,200 Tesco Plc............................................. 61,343
6,600 Unilever Plc.......................................... 48,508
-----------
541,373
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Forest Products & Paper - 2.8%
5,720 Empresa Nacional de Celulosas SA...................... $ 114,376
40,000 Oji Paper Co., Ltd.................................... 240,775
12,634 Stora Enso Oyj........................................ 220,302
3,122 UPM-Kymmene Oyj....................................... 125,798
-----------
701,251
-----------
Health & Personal Care - 1.9%
8,000 Body Shop International Plc........................... 14,990
50,000 British Biotech....................................... 23,624
2,800 * Celltech Group Plc.................................. 23,926
7,007 * Elan Corp. Plc, ADR................................. 206,706
646 Novo Nordisk AS, Ser. B............................... 85,680
5,200 Nycomed Amersham Plc.................................. 32,758
4,231 PowderJect Pharmaceuticals Plc........................ 56,110
10,800 Scotia Holdings Plc................................... 22,679
-----------
466,473
-----------
Industrial Components - 0.2%
9,000 Cookson Group Plc..................................... 36,344
-----------
Insurance - 1.4%
2,550 Britannic Assurance Plc............................... 38,719
2,723 Fortis (B)............................................ 98,255
5,000 Legal & General Group Plc............................. 13,649
50,000 Pacific Century....................................... 116,100
5,808 Sun Life & Provincial Holdings Plc.................... 49,347
5,700 United Assurance Group CNV............................ 28,082
-----------
344,152
-----------
Leisure & Tourism - 0.5%
9,000 First Choice Holidays Plc............................. 19,044
9,132 Hilton Group Plc...................................... 29,649
7,450 Rank Group............................................ 24,068
20,000 Tanjong Plc........................................... 44,211
-----------
116,972
-----------
Machinery & Engineering - 1.5%
6,541 BBA Group Plc......................................... 54,202
10,700 Elexis AG............................................. 79,762
11,122 Meggitt Plc........................................... 35,033
4,740 Metra AB Oyj.......................................... 88,335
2,500 Spirax-Sarco Engineering Plc.......................... 17,889
105 Sulzer AG............................................. 68,250
5,240 TI Group Plc.......................................... 38,004
-----------
381,475
-----------
Merchandising - 1.3%
2,000 Boots Co. Plc......................................... 19,578
4,400 D.F.S. Furniture Co. Plc.............................. 25,586
6,000 Debenhams Retail Plc.................................. 18,415
1,150 Dixons Group Plc...................................... 27,678
70,000 Giordano International, Ltd........................... 72,040
6,928 Next Plc.............................................. 66,473
9,000 Selfridges Plc........................................ 38,452
6,260 Smith (H.W.) Group Plc................................ 48,663
-----------
316,885
-----------
</TABLE>
18
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Schedule of Investments(continued)
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Metals - Non Ferrous - 0.9%
3,013 Pechiney SA.......................................... $ 215,343
-----------
Metals - Steel - 1.6%
3,700 Pohang Iron & Steel, Ltd., ADR....................... 129,500
14,836 Usinor SA............................................ 278,725
-----------
408,225
-----------
Mining - 2.1%
3,189 Eramet SLN........................................... 183,109
30,000 Nippon Mining & Metals Co., Ltd...................... 234,903
3,125 Rio Tinto Plc........................................ 75,010
90,000 Yanzhou Coal Mining Co., Ltd......................... 24,892
-----------
517,914
-----------
Multi-Industry - 4.8%
4,500 ALFA SA de CV, Ser. A................................ 21,135
100,000 First Pacific Co., Ltd............................... 77,829
4,500 Granada Group Plc.................................... 45,430
3,500 Grupo Carso SA de CV, ADR............................ 34,852
16,000 Hutchison Whampoa, Ltd............................... 232,585
1,100 Larsen & Toubro, Ltd., GDR........................... 36,300
50,000 Nisshinbo Industries Inc............................. 226,094
10,115 Securicor Plc........................................ 25,815
2,394 Siemens AG........................................... 304,584
2,177 Vivendi.............................................. 196,603
-----------
1,201,227
-----------
Real Estate - 1.6%
50,000 Amoy Properties, Ltd................................. 42,130
4,000 Bukit Sembawang Estates, Ltd......................... 40,829
12,000 Burford Holdings Plc................................. 19,868
2,000 Chelsfield Plc....................................... 10,144
6,000 Cheung Kong Holdings, Ltd............................ 76,028
12,500 DBS Land, Ltd........................................ 24,617
13,400 Fairview Holdings Plc................................ 34,632
180,000 Filinvest Development Corp........................... 11,613
10,000 Henderson Land Development
Co., Ltd............................................ 64,321
40,000 HKR International, Ltd. ............................. 28,044
4,100 Land Securities Plc.................................. 45,945
-----------
398,171
-----------
Retail - 0.2%
1,200 Companhia Brasileira de Distribuicao Grupo Pao de
Acucar, ADR......................................... 38,775
-----------
Technology - 5.4%
8,860 * Avenir ASA......................................... 56,429
48,000 CSE Systems & Engineering............................ 40,925
27,000 * Graphisoft NV...................................... 278,784
1,827 Nokia AB Oyj......................................... 331,277
1,450 Ritek Corp........................................... 16,784
500 SOFTBANK CORP........................................ 478,614
5,200 Synnex Technology
International Corp.................................. 134,420
-----------
1,337,233
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Telecommunications - 10.8%
9,000 Asia Satellite Telecommunications Holdings, Ltd...... $ 28,423
21,864 Cable & Wireless Hong Kong, Ltd...................... 63,144
3,000 Cable & Wireless Plc................................. 51,463
22,000 China Telecom (Hong Kong), Ltd....................... 137,261
6,090 Ericsson LM Telephone, Ser B......................... 391,495
5,760 * Global TeleSystems Group, Inc...................... 199,440
30,000 Indosat, ADR......................................... 66,977
14,720 * ITG Group Plc...................................... 144,575
1,000 Korea Telecom Corp................................... 74,750
2,000 Mahanagar Telep Ni, GDR.............................. 22,000
1,188 Mannesmann AG........................................ 286,617
32 Nippon Telegraph & Telephone Corp.................... 548,106
468 Swisscom AG.......................................... 189,281
145 Telecomunicacoes Brasileiras SA, ADR ("Telebras").... 2
715 * Telecomunicacoes Brasileiras SA, ADR Preference
Shares ("Telebras")................................. 91,878
8,044 * Telefonica SA...................................... 200,957
820 Telefonos de Mexico SA, ADR ("Telmex")............... 92,250
1,270 * Telegate SA........................................ 73,690
500 Telesp Participacoes SA, ADR......................... 12,219
-----------
2,674,528
-----------
Textiles - 0.9%
60,000 Teijin, Ltd.......................................... 221,396
-----------
Transportation - Airlines - 0.9%
8,400 British Airways Plc.................................. 54,817
7,133 Lufthansa AG......................................... 165,983
-----------
220,800
-----------
Transportation - Roads
& Rail - 1.3%
45,000 Nippon Express Co., Ltd.............................. 248,850
3,500 Railtrack Group Plc.................................. 58,797
7,000 Stagecoach Holdings Plc.............................. 17,978
-----------
325,625
-----------
Transportation - Shipping - 0.5%
4,005 Associated British Ports Holdings Plc................ 18,373
2,730 IHC Caland NV........................................ 99,690
-----------
118,063
-----------
Utilities - Electric, Gas
& Water - 2.8%
8,500 National Power Plc................................... 49,016
3,500 Powergen Plc......................................... 25,158
3,500 Scot & Southern Energy Plc........................... 27,844
13,000 The Tokyo Electric Power Co., Inc.................... 348,635
2,976 United Utilities Plc................................. 30,669
4,470 Veba AG.............................................. 217,263
-----------
698,585
-----------
</TABLE>
19
<PAGE>
MENTOR VARIABLE INVESTMENT PORTFOLIOS
Mentor VIP Perpetual International Portfolio
Schedule of Investments(continued)
December 31, 1999
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
COMMON STOCKS - continued
Wholesale & International
Trade - 1.9%
7,040 Buhrmann NV........................................... $ 106,022
67,000 Marubeni Corp......................................... 281,325
68,925 Signet Group Plc...................................... 72,924
-----------
460,271
-----------
Total Common Stocks
(cost $18,217,254)................................... 23,083,417
-----------
PREFERRED STOCKS - 0.8%
Automobiles - 0.8%
70 Porsche AG
(cost $146,158)...................................... 191,799
-----------
WARRANTS - 0.4%
Banking - 0.2%
65,000 * Deutsche Bank AG, expire 3/28/2002.................. 62,054
-----------
Financial Services - 0.1%
381 * Morgan Stanley AG, expire 9/15/2000................. 26,919
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
<C> <S> <C>
WARRANTS - continued
Health & Personal Care - 0.1%
156 * Novartis AG, expire 9/15/2000...................... $ 12,442
-----------
Total Warrants
(cost $86,686)...................................... 101,415
-----------
<CAPTION>
Principal
Amount Value
<C> <S> <C>
SHORT-TERM INVESTMENTS - 5.2%
Repurchase Agreements - 5.2%
$1,296,881 State Street Bank & Trust Co. purchased 12/31/1999,
3.25%, maturing 1/3/2000, maturity value $1,297,232
(cost $1,296,881) (a)............................... $ 1,296,881
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $19,746,979)........................... 99.4% 24,673,512
Other Assets and
Liabilities - net............................ 0.6 142,378
----- -----------
Net Assets.................................... 100.0% $24,815,890
===== ===========
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. govern-
ment and/or agency obligations based on market prices plus ac-
crued interest at December 31, 1999.
* Non-income producing security.
144A Security that may be resold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933. This security has
been determined to be liquid under guidelines established by the
Board of Trustees.
Summary of Abbreviations
ADR American Depository Receipts
GDR Global Depository Receipts
At December 31, 1999, the Fund held securities in the following coun-
tries:
<TABLE>
<CAPTION>
Percentage of
Market Value Portfolio Assets
- --------------------------------------------------------------------------------
<S> <C> <C>
Japan............................................. $ 6,434,041 26.1%
United Kingdom.................................... 3,466,384 14.1%
Germany........................................... 2,272,228 9.2%
France............................................ 2,182,156 8.9%
Netherlands....................................... 1,505,388 6.1%
Hong Kong......................................... 1,297,250 5.3%
United States+.................................... 1,296,881 5.2%
Finland........................................... 1,132,802 4.6%
Ireland........................................... 744,213 3.0%
Switzerland....................................... 427,298 1.7%
Singapore......................................... 425,305 1.7%
Spain............................................. 418,947 1.7%
Sweden............................................ 391,495 1.6%
Taiwan............................................ 293,629 1.2%
Korea............................................. 279,125 1.1%
Other............................................. 2,106,370 8.5%
----------- -----
$24,673,512 100.0%
=========== =====
</TABLE>
+ Includes short-term investments.
See Combined Notes to Financial Statements.
20
<PAGE>
Mentor Variable Investment Portfolios
Statements of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
Perpetual
Capital Growth International
Portfolio Growth Portfolio Portfolio
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Identified cost of securities... $26,390,843 $11,972,938 $19,746,979
Net unrealized gains on
securities..................... 2,616,665 3,905,781 4,926,533
- ---------------------------------------------------------------------------------
Market value of securities...... 29,007,508 15,878,719 24,673,512
Cash............................ 34,429 21,599 4,534
Foreign currency, at value (cost
$0 ,$0 and $133,436,
respectively).................. 0 0 133,443
Receivable for securities sold.. 0 28,230 18,518
Dividends and interest
receivable..................... 31,484 1,801 29,061
Deferred organization expenses.. 10,719 6,056 7,297
Prepaid expenses and other
assets......................... 19,535 263 186
- ---------------------------------------------------------------------------------
Total assets................... 29,103,675 15,936,668 24,866,551
- ---------------------------------------------------------------------------------
Liabilities
Payable for securities
purchased...................... 701,670 35,088 0
Advisory fee payable............ 18,377 8,547 19,491
Due to other related parties.... 2,297 0 1,949
Accrued expenses and other
liabilities.................... 4,681 4,833 29,221
- ---------------------------------------------------------------------------------
Total liabilities.............. 727,025 48,468 50,661
- ---------------------------------------------------------------------------------
Net assets...................... $28,376,650 $15,888,200 $24,815,890
- ---------------------------------------------------------------------------------
Net assets represented by
Paid-in capital................. $25,118,618 $12,258,053 $17,721,820
Undistributed net investment
income......................... 12,710 0 0
Accumulated net realized gains
or losses on securities and
foreign currency
related transactions........... 628,657 (275,634) 2,168,114
Net unrealized gains on
securities and foreign currency
related transactions........... 2,616,665 3,905,781 4,925,956
- ---------------------------------------------------------------------------------
Total net assets................ $28,376,650 $15,888,200 $24,815,890
- ---------------------------------------------------------------------------------
Shares outstanding.............. 1,967,517 1,145,655 1,266,360
- ---------------------------------------------------------------------------------
Net asset value per share....... $ 14.42 $ 13.87 $ 19.60
- ---------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
21
<PAGE>
Mentor Variable Investment Portfolios
Statements of Operations
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Perpetual
Capital Growth International
Portfolio Growth Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Dividends (net of foreign
withholding taxes of $0, $27
and $37,266, respectively).... $ 225,804 $ 10,528 $ 336,067
Interest....................... 78,004 64,473 24,514
- -------------------------------------------------------------------------------
Total investment income........ 303,808 75,001 360,581
- -------------------------------------------------------------------------------
Expenses
Advisory fee................... 197,527 79,436 172,752
Distribution Plan expenses..... 61,384 27,800 43,069
Administrative services fees... 24,691 11,348 17,275
Transfer agent fee............. 0 144 75
Trustees' fees and expenses.... 489 225 345
Printing and postage
expenses...................... 12,298 4,845 9,967
Custodian fee.................. 13,526 10,048 86,437
Professional fees.............. 36,206 20,478 30,740
Organization expenses.......... 3,385 1,913 2,306
Other.......................... 2,516 22,205 18,967
- -------------------------------------------------------------------------------
Total expenses................ 352,022 178,442 381,933
- -------------------------------------------------------------------------------
Less: Expense reductions...... (501) (341) (595)
Fee waivers.................. (61,384) (27,800) (43,069)
- -------------------------------------------------------------------------------
Net expenses.................. 290,137 150,301 338,269
- -------------------------------------------------------------------------------
Net investment income or
loss.......................... 13,671 (75,300) 22,312
- -------------------------------------------------------------------------------
Net realized and unrealized
gains or losses on securities
and foreign currency related
transactions
Net realized gains or losses
on:
Securities.................... 680,856 274,592 2,269,459
Foreign currency related
transactions................. 0 0 (96,758)
- -------------------------------------------------------------------------------
Net realized gains on
securities and foreign
currency related
transactions.................. 680,856 274,592 2,172,701
- -------------------------------------------------------------------------------
Net change in unrealized gains
on securities and foreign
currency
related transactions.......... 835,607 2,704,797 4,273,273
- -------------------------------------------------------------------------------
Net realized and unrealized
gains on securities and
foreign currency
related transactions.......... 1,516,463 2,979,389 6,445,974
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations..... $1,530,134 $2,904,089 $6,468,286
- -------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
22
<PAGE>
Mentor Variable Investment Portfolios
Statements of Changes in Net Assets
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Perpetual
Capital Growth International
Portfolio Growth Portfolio Portfolio
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income or
loss......................... $ 13,671 $ (75,300) $ 22,312
Net realized gains on
securities and foreign
currency related
transactions................. 680,856 274,592 2,172,701
Net change in unrealized gains
on securities and foreign
currency
related transactions......... 835,607 2,704,797 4,273,273
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations... 1,530,134 2,904,089 6,468,286
- -------------------------------------------------------------------------------
Distributions to shareholders
from
Net investment income......... (35,194) (17,317) 0
Net realized gains............ (40,752) 0 (11,368)
- -------------------------------------------------------------------------------
Total distributions to
shareholders................ (75,946) (17,317) (11,368)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold..... 10,355,763 4,282,662 7,703,706
Payment for shares redeemed... (3,651,247) (2,362,779) (1,177,344)
Net asset value of shares
issued in reinvestment of
distributions................ 75,941 17,317 11,368
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions................ 6,780,457 1,937,200 6,537,730
- -------------------------------------------------------------------------------
Total increase in net
assets...................... 8,234,645 4,823,972 12,994,648
Net assets
Beginning of period........... 20,142,005 11,064,228 11,821,242
- -------------------------------------------------------------------------------
End of period................. $28,376,650 $15,888,200 $24,815,890
- -------------------------------------------------------------------------------
Undistributed net investment
income or loss............... $ 12,710 $ 0 $ 0
- -------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
23
<PAGE>
Mentor Variable Investment Portfolios
Statements of Changes in Net Assets
Period Ended December 31, 1998 (a)
<TABLE>
<CAPTION>
Perpetual
Capital Growth International
Portfolio Growth Portfolio Portfolio
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income........... $ 35,347 $ 16,688 $ 14,914
Net realized losses on
securities and foreign
currency related
transactions................... (12,561) (550,226) (30,445)
Net change in unrealized gains
on securities and foreign
currency
related transactions........... 1,781,058 1,200,984 652,683
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations..... 1,803,844 667,446 637,152
- --------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold....... 18,945,250 10,698,100 11,422,347
Payment for shares redeemed..... (607,089) (301,318) (238,257)
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions.................. 18,338,161 10,396,782 11,184,090
- --------------------------------------------------------------------------------
Total increase in net assets.. 20,142,005 11,064,228 11,821,242
Net assets
Beginning of period............. 0 0 0
- --------------------------------------------------------------------------------
End of period................... $20,142,005 $11,064,228 $11,821,242
- --------------------------------------------------------------------------------
Undistributed net investment
income or loss................. $ 35,347 $ 16,688 $ (10,945)
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period from March 3, 1998 (commencement of operations) to December
31, 1998.
See Combined Notes to Financial Statements.
24
<PAGE>
Combined Notes to Financial Statements
1. ORGANIZATION
The Mentor Variable Investment Portfolios (the "Trust") consist of Mentor VIP
Capital Growth Portfolio ("Capital Growth Portfolio"), Mentor VIP Growth Port-
folio ("Growth Portfolio") and Mentor VIP Perpetual International Portfolio
("Perpetual International Portfolio") (collectively, the "Portfolios"). Each
Portfolio is a diversified series of the Trust which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an open-end man-
agement investment company.
The Capital Growth Portfolio's investment objective is to provide long-term ap-
preciation of capital. The Portfolio invests in a wide variety of securities
which the investment advisor believes offers the potential for capital appreci-
ation over both the intermediate and long-term.
The Growth Portfolio's investment objective is to seek long-term capital
growth. The Portfolio invests in a diversified portfolio of U.S. securities of
primarily small to mid-sized companies.
The Perpetual International Portfolio's investment objective is to seek long-
term capital appreciation. The Portfolio invests in a diversified portfolio of
securities of issuers located outside the United States.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Portfolios in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect amounts re-
ported herein. Actual results could differ from these estimates.
A. Valuation of Securities
Securities traded on an established exchange or included on the Nasdaq National
Market System ("NMS") are valued on the basis of the last reported sales price
on the exchange where the security is primarily traded. Securities traded on
the over-the-counter market are valued on the basis of the last reported sales
price. Securities traded on an exchange or NMS and other securities traded in
the over-the-counter market for which there has been no sale are valued at the
mean between the last reported bid and asked price. Securities for which market
quotations are not readily available, including restricted securities, are val-
ued at fair value as determined in good faith according to procedures approved
by the Board of Trustees.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Portfolio may invest in repurchase agreements. Securities pledged as col-
lateral for repurchase agreements are held in a segregated account by the cus-
todian on the Portfolio's behalf. Each Portfolios 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 carry-
ing value of the repurchase agreement, including accrued interest. Each Portfo-
lio 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. Foreign Currency
The books and records of the Portfolios are maintained in United States (U.S.)
dollars. Foreign currency amounts are translated into U.S. dollars as follows:
market value of investment securities, other assets and liabilities at the
daily rate of exchange; purchases and sales of investment securities and income
and expenses at the rate of exchange prevailing on the respective dates of such
transactions. Net unrealized foreign exchange gains or losses resulting from
changes in foreign currency exchange rates are a component of net unrealized
gains or losses on securities and foreign currency related transactions. Net
realized foreign currency gains or losses on foreign currency related transac-
tions include: foreign currency gains or losses between trade date and settle-
ment date on investment securities transactions, foreign currency related
transactions and the
25
<PAGE>
Combined Notes to Financial Statements (continued)
difference between the amounts of interest and dividends recorded on the books
of the Portfolio and the amounts that are actually received. The portion of
foreign currency gains or losses related to fluctuations in exchange rates be-
tween the initial purchase trade date and subsequent sale trade date is in-
cluded in realized gains or losses on securities.
D. Forward Foreign Currency Exchange Contracts
The Portfolios may enter into forward foreign currency exchange contracts
("forward contracts") to settle portfolio purchases and sales of securities de-
nominated in a foreign currency and to hedge certain foreign currency assets or
liabilities. Forward contracts are recorded at the forward rate and marked-to-
market daily. Realized gains or losses arising from such transactions are in-
cluded in net realized gains or losses on foreign currency related transac-
tions. The Portfolio bears the risk of an unfavorable change in the foreign
currency exchange rate underlying the forward contract and is subject to the
credit risk that the other party will not fulfill their obligations under the
contract. Forward contracts involve elements of market risk in excess of the
amount reflected in the Statements of Assets and Liabilities.
E. 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. Dividend income is recorded on the
ex-dividend date, or in the case of some foreign securities, on the date there-
after when the Portfolio is made aware of the dividend. Foreign income and cap-
ital gains realized on some foreign securities may be subject to foreign taxes,
which are accrued as applicable.
F. Federal Taxes
The Portfolios have qualified and intend to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Portfolios will not incur any federal income tax liability
since they are expected to distribute all of their net investment company tax-
able income and net capital gains, if any, to their shareholders. Accordingly,
no provisions for federal taxes are required. To the extent that realized capi-
tal gains can be offset by capital loss carryforwards, it is each Portfolio's
policy not to distribute such gains.
G. Distributions
Distributions from net investment income and/or net realized capital gains for
the Portfolios, if any, are declared and paid at least annually. Distributions
to shareholders are recorded at the close of business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles. The significant differences between financial statement
amounts available for distributions and distributions made in accordance with
income tax regulations are primarily due to differing treatment for net operat-
ing losses, certain realized losses on securities re-purchased, net realized
foreign currency gains or losses and unrealized depreciation on passive foreign
investment companies.
H. Organization Expenses
Organization expenses are amortized to operations over a five-year period on a
straight-line basis. In the event any of the initial shares of the Portfolios
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 to the Capital
Growth Portfolio and the Growth Portfolio and is paid a management
26
<PAGE>
Combined Notes to Financial Statements (continued)
fee that is computed daily and paid monthly based on amounts determined by ap-
plying percentage rates starting at 0.80% and declining to 0.70% per annum as
net assets increase, to the average daily net assets of the Capital Growth
Portfolio and the Growth Portfolio.
Mentor Perpetual Advisors, LLC ("Mentor Perpetual"), an advisory firm organized
in 1995, is owned equally by Perpetual plc and Mentor Advisors. Mentor Advisors
serves as the investment advisor to the Perpetual International Portfolio and
is paid a management fee that is computed daily and paid monthly at an annual
rate of 1.00% of Perpetual International Portfolio's average daily net assets.
Evergreen Investment Services ("EIS"), an indirect, wholly-owned subsidiary of
First Union National Bank ("FUNB"), is the administrator to the Portfolios. As
administrator, EIS provides the Portfolios with facilities, equipment and per-
sonnel. EIS is entitled to a fee of 0.10% based on the average net assets of
each Portfolio. Prior to June 14, 1999, Mentor Investment Group, LLC ("Men-
tor"), an indirect, wholly-owned subsidiary of First Union, provided adminis-
trative personnel and services for the Portfolios at the same rate currently
paid to EIS.
For the year ended December 31, 1999, the Portfolios paid or accrued to EIS and
Mentor, the following amounts for administrative services:
<TABLE>
<CAPTION>
EIS Mentor
---------------
<S> <C> <C>
Capital Growth Portfolio........................ $14,571 $10,120
Growth Portfolio................................ 6,694 4,654
Perpetual International Portfolio............... 10,481 6,794
</TABLE>
Officers of the Portfolios and affiliated Trustees receive no compensation di-
rectly from the Portfolios.
Evergreen Service Company ("ESC"), an indirect, wholly-owned subsidiary of
FUNB, is the transfer and dividend disbursing agent for the Portfolios. Prior
to September 13, 1999, Boston Financial Data Services, Inc. served as each
Portfolio's transfer and dividend disbursing agent. For the year ended December
31, 1999, all transfer agent fees paid or accrued by the Portfolios were paid
to ESC.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of The BISYS
Group, Inc., serves as principal underwriter to the Portfolios. The Portfolios
have adopted Distribution Plans, as allowed by Rule 12b-1 of the 1940 Act. Dis-
tribution Plans permit the Portfolios to compensate its principal underwriter
for costs relating to selling shares of the Portfolios and for various other
services. These costs, which consist primarily of commissions and service fees
to broker-dealers who sell shares of the Portfolios, are paid by the Portfolios
through "Distribution Plan Expenses" and are accrued daily and paid at least
quarterly at the annual rate of 0.25% of each Portfolio's average daily net as-
sets. None of the Portfolios currently makes payments under the Plan.
Prior to October 18, 1999, Mentor Distributors, LLC ("Mentor Distributors")
served as principal underwriter to the Portfolios. Mentor Distributors is a
wholly-owned subsidiary of BISYS Fund Services, Inc. To compensate Mentor Dis-
tributors for the services it provided and for the expenses it incurred, the
Portfolios paid a distribution fee of 0.25%, which was accrued daily and paid
monthly.
During the year ended December 31, 1999, amounts paid or accrued to EDI and
Mentor Distributors were as follows:
<TABLE>
<CAPTION>
Mentor
EDI Distributors
--------------------
<S> <C> <C>
Capital Growth Portfolio................... $14,166 $47,218
Growth Portfolio........................... 6,926 20,874
Perpetual International Portfolio.......... 11,295 31,774
</TABLE>
27
<PAGE>
Combined Notes to Financial Statements (continued)
During the year ended December 31, 1999, the Portfolios waived all distribution
fees and the impact on each Portfolio's expense ratio represented as a percent-
age of its average net assets were as follows:
<TABLE>
<CAPTION>
Fees % of Average
Waived Net Assets
--------------------
<S> <C> <C>
Capital Growth Portfolio................... $61,384 0.25%
Growth Portfolio........................... 27,800 0.25%
Perpetual International Portfolio.......... 43,069 0.25%
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolios were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1999 1998 (a)
Capital Growth Portfolio
<S> <C> <C>
Shares sold.......................................... 744,068 1,533,925
Shares redeemed...................................... (265,656) (50,264)
Shares issued in reinvestment of distributions....... 5,444 0
- --------------------------------------------------------------------------------
Net increase......................................... 483,856 1,483,661
- --------------------------------------------------------------------------------
Growth Portfolio
Shares sold.......................................... 400,486 993,514
Shares redeemed...................................... (221,726) (28,253)
Shares issued in reinvestment of distributions....... 1,634 0
- --------------------------------------------------------------------------------
Net increase......................................... 180,394 965,261
- --------------------------------------------------------------------------------
Perpetual International Portfolio
Shares sold.......................................... 497,308 862,079
Shares redeemed...................................... (75,708) (18,013)
Shares issued in reinvestment of distributions....... 694 0
- --------------------------------------------------------------------------------
Net increase......................................... 422,294 844,066
- --------------------------------------------------------------------------------
</TABLE>
(a) For the period from March 3, 1998 (commencement of operations) to December
31, 1998.
6. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities (excluding
short-term securities) were as follows for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
-------------------------------------
<S> <C> <C>
Capital Growth Portfolio.. $26,130,733 $20,426,270
Growth Portfolio.......... 14,798,785 13,760,653
Perpetual International
Portfolio................ 25,169,368 18,960,682
</TABLE>
On December 31, 1999 the composition of unrealized appreciation and deprecia-
tion on securities based on the aggregate cost of securities for federal income
tax purposes were as follows:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized Net Unrealized
Tax Cost Appreciation Depreciation Appreciation
------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital Growth
Portfolio.............. $26,640,503 $3,920,178 $1,553,173 $2,367,005
Growth Portfolio........ 12,114,658 4,293,339 529,278 3,764,061
Perpetual International
Portfolio.............. 19,811,811 5,706,769 845,068 4,861,701
</TABLE>
At December 31, 1999 the Growth Portfolio, for federal tax purposes, had a cap-
ital loss carryforward of $133,914. Pursuant to the Internal Revenue Code, such
capital loss carryforward expires on 12/31/2006.
Capital losses incurred after October 31st within a Portfolio's fiscal year are
deemed to arise on the first business day of the Portfolio's following fiscal
year.
28
<PAGE>
Combined Notes to Financial Statements (continued)
7. EXPENSE REDUCTIONS
The Portfolios have entered into expense offset arrangements with ESC as of
September 15, 1999, and their custodian as of June 11, 1999, whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of each Portfolio's related expenses. The assets deposited with ESC and the
custodian under these expense offset arrangements could have been invested in
income-producing assets. The amount of expense reductions received by each
Portfolio and the impact of the total expense reductions on each Portfolio's
expense ratio represented as a percentage of its average net assets were as
follows:
<TABLE>
<CAPTION>
% of
Expense Offset Average
Arrangements Net Assets
-------------------------
<S> <C> <C>
Capital Growth Portfolio.............. $501 0.00%
Growth Portfolio...................... 341 0.00%
Perpetual International Portfolio..... 595 0.00%
</TABLE>
8. FINANCING AGREEMENTS
On August 6, 1999 the Portfolios became party to a credit agreement between the
Evergreen Funds and a group of banks (the "Lenders"). Under this agreement, the
Lenders provide an unsecured revolving credit commitment in the aggregate
amount of $1.050 billion. The credit facility is allocated, under the terms of
the financing agreement, among the Lenders. The credit facility is accessed by
the Portfolios for temporary or emergency purposes to fund the redemption of
their shares or as general working capital as permitted by each Portfolio's
borrowing restrictions. Borrowings under this facility are assessed 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 commitment fee of 0.10% per annum is incurred on
the average daily unused portion of the revolving credit commitment. The com-
mitment fee is allocated to all Portfolios. 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 & Trust Co. serves as paying
agent for the Portfolios, and as paying agent is entitled to a fee of $20,000
per annum which is allocated to all of the Portfolios. During the year ended
December 31, 1999 the Portfolios had no borrowings under this agreement.
9. SUBSEQUENT EVENTS (Unaudited)
Effective February 1, 2000 shares of funds in the Evergreen Variable Annuity
Trust, a Delaware business trust organized on December 23, 1997, were substi-
tuted for shares of each Mentor Variable Investment Portfolio ("Mentor Portfo-
lios"). As a result of the substitution, shareholders of the Mentor Portfolios
became owners of that number of full and fractional shares of the respective
fund in the Evergreen Variable Annuity Trust ("Evergreen Funds") having a net
asset value equal to the net asset value of their shares immediately prior to
the substitution of shares as follows:
<TABLE>
<CAPTION>
Shares Owned Shares Received
----------------------------------------------------------------
<S> <C>
Mentor VIP Capital
Growth Portfolio Evergreen VA Capital Growth Fund
Mentor VIP Growth
Portfolio Evergreen VA Growth Fund
Mentor VIP Perpetual
International
Portfolio Evergreen VA Perpetual International Fund
</TABLE>
Since the Mentor Portfolios and the Evergreen Funds have substantially similar
investment objectives and policies, and the Mentor Portfolios contributed the
majority of the net assets and shareholders, each Mentor Portfolio's basis of
accounting for assets and liabilities and its operating results for prior peri-
ods are being carried forward.
29
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Mentor Variable Investment Portfolios
We have audited the accompanying statements of assets and liabilities, includ-
ing the schedules of investments, of Mentor VIP Capital Growth Portfolio, Men-
tor VIP Growth Portfolio and Mentor VIP Perpetual International Portfolio,
portfolios of Mentor Variable Investment Portfolios, as of December 31, 1999,
and the related statements of operations for the year then ended, the state-
ments of changes in net assets for each of the years or periods in the two-year
period then ended and financial highlights for each of the years or periods in
the two-year period then ended. These financial statements and financial high-
lights are the responsibility of the Portfolios' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights 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 De-
cember 31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Men-
tor VIP Capital Growth Portfolio, Mentor VIP Growth Portfolio and Mentor VIP
Perpetual International Portfolio as of December 31, 1999, the results of their
operations, changes in their net assets and financial highlights for the peri-
ods described above, in conformity with generally accepted accounting princi-
ples.
/s/ KPMG LLP
Boston, Massachusetts
January 28, 2000
30
<PAGE>
Additional Information (Unaudited)
FEDERAL TAX STATUS OF DISTRIBUTIONS
For corporate shareholders, the following percentages of ordinary in-
come dividends paid during the fiscal year ended December 31, 1999
qualified for the dividends received deduction.
<TABLE>
<S> <C>
Capital Growth Portfolio.................................. 93.67%
Growth Portfolio.......................................... 21.25%
</TABLE>
31
<PAGE>
Variable Annuities
------------------------------------
NOT May lose value
FDIC
INSURED No bank guarantee
------------------------------------
Evergreen Investment Services, Inc.
68449 552503 2/2000
