AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO. 33-45315
FILE NO. 811-6550
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
PRE-EFFECTIVE AMENDMENT NO. _ ( )
POST-EFFECTIVE AMENDMENT NO. 19 (X)
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
AMENDMENT NO. 21 (X)
(CHECK APPROPRIATE BOX OR BOXES)
MENTOR FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
901 EAST BYRD STREET
RICHMOND, VIRGINIA 23219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(804) 782-3648
(REGISTRANT'S TELEPHONE NUMBER)
PAUL F. COSTELLO
PRESIDENT
901 EAST BYRD STREET
RICHMOND, VIRGINIA 23219
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
TIMOTHY W. DIGGINS, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MA 02110
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
( ) IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
<PAGE>
( ) ON (date) PURSUANT TO PARAGRAPH (B)
(X) 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
( ) ON (DATE) PURSUANT TO PARAGRAPH (A)(1)
( ) 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
( ) ON (DATE) PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
<PAGE>
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
( ) THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR
A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT
THIS POST-EFFECTIVE AMENDMENT RELATES ONLY TO RETAIL SHARES OF THE MENTOR
INSTITUTIONAL MONEY MARKET PORTFOLIO AND THE MENTOR INSTITUTIONAL U.S.
GOVERNMENT MONEY MARKET PORTFOLIO. NO INFORMATION RELATING TO ANY OTHER
CLASS OR SERIES OF SHARES OF THE REGISTRANT IS AMENDED, DELETED, OR
SUPERSEDED HEREBY.
MENTOR FUNDS
CROSS REFERENCE SHEET
(as required by Rule 404(a))
Part A - Mentor Funds - Mentor U.S. Government Money Market Portfolio --
Retail Shares
<TABLE>
<CAPTION>
N-1A Item No. Location
<S> <C>
1. Cover Page......................................... Cover Page
2. Synopsis........................................... Cover Page; Expense Summary
3. Condensed Financial Information.................... Not Applicable
4. General Description of Registrant.................. Cover Page; Investment Objective
and Policies; General
5. Management of the Fund............................. Investment Objective and Policies;
Management; General; How the Portfolio
Values its Shares; Custodian and
Transfer and Dividend Agent; Performance
Information
5A. Management's Discussion of
Fund Performance................................ Not Applicable
6. Capital Stock and Other Securities................. Management; General; Purchase of Shares;
How Distributions are Made; Tax Information;
Performance Information; Management;
Purchase of Shares
7. Purchase of Securities Being Offered............... Management; Purchase of Shares
8. Redemption or Repurchase........................... Purchase of Shares; Redemption of Shares
9. Pending Legal Proceedings.......................... Not Applicable
-1-
<PAGE>
<CAPTION>
Part A - Mentor Funds - Mentor Institutional Money Market Portfolio --
Retail Shares
N-1A Item No. Location
<S> <C>
1. Cover Page......................................... Cover Page
2. Synopsis........................................... Cover Page; Expense Summary
3. Condensed Financial Information.................... Not Applicable
4. General Description of Registrant.................. Cover Page; Investment Objective
and Policies; General
5. Management of the Fund............................. Investment Objective and Policies;
Management; General; How the Portfolio
Values its Shares; Custodian and
Dividend Agent; Performance
Information
5A. Management's Discussion of
Fund Performance................................ Not Applicable
6. Capital Stock and Other Securities................. Management; General; Purchase of Shares;
How Distributions are Made; Performance
Information
7. Purchase of Securities Being Offered............... Management; Purchase of Shares
8. Redemption or Repurchase........................... Purchase of Shares; Redemption of
Shares
9. Pending Legal Proceedings.......................... Not Applicable
-3-
Part B - Mentor Funds - Money Market Portfolios -- Retail Shares
N-1A Item No. Location
10. Cover Page......................................... Cover Page
11. Table of Contents.................................. Cover Page
12. General Information and History.................... General
13. Investment Objectives and Policies................. Investment Restrictions;
Investment Techniques
14. Management of the Fund............................. Management of the Trust;
Investment Advisory and Other
Services; The Distributor
15. Control Persons and Principal
Holders of Securities......................... Principal Holders
of Securities
16. Investment Advisory and Other Services............. Investment Advisory and
Other Services; Management of
the Trust; Independent Accountants;
Experts; Custodian;
Members of Investment Management
Teams
17. Brokage Allocation................................. Brokerage
18. Capital Stock and Other Securities................. Determination of Net Asset Value;
Tax Status; The Distributor; Shareholder
Liability
19. Purchase, Redemption and Pricing
of Securities Being Offered................... Brokerage; Determination
of Net Asset Value; The
Distributor
20. Tax Status......................................... Investment Restrictions;
Tax Status
21. Underwriters....................................... The Distributor
22. Calculation fo Yield Quotations of
Money Market Funds............................ Performance
</TABLE>
<PAGE>
P R O S P E C T U S September , 1998,
Retail Shares
Mentor Funds
Mentor Institutional Money Market Portfolio
Mentor Institutional U.S. Government Money Market Portfolio
The Mentor Institutional Money Market Portfolios are designed for
investors who seek current income consistent with preservation of capital and
maintenance of liquidity. The Portfolios are diversified investment portfolios
of Mentor Funds (the "Trust").
An investment in a Portfolio is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that a Portfolio will be able to maintain
a stable net asset value of $1.00 per share.
This Prospectus explains concisely what you should know before investing
in a Portfolio. Please read it carefully and keep it for future reference. You
can find more detailed information about the Portfolios in the September
Statement of Additional Information, as amended from time to time. For a free
copy of the Statement, call Mentor Services Company, Inc. at 1-800-869-6042.
The Statement has been filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing in a
Portfolio. The following table summarizes your maximum transaction costs from
an investment in Retail Shares of each of the Portfolios and expenses each
Portfolio expects to incur in respect of its Retail Shares during the current
fiscal year. The Examples show the cumulative expenses attributable to a
hypothetical $1,000 investment in each Portfolio over specified periods. The
information presented below does not reflect any fees or charges imposed by
Financial Institutions through which you may invest in the Portfolios.
<TABLE>
<CAPTION>
Mentor
Mentor Institutional
Institutional U.S. Government
Money Market Money Market
Portfolio Portfolio
--------------- ----------------
<S> <C> <C>
Shareholder Transaction Expenses None None
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Management Fees .22% .22%
12b-1 Fees .38% .38%
Other Expenses .29% .24%
----- ----
Total Fund Operating Expenses .89% .84%
----- ----
</TABLE>
Examples
Your investment of $1,000 in a Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Mentor Institutional Money Market Portfolio $9 $27 $48 $106
Mentor Institutional U.S. Government Money Market Portfolio $8 $26 $45 $100
</TABLE>
The table is provided to help you understand the expenses of investing in
each of the Portfolios and your share of the operating expenses which each of
the Portfolios expects to incur. The Examples do not represent past or future
expense levels. Actual returns and expenses may be greater or less than those
shown. Federal regulations require the Examples to assume a 5% annual return,
but actual annual return will vary. Because of the 12b-1 fees payable by the
Portfolios, long-term shareholders may pay more in aggregate sales charges than
the maximum initial sales charge permitted by the National Association of
Securities Dealers, Inc.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of Mentor Institutional Money Market Portfolio
(the "Money Market Portfolio") and Mentor Institutional U.S. Government Money
Market Portfolio (the "U.S. Government Money Market Portfolio") is to seek as
high a rate of current income as Mentor Investment Advisors, LLC, the
Portfolios' investment advisor ("Mentor Advisors"), believes is consistent with
preservation of capital and maintenance of liquidity. The Portfolios seek their
objectives through the investment policies described below. Because each of the
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Portfolios is a money market fund, it will only invest in the types of
investments described below under "Selection of Investments".
The investment objective and policies of each Portfolio may, unless
otherwise specifically stated, be changed by the Trustees without shareholder
approval. Neither of the Portfolios is intended to be a complete investment
program, and there is no assurance a Portfolio will achieve its objective.
Mentor Institutional Money Market Portfolio.
The Portfolio will invest in a portfolio of high-quality, short-term
instruments consisting of any or all of the following:
o U.S. Government securities: securities issued or guaranteed as to
principal or interest by the U.S. Government or by any of its agencies or
instrumentalities.
o Banker's acceptances: negotiable drafts or bills of exchange, which have
been "accepted" by a domestic bank (or a foreign bank with an agency
domiciled in the United States), meaning, in effect, that the bank has
unconditionally agreed to pay the face value of the instrument on
maturity.
o Prime commercial paper: high-quality, short-term obligations issued by
banks, corporations, and other issuers organized under the laws of a
jurisdiction within the United States.
o Other short-term obligations: high-quality, short-term obligations of
corporate issuers.
o Repurchase agreements: with respect to U.S. Government or agency
securities.
Mentor Institutional U.S. Government Money Market Portfolio
The U.S. Government Money Market Portfolio invests exclusively in U.S.
Treasury bills, notes, and bonds, and other obligations issued or guaranteed as
to principal or interest by the U.S. Government, its agencies, or
instrumentalities, and in repurchase agreements with respect to such
obligations. Certain of these obligations, including U.S. Treasury bills,
notes, and bonds, mortgage participation certificates issued or guaranteed by
the Government National Mortgage Association, and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government securities issued by federal agencies or
government-sponsored enterprises are not supported by the full faith and credit
of the United States. These securities include obligations supported by the
right of the issuer to borrow from the U.S. Treasury, such as obligations of
Federal Home Loan Banks, and obligations supported only by the credit of an
instrumentality, such as Federal National Mortgage Association bonds.
Short-term U.S. Government obligations generally are considered among the
safest short-term investments. Because of their added safety, the yields
available from U.S. Government obligations are generally lower than the yields
available from comparable corporate debt securities. The U.S. Government
guarantee of securities owned by the Portfolio does not guarantee the net asset
value of the Portfolio's shares, which the Portfolio seeks to maintain at $1.00
per share.
3
<PAGE>
Selection of Investments
Each Portfolio will invest only in U.S. dollar-denominated high-quality
securities and other U.S. dollar- denominated money market instruments meeting
credit criteria which the Trustees believe present minimal credit risk.
"High-quality securities," in the case of the Money Market Portfolio, are (i)
commercial paper or other short-term obligations rated in one of the two
highest short-term rating categories by at least two nationally recognized
rating services (or, if only one rating service has rated the security, by that
service), (ii) obligations rated at least AA by Standard & Poor's or Aa by
Moody's Investors Service, Inc. at the time of investment, and (iii) unrated
securities determined by Mentor Advisors to be of comparable quality. Each
Portfolio will maintain a dollar-weighted average maturity of 90 days or less
and will not invest in securities with remaining maturities of more than 397
days. A Portfolio may invest in variable or floating-rate securities which bear
interest at rates subject to periodic adjustment or which provide for periodic
recovery of principal on demand. Under certain conditions, these securities may
be deemed to have remaining maturities equal to the time remaining until the
next interest adjustment date or the date on which principal can be recovered
on demand. Each of the Portfolios follows investment and valuation policies
designed to maintain a stable net asset value of $1.00 per share, although
there is no assurance that these policies will be successful.
Considerations of liquidity and preservation of capital mean that a
Portfolio may not necessarily invest in money market instruments paying the
highest available yield at a particular time. Consistent with its investment
objective, a Portfolio will attempt to maximize yields by portfolio trading and
by buying and selling portfolio investments in anticipation of or in response
to changing economic and money market conditions and trends. Each Portfolio may
also invest to take advantage of what Mentor Advisors believes to be temporary
disparities in the yields of different segments of the high-quality money
market or among particular instruments within the same segment of the market.
These policies, as well as the relatively short maturity of obligations
purchased by the Portfolios, may result in frequent changes in the investments
held by the Portfolios. The Portfolios will not usually pay brokerage
commissions in connection with the purchase or sale of portfolio securities.
The Portfolios' investments will be affected by general changes in
interest rates resulting in increases or decreases in the values of the
obligations held by the Portfolios. The values of a Portfolio's securities can
be expected to vary inversely to changes in prevailing interest rates.
Withdrawals by shareholders could require the sale of portfolio investments at
a time when such a sale might not otherwise be desirable.
Diversification and concentration policies
Each Portfolio is a "diversified" investment company under the Investment
Company Act of 1940. This means that each Portfolio may invest up to 25% of its
total assets in the securities of one or more issuers, and is limited with
respect to the remaining portion of its assets to investing 5% or less of its
total assets in the securities of any one issuer (other than the U.S.
government). However, under the current rules governing money market funds, the
Portfolios generally may not invest more than 5% of their assets in any one
issuer (other than the U.S. government).
The Money Market Portfolio may invest without limit in obligations of
domestic branches of U.S. banks and U.S. branches of foreign banks (if it can
be demonstrated that they are subject to the same regulations as U.S. banks).
At times when the Portfolio has concentrated its investments in bank
obligations, the values of its portfolio securities may be especially affected
by factors pertaining to the issuers of such obligations.
4
<PAGE>
Other Investment Practices
A Portfolio may also engage to a limited extent in the following
investment practices, each of which involves certain special risks. The
Statement of Additional Information contains more detailed information about
these practices.
Foreign investments. The Money Market Portfolio may invest in obligations
of foreign issuers and in bank certificates of deposit and bankers' acceptances
payable in U.S. dollars and issued by foreign banks (including U.S. branches of
foreign banks) or by foreign branches of U.S. banks. These investments subject
the Portfolio to investment risks different from those associated with domestic
investments. Such risks include adverse political and economic developments in
foreign countries, the imposition of withholding taxes on interest income,
seizure or nationalization of foreign deposits, or the adoption of other
governmental restrictions which may adversely affect the payment of principal
and interest on such obligations. Legal remedies available to investors in
certain foreign countries may be more limited than those available with respect
to investments in the U.S. or in other foreign countries. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Portfolio's assets
held abroad) and expenses not present in the settlement of domestic
investments. In addition, foreign securities may be less liquid than U.S.
securities, and foreign accounting and disclosure standards may differ from
U.S. standards. Special tax considerations apply to foreign investments.
Repurchase agreements. Under a repurchase agreement, a Portfolio purchases
a debt instrument for a relatively short period (usually not more than one
week), which the seller agrees to repurchase at a fixed time and price,
representing the Portfolio's cost plus interest. A Portfolio will enter into
repurchase agreements only with commercial banks and with registered
broker-dealers who are members of a national securities exchange or market
makers in government securities, and only if the debt instrument subject to the
repurchase agreement is a U.S. Government security. Although Mentor Advisors
will monitor repurchase agreement transactions to ensure that they will be
fully collateralized at all times, a Portfolio bears a risk of loss if the
other party defaults on its obligation and the Portfolio is delayed or
prevented from exercising its rights to dispose of the collateral. If the other
party should become involved in bankruptcy or insolvency proceedings, it is
possible that a Portfolio may be treated as an unsecured creditor and required
to return the collateral to the other party's estate.
Securities lending. A Portfolio may lend portfolio securities to
broker-dealers. These transactions must be fully collateralized at all times
with cash or short-term debt obligations, but involve some risk to a Portfolio
if the other party should default on its obligation and the Portfolio is
delayed or prevented from exercising its rights in respect of the collateral.
Any investment of collateral by a Portfolio would be made in accordance with
the Portfolio's investment objective and policies described above.
Dividends
The Trust determines the net income of each Portfolio as of the close of
regular trading on the New York Stock Exchange (the "Exchange") each day the
Exchange is open. Each determination of a Portfolio's net income includes (i)
all accrued interest on the Portfolio's investments, (ii) plus or minus all
realized and unrealized gains and losses on the Portfolio's investments, (iii)
less all accrued expenses of the Portfolio. Each Portfolio's investments are
valued at amortized cost according to Securities and Exchange Commission Rule
2a-7. A Portfolio will not normally have unrealized gains or losses so long as
it values its investments by the amortized cost method.
5
<PAGE>
Daily dividends. Each Portfolio declares all of its net income as a
distribution on each day it is open for business, as a dividend to shareholders
of record immediately prior to the close of regular trading on the Exchange.
Shareholders whose purchase of shares of a Portfolio is accepted at or before
12:00 noon on any day will receive the dividend declared by the Portfolio for
that day; shareholders who purchase shares after 12:00 noon will begin earning
dividends on the next business day after the Portfolio accepts their order. A
Portfolio's net income for Saturdays, Sundays, and holidays is declared as a
dividend on the preceding business day. Dividends for any calendar month will
be paid on the last day of that month (or, if that day is not a business day,
on the next preceding business day), except that a Portfolio's schedule for
payment of dividends during the month of December may be adjusted to assist in
tax reporting and distribution requirements. A shareholder who withdraws the
entire balance of an account at any time during a month will be paid all
dividends declared through the time of the withdrawal. Since the net income of
each Portfolio is declared as a dividend each time it is determined, the net
asset value per share of each Portfolio normally remains at $1 per share
immediately after each determination and dividend declaration.
You can choose from two distribution options: (1) automatically reinvest
all distributions from a Portfolio in additional shares of that Portfolio; or
(2) receive all distributions in cash. If you wish to change your distribution
option, you should contact your Financial Institution (as defined below), who
will be responsible for forwarding the necessary instructions to the Trust's
transfer agent, Investors Fiduciary Trust Company ("IFTC"). If you do not
select an option when you open your account, all distributions will be
reinvested. You will receive a statement confirming reinvestment of
distributions in additional shares of a Portfolio promptly following the month
in which the reinvestment occurs.
Tax information
Federal taxes. Each Portfolio intends to qualify as a "regulated
investment company" for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal income taxes
on income (and gains, if any) it distributes to shareholders. Each Portfolio
will distribute substantially all of its ordinary income (and net capital
gains, if any) on a current basis.
General. The foregoing is a summary of certain federal income tax
consequences of investing in the Portfolios. You should consult your tax
adviser to determine the precise effect of an investment in each Portfolio on
your particular tax situation.
Buying and Selling Shares of the Portfolios
How to buy shares. The Trust offers shares of the Portfolios continuously
at a price of $1.00 per share. The Trust determines the net asset value of each
Portfolio twice each day, as of 12:00 noon and as of the close of regular
trading on the Exchange. The shares of each Portfolio are sold at net asset
value through a number of selected financial institutions, such as investment
dealers and banks (each, a "Financial Institution"). Your Financial Institution
is responsible for forwarding any necessary documentation to IFTC. There is no
sales charge on sales of shares, nor is any minimum investment required for any
of the Portfolios.
Because each Portfolio seeks to be fully invested at all times,
investments must be in Same Day Funds to be accepted. Investments which are
accepted at or before 12:00 noon will be invested at the net asset value
determined at that time; investments accepted after 12:00 noon will receive the
net asset value determined at the
6
<PAGE>
close of regular trading on the Exchange. "Same Day Funds" are funds credited
by the applicable regional Federal Reserve Bank to the account of the Trust at
its designated bank. When payment in Same Day Funds is available to the Trust,
the Trust will accept the order to purchase shares at the net asset value next
determined.
If you are considering redeeming shares or transferring shares to another
person shortly after purchase, you should pay for those shares with wired Same
Day Funds or a certified check to avoid any delay in redemption or transfer.
Otherwise, the Trust may delay payment for shares until the purchase price of
those shares has been collected which may be up to 15 calendar days after the
purchase date.
For more information on how to purchase shares of the Portfolios, contact
your Financial Institution or Mentor Services Company, Inc. ("Mentor Services
Company"), 901 East Byrd Street, Richmond, Virginia 23219. Mentor Services
Company's telephone number is 1-800-869-6042.
How to sell shares. You can redeem your Portfolio shares through your
Financial Institution any day the Exchange is open, or you may redeem your
shares by check or by mail. Redemption will be effected at the net asset value
per share of the Portfolio next determined after receipt of the redemption
request in good order. The Fund must receive your properly completed purchase
documentation before you may sell shares.
Selling shares through your Financial Institution. You may redeem your
shares through your Financial Institution. Your Financial Institution is
responsible for delivering your redemption request and all necessary
documentation to the Trust, and may charge you for its services (including, for
example, charges relating to the wiring of funds). Your Financial Institution
may accept your redemption instructions by telephone. Consult your Financial
Institution.
Selling shares by check. If you would like the ability to write checks
against your investment in a Portfolio, you should provide the necessary
documentation to your Financial Institution and complete the signature card
which you may obtain by calling your Financial Institution or your Portfolio.
When a Portfolio receives your properly completed documentation and card, you
will receive checks drawn on your Portfolio account and payable through the
Portfolio's designated bank. These checks may be made payable to the order of
any person. You will continue to earn dividends until the check clears. When a
check is presented for payment, a sufficient number of full and fractional
shares of the Portfolio in your account will be redeemed to cover the amount of
the check. Your Financial Institution may limit the availability of the
check-writing privilege or assess certain fees in connection with the
checkwriting privilege.
Shareholders using Trust checks are subject to the Trust's designated
bank's rules governing checking accounts. There is currently no charge to the
shareholder for the use of checks, although one may be imposed in the future.
Shareholders would be notified in advance of the imposition of any such charge.
(In addition, if you deplete your original check supply, there may be a charge
to order additional checks.) You should make sure that there are sufficient
shares in your account to cover the amount of the check drawn. If there is an
insufficient number of shares in the account, the check will be dishonored and
returned, and no shares will be redeemed. Because dividends declared on shares
held in your account and prior withdrawals may cause the value of your account
to change, it is impossible to determine in advance your account's total value.
Accordingly, you should not write a check for the entire value of your account
or close your account by writing a check. A shareholder may revoke
check-writing authorization by written notice to IFTC.
7
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Selling shares by mail. You may also sell shares of a Portfolio by sending
a written withdrawal request to your Financial Institution. You must sign the
withdrawal request and include a stock power with signature(s) guaranteed by a
bank, broker/dealer, or certain other financial institutions.
A Portfolio generally sends you payment for your shares the business day
after your request is received in good order. Under unusual circumstances, a
Portfolio may suspend repurchases, or postpone payment for more than seven
days, as permitted by federal securities law.
How to Exchange Shares
You can exchange your shares in any Portfolio for shares of any other
Portfolio in the Fund at net asset value, except as described below. If you
request an exchange through your Financial Institution, your Financial
Institution will be responsible for forwarding the necessary documentation to
IFTC. Exchange Authorization Forms are available from your Financial
Institution or Mentor Services Company. For federal income tax purposes, an
exchange is treated as a sale of shares and may result in a capital gain or
loss. The Trust reserves the right to change or suspend the exchange privilege
at any time. Shareholders would be notified of any change or suspension.
Consult your Financial Institution or Mentor Services Company before requesting
an exchange.
Financial Institutions
Financial Institutions provide varying arrangements for their clients with
respect to the purchase and redemption of Portfolio shares and the confirmation
thereof and may arrange with their clients for other investment or
administrative services. When you effect transactions with a Portfolio
(including among other things the purchase, redemption, or exchange of
Portfolio shares) through a Financial Institution, the Financial Institution,
and not the Portfolio, will be responsible for taking all steps, and furnishing
all necessary documentation, to effect such transactions. Financial
Institutions have the responsibility to deliver purchase and redemption
requests to a Portfolio promptly. Some Financial Institutions may establish
minimum investment requirements with respect to a Portfolio. They may also
establish and charge fees and other amounts to their client for their services.
Certain privileges, such as the check writing privilege or reinvestment
options, may not be available through certain Financial Institutions or they
may be available only under certain conditions. If your Financial Institution
holds your investment in a Portfolio in its own name, then your Financial
Institution will be the shareholder of record in respect of that investment;
your ability to take advantage of any investment options or services of the
Portfolio will depend on whether, and to what extent, your Financial
Institution is willing to take advantage of them on your behalf. Financial
Institutions may charge fees to or impose restrictions on your shareholder
account. Consult your Financial Institution for information about any fees or
restrictions or for further information concerning its services.
Management
The Trustees are responsible for generally overseeing the conduct of the
Trust's business. Mentor Investment Advisors, LLC, located at 901 East Byrd
Street, Richmond, Virginia 23219, serves as investment adviser to each of the
Portfolios, providing investment advisory services and advising and assisting
the officers of the Trust in taking such steps as are necessary or appropriate
to carry out the decisions of the Trustees. Subject to such policies as the
Trustees may determine, Mentor Advisors furnishes a continuing investment
program for the Portfolios and makes investment decisions on their behalf.
8
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Mentor Advisors has over $13 billion in assets under management and is a
wholly owned subsidiary of Mentor Investment Group, LLC ("Mentor Investment
Group") and its affiliates. Mentor Investment Group is a subsidiary of Wheat
First Butcher Singer, Inc., which is in turn a wholly owned subsidiary of First
Union Corp. ("First Union"). First Union is a leading financial services
company with approximately $172 billion in assets and $12 billion in total
stockholders' equity as of March 31, 1998. EVEREN Capital Corporation has a 20%
ownership in Mentor Investment Group and may acquire additional ownership based
principally on the amount of Mentor Investment Group's revenues derived from
assets attributable to clients of EVEREN Securities, Inc. and its affiliates.
Each Portfolio pays management fees to Mentor Advisors monthly at the
following annual rates (based on the average daily net assets of the
Portfolio): 0.22% of the first $500 million of the Portfolio's average net
assets; 0.20% of the next $500 million; 0.175% of the next $1 billion; 0.16% of
the next $1 billion; and 0.15% of any amounts over $3 billion.
The Portfolios pay all expenses not assumed by Mentor Advisors, including
Trustees' fees, auditing, legal, custodial, investor servicing, and shareholder
reporting expenses, and payments under their Distribution Plans. General
expenses of the Trust will be charged to the assets of each Portfolio on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each Portfolio (and other series of shares of the Trust) or
the nature of the services performed and relative applicability to each
Portfolio. Expenses directly charged or attributable to a Portfolio will be
paid from the assets of that Portfolio.
Mentor Advisors places all orders for purchases and sales of the
investments of each Portfolio. In selecting broker-dealers, Mentor Advisors may
consider research and brokerage services furnished to it and its affiliates.
Subject to seeking the most favorable price and execution available, Mentor
Advisors may consider sales of shares of the Portfolios (and, if permitted by
law, of the other funds in the Mentor family) as a factor in the selection of
broker-dealers.
Distribution Services
Mentor Distributors, LLC ("Mentor Distributors"), 3435 Stelzer Road,
Columbus, Ohio 43219, is the distributor of the Portfolios' shares. Mentor
Distributors is a wholly owned subsidiary of BISYS Fund Services, Inc. Each
Portfolio has adopted a Distribution Plan (each, a "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to
permit each of the Portfolios to compensate Mentor Distributors for services
provided and expenses incurred by it in promoting the sale of shares of the
Portfolio, reducing redemptions, or maintaining or improving services provided
to shareholders. The Plans provide for monthly payments by the Portfolios to
Mentor Distributors, subject to the authority of the Trustees to reduce the
amount of payments or to suspend the Plans for such periods as they may
determine. Any material increase in amounts payable under a Plan would require
shareholder approval.
In order to compensate Financial Institutions for services provided in
connection with sales of Portfolio shares and the maintenance of shareholder
accounts (or, in the case of certain Financial Institutions which are
9
<PAGE>
banking institutions, for certain administrative and shareholder services),
Mentor Distributors may make periodic payments (from any amounts received by it
under the Plans or from its other resources) to any qualifying Financial
Institution based on the average net asset value of shares for which the
Financial Institution is designated as the financial institution of record.
Mentor Distributors makes such payments at the annual rate of between 0.15% and
0.40%. Mentor Distributors may suspend or modify these payments at any time,
and payments are subject to the continuation of each Portfolio's Plan and of
applicable agreements between Mentor Distributors and the applicable Financial
Institution.
How a Portfolio's Performance is Calculated
Yield and effective yield data of a Portfolio's Retail Shares may from
time to time be included in advertisements about the Portfolios. "Yield" is
calculated by dividing a Portfolio's annualized net investment income per
Retail Share during a recent seven-day period by the net asset value per share
on the last day of that period. "Effective yield" compounds that yield for a
year and is, for that reason, greater than a Portfolio's yield. Quotations of
yield for any period when an expense limitation was in effect will be greater
than if the limitation had not been in effect. A Portfolio's performance may be
compared to various indices. See the Statement of Additional Information.
All data is based on a Portfolio's past investment results and does not
predict future performance. Investment performance, which will vary, is based
on many factors, including market conditions, the composition of a Portfolio's
investments, a Portfolio's operating expenses, and the class of shares
purchased. Investment performance also often reflects the risks associated with
a Portfolio's investment objective and policies. These factors should be
considered when comparing a Portfolio's investment results to those of other
mutual funds and other investment vehicles.
General Information
Mentor Funds is a Massachusetts business trust organized on January 20,
1992. A copy of the Agreement and Declaration of Trust, which is governed by
Massachusetts law, is on file with the Secretary of State of The Commonwealth
of Massachusetts.
The Trust is an open-end, management investment company with an unlimited
number of authorized shares of beneficial interest. Shares of the Trust may,
without shareholder approval, be divided into two or more series of shares
representing separate investment portfolios, and are currently divided into
eleven series of shares. Under the Agreement and Declaration of Trust, a
Portfolio's shares may be further divided, without shareholder approval, into
two or more classes of shares having such preferences or special or relative
rights and privileges as the Trustees may determine. Each Portfolio's shares are
currently divided into two classes, Retail Shares, which are offered, the
Prospectus, and Institutional Shares. Institutional Shares are not subject to
any 12b-1 fees, and may be subject to different expenses of other types.
Differences in expenses between the classes will affect performance. Contact
Mentor Services Company at 1-800-869-6042 for information concerning
Institutional Shares of a Portfolio and your eligibility to purchase those
shares. Each share has one vote, with fractional shares voting proportionally.
Shares of each Portfolio are freely transferable, are entitled to dividends as
declared by the Trustees, and, if a Portfolio were liquidated, would receive the
net assets of the Portfolio. The Trust may suspend the sale of shares of any
Portfolio at any time and may refuse any order to purchase shares.
10
<PAGE>
Although the Trust is not required to hold annual meetings of its shareholders,
shareholders have the right to call a meeting to elect or remove Trustees, or
to take other actions as provided in the Agreement and Declaration of Trust.
Investors Fiduciary Trust Company, located at 127 West 10th Street, Kansas
City, Missouri 64105, is the transfer agent and dividend-paying agent for the
Trust. IFTC engages at its own expense certain Financial Institutions to
perform bookkeeping, data processing, and administrative services pertaining to
the maintenance of shareholder accounts.
If you own fewer shares of a Portfolio than a minimum amount set by the
Trustees (presently 500 shares), the Trust may choose to redeem your shares and
pay you for them. You will receive at least 30 days written notice before the
Trust redeems your shares, and you may purchase additional shares at any time
to avoid a redemption. The Trust may also redeem shares if you own shares of
any Portfolio or of the Trust above any maximum amount set by the Trustees.
There is presently no maximum, but the Trustees may establish one at any time,
which could apply to both present and future shareholders.
The Trust may send a single copy of shareholder reports and communications
to an address where there is more than one registered shareholder with the same
last name, unless a shareholder at that address requests, by calling or writing
his Financial Institution or Mentor Services Company, that the Trust do
otherwise.
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<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and in the
Portfolio's official sales literature in connection with the offer of the
Portfolio's shares, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the
Portfolio. This Prospectus does not constitute an offer in any State in which,
or to any person to whom, such offering may not lawfully be made. This
Prospectus omits certain information contained in the Registration Statement,
to which reference is made, filed with the Securities and Exchange Commission.
Items which are thus omitted, including contracts and other documents referred
to or summarized herein, may be obtained from the Commission upon payment of
the prescribed fees.
Additional information concerning the securities offered hereby and the
Portfolio is to be found in the Registration Statement, including various
exhibits thereto and financial statements included or incorporated therein,
which may be inspected at the office of the Commission.
Mentor Funds
901 East Byrd Street
Richmond, VA 23219
(800) 869-6042
1998 Mentor Distributors, LLC
SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED
MAY LOSE VALUE
MK 1341
Mentor Funds
Mentor Institutional
Money Market Portfolio
Mentor Institutional U.S. Government Money Market Portfolio
Retail Shares
-------------------------
PROSPECTUS
-------------------------
September , 1998
[logo]
MENTOR
INVESTMENT GROUP
<PAGE>
MENTOR FUNDS
STATEMENT OF ADDITIONAL INFORMATION
(Mentor Institutional U.S. Government Money Market Portfolio
and Mentor Institutional Money Market Portfolio--Retail Shares)
September __, 1998
This Statement of Additional Information relates to Retail
Shares of the Mentor Institutional U.S. Government Money Market
Portfolio and Mentor Institutional Money Market Portfolio (each a
"Portfolio" and collectively the "Portfolios"). Each of the Portfolios
is a series of shares of beneficial interest of Mentor Funds (the
"Trust"). This Statement is not a prospectus and should be read in
conjunction with the relevant prospectus. Separate statements of
additional information relate to the other Portfolios comprising the
Trust. A copy of any prospectus or statement of additional information
can be obtained upon request made to Mentor Services Company, Inc., at
P.O. Box 1357, Richmond, Virginia 23218-1357, or calling Mentor Services
Company, Inc. at 1-(800) 869-6042.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
<S> <C>
GENERAL ..................................................
INVESTMENT RESTRICTIONS....................................
CERTAIN INVESTMENT TECHNIQUES..............................
MANAGEMENT OF THE TRUST....................................
PRINCIPAL HOLDERS OF SECURITIES............................
INVESTMENT ADVISORY AND OTHER SERVICES.....................
BROKERAGE..................................................
DETERMINATION OF NET ASSET VALUE...........................
TAX STATUS.................................................
THE DISTRIBUTOR............................................
INDEPENDENT ACCOUNTANTS....................................
CUSTODIAN..................................................
PERFORMANCE INFORMATION....................................
SHAREHOLDER LIABILITY......................................
MEMBERS OF INVESTMENT MANAGEMENT TEAMS.....................
RATINGS ..................................................
</TABLE>
<PAGE>
GENERAL
Mentor Funds (the "Trust") is a Massachusetts business trust
organized on January 20, 1992 as Cambridge Series Trust.
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be
changed with respect to a Portfolio without approval by the holders of a
majority of the outstanding shares of that Portfolio, a Portfolio may
not:
1. Purchase any security (other than U.S. Government
securities) if as a result: (i) as to 75% of such
Portfolio's total assets, more than 5% of the
Portfolio's total assets (taken at current value)
would then be invested in securities of a single
issuer, or (ii) more than 25% of the Portfolio's total
assets would be invested in a single industry; except
that the Institutional Money Market Portfolio may
invest up to 100% of its assets in securities of
issuers in the banking industry.
2. Acquire more than 10% of the voting securities of any
issuer.
3. Act as underwriter of securities of other issuers
except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed
to be an underwriter under certain federal securities
laws.
4. Issue any class of securities which is senior to the
Portfolio's shares of beneficial interest.
5. Purchase or sell real estate or interests in real
estate, including real estate mortgage loans, although
it may purchase and sell securities which are secured
by real estate and securities of companies that invest
or deal in real estate or real estate limited
partnership interests. (For purposes of this
restriction, investments by a Portfolio in
mortgage-backed securities and other securities
representing interests in mortgage pools shall not
constitute the purchase or sale of real estate or
interests in real estate or real estate mortgage
loans.)
6. Borrow money in excess of 5% of the value (taken at
the lower of cost or current value) of its total
assets (not including the amount borrowed) at the time
the borrowing is made, and then only from banks as a
temporary measure to facilitate the meeting of
redemption requests (not for leverage) which might
otherwise require the untimely disposition of
portfolio investments or for extraordinary or
emergency purposes.
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<PAGE>
7. Purchase or sell commodities or commodity contracts,
except that a Portfolio may purchase or sell financial
futures contracts, options on futures contracts, and
futures contracts, forward contracts, and options with
respect to foreign currencies, and may enter into swap
transactions.
8. Make loans, except by purchase of debt obligations in
which the Portfolio may invest consistent with its
investment policies, by entering into repurchase
agreements, or by lending its portfolio securities.
In addition, it is contrary to the current policy of each
Portfolio, which policy may be changed without shareholder approval, to
invest in (a) securities which at the time of such investment are not
readily marketable, (b) securities restricted as to resale (excluding
securities determined by the Trustees of the Trust (or the person
designated by the Trustees to make such determinations) to be readily
marketable), and (c) repurchase agreements maturing in more than seven
days, if, as a result, more than 10% of the Portfolio's net assets
(taken at current value) would then be invested in securities described
in (a), (b), and (c).
All percentage limitations on investments will apply at the
time of investment and shall not be considered violated unless an excess
or deficiency occurs or exists immediately after and as a result of such
investment. Except for the investment restrictions listed above as
fundamental or to the extent designated as such in a Prospectus with
respect to a Portfolio, the other investment policies described in this
Statement or in a Prospectus are not fundamental and may be changed by
approval of the Trustees.
The Investment Company Act of 1940, as amended (the "1940
Act"), provides that a "vote of a majority of the outstanding voting
securities" of a Portfolio means the affirmative vote of the lesser of
(1) more than 50% of the outstanding shares of the Portfolio, and (2)
67% or more of the shares present at a meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by proxy.
CERTAIN INVESTMENT TECHNIQUES
Set forth below is information concerning certain investment
techniques in which each Portfolio may engage, and certain of the risks
they may entail.
Repurchase Agreements
A Portfolio may enter into repurchase agreements. A repurchase
agreement is a contract under which the Portfolio acquires a security
for a relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Portfolio to
resell such security at a fixed time and price (representing the
Portfolio's cost plus interest). It is the Trust's present intention to
enter into repurchase agreements only with member banks of the Federal
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<PAGE>
Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition established by the Trustees of
the Trust and only with respect to obligations of the U.S. government or
its agencies or instrumentalities or other high quality short term debt
obligations. Repurchase agreements may also be viewed as loans made by a
Portfolio which are collateralized by the securities subject to
repurchase. The investment adviser will monitor such transactions to
ensure that the value of the underlying securities will be at least
equal at all times to the total amount of the repurchase obligation,
including the interest factor. If the seller defaults, a Portfolio could
realize a loss on the sale of the underlying security to the extent that
the proceeds of sale including accrued interest are less than the resale
price provided in the agreement including interest. In addition, if the
seller should be involved in bankruptcy or insolvency proceedings, a
Portfolio may incur delay and costs in selling the underlying security
or may suffer a loss of principal and interest if a Portfolio is treated
as an unsecured creditor and required to return the underlying
collateral to the seller's estate.
Loans of Portfolio Securities
A Portfolio may lend its portfolio securities, provided: (1)
the loan is secured continuously by collateral consisting of U.S.
Government Securities, cash, or cash equivalents adjusted daily to have
market value at least equal to the current market value of the
securities loaned; (2) the Portfolio may at any time call the loan and
regain the securities loaned; (3) a Portfolio will receive any interest
or dividends paid on the loaned securities; and (4) the aggregate market
value of securities of any Portfolio loaned will not at any time exceed
one-third (or such other limit as the Trustee may establish) of the
total assets of the Portfolio. Cash collateral received by a Portfolio
may be invested in any securities in which the Portfolio may invest
consistent with its investment policies. In addition, it is anticipated
that a Portfolio may share with the borrower some of the income received
on the collateral for the loan or that it will be paid a premium for the
loan. Before a Portfolio enters into a loan, its investment adviser
considers all relevant facts and circumstances including the
creditworthiness of the borrower. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible
delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Although voting rights
or rights to consent with respect to the loaned securities pass to the
borrower, a Portfolio retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be
voted by a Portfolio if the holders of such securities are asked to vote
upon or consent to matters materially affecting the investment. A
Portfolio will not lend portfolio securities to borrowers affiliated
with the Portfolio.
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<PAGE>
MANAGEMENT OF THE TRUST
The following table provides biographical information with respect to
each Trustee and officer of the Trust. Each Trustee who is an "interested
person" of the Trust, as defined in the 1940 Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
Position Held Principal Occupation
Name and Address with Portfolio During Past 5 Years
- ---------------- -------------- -------------------
<S> <C>
*Daniel J. Ludeman Chairman; Trustee Chairman and Chief Executive
Officer, Mentor Investment
Group, LLC; Managing Director,
Wheat, First Securities, Inc.;
Director, Wheat First Butcher
Singer, Inc.; Chairman and
Director, Mentor Income Fund,
Inc. and America's Utility Fund,
Inc.; Chairman and Trustee,
Mentor Institutional Trust and
Cash Resource Trust.
Louis W. Moelchert, Jr. Trustee Vice President for Investments,
University of Richmond; Trustee,
Mentor Institutional Trust and Cash
Resource Trust; Director, America's
Utility Fund, Inc. and Mentor Income
Fund, Inc.
<PAGE>
Thomas F. Keller Trustee Professor of Business Administration
and former Dean, Fuqua School of
Business, Duke University; Trustee,
Mentor Institutional Trust and Cash
Resource Trust; Director, America's
Utility Fund, Inc. and Mentor Income
Fund, Inc.
Arnold H. Dreyfuss Trustee Chairman, Eskimo Pie Corp.; formerly,
Chairman and Chief Executive Officer,
Hamilton Beach/Proctor-Silex, Inc.;
Trustee, Mentor Institutional Trust and
Cash Resource Trust; Director,
America's Utility Fund, Inc. and Mentor
Income Fund, Inc.
Troy A. Peery, Jr. Trustee President, Heilig-Meyers Company;
Trustee, Mentor Institutional Trust and
Cash Resource Trust; Director,
America's Utility Fund, Inc. and Mentor
Income Fund, Inc.
*Peter J. Quinn, Jr. Trustee President, Mentor Distributors, LLC; Managing Director, Mentor Investment
Group, LLC and Wheat First Butcher Singer, Inc.; formerly, Senior Vice
President/Director of Mutual Funds, Wheat First Butcher Singer, Inc.;
Trustee, Mentor Institutional Trust and Cash Resource Trust; Director,
America's Utility Fund, Inc. and Mentor Income Fund, Inc.
Arch T. Allen, III Trustee Attorney at law, Raleigh, North Carolina; Trustee, Mentor
Institutional Trust and Case Resource Trust; Director, Mentor Income Fund,
Inc. and America's Utility Fund, Inc.; formerly, Vice Chancellor for
Development and University Relations, University of North Carolina at
Chapel Hill.
<PAGE>
Weston E. Edwards Trustee President, Weston Edwards &
Associates; Trustee, Mentor
Institutional Trust and Cash Resource
Trust; Director, Mentor Income Fund,
Inc. and America's Utility Fund, Inc.;
Founder and Chairman, The Housing
Roundtable; formerly, President, Smart
Mortgage Access, Inc.
Jerry R. Barrentine Trustee President, J.R. Barrentine &
Associates; Trustee, Mentor
Institutional Trust and Cash Resource
Trust; Director, Mentor Income Fund,
Inc. and America's Utility Fund, Inc.;
formerly, Executive Vice President and
Chief Financial Officer, Barclays/American Mortgage Director Corporation;
Managing Partner, Barrentine Lott & Associates.
J. Garnett Nelson Trustee Consultant, Mid-Atlantic Holdings, LLC; Trustee, Mentor Institutional Trust
and Cash Resource Trust; Director, Mentor Income Fund, Inc., America's
Utility Fund, Inc., GE Investment Funds, Inc., and Lawyers Title Corporation;
Member, Investment Advisory Committee, Virginia Retirement System; formerly,
Senior Vice President, The Life Insurance Company of Virginia.
Paul F. Costello President Managing Director, Mentor Investment Group, LLC, Wheat First Butcher Singer,
Inc., and Mentor Investment Advisors, LLC; President, Mentor Income Fund, Inc.,
America's Utility Fund, Inc., Mentor Institutional Trust, and Cash Resource
Trust; Director, Mentor Perpetual Advisors, LLC and Mentor Trust Company.
<PAGE>
Terry L. Perkins Treasurer Senior Vice President, Mentor Investment Group, LLC; Treasurer, Cash Resource
Trust, Mentor Income Fund, Inc., and Mentor Institutional Trust; Treasurer and
Senior Vice President, America's Utility Fund, Inc.; formerly, Treasurer and
Comptroller, Ryland Capital Management, Inc.
Michael Wade Assistant Vice President, Mentor Investment Group, LLC; Assistant Treasurer, Cash
Treasurer Resource Trust, Mentor Income Fund, Inc., Mentor Institutional Trust, and
America's Utility Fund, Inc.; formerly, Senior Accountant, Wheat First Butcher
Singer, Inc.; Audit Senior, BDO Seidman.
Geoffrey B. Sale Secretary Associate Vice President Mentor Investment Group, LLC; Clerk Mentor
Institutional Trust; Secretary Cash Resource Trust, Mentor Income Fund,
Inc., Mentor Funds and Mentor Variable Investment Portfolios.
</TABLE>
The table below shows the fees paid to each Trustee by the Trust
for the 1997 fiscal year and the fees paid to each Trustee by all funds in the
Mentor family (including the Trust) during the 1997 calendar year.
<PAGE>
Total compensation
Aggregate compensation from all
Trustees from the Trust complex funds (23 Funds)
- -------- ---------------------- -------------------------
Daniel J. Ludeman 0 0
Arnold H. Dreyfuss $6,000 $12,200
Thomas F. Keller $6,000 $12,200
Louis W. Moelchert, Jr. $6,000 $12,200
Stanley F. Pauley* $6,000 $12,200
Troy A. Peery, Jr. $5,500 $11,175
Peter J. Quinn, Jr. $ 0 $ 0
Arch T. Allen, III+ $ 0 $ 0
Weston E. Edwards+ $ 0 $ 0
Jerry R. Barrentine+ $ 0 $ 0
J. Barnett Nelson+ $ 0 $ 0
- -------------
* Resigned as Trustee effective December 22, 1997
+ Elected Trustee December 22, 1997
The Trustees do not receive pension or retirement benefits from the
Trust.
The Agreement and Declaration of Trust of the Trust provides that the
Trust will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Trust, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in the best interests of the
Trust or that such indemnification would relieve any officer or Trustee of any
liability to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of his or her duties. The Trust,
at its expense, provides liability insurance for the benefit of its Trustees and
officers.
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1998, the officers and Trustees of the Trust owned as
a group less than one percent of the outstanding shares of each Portfolio. To
the knowledge of the Trust, no person owned of record or beneficially more than
5% of the outstanding shares of either Portfolio as of that date except that the
following persons owned of record Institutional Shares of the Institutional U.S.
Government Money Market Portfolio as follows:
Chase Manhattan Bank TTEE 64.05%
EVEREN Capital Corp 401K
Attn: Sandra Madrid
770 Broadway 10th Fl
New York, NY 10003-9522
Valley Childrens Hospital 7.78%
Attn: Darrell Fischer
1990 E. Gettysburg Ave.
Fresno, CA 93276-0244
The following persons owned of record Institutional Shares of the
Institutional Money Market Portfolio as follows:
WHEAT FIRST F/A/O 10.27%
JAMES J BALZARINI &
SARA S BALZARINI JT TEN
1446 RESERVE DR
AKRON OH 44333-1095
DANIEL M TABAS 10.24%
915 MONTGOMERY AVE 4TH FL
ROYAL PLAZA
NABERTH PA 19072-1549
CITY OF HOPEWELL 8.83%
300 N MAIN ST
HOPEWELL VA 23860-2740
SUSSEX COUNTY 6.91%
PO BOX 1399
SUSSEX VA 23884-0399
GREENSVILLE COUNTY 5.78%
1750 E ATLANTIC ST RM 213
EMPORIA VA 23847-6584
DINWIDDIE COUNTY 5.73%
PO BOX 178
DINWIDDIE VA 23841-0178
EVEREN CLEARING CORP CUST 5.65%
FBO ALIK A KURI IRA
112 FRANCIS ST
KENT OH 44240
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Services
Mentor Investment Advisors, LLC ("Mentor Advisors") serves as
investment adviser to each Portfolio pursuant to a Management Contract with
the Trust. Subject to the supervision and direction of the Trustees, Mentor
Advisors manages a Portfolio's portfolio in accordance with the stated
policies of that Portfolio and of the Trust. Mentor Advisors makes investment
decisions for the Portfolios and places the purchase and sale orders for
portfolio transactions. Mentor Advisors bears all of its expenses in connection
with the performance of its services. In addition, Mentor Advisors pays the
salaries of all officers and employees who are employed by it and the Trust.
Mentor Advisors provides the Portfolios with investment officers
who are authorized to execute purchases and sales of securities.
Investment decisions for the Portfolios and for the other investment
advisory clients of Mentor Advisors and its affiliates are made with a
view to achieving their respective investment objectives. Investment
decisions are the product of many factors in addition to basic
suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could
have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or
more other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously purchase or
sell the same security, in which event each day's transactions in such
security are, insofar as possible, averaged as to price and allocated
between such clients in a
-8-
<PAGE>
manner which in an investment adviser's opinion is equitable to each and
in accordance with the amount being purchased or sold by each. There may
be circumstances when purchases or sales of portfolio securities for one
or more clients will have an adverse effect on other clients. In the
case of short-term investments, the Treasury area of Wheat First Butcher
Singer handles purchases and sales under guidelines approved by
investment officers of the Trust. Mentor Advisors employs a professional
staff of portfolio managers who draw upon a variety of resources,
including Wheat, First Securities, Inc., an affiliate of Mentor
Advisors, for research information for the Portfolios.
The proceeds received by each Portfolio for each issue or sale
of its shares, and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, will be specifically allocated
to such Portfolio, and constitute the underlying assets of that
Portfolio. The underlying assets of each Portfolio will be segregated on
the Trust's books of account, and will be charged with the liabilities
in respect of such Portfolio and with a share of the general liabilities
of the Trust. Expenses with respect to a Portfolio may be allocated in
proportion to the net asset values of that Portfolio except where
allocations of direct expenses can otherwise be fairly made.
Expenses incurred in the operation of a Portfolio or otherwise
allocated to a Portfolio, including but not limited to taxes, interest,
brokerage fees and commissions, fees to Trustees who are not officers,
directors, stockholders, or employees of Wheat First Butcher Singer and
subsidiaries, SEC fees and related expenses, state Blue Sky qualification fees,
charges of the custodian and transfer and dividend disbursing agents, outside
auditing, accounting, and legal services, investor servicing fees and expenses,
charges for the printing of prospectuses and statements of additional
information for regulatory purposes or for distribution to shareholders, certain
shareholder report charges and charges relating to corporate matters are borne
by the Portfolio.
Each Management Contract is subject to annual approval by (i) the
Trustees or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the affected Portfolio, provided that in either
event the continuance is also approved by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust or Mentor
Advisors, by vote cast in person at a meeting called for the purpose of voting
on such approval. Each Management Contract is terminable without penalty, on not
more than sixty days' notice and not less than thirty days' notice, by the
Trustees, by vote of the holders of a majority of the affected Portfolio's
shares, or by Mentor Advisors. Each Management Contract terminates automatically
in the event of its assignment (as defined in the 1940 Act).
Under each Management Contract, each Portfolio pays management fees to
Mentor Advisors monthly at the following annual rates (based on average net
assets of a Portfolio): 0.22% of the first $500 million; 0.20% of the next $500
million; 0.175% of the next $1 billion; 0.16% of the next $1 billion; and 0.15%
of any amounts over $3 billion. For the fiscal period ended September 30,
1997, the U.S. Government Institutional Money Market Portfolio paid investment
advisory fees in the amount of $29,982.
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<PAGE>
BROKERAGE
Transactions on U.S. stock exchanges, commodities markets, and
futures markets and other agency transactions involve the payment by a
Portfolio of negotiated brokerage commissions. Such commissions vary
among different brokers. A particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction. Transactions in foreign investments often involve the
payment of fixed brokerage commissions, which may be higher than those
in the United States. There is generally no stated commission in the
case of securities traded in the over-the-counter markets, but the price
paid by the Portfolio usually includes an undisclosed dealer commission
or mark-up. In underwritten offerings, the price paid by the Portfolio
includes a disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and sales
of portfolio securities by a Portfolio will be with the issuer or with
underwriters of or dealers in those securities, acting as principal.
Accordingly, the Portfolios would not ordinarily pay significant
brokerage commissions with respect to securities transactions.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other
institutional investors to receive brokerage and research services (as
defined in the Securities Exchange Act of 1934, as amended (the "1934
Act")) from broker-dealers that execute portfolio transactions for the
clients of such advisers and from third parties with which such
broker-dealers have arrangements. Consistent with this practice, Mentor
Advisors receives brokerage and research services and other similar
services from many broker-dealers with which it places the Portfolios'
portfolio transactions and from third parties with which these
broker-dealers have arrangements. These services include such matters as
general economic and market reviews, industry and company reviews,
evaluations of investments, recommendations as to the purchase and sale
of investments, newspapers, magazines, pricing services, quotation
services, news services and personal computers utilized by the
investment advisers' managers and analysts. Where the services referred
to above are not used exclusively by Mentor Advisors for research
purposes, Mentor Advisors, based upon its own allocations of expected
use, bears that portion of the cost of these services which directly
relates to its non-research use. Some of these services are of value to
Mentor Advisors and its affiliates in advising various of its clients
(including the Portfolios), although not all of these services are
necessarily useful and of value in managing the Portfolios.
Mentor Advisors places all orders for the purchase and sale of
portfolio investments for the Portfolios and buys and sells investments
for the Portfolios through a substantial number of brokers and dealers.
Mentor Advisors seeks the best overall terms available for the
Portfolios, except to the extent it may be permitted to pay higher
brokerage commissions as described below. In doing so, Mentor Advisors,
having in mind a Portfolio's best interests, considers all factors it
deems relevant, including, by way of illustration, price, the size of
the transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience
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and financial stability of the broker-dealer involved and the quality of
service rendered by the broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Mentor Advisors may cause a Portfolio to pay a
broker-dealer which provides "brokerage and research services" (as
defined in the 1934 Act) to it an amount of disclosed commission for
effecting securities transactions on stock exchanges and other
transactions for a Portfolio on an agency basis in excess of the
commission which another broker-dealer would have charged for effecting
that transaction. Mentor Advisors' authority to cause a Portfolio to pay
any such greater commissions is also subject to such policies as the
Trustees may adopt from time to time. Mentor Advisors does not currently
intend to cause a Portfolio to make such payments. It is the position of
the staff of the Securities and Exchange Commission that Section 28(e)
does not apply to the payment of such greater commissions in "principal"
transactions. Accordingly, Mentor Advisors will use its best efforts to
obtain the best overall terms available with respect to such
transactions, as described above.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to such other
policies as the Trustees may determine, Mentor Advisors may consider
sales of shares of a Portfolio (and, if permitted by law, of the other
Mentor funds) as a factor in the selection of broker-dealers to execute
portfolio transactions for a Portfolio.
The Trustees have determined that portfolio transactions for
the Trust may be effected through Wheat, First Securities, Inc.
("Wheat") or EVEREN Securities, Inc. ("EVEREN"), broker-dealers
affiliated with Mentor Advisors. The Trustees have adopted certain
policies incorporating the standards of Rule 17e-l issued by the SEC
under the 1940 Act which requires, among other things, that the
commissions paid to Wheat and EVEREN must be reasonable and fair
compared to the commissions, fees, or other remuneration received by
other brokers in connection with comparable transactions involving
similar securities during a comparable period of time. Wheat and EVEREN
will not participate in brokerage commissions paid by a Portfolio to
other brokers or dealers. Over-the-counter purchases and sales are
transacted directly with principal market makers except in those cases
in which better prices and executions may be obtained elsewhere. A
Portfolio will in no event effect principal transactions with Wheat or
EVEREN in over-the-counter securities in which Wheat or EVEREN makes a
market, as the case may be.
Under rules adopted by the SEC, neither Wheat nor EVEREN may
execute transactions for a Portfolio on the floor of any national
securities exchange, but either may effect transactions for a Portfolio
by transmitting orders for execution and arranging for the performance
of this function by members of the exchange not associated with them.
Wheat and EVEREN will be required to pay fees charged to those persons
performing the floor brokerage elements out of the brokerage
compensation it receives from a Portfolio. The Trust has been
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advised by Wheat that, on most transactions, the floor brokerage
generally constitutes from 5% and 10% of the total commissions paid.
The Institutional U.S. Government Money Market Portfolio paid no
brokerage fees for the fiscal period ended September 30, 1997.
DETERMINATION OF NET ASSET VALUE
The Trust determines net asset value per share of the
Portfolios each day the New York Stock Exchange (the "Exchange") is
open. Currently, the Exchange is closed Saturdays, Sundays, and the
following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, the Fourth of July, Labor Day, Thanksgiving, and
Christmas.
The valuation of each Portfolio's portfolio securities is based
upon its amortized cost, which does not take into account unrealized
securities gains or losses. This method involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. By
using amortized cost valuation, each Portfolio seeks to maintain a
constant net asset value of $1.00 per share, despite minor shifts in the
market value of its portfolio securities. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a
Portfolio would receive if it sold the instrument. During periods of
declining interest rates, the quoted yield on shares of a Portfolio may
tend to be higher than a like computation made by a fund with identical
investments utilizing a method of valuation based on market prices and
estimates of market prices for all of its portfolio instruments. Thus,
if the use of amortized cost by a Portfolio resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in
the Portfolio would be able to obtain a somewhat higher yield if he
purchased shares of the Portfolio on that day, than would result from
investment in a fund utilizing solely market values, and existing
investors in the Portfolio would receive less investment income. The
converse would apply on a day when the use of amortized cost by a
Portfolio resulted in a higher aggregate portfolio value. However, as a
result of certain procedures adopted by the Trust, the Trust believes
any difference will normally be minimal.
The valuation of a Portfolio's portfolio instruments at
amortized cost is permitted in accordance with Securities and Exchange
Commission Rule 2a-7 and certain procedures adopted by the Trustees.
Under these procedures, a Portfolio must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase only instruments
having remaining maturities of 397 days or less, and invest in
securities determined by the Trustees to be of high quality with minimal
credit risks. The Trustees have also established procedures designed to
stabilize, to the extent reasonably possible, a Portfolio's price per
share as computed for the purpose of distribution, redemption and
repurchase at $1.00. These procedures include review of a Portfolio's
portfolio holdings by the Trustees, at such intervals as they may deem
appropriate, to determine whether a Portfolio's net asset value
calculated by using readily available market quotations deviates from
$1.00 per share, and, if so, whether such deviation may result in
material dilution or is otherwise unfair to existing shareholders. In
the event the Trustees
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determine that such a deviation may result in material dilution or is
otherwise unfair to existing shareholders, they will take such
corrective action as they regard as necessary and appropriate, including
the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten the average portfolio maturity;
withholding dividends; redemption of shares in kind; or establishing a
net asset value per share by using readily available market quotations.
Since the net income of a Portfolio is declared as a dividend
each time it is determined, the net asset value per share of a Portfolio
remains at $1.00 per share immediately after such determination and
dividend declaration. Any increase in the value of a shareholder's
investment in a Portfolio representing the reinvestment of dividend
income is reflected by an increase in the number of shares of a
Portfolio in the shareholder's account on the last day of each month
(or, if that day is not a business day, on the next business day). It is
expected that a Portfolio's net income will be positive each time it is
determined. However, if because of realized losses on sales of portfolio
investments, a sudden rise in interest rates, or for any other reason
the net income of a Portfolio determined at any time is a negative
amount, that Portfolio will offset such amount allocable to each then
shareholder's account from dividends accrued during the month with
respect to such account. If at the time of payment of a dividend by a
Portfolio (either at the regular monthly dividend payment date, or, in
the case of a shareholder who is withdrawing all or substantially all of
the shares in an account, at the time of withdrawal), such negative
amount exceeds a shareholder's accrued dividends, that Portfolio will
reduce the number of outstanding shares by treating the shareholder as
having contributed to the capital of the Portfolio that number of full
and fractional shares which represent the amount of the excess. Each
shareholder is deemed to have agreed to such contribution in these
circumstances by its investment in a Portfolio.
Should a Portfolio incur or anticipate any unusual or
unexpected significant expense or loss which would affect
disproportionately the Portfolio's income for a particular period, the
Trustees would at that time consider whether to adhere to the dividend
policy described above or to revise it in light of the then prevailing
circumstances in order to ameliorate to the extent possible the
disproportionate effect of such expense or loss on then existing
shareholders. Such expenses or losses may nevertheless result in a
shareholder's receiving no dividends for the period during which the
shares are held and receiving upon redemption a price per share lower
than that which was paid.
TAX STATUS
Each Portfolio intends to qualify each year and elect to be
taxed as a regulated investment company under Subchapter M of the United
States Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax
liability determined under Subchapter M, a Portfolio will not be subject
to federal income tax on any of its net investment
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income or net realized capital gains that are distributed to
shareholders. As a series of Massachusetts business trust, a Portfolio
will not under present law be subject to any excise or income taxes in
Massachusetts.
In order to qualify as a "regulated investment company," a Portfolio must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies;
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government Securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Portfolio and not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any issuer (other than U.S. Government Securities). In
order to receive the favorable tax treatment accorded regulated investment
companies and their shareholders, moreover, a Portfolio must in general
distribute at least 90% of its interest, dividends, net short-term capital gain,
and certain other income each year.
An excise tax at the rate of 4% will be imposed on the excess,
if any, of each Portfolio's "required distribution" over its actual
distributions in any calendar year. Generally, the "required
distribution" is 98% of the Portfolio's ordinary income for the calendar
year plus 98% of its capital gain net income recognized during the
one-year period ending on October 31 (or December 31, if the Portfolio
so elects) plus undistributed amounts from prior years. Each Portfolio
intends to make distributions sufficient to avoid imposition of the
excise tax. Distributions declared by a Portfolio during October,
November, or December to shareholders of record on a date in any such
month and paid by the Portfolio during the following January will be
treated for federal tax purposes as paid by the Portfolio and received
by shareholders on December 31 of the year in which declared.
Under federal income tax law, a portion of the difference
between the purchase price of zero-coupon securities in which a
Portfolio has invested and their face value ("original issue discount")
is considered to be income to the Portfolio each year, even though the
Portfolio will not receive cash interest payments from these securities.
This original issue discount (imputed income) will comprise a part of
the net investment income of the Portfolio which must be distributed to
shareholders in order to maintain the qualification of the Portfolio as
a regulated investment company and to avoid federal income tax at the
level of the Portfolio.
Each Portfolio is required to withhold 31% of all income
dividends and capital gain distributions, and 31% of the gross proceeds
of all redemptions of Portfolio shares, in the case of any shareholder
who does not provide a correct taxpayer identification number, about
whom a
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Portfolio is notified that the shareholder has under reported income in the
past, or who fails to certify to a Portfolio that the shareholder is not subject
to such withholding. Tax-exempt shareholders are not subject to these back-up
withholding rules so long as they furnish the Portfolio with a proper
certification.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and related regulations currently in
effect. For the complete provisions, reference should be made to the
pertinent Code sections and regulations. The Code and regulations are
subject to change by legislative or administrative actions. Dividends
and distributions also may be subject to state and federal taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes. The foregoing discussion
relates solely to U.S. federal income tax law. Non-U.S. investors should
consult their tax advisers concerning the tax consequences of ownership
of shares of a Portfolio, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate
of withholding provided by treaty).
THE DISTRIBUTOR
Mentor Distributors, LLC, located at 3435 Stelzer Road, Columbus,
Ohio 43219, is the principal distributor of the Portfolios' shares, a
subsidiary of Wheat First Butcher Singer. Mentor Distributors is acting on a
best efforts basis in the continuous offering of the Trust's shares. Mentor
Distributors, LLC is a wholly owned subsidiary of BISYS Fund Services, Inc.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, located at 99 High Street, Boston,
Massachusetts 02110, are the Portfolios' independent auditors, providing
audit services, tax return review, and other tax consulting services.
CUSTODIAN
The custodian of the Portfolios, Investors Fiduciary Trust
Company, is located at 127 West 10th Street, Richmond, Virginia 64105. A
custodian's responsibilities include generally safeguarding and
controlling a Portfolio's cash and securities, handling the receipt and
delivery of securities, and collecting interest and dividends on a
Portfolio's investments.
PERFORMANCE INFORMATION
The yield of each Portfolio is computed by determining the
percentage net change, excluding capital changes, in the value of an
investment in one share of the Portfolio over the base period, and
multiplying the net change by 365/7 (or approximately 52 weeks). A
Portfolio's effective yield represents a compounding of the yield by
adding 1 to the number representing the
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percentage change in value of the investment during the base period,
raising that sum to a power equal to 365/7, and subtracting 1 from the
result.
The Institutional U.S. Government Money Market Portfolio's yield
and effective yield for the seven-day period ended March 31, 1998 were
5.34% and 5.48%, respectively.
The Institutional Money Market Portfolio's yield and effective yield
for the seven-day period ended March 31, 1998 were 5.39% and 5.53%,
respectively.
All data for each of the Portfolios are based on past
performance and do not predict future results.
Independent statistical agencies measure a Portfolio's
investment performance and publish comparative information showing how
the Portfolio, and other investment companies, performed in specified
time periods. Agencies whose reports are commonly used for such
comparisons are set forth below. From time to time, a Portfolio may
distribute these comparisons to its shareholders or to potential
investors. The agencies listed below measure performance based on the
basis of their own criteria rather than on the basis of the standardized
performance measures described above.
Lipper Analytical Services, Inc. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, reflecting generally changes
in net asset value adjusted for reinvestment of capital gains
and income dividends. They do not reflect deduction of any
sales charges. Lipper rankings cover a variety of performance
periods, for example year-to-date, 1-year, 5-year, and 10-year
performance. Lipper classifies mutual funds by investment
objective and asset category.
Morningstar, Inc. distributes mutual fund ratings twice a
month. the ratings are divided into five groups: highest, above
average, neutral, below average and lowest. They represent a
fund's historical risk/reward ratio relative to other funds
with similar objectives. The performance factor is a
weighted-average assessment of the Portfolio's 3- year, 5-year,
and 10-year total return performance (if available) reflecting
deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk
profile of the fund. The ratings are derived from a purely
quantitative system that does not utilize the subjective
criteria customarily employed by rating agencies such as
Standard & Poor's Corporation and Moody's Investor Service,
Inc.
Weisenberger's Management Results publishes mutual fund
rankings and is distributed monthly. The rankings are based
entirely on total return calculated by Weisenberger for periods
such as year-to-date, 1-year, 3-year, 5-year and 10-year
performance. Mutual funds are ranked in general categories
(e.g., international bond, international equity, municipal
bond, and maximum capital gain). Weisenberger rankings do not
reflect deduction of sales charges or fees.
Independent publications may also evaluate a Portfolio's
performance. Certain of those publications are listed below, at the
request of Mentor Distributors, which bears full responsibility for
their use and the descriptions appearing below. From time to time any or
all of the Portfolios may distribute evaluations by or excerpts from
these publications to its
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shareholders or to potential investors. The following illustrates the
types of information provided by these publications.
Business Week publishes mutual fund rankings in its Investment
Figures of the Week column. The rankings are based on 4-week
and 52-week total return reflecting changes in net asset value
and the reinvestment of all distributions. They do not reflect
deduction of any sales charges. Portfolios are not categorized;
they compete in a large universe of over 2,000 funds. The
source for rankings is data generated by Morningstar, Inc.
Investor's Business Daily publishes mutual fund rankings on a
daily basis. The rankings are depicted as the top 25 funds in a
given category. The categories are based loosely on the type of
fund, e.g., growth funds, balanced funds, U.S. government
funds, GNMA funds, growth and income funds, corporate bond
funds, etc. Performance periods for sector equity funds can
vary from 4 weeks to 39 weeks; performance periods for other
fund groups vary from 1 year to 3 years. Total return
performance reflects changes in net asset value and
reinvestment of dividends and capital gains. The rankings are
based strictly on total return. They do not reflect deduction
of any sales charges Performance grades are conferred from A+
to E. An A+ rating means that the fund has performed within the
top 5% of a general universe of over 2000 funds; an A rating
denotes the top 10%; an A- is given to the top 15%, etc.
Barron's periodically publishes mutual fund rankings. The
rankings are based on total return performance provided by
Lipper Analytical Services. The Lipper total return data
reflects changes in net asset value and reinvestment of
distributions, but does not reflect deduction of any sales
charges. The performance periods vary from short-term intervals
(current quarter or year-to-date, for example) to long-term
periods (five-year or ten-year performance, for example).
Barron's classifies the funds using the Lipper mutual fund
categories, such as Capital Appreciation Portfolios, Growth
Portfolios, U.S. Government Portfolios, Equity Income
Portfolios, Global Portfolios, etc. Occasionally, Barron's
modifies the Lipper information by ranking the funds in asset
classes. "Large funds" may be those with assets in excess of
$25 million; "small funds" may be those with less than $25
million in assets.
The Wall Street Journal publishes its Mutual Portfolio
Scorecard on a daily basis. Each Scorecard is a ranking of the
top-15 funds in a given Lipper Analytical Services category.
Lipper provides the rankings based on its total return data
reflecting changes in net asset value and reinvestment of
distributions and not reflecting any sales charges. The
Scorecard portrays 4-week, year-to-date, one-year and 5-year
performance; however, the ranking is based on the one-year
results. The rankings for any given category appear
approximately once per month.
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Fortune magazine periodically publishes mutual fund rankings
that have been compiled for the magazine by Morningstar, Inc.
Portfolios are placed in stock or bond fund categories (for
example, aggressive growth stock funds, growth stock funds,
small company stock funds, junk bond funds, Treasury bond funds
etc.), with the top-10 stock funds and the top-5 bond funds
appearing in the rankings. The rankings are based on 3- year
annualized total return reflecting changes in net asset value
and reinvestment of distributions and not reflecting sales
charges. Performance is adjusted using quantitative techniques
to reflect the risk profile of the fund.
Money magazine periodically publishes mutual fund rankings on a
database of funds tracked for performance by Lipper Analytical
Services. The funds are placed in 23 stock or bond fund
categories and analyzed for five-year risk adjusted return.
Total return reflects changes in net asset value and
reinvestment of all dividends and capital gains distributions
and does not reflect deduction of any sales charges. Grades are
conferred (from A to E): the top 20% in each category receive
an A, the next 20% a B, etc. To be ranked, a fund must be at
least one year old, accept a minimum investment of $25,000 or
less and have had assets of at least $25 million as of a given
date.
Financial World publishes its monthly Independent Appraisals of
Mutual Portfolios, a survey of approximately 1000 mutual funds.
Portfolios are categorized as to type, e.g., balanced funds,
corporate bond funds, global bond funds, growth and income
funds, U.S. government bond funds, etc. To compete, funds must
be over one year old, have over $1 million in assets, require a
maximum of $10,000 initial investment, and should be available
in at least 10 states in the United States. The funds receive a
composite past performance rating, which weighs the
intermediate - and long-term past performance of each fund
versus its category, as well as taking into account its risk,
reward to risk, and fees. An A+ rated fund is one of the best,
while a D- rated fund is one of the worst. The source for
Financial World rating is Schabacker investment management in
Rockville, Maryland.
Forbes magazine periodically publishes mutual fund ratings
based on performance over at least two bull and bear market
cycles. The funds are categorized by type, including stock and
balanced funds, taxable bond funds, municipal bond funds, etc.
Data sources include Lipper Analytical Services and CDA
Investment Technologies. The ratings are based strictly on
performance at net asset value over the given cycles.
Portfolios performing in the top 5% receive an A+ rating; the
top 15% receive an A rating; and so on until the bottom 5%
receive an F rating. Each fund exhibits two ratings, one for
performance in "up" markets and another for performance in
"down" markets.
Kiplinger's Personal Finance Magazine (formerly Changing
Times), periodically publishes rankings of mutual funds based
on one-, three- and five-year total return performance
reflecting changes in net asset value and reinvestment of
dividends and
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capital gains and not reflecting deduction of any sales
charges. Portfolios are ranked by tenths: a rank of 1 means
that a fund was among the highest 10% in total return for the
period; a rank of 10 denotes the bottom 10%. Portfolios compete
in categories of similar funds -- aggressive growth funds,
growth and income funds, sector funds, corporate bond funds,
global governmental bond funds, mortgage-backed securities
funds, etc. Kiplinger's also provides a risk-adjusted grade in
both rising and falling markets. Portfolios are graded against
others with the same objective. The average weekly total return
over two years is calculated. Performance is adjusted using
quantitative techniques to reflect the risk profile of the
fund.
U.S. News and World Report periodically publishes mutual fund
rankings based on an overall performance index (OPI) devised by
Kanon Bloch Carre & Co., a Boston research firm. Over 2000
funds are tracked and divided into 10 equity, taxable bond and
tax-free bond categories. Portfolios compete within the 10
groups and three broad categories. The OPI is a number from
0-100 that measures the relative performance of funds at least
three years old over the last 1, 3, 5 and 10 years and the last
six bear markets. Total return reflects changes in net asset
value and the reinvestment of any dividends and capital gains
distributions and does not reflect deduction of any sales
charges. Results for the longer periods receive the most
weight.
The 100 Best Mutual Portfolios You Can Buy (1992), authored by
Gordon K. Williamson. The author's list of funds is divided
into 12 equity and bond fund categories, and the 100 funds are
determined by applying four criteria. First, equity funds whose
current management teams have been in place for less than five
years are eliminated. (The standard for bond funds is three
years.) Second, the author excludes any fund that ranks in the
bottom 20 percent of its category's risk level. Risk is
determined by analyzing how many months over the past three
years the fund has underperformed a bank CD or a U.S. Treasury
bill. Third, a fund must have demonstrated strong results for
current three-year and five-year performance. Fourth, the fund
must either possess, in Mr. Williamson's judgment, "excellent"
risk-adjusted return or "superior" return with low levels of
risk. Each of the 100 funds is ranked in five categories: total
return, risk/volatility, management, current income and
expenses. The rankings follow a fivepoint system: zero
designates "poor"; one point means "fair"; two points denote
"good"; three points qualify as a "very good"; four points rank
as "superior"; and five points mean "excellent."
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the
Trust. However, the Agreement and Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation,
or instrument entered into or executed by
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the Trust or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of a Portfolio's property for all loss
and expense of any shareholder held personally liable for the
obligations of a Portfolio. Thus the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Portfolio would be unable to meet its
obligations.
Financial Statements
The Independent Auditors' Report, financial highlights, and financial
statements included in the Institutional U.S. Government Money Market
Portfolio's Annual Report for the fiscal year ended September 30, 1997, filed
electronically on December 4, 1997 (File No. 811-6550; Accession No.
0000916641-97-001148, and the unaudited financial statements of the
Institutional U.S. Government Money Market Portfolio and of the Institutional
Money Market Portfolio filed electronically on July 9, 1998 (File No.
811-6550; Accession No. 0000916641-98-000790), are incorporated by reference
into this Statement of Additional Information.
MEMBERS OF INVESTMENT MANAGEMENT TEAMS
The following persons are investment personnel of Mentor Advisors:
Mentor Investment Advisors, LLC
Cash Management
R. Preston Nuttall, CFA -- Managing Director, Chief Investment Officer
Mr. Nuttall has more than thirty years of investment management
experience. Prior to Mentor Advisors, he led short-term fixed-income
management for fifteen years at Capitoline Investment Services, Inc. He
has his undergraduate degree in economics from the University of
Richmond and his graduate degree in finance from the Wharton School at
the University of Pennsylvania.
Hubert R. White III -- Vice President, Portfolio Manager
Mr. White has eleven years of investment management experience. Prior to
joining Mentor Advisors, he served for five years as portfolio manager
with Capitoline Investment Services. He has his undergraduate degree in
business from the University of Richmond.
Kathryn T. Allen -- Vice President, Portfolio Manager
Ms. Allen has fourteen years of investment management experience and
specializes in tax-free trades. Prior to joining Mentor Advisors, Ms.
Allen was portfolio group manager at PNC Institutional Management
Corporation. She has her undergraduate degree in commerce and business
administration from the University of Alabama.
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RATINGS
The rating services' descriptions of corporate bonds are:
Moody's Investors Service, Inc.:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge". Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Standard & Poor's:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
-21-
<PAGE>
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
A-1 and Prime-1 Commercial Paper Ratings
The rating A-1 (including A-1+) is the highest commercial paper rating
assigned by S&P. Commercial paper rated A-1 by S&P has the following
characteristics:
o liquidity ratios are adequate to meet cash requirements;
o long-term senior debt is rated "A" or better;
o the issuer has access to at least two additional channels of
borrowing;
o basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances;
o typically, the issuer's industry is well established and the
issuer has a strong position within the industry; and
o the reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determines whether
the issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1
that are determined by S&P to have overwhelming safety characteristics
are designated A-1+.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings
are the following:
o evaluation of the management of the issuer;
o economic evaluation of the issuer's industry or industries
and an appraisal of speculative- type risks which may be
inherent in certain areas;
o evaluation of the issuer's products in relation to
competition and customer acceptance;
o liquidity;
o amount and quality of long-term debt;
-22-
<PAGE>
o trend of earnings over a period of ten years;
o financial strength of parent company and the relationships
which exist with the issuer; and
o recognition by the management of obligations which may be
present or may arise as a result of public interest.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
(1) Audited Financial Statements and Supporting Schedules (For all
Portfolios other than Mentor Asset Allocation Portfolio, Mentor High
Income Portfolio, Mentor Institutional Money Market Portfolio
Mentor Institutional U.S. Government Money Market Portfolio,
Institutional Shares, and Mentor Growth Opportunities)
Financial Statements:
Portfolios of Investments -- September 30, 1997*
Statements of Assets and Liabilities -- September 30, 1997*
Statements of Operations -- year ended September 30, 1997*
Statements of Changes in Net Assets -- years/periods ended
September 30, 1997 and September 30, 1996*
Financial Highlights *(+)
Notes to Financial Statements*
Independent Auditors' Report
(2) Unaudited Financial Statements and Supporting Schedules
(Mentor Institutional Money Market Portfolio,
Mentor Institutional U.S. Government Money Market Portfolio,
Institutional Shares)
Financial Statements:
Portfolios of Investments -- March 31, 1998*
Statements of Assets and Liabilities -- March 31, 1998*
Statements of Operations -- year ended March 31, 1998*
Statements of Changes in Net Assets -- years/periods ended
March 31, 1998 and March 31, 1997*
Financial Highlights *
Notes to Financial Statements*
_____________
* Incorporated by reference into Part B to this Registration
Statement.
(+) Incorporated by reference to Part A to this Registration Statement.
(b) Exhibits:
(1)(i) Conformed copy of Declaration of Trust of the
Registrant, with Amendments No. 1 and 2 (2);
(ii) Amendment No. 5 to the Declaration of Trust of the
Registrant (12);
(iii) Form of Amendment to the Declaration of Trust of the
Registrant (13)
(iv) Form of Proposed Amendment to the Declaration of Trust
of the Registrant to be dated as of May 12, 1998 (14)
(2) Copy of By-Laws of the Registrant (1);
(3) Not applicable;
(4) Portions of Registrant's Declaration of Trust and By-Laws
relating to shareholder rights (1)(2)(12)(13);
(5)(i) Form Management Agreement of the Registrant
(Capital Growth, Income and Growth, Quality Income, and
Municipal Income Portfolios) (14);
(ii) Form of Investment Advisory Agreement
(Municipal Income Portfolio) (14);
(iii) Form of Investment Advisory Agreement
(Income and Growth Portfolio) (14);
(iv) Form of Investment Advisory and Management Agreement
(Perpetual Global Portfolio) (8);
(v) Form of Investment Advisory and Management
Agreement (Growth Portfolio) (14);
(vi) Form of Investment Advisory and Management
Agreement (Strategy Portfolio) (14);
(vii) Form of Investment Advisory and Management Agreement
(Short-Duration Income Portfolio) (14);
(viii) Form of Investment Advisory and Management
Agreement (Balanced Portfolio) (14);
(ix) Form of Investment Advisory and Management Agreement
(Institutional Money Market Portfolio) (14);
(x) Form of Investment Advisory and Management Agreement
(Institutional U.S. Government Money Market Portfolio)
(14);
(xi) Form of Investment Advisory and Management Agreement
(Growth Opportunities Portfolio) (11);
(xii) Form of Investment Advisory and Management Agreement
(Mentor High Income Portfolio) (14)
(xiii) Sub-Advisory Agreement (Mentor High Income Portfolio)(14)
(xiv) Form of Investment Advisory and Management Agreement
(Mentor Asset Allocation Portfolio) (13)
(6) Form of Distribution Agreement of the Registrant (14)
(7) Not applicable;
(8)(i) Conformed copy of Custodian Contract of the Registrant
with Investors Fiduciary Trust Company (2);
(ii) Conformed copy of Custodian Contract of the Registrant
with State Street Bank and Trust Company (2);
(iii) Form of Administration Agreement of the
Registrant in respect of each Portfolio (14);
(iv) Form of Custodian Contract with State Street Bank
and Trust Company in respect of foreign securities(7);
(9)(i) Conformed copy of Transfer Agency and Registrar
Agreement of the Registrant (2);
(ii) (a) Conformed copy of Shareholder Services Plan of the
Registrant through and including Exhibit B in respect of
the Capital Growth, Quality Income, Municipal Income,
Income and Growth, and Global Portfolios (3);
(b) Form of Instrument of Transfer of Shareholder Services
Plan (8);
(c) Form of New Exhibit C to the Shareholder Services Plan
in respect of the Class A and B shares of the Growth,
Strategy, Short-Duration Income Portfolios and the
Balanced Portfolio (6);
(d) Form of New Exhibit D to Shareholder Services Plan in
respect of Class A and B shares of the Growth Opportunities
Portfolio (11);
(e) Form of New Exhibit E to Shareholder Services Plan in
respect of Class A and B shares of the High Yield and Asset
Allocation Portfolios (13);
(9)(iii) Form of Agency Agreement with Investors Fiduciary Trust
Company (Institutional Money Market Portfolio
Institutional, U.S. Government Money Market Portfolio)
(15);
(9)(iv) Form of Draft Processing Agreement with Investors Fiduciary
Trust Company (Institutional Money Market Portfolio,
Institutional U.S. Government Money Market Portfolio) (15)
(10) Not applicable;
(11)(i) Conformed copy of Consent of Independent Auditors (15);
(ii) Conformed copy of KPMG Peat Marwick LLP opinion on
Methodology and Procedures for Accounting for Multiple
Classes of Shares (5);
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (1);
(14) Not applicable;
(15)(i) Plan of Distribution (12)
(ii) Revised Exhibit A to Plan of Distribution (15)
(16)(i) Schedules for Computation of Performance
(all Portfolios)(8)
(18)(i) Amended and Restated Rule 18f-3(d) Plan (Portfolios other
than Money Market Portfolios) (10)
(ii) Rule 18f-3 Plan (Money Market Portfolios) (15)
(27)(i) Financial Data Schedules of Class A Shares (12)
(ii) Financial Data Schedules of Class B Shares (12)
(iii) Financial Data Schedule in respect of the Balanced
Portfolio. (12)
(iv) Financial Data Schedules in respect of Money Market
Portfolios (15)
1. Incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed April 14, 1992.
2. Incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed May 14, 1993.
3. Incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed November 26, 1993.
4. Incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed August 3, 1994.
5. Incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed January 27, 1995.
6. Incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed March 15, 1995.
7. Incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed January 15, 1996.
8. Incorporated by reference to Registrant's Post-Effective Amendment No. 11
on Form N-1A filed November 29, 1996.
9. Incorporated by reference to Registrant's Post-Effective Amendment No. 12
on Form N-1A filed January 22, 1997.
10. Incorporated by reference to Registrant's Post-Effective Amendment No. 13
on Form N-1A filed March 4, 1997.
11. Incorporated by reference to Registrant's Post-Effective Amendment
No. 14 on Form N-1A filed November 7, 1997.
12. Incorporated by reference to Registrant's Post-Effective Amendment No. 15
on Form N-1A filed December 22, 1997.
13. Incorporated by reference to Registrant's Post-Effective Amendment No. 16
on Form N-1A filed on January 30, 1998.
14. Incorporated by reference to Registrant's Post-Effective Amendment No. 18
on Form N-1A filed on May 12, 1998.
15. Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant:
Reference is made to "Principal Holders of Securities" in Part
B of this Registration Statement
Item 26. Number of Holders of Securities as of June 30, 1998
Multiclass Portfolios Class A Class B
Capital Growth Portfolio 6,749 12,766
Global Portfolio 3,345 8,415
Growth Portfolio 5,905 30,212
Income and Growth Portfolio 3,978 8,951
Municipal Income Portfolio 794 1,316
Quality Income Portfolio 2,543 4,508
Short-Duration Income Portfolio 963 2,004
Strategy Portfolio 1,478 13,482
Single Class Portfolios
Balanced Portfolio 4
Mentor Institutional U.S. Government Money
Market Portfolio--Institutional Class 58
Mentor Institutional Money Market
Portfolio--Institutional Class 43
No Retail Shares of either Money Market Portfolio were outstanding on June 30,
1998
Item 27. Indemnification:
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed January 31, 1992 (File Nos.
33-45315 and 811-6550).
Item 28. Business and Other Connections of Investment Advisers
The business and other connections of each director, officer, or partner
of the entities below in which such director, officer, or partner is or has
been, at any time during the past two fiscal years, engaged for his own account
or in the capacity of director, officer, employee, partner, or trustee are set
forth in the following tables.
(a) The following is additional information with respect to the
directors and officers of Mentor Investment Advisors, LLC:
Business, Profession,
Vocation or Employment
Position with during the past
Name Investment Adviser two fiscal years
John G. Davenport Managing Director Managing Director,
Mentor Investment
Group, LLC.
R. Preston Nuttall Managing Director Managing Director,
Mentor Investment
Group, LLC.
Paul F. Costello Managing Director Managing Director,
Mentor Investment Group,
LLC; President, Mentor
Funds, Mentor
Institutional Trust, Cash
Resource Trust, Mentor
Income Fund, Inc.; and
America's Utility Fund,
Inc.; Senior Vice
President, Mentor
Distributors, LLC;
Managing Director, Mentor
Perpetual Advisors, LLC.
Theodore W. Price Managing Director Managing Director,
Mentor Investment
Group, LLC.
P. Michael Jones Managing Director Managing Director,
Mentor Investment
Group, LLC.
Peter J. Quinn, Jr. Managing Director Managing Director,
Mentor Investment
Group, LLC.
-3-
<PAGE>
Daniel J. Ludeman Chairman Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC.
Karen H. Wimbish Managing Director Managing Director,
Mentor Investment
Group, LLC.
Terry L. Perkins Treasurer Senior Vice President,
Mentor Investment Group,
L.L.C.
Michael A. Wade Controller Vice President, Mentor
Investment Group, L.L.C.
Geoffrey B. Sale Secretary Associate Vice President
Mentor Investment Group,
LLC; Clerk Mentor
Institutional Trust;
Secretary Cash Resource
Trust, Mentor Income Fund,
Inc., Mentor Funds and
Mentor Variable Investment
Portfolios.
(b) The following is additional information with respect to the directors and
officers of Mentor Perpetual Advisors, LLC ("Mentor Perpetual"):
<TABLE>
Other Substantial
Position with the Business, Profession,
Name Investment Advisor Vocation or Employment
<S> <C> <C>
Scott A. McGlashan President Director, Perpetual
Portfolio Management
Limited.
Martyn Arbib Managing Director Chairman, Perpetual
Portfolio Management
Limited.
Roger C. Cormick Managing Director Deputy Chairman -
Marketing, Perpetual
Portfolio Management
Limited.
Paul F. Costello Managing Director Managing Director, Mentor
Investment Group, LLC
and Mentor Investment
Advisors, LLC; President,
Mentor Funds, Mentor Institutional
Trust, Cash Resource
Trust, Mentor Income Fund, Inc.,
and America's Utility Fund, Inc.;
Senior Vice President, Mentor
Distributors, LLC.
Daniel J. Ludeman Managing Director Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC; Director,
Wheat First Securities,
Inc.; Managing Director,
Wheat First Butcher
Singer, Inc.
David S. Mossop Managing Director Director, Perpetual
Portfolio Management
Limited
Peter J. Quinn, Jr. Managing Director Managing Director,
Mentor Investment
Group, LLC.
Roderick A. Smyth Managing Director Managing Director,
Mentor Investment
Group, LLC.
* The address of Mentor Investment Group, LLC, Wheat, First Securities,
Inc., Wheat First Butcher Singer, Inc., Mentor Funds, Mentor Income
Fund, Inc., Mentor Investment Advisors, LLC, and Mentor Perpetual
Advisors, LLC is 901 East Byrd Street, Richmond, VA 23219. The address
of Ryland Capital Management, Inc. and RAC Income Fund, Inc. is 11000
Broken Land Parkway, Columbia, MD 21044. The address of Perpetual
Portfolio Management Limited is 48 Hart Street, Henley-on-Thames, Oxon,
England, RG92AZ.
</TABLE>
(c) The following is a list of the general partners and Senior Vice Presidents
of Wellington Management Company, LLP, located at 75 State Street, Boston
Massachusetts 02109:
Kenneth L. Abrams Paul D. Kaplan Richard S. Press
Nicholas C. Adams John C. Keogh Robert D. Rands
Rand L. Alexander Mark T. Lynch Eugene E. Record, Jr.
Deborah L. Allinson Nanch T. Lukitsh John R. Ryan
Nancy T. August Christine S. Manfredi Joseph H. Schwartz
James H. Averill Patrick J. McCloskey David W. Scudder
Marie-Claude Bernal Earl E. McEvoy Binkley C. Shorts
William N. Booth Duncan M. McFarland Trond Skramstad
Paul Braverman Paul M. Mecray, III Catherine A. Smith
William D. Dilanni Matthew E. Megargel Stephen A. Soderberg
Pamela Dippel James N. Mordy Harriett Tee Taggart
Robert W. Doran Diane C. Nordin Perry M. Traquina
Charles T. Freeman Edward P. Owens Gene R. Tremblay
Laurie A. Gabriel Saul J. Pannell Mary Ann Tynan
Frank J. Gilday, III Thomas L. Pappas Ernst H. von Metzsch
John H. Gooch David M. Parker Clare Villari
Nicholas P. Greville Robert D. Payne James L. Walters
William C.S. Hicks Jonathan M. Payson Kim Williams
Stephen M. Pazuk Frank V. Wisneski
(d) The following is additional information with respect to the directors
and officers of Van Kampen American Capital Management Inc., located
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181-4486:
Other Substantial
Position with Business, Profession,
Name Investment Advisor Vocation or Employment
---- ------------------ ----------------------
Don G. Powell Chairman and Director Chairman and Director,
VK/AC Holding, Inc.,
Van Kampen American
Capital, Inc., Van
Kampen American Capital
Distributors, Inc.,
Van Kampen American
Capital Asset
Management, Inc., Van
Kampen American Capital
Investment Advisory
Corp., and Van
Kampen American Capital
Advisors, Inc.
Philip N. Duff Chief Executive Officer President and Chief
Executive Officer,
VK/AC Holding, Inc.
and Van Kampen American
Capital, Inc.
Dennis J. McDonnell President and Chief Executive Vice
Operating Officer President, VK/AC
Holding, Inc. and Van
Kampen American
Capital, Inc.;
President and Chief
Operating Officer, Van
Kampen American
Capital Advisors, Inc.,
Van Kampen American
Capital Asset
Management, Inc.,
and Van Kampen
American Capital
Investment Advisory
Corp.
Ronald A. Nyberg Executive Vice President Executive Vice
and General Counsel President and General
Counsel, VK/AC Holding,
Inc., Van Kampen
American Capital, Inc.,
Van Kampen American
Capital Distributors,
Inc., Van Kampen
American Asset
Management, Inc., Van
Kampen American
Investment Advisory
Corp., and Van Kampen
American Capital
Advisors, Inc.
William R. Rybak Executive Vice President Executive Vice
and Chief Financial President and Chief
Officer Financial Officer,
VK/AC Holding, Inc.,
Van Kampen American
Capital, Inc., Van
Kampen American Capital
Distributors, Inc.,
Van Kampen American
Capital Asset
Management Inc., Van
Kampen American
Capital Investment
Advisory Corp., and
Van Kampen American
Capital Advisors, Inc.
Peter W. Hegel Executive Vice President Executive Vice
President, Van Kampen
American Capital Asset
Management, Inc.,
Van Kampen American
Capital Investment
Advisory Corp., and
Van Kampen American
Capital Advisors, Inc.
Alan T. Sachtleben Executive Vice President Executive Vice
President, Van Kampen
American Capital
Asset Management, Inc.,
Van Kampen American
Capital Investment
Advisory Corp., and
Van Kampen American
Capital Advisors, Inc.
Item 29. Principal Underwriters:
(a) Mentor Distributors, LLC, the Fund's principal underwriter, acts as
principal underwriter for the following investment companies:
The Mentor Funds
o Mentor Growth Portfolio
o Mentor Strategy Portolio
o Mentor Short-Duration Income Portfolio
o Mentor Balanced Portfolio
o Mentor Capital Growth Portfolio
o Mentor Perpetual Global Portfolio
o Mentor High Income Portfolio
o Mentor Income and Growth Portfolio
o Mentor Quality Income Portfolio
o Mentor Municipal Income Portfolio
o Mentor Institutional U.S. Government Money Market Portfolio
o Mentor Institutional Money Market Portfolio
Cash Resource Trust
o Cash Resource Money Market Fund
o Cash Resource U.S. Government Money Market Fund
o Cash Resource Tax-Exempt Money Market Fund
o Cash Resource California Tax-Exempt Money Market Fund
o Cash Resource New York Tax-Exempt Money Market Fund
Mentor Institutional Trust
o Mentor U.S. Government Cash Management Portfolio
o Mentor Fixed-Income Portfolio
o Mentor Perpetual International Portfolio
Mentor Investment Group
o Mentor Income Fund
o America's Utility Fund
Mentor Variable Investment Portfolios
o Mentor VIP Growth Portfolio
o Mentor VIP Strategy Portfolio
o Mentor VIP Balanced Portfolio
o Mentor VIP Capital Growth Portfolio
o Mentor VIP Perpetual International Portfolio
(b) Information concerning officers of Mentor Distributors, LLC:
-10-
Name And Principal Positions And Offices Positions And Offices
Business Address* With Underwriter With Registrant
- ----------------- -------------------- ---------------------
Lynn Mangum Chairman Inapplicable
D'Ray Moore President Inapplicable
Dennis Sheehan Executive Vice President Inapplicable
William J. Tomko Senior Vice President Inapplicable
Mark J. Rybarczyk Senior Vice President Inapplicable
Kevin J. Dell Vice President and Inapplicable
Secretary
Michael D. Burns Vice President Inapplicable
David Blackmore Vice President Inapplicable
Robert L. Tuch Assistant Secretary Inapplicable
Steven Ludwig Compliance Officer Inapplicable
*Principal Address for all Officers:
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-8000
(c) Inapplicable.
Item 30. Location of Accounts and Records
Certain accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act and the rules promulgated thereunder
are maintained by the Fund at 901 East Byrd Street, Richmond, Virginia
23219 or by Boston Financial Data Services, Inc., the Registrant's
transfer agent, at 2 Heritage Drive, North Quincy, Massachusetts
02171. Records relating to the duties of the Registrant's custodian
are maintained by the Registrant's Custodian, Investors Fiduciary
Trust Company, 127 West 10th Street, Kansas City, Missouri 64105.
Records relating to the duties of the Registrant's distributor are
maintained by the Registrant's Distributor, Mentor Distributors, LLC,
3435 Stelzer Road, Columbus, Ohio 43219-8000.
Item 31. Management Services
None.
Item 32. Undertakings:
(a) Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
be signed on behalf of the undersigned, thereunto duly authorized, in the City
of Richmond and the Commonwealth of Virginia, on the 10th day of July, 1998.
MENTOR FUNDS
By: /s/ Paul F. Costello
Paul F. Costello
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacity and on the date
indicated:
<TABLE>
<CAPTION>
Name Title Date
<S> <C>
* July 10, 1998
- -----------------------
Daniel J. Ludeman Chairman and Trustee
(Chief Executive
Officer)
/s/ Peter J. Quinn, Jr. Trustee July 10, 1998
- -----------------------
Peter J. Quinn, Jr.
* July 10, 1998
- -----------------------
Arnold H. Dreyfuss Trustee
* July 10, 1998
- -----------------------
Thomas F. Keller Trustee
* July 10, 1998
- -----------------------
Louis W. Moelchert, Jr. Trustee
* July 10, 1998
- -----------------------
Troy A. Peery, Jr. Trustee
- -----------------------
Arch T. Allen, III Trustee
- -----------------------
Weston E. Edwards Trustee
- -----------------------
Jerry R. Barrentine Trustee
- -----------------------
J. Garnett Nelson Trustee
/s/ Paul F. Costello July 10, 1998
- ------------------------
Paul F. Costello President
/s/ Terry L. Perkins July 10, 1998
- ------------------------
Terry L. Perkins Treasurer (Principal Financial
and Accounting Officer)
*/s/ Peter J. Quinn, Jr. Attorney-in-fact July 10, 1998
- ------------------------
Peter J. Quinn, Jr.
</TABLE>
EXHIBIT INDEX
Exhibit Page
9(iii) Form of Agency Agreement with Investors Fiduciary Trust
Company (Institutional Money Market Portfolio, Institutional
U.S. Government Money Market Portfolio)
(iv) Form of Draft Processing Agreement with Investors Fiduciary
Trust Company (Institutional Money Market Portfolio,
Institutional U.S. Government Money Market Portfolio)
15 (ii) Revised Exhibit A to Plan of Distribution
18 (ii) Rule 18f-3 Plan (Money Market Portfolios)
27 (iv) Financial Data Schedules in respect of Money Market Portfolios
AGENCY AGREEMENT
THIS AGREEMENT made the ___ day of ________, 1998, by and between INVESTORS
FIDUCIARY TRUST COMPANY, a state chartered trust company organized and existing
under the laws of the State of Missouri, having its principal place of business
at 127 West 10th Street, Kansas City, Missouri 64105 ("IFTC"), and MENTOR FUNDS,
a Massachusetts business trust, having its principal place of business at 901
East Byrd Street, Richmond, Virginia 23219 on behalf of each of Mentor
Institutional Money Market Portfolio and Mentor Institutional U.S. Government
Money Market Portfolio (A reference to "Fund" shall be to Mentor Funds on behalf
of each such Portfolio, severally and not jointly).:
WITNESSETH:
WHEREAS, Mentor Funds desires to appoint IFTC as Transfer Agent and
Dividend Disbursing Agent for each Fund, and IFTC desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of IFTC as Transfer Agent and Dividend
Disbursing Agent for Fund, there will be filed with IFTC the following
documents, upon request:
A. A certified copy of the resolutions of the Trustees of Mentor Funds
appointing IFTC as Transfer Agent and Dividend Disbursing Agent, approving
the form of
-1-
<PAGE>
this Agreement, and designating certain persons to sign share certificates,
if any, and give written instructions and requests on behalf of Fund;
B. A certified copy of the Agreement and Declaration of Trust of Mentor
Funds and all amendments thereto,:
C. A certified copy of the Bylaws of Mentor Funds;
D. Copies of Registration Statements and amendments thereto, filed with the
Securities and Exchange Commission.
E. Specimens of all forms of outstanding share certificates, in the forms
approved by the Trustees of Mentor Funds, with a certificate of the
Secretary of Mentor Funds as to such approval;
F. Specimens of the signatures of the officers of Mentor Funds authorized
to sign share certificates and individuals authorized to sign written
instructions and requests;
G. An opinion of counsel for Mentor Funds with respect to:
(1) Mentor Funds' organization and existence under the laws of its
state of organization,
(2) The status of all shares of beneficial interest of Fund under the
Securities Act of 1933, as amended, and any other applicable federal
or state statute and
(3) That all issued shares are, and all unissued shares will be, when
issued, validly issued, fully paid and nonassessable.
-2-
<PAGE>
2. Certain Representations and Warranties of IFTC.
IFTC represents and warrants to Fund that:
A. It is a trust company duly organized and existing and in good standing
under the laws of Missouri.
B. It is duly qualified to carry on its business in the State of Missouri.
C. It is empowered under applicable laws and by its charter and bylaws to
enter into and perform the services contemplated in this Agreement.
D. It is registered as a transfer agent to the extent required under the
Securities Exchange Act of 1934.
E. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
F. It has and will continue to have and maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
3. Certain Representations and Warranties of Fund.
Mentor Fund represents and warrants to IFTC that:
A. It is a business trust duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
B. It is an open-end management investment company registered under the
Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of 1933 has been filed
and will be effective with respect to all shares of Fund being offered for
sale.
-3-
<PAGE>
D. All requisite steps have been or will be taken to register Fund's shares
for sale in all applicable states.
E. Mentor Funds is empowered under applicable laws and by its Agreement and
Declaration of Trust and bylaws to enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, Mentor Funds
hereby appoints IFTC as Transfer Agent and Dividend Disbursing Agent in
respect of each Fund.
B. IFTC hereby accepts such appointment and agrees that it will act as each
Fund's Transfer Agent and Dividend Disbursing Agent. IFTC agrees that it
will also act as agent in connection with Fund's periodic withdrawal
payment accounts and other open accounts or similar plans for shareholders,
if any.
C. IFTC agrees to provide the necessary facilities, equipment and personnel
to perform its duties and obligations hereunder in accordance with industry
practice.
D. Mentor Funds agrees to use its best efforts to deliver to IFTC in Kansas
City, Missouri, as soon as they are available, originals or copies of all
of its shareholder account records in respect of each Fund.
E. IFTC agrees that it will perform the usual and ordinary services as
transfer, dividend disbursing and shareholders' servicing agent for Fund,
and as agent of Fund for shareholder accounts thereof, in a timely manner,
including issuing
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<PAGE>
(including countersigning), transferring and canceling share certificates;
maintaining all shareholder accounts; providing transaction journals;
preparing shareholder meeting lists, mailing proxies and proxy materials,
receiving and tabulating proxies, certifying the shareholder votes in the
Fund; mailing shareholder reports and prospectuses; withholding, as
required by Federal law, taxes on shareholder accounts, disbursing income
dividends and capital gains distributions to shareholders, preparing,
filing and mailing U.S. Treasury Department Forms 1099, W2-P, 1042S and
backup withholding as required for all shareholders; preparing and mailing
confirmation forms to shareholders and dealers, as instructed, for all
purchases and liquidations of shares of the Fund and other confirmable
transactions in shareholders' accounts; recording reinvestment of dividends
and distributions in shares of the Fund; providing or making available
on-line daily and monthly reports as provided by the mutual fund processing
system utilized by IFTC (the "DST System") and as requested by the Fund or
its management company; maintaining those records necessary to carry out
IFTC's duties hereunder, including all information reasonably required by
the Fund to account for all transactions in Fund shares, calculating the
appropriate sales charge with respect to each purchase of Fund shares as
set forth in the prospectus for the Fund, determining the portion of each
sales charge payable to the dealer participating in a sale in accordance
with schedules delivered to IFTC by the Fund's principal underwriter or
distributor (hereinafter
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<PAGE>
"principal underwriter") from time to time, disbursing dealer commissions
collected to such dealers, determining the portion of each sales charge
payable to such principal underwriter and disbursing such commissions to
the principal underwriter; receiving correspondence pertaining to any
former, existing or new shareholder account, processing such correspondence
for proper recordkeeping, and responding promptly to shareholder
correspondence; processing, as provided in the Fund's prospectus, purchases
or redemptions or instructions to settle any mail or wire order purchases
or redemptions received in proper order as set forth in the prospectus,
rejecting promptly any requests not received in proper order (as defined by
the Fund or its designated agents), and causing exchanges of shares to be
executed in accordance with the Fund's instructions and prospectus and the
general exchange privilege application, as they may be amended for time to
time; mailing to dealers confirmations of wire order trades; and mailing
copies of shareholder statements to shareholders and registered
representatives of dealers in accordance with the Fund's instructions.
F. IFTC will use reasonable efforts to provide, reasonably promptly under
the circumstances, the same services with respect to any new, additional
functions or features or any changes or improvements to existing functions
or features as provided for in the Fund's prospectus as amended from time
to time, provided, however, that IFTC is advised in advance by the Fund of
any changes therein and the mutual fund processing system utilized by IFTC
(the "DST System") as
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<PAGE>
then constituted supports such additional functions and features. If any
addition to, improvement of or change in the features and functions
currently provided by the DST System requested by the Fund requires an
enhancement or modification to the DST System, IFTC shall not be liable
therefor until such modification or enhancement is installed on the DST
System. If any new, additional function or feature or change or improvement
to existing functions or features or new service measurably increases
IFTC's cost of performing the services required hereunder at the current
level of service, IFTC shall advise the Fund of the amount of such increase
and if the Fund elects to utilize such function, feature or service, IFTC
shall be entitled to increase its fees by the amount of the increase in
costs.
5. Limit of Authority.
Unless otherwise expressly limited by the resolution of appointment or by
subsequent action by the Fund, the appointment of IFTC as Transfer Agent
will be construed to cover the full amount of authorized shares of the
class or classes for which IFTC is appointed as the same will, from time to
time, be constituted, and any subsequent increases in such authorized
amount.
6. Compensation and Expenses.
A. In consideration for its services hereunder as Transfer Agent and
Dividend Disbursing Agent, Fund will pay to IFTC from time to time, as
compensation for all services rendered as Agent, the fees set forth in a
separate schedule to be
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<PAGE>
agreed to by Fund and IFTC in writing from time to time and also all its
reasonable out-of-pocket expenses, charges, counsel fees, and other
disbursements (Compensation and Expenses) incurred in connection with the
agency. The initial fee schedule is attached hereto and incorporated herein
by reference. If the Fund has not paid such Compensation and Expenses to
IFTC within a reasonable time, IFTC may charge against any monies held
under this Agreement, the amount of any Compensation and/or Expenses for
which it shall be entitled to reimbursement under this Agreement.
B. The Fund also agrees promptly to reimburse IFTC for all reasonable
out-of- pocket expenses or disbursements incurred by IFTC in connection
with the performance of services under this Agreement including, but not
limited to, expenses for postage (in advance if requested), express
delivery services, freight charges, envelopes, checks, drafts, forms
(continuous or otherwise), specially requested reports and statements,
telephone calls, telegraphs, stationery supplies, reasonable outside
counsel fees, outside mailing fu-ms, (including Support Resources, Inc.),
magnetic tapes, reels or cartridges (if sent to Fund or to a third party at
Fund's request) and magnetic tape handling charges, record storage and
media for storage of records (e.g., microfilm, microfiche, optical
platters, computer tapes), computer equipment installed at the Fund's
request at the Fund's or third party's premises, telecommunications
equipment and related telephone lines, proxy soliciting, processing and/or
tabulating costs, and NSCC
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<PAGE>
transaction fees to the extent any of the foregoing are paid by IFTC. The
Fund agrees to pay postage expenses at least one day in advance if so
requested. In addition, any other expenses incurred by IFTC at the request
or with the consent of the Fund will be promptly reimbursed by the Fund.
7. Operation of IFTC System.
A. In connection with the performance of its services under this Agreement,
IFTC is responsible for such items as:
(1) The accuracy of entries in IFTC's records reflecting orders and
instructions received by IFTC from dealers, shareholders, Fund or its
principal underwriter;
(2) The availability and the accuracy of shareholder lists,
shareholder account verifications, confirmations and other shareholder
account information to be produced from its records or data;
(3) The accurate and timely issuance of dividend and distribution
checks in accordance with instructions received from Fund;
(4) The accuracy of redemption transactions and payments in accordance
with redemption instructions received from dealers, shareholders or
Fund;
(5) The deposit daily in Fund's appropriate special bank account of
all checks and payments received from dealers or shareholders for
investment in shares;
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<PAGE>
(6) The requiring of proper forms of instruction, signatures and
signature guarantees and any necessary documents supporting the
legality of transfers, redemptions and other shareholder account
transactions, all in conformance with IFTC's present procedures with
such changes as may be required or approved by Fund; and
(7) The maintenance of a current duplicate set of Fund's essential
records at a secure distant location, in a form available and usable
forthwith in the event of any break-down or disaster disrupting its
main operation.
8. Indemnification.
A. IFTC shall at all times use reasonable care, due diligence and act in
good faith in performing its duties under this Agreement. Except to the
extent caused by IFTC's bad faith conduct, IFTC shall not be responsible
for, and the Fund shall indemnify and hold IFTC harmless from and against,
any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability which may be asserted against IFTC or for which IFTC
may be held to be liable, to the extent arising out of or attributable to:
(1) All actions of IFTC required to be taken by IFTC pursuant to this
Agreement, provided that IFTC has acted in good faith and with due
diligence and reasonable care;
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<PAGE>
(2) The Fund's refusal or failure to comply with the terms of this
Agreement, the Fund's negligence or willful misconduct, or the breach
of any representation or warranty of the Fund hereunder;
(3) The good faith reliance on, or the carrying out of, any written or
recorded oral instructions or requests of persons designated by the
Fund in writing from time to time as authorized to give instructions
on its behalf or representatives of the Fund's investment advisor,
sponsor or principal underwriter or IFTC's good faith reliance on, or
use of, information, data, records and documents received from, or
which have been prepared and/or maintained by the Fund, its investment
advisor, its sponsor or its principal underwriter;
(4) Defaults by dealers or shareowners with respect to payment for
share orders previously entered;
(5) The offer or sale of the Fund's shares in violation of any
requirement under federal securities laws or regulations or the
Securities laws or regulations of any state or in violation of any
stop order or other determination or ruling by any federal agency or
state with respect to the offer or sale of such shares in such state
(unless such violation results from IFTC's failure to comply with
written instructions of the Fund or of any officer of the Fund that no
offers or sales be made in or to residents of such state);
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<PAGE>
(6) The Fund's errors and mistakes in the use of the DST System, the
data center, computer and related equipment used to access the DST
System (the "DST Facilities"), and control procedures relating thereto
in the verification of output and in the remote input of data; and
(7) Errors, inaccuracies, and omissions in, or errors, inaccuracies or
omissions of IFTC arising out of or resulting from such errors,
inaccuracies and omissions in, the Fund's records, shareholder and
other records, delivered to IFTC hereunder by the Fund or its prior
agent(s).
B. IFTC shall indemnify and hold the Fund harmless from and against any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of IFTC's failure to comply with the terms of this
Agreement or arising out of or attributable to IFTC's negligence or willful
misconduct or breach of any representation or warranty of IFTC hereunder.
In the event IFTC shall be liable under this subsection, then the Fund
shall (unless the liability arises out of IFTC's willful misconduct) take
reasonable steps with IFTC to mitigate the amount of such liability.
C. EXCEPT FOR VIOLATIONS OF SECTION 23., IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO ANYONE,
INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR CONSEQUENTIAL,
SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT OR FAILURE TO
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ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THE
POSSIBILITY THEREOF.
9. Certain Covenants of IFTC and Fund.
A. All requisite steps will be taken by Fund from time to time when and as
necessary to register the Fund's shares for sale in 0 states in which
Fund's shares shall at the time be offered for sale and require
registration. If at any time Fund will receive notice of any stop order or
other proceeding in any such state affecting such registration or the sale
of Fund's shares, or of any stop order or other proceeding under the
federal securities laws affecting the sale of Fund's shares, Fund will give
prompt notice thereof to IFTC.
B. IFTC hereby agrees to perform such transfer agency functions as are set
forth in Section 4.E. above and establish and maintain facilities and
procedures reasonably acceptable to Fund for safekeeping of share
certificates, check forms, and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices, and to carry such insurance as it
considers adequate and reasonably available.
C. To the extent required by Section 31 of the Investment Company Act of
1940 as amended and Rules thereunder, IFTC agrees that all records
maintained by IFTC relating to the services to be performed by IFTC under
this Agreement are
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<PAGE>
the property of Fund and will be preserved and will be surrendered promptly
to Fund on request.
D. IFTC agrees to furnish Fund semiannual reports of its financial
condition, consisting of a balance sheet, earnings statement and any other
financial information reasonably requested by Fund. The annual financial
statements will be certified by IFTC's certified public accountants.
E. IFTC represents and agrees that it will use its best efforts to keep
current on the trends of the investment company industry relating to
shareholder services and will use its best efforts to continue to modernize
and improve.
F. IFTC will permit Fund and its authorized representatives to make
periodic inspections of its operations as such would involve the Fund at
reasonable times during business hours.
10. Recapitalization or Readjustment.
In case of any recapitalization, readjustment or other change in the
capital structure of Fund requiring a change in the form of share
certificates, IFTC will issue or register certificates in the new form in
exchange for, or in transfer of, the outstanding certificates in the old
form, upon receiving:
A. Written instructions from an officer of Fund;
B. Certified copy of the amendment to Mentor Funds' Agreement and
Declaration of Trust or other document effecting the change;
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<PAGE>
C. Certified copy of the order or consent of each governmental or
regulatory authority, required by law to the issuance of the shares in the
new form, and an opinion of counsel that the order or consent of no other
government or regulatory authority is required;
D. Specimens of the new certificates in the form approved by the Trustees
of Mentor Funds, with a certificate of the Secretary of Mentor Funds as to
such approval;
E. Opinion of counsel for Mentor Funds stating:
(1) The status of the shares of beneficial interest of Fund in the new
form under the Securities Act of 1933, as amended and any other
applicable federal or state statute; and
(2) That the issued shares in the new form are, and all unissued
shares will be, when issued, validly issued, fully paid and
nonassessable.
11. Share Certificates.
Fund will furnish IFTC with a sufficient supply of blank share certificates
and from time to time will renew such supply upon the request of IFTC. Such
certificates will be signed manually or by facsimile signatures of the
officers of Fund authorized by law and by bylaws to sign share
certificates, and if required, will bear the corporate seal or facsimile
thereof.
12. Death, Resignation or Removal of Signing Officer.
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<PAGE>
Fund will file promptly with IFTC written notice of any change in the
officers authorized to sign share certificates, written instructions or
requests, together with two signature cards bearing the specimen signature
of each newly authorized officer. In case any officer of Fund who will have
signed manually or whose facsimile signature will have been affixed to
blank share certificates will die, resign, or be removed prior to the
issuance of such certificates, IFTC may issue or register such share
certificates as the share certificates of Fund notwithstanding such death,
resignation, or removal, until specifically directed to the contrary by
Fund in writing. In the absence of such direction, Fund will file promptly
with IFTC such approval, adoption, or ratification as may be required by
law.
13. Future Amendments of Charter and Bylaws.
Fund will promptly file with IFTC copies of all material amendments to its
Agreement and Declaration of Trust or bylaws made after the date of this
Agreement.
14. Instructions, Opinion of Counsel and Signatures.
At any time IFTC may apply to any person authorized by the Fund to give
instructions to IFTC, and may with the approval of a Fund officer consult
with legal counsel for Fund or its own legal counsel at the expense of
Fund, with respect to any matter arising in connection with the agency and
it will not be liable for any action taken or omitted by it reasonably and
in good faith in reliance upon such instructions or upon the opinion of
such counsel. IFTC will be protected in acting upon any paper or document
reasonably believed by it to be genuine and to have been signed by the
proper person or
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<PAGE>
persons and will not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from Fund. It will also
be protected in recognizing share certificates which it reasonably believes
to bear the proper manual or facsimile signatures of the officers of Mentor
Funds, and the proper countersignature of any former Transfer Agent or
Registrar, or of a co-Transfer Agent or co-Registrar.
15. Omnibus Accounts.
The Fund recognizes that the Fund shall be marketed primarily through
broker-dealers whose clients' positions and holdings in the Fund will be
contained within an omnibus account in the broker-dealer's name.
Accordingly, the books and records of the Fund as maintained by IFTC may
not reflect the name, address and other identifying information concerning
the ultimate investors but merely the name, address and other identifying
information concerning the nominee broker-dealer. Further, IFTC shall not
have any role or responsibility in choosing, accepting or rejecting
prospective broker- dealer nominees. Accordingly, IFTC shall have no
responsibility or liability for the actions or omissions of any such
broker-dealer.
16. [Intentionally Omitted].
17. Records.
IFTC will maintain customary records in connection with its agency, and
particularly will maintain those records required to be maintained pursuant
to subparagraph (2) (iv) of paragraph (b) of Rule 31a-l under the
Investment Company Act of 1940, if any.
18. Disposition of Books, Records and Canceled Certificates.
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<PAGE>
IFTC will send periodically to Fund, or to where designated by the
Secretary or an Assistant Secretary of Mentor Funds, all books, documents,
and all records no longer deemed needed for current purposes and share
certificates which have been canceled in transfer or in exchange, upon the
understanding that such books, documents, records, and share certificates
will be maintained by the Fund under and in accordance with the
requirements of Section 17Ad-7 adopted under the Securities Exchange Act of
1934. Such materials relating to share certificates which have been stopped
and replaced and share certificates escheated will not be destroyed by Fund
without the written consent of IFTC (which consent will not be unreasonably
withheld), but will be safely stored for possible future reference.
19. Provisions Relating to IFTC as Transfer Aunt.
A. IFTC will make original issues of share certificates upon written
request of an officer of Fund and upon being furnished with a certified
copy of a resolution of the Trustees authorizing such original issue, an
opinion of counsel as outlined in paragraphs LD. and G. of this Agreement,
any documents required by paragraphs 5. or 10. of this Agreement, and
necessary funds for the payment of any original issue tax.
B. Before making any original issue of certificates Fund will furnish IFTC
with sufficient funds to pay all required taxes on the original issue of
the share, if any. Fund will furnish IFTC such evidence as may be required
by IFTC to show the actual value of the shares.
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<PAGE>
C. Shares will be transferred and new certificates issued in transfer, or
shares accepted for redemption and funds remitted therefor, upon surrender
of the old certificates in form reasonably deemed by IFTC properly endorsed
for transfer or redemption accompanied by such documents as IFTC may
reasonably deem necessary to evidence that authority of the person making
the transfer or redemption, and bearing satisfactory evidence of the
payment of any applicable share transfer taxes. IFTC reserves the right to
refuse to transfer or redeem shares until it is satisfied that the
endorsement or signature on the certificate or any other document is valid
and genuine, and for that purpose it may require a guaranty of signature by
a firm having membership in the New York Stock Exchange, Midwest Stock
Exchange, American Stock Exchange, Pacific Coast Stock Exchange, or any
other exchange acceptable to IFTC or by a bank or trust company approved by
it. IFTC also reserves the right to refuse to transfer or redeem shares
until it is satisfied that the requested transfer or redemption is legally
authorized, and it will incur no liability for the refusal in good faith to
make transfers or redemptions which, in its reasonable judgment, are
improper or unauthorized. IFTC may, in effecting transfers or redemptions,
rely upon Simplification Acts or other statutes which protect it and Fund
in not requiring complete fiduciary documentation.
D. When mail is used for delivery of share certificates IFTC will forward
share certificates in "nonnegotiable" form by first class or registered
mail and share
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<PAGE>
certificates in "negotiable" form by registered mail, all such mail
deliveries to be covered while in transit to the addressee by insurance
arranged for by IFTC.
E. IFTC will issue and mail subscription warrants, certificates
representing share dividends, exchanges or split ups, or act as Conversion
Agent upon receiving written instructions from any officer of Mentor Funds
and such other documents as IFTC deems necessary.
F. IFTC will issue, transfer, and split up certificates and will issue
certificates representing full shares upon surrender of scrip certificates
aggregating one full share or more when presented to IFTC for that purpose
upon receiving written instructions from an officer of Mentor Funds and
such other documents as IFTC may deem necessary.
G. IFTC may issue new certificates in place of certificates represented to
have been lost, destroyed, stolen or otherwise wrongfully taken upon
receiving instructions from Fund and indemnity satisfactory to IFTC and
Fund, and may issue new certificates in exchange for, and upon surrender
of, mutilated certificates. Such instructions from Fund will be in such
form as will be approved by the Trustees of Fund and will be in accordance
with the provisions of law and the bylaws of Fund governing such matter.
H. IFTC will supply a shareholder's list to Fund for any shareholder
meeting upon receiving a request from an officer of Mentor Funds. It will
also supply lists at such other times as may be requested by an officer of
Mentor Funds.
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I. Upon receipt of written instructions of an officer of Mentor Funds, IFTC
will address and mail notices to shareholders.
J. In case of any request or demand for the inspection of the share books
of Fund or any other books in the possession of IFTC, IFTC will endeavor to
notify Fund and to secure instructions as to permitting or refusing such
inspection. IFTC reserves the right, however, to exhibit the share books or
other books to any person in case it is advised by its counsel that it may
be held responsible for the failure to exhibit the share books or other
books to such person.
20. Provisions Relating to Dividend Disbursing Agency.
A. IFTC will, at the expense of Fund, provide a special form of check
containing the imprint of any device or other matter desired by Fund. Said
checks must, however, be of a form and size convenient for use by IFTC.
B. If Fund desires to include additional printed matter, financial
statements, etc., with the dividend checks, the same will be furnished IFTC
within a reasonable time prior to the date of mailing of the dividend
checks, at the expense of Fund.
C. If Fund desires its distributions mailed in any special form of
envelopes, sufficient supply of the same will be furnished to IFTC but the
size and form of said envelopes will be subject to the approval of IFTC. If
stamped envelopes are used, they must be furnished by Fund; or if postage
stamps are to be affixed to the envelopes, the stamps or the cash necessary
for such stamps must be furnished by Fund.
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<PAGE>
D. IFTC will maintain one or more deposit accounts as Agent for Fund, into
which the monies received by IFTC as agent of the Fund and monies for
payment of dividends, distributions, redemptions or other disbursements
provided for hereunder will be deposited, and against which checks will be
drawn. If IFTC shall, in its sole discretion, advance funds to the account
of the Fund which results in an overdraft on any account of Fund maintained
at IFTC, the amount of the overdraft shall be payable on demand along with
the overdraft fee provided for in the then-current fee schedule. IFTC shall
be entitled to offset the amount owed for any such overdraft against any
other monies of Fund held by IFTC.
E. IFTC is authorized and directed to stop payment of checks theretofore
issued hereunder, but not presented for payment, when the payees thereof
allege either that they have not received the checks or that such checks
have been mislaid, lost, stolen, destroyed or through no fault of theirs,
are otherwise beyond their control, and cannot be produced by them for
presentation and collection, and, upon receipt of appropriate indemnities
or undertakings from the payees, to issue and deliver duplicate checks in
replacement thereof.
21. Assumption of Duties By the Fund.
The Fund may assume certain duties and responsibilities of IFTC or those
usual and ordinary services of Transfer Agent and Dividend Disbursement
Agent as those terms are referred to in Section 4.E. of this Agreement
including but not limited to accepting
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shareholder instructions and transmitting orders based on such instructions
to IFTC, preparing and mailing confirmations, obtaining certified TIN
numbers, and disbursing monies of the Fund. To the extent the Fund or its
agent or affiliate assumes such duties and responsibilities, IFTC shall be
relieved from all responsibility and liability therefor.
22. Termination of Agreement.
A. This Agreement may be terminated by either party upon receipt of ninety
(90) days written notice from the other party.
B. Fund, in addition to any other rights and remedies, shall have the right
to terminate this Agreement forthwith upon the occurrence at any time of
any of the following events:
(1) Any interruption or cessation of operations by IFTC or its assigns
which materially interferes with the business operation of Fund;
(2) The insolvency or bankruptcy of IFTC or the appointment of a
receiver for IFTC;
(3) Any merger, consolidation or sale of substantially all the assets
of IFTC;
(4) The acquisition of a controlling interest in IFTC by any broker,
dealer, investment adviser or investment company except as may
presently exist; or
(5) Failure by IFTC or its assigns to perform its duties in accordance
with the Agreement, which failure materially adversely affects the
business operations of Fund and which failure continues for ten (10)
business days
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after receipt of written notice from Fund; provided, however, that
notwithstanding the foregoing, if such failure cannot reasonably be
cured within ten (10) business days, then IFTC shall have such time as
is reasonably necessary to cure such failure, but not to exceed thirty
(30) days.
C. In the event of termination, Fund will promptly pay IFTC all amounts due
to IFTC hereunder.
D. In the event of termination, (1) IFTC will transfer the books and
records of the Fund to the designated successor transfer for reasonable
compensation therefor, and (2) IFTC will provide other reasonably necessary
information relating to its services provided hereunder other than IFTC
Protected Information (as defined in Section 23.C.) for reasonable
compensation therefor.
23. Confidentiality.
A. IFTC agrees that, except as provided in the last sentence of Section
19.J hereof, or as otherwise required by law, IFTC will keep confidential
all records of and information in its possession relating to Fund or its
shareholders or shareholder accounts and will not disclose the same to any
person except at the request or with the consent of Fund.
B. Fund agrees that, except as otherwise required by law, Fund will keep
confidential all financial statements and other financial records (other
than statements and records relating solely to Fund's business dealings
with IFTC or
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Fund operations) and all manuals, systems and other technical information
and data, not publicly disclosed, relating to IFTC's operations and
programs furnished to it by IFTC pursuant to this Agreement and will not
disclose the same to any person except at the request or with the consent
of IFTC.
C. The Fund acknowledges that IFTC and DST Systems, Inc. (DST) have
proprietary rights in and to the computerized data processing recordkeeping
system used by IFTC to perform services hereunder including, but not
limited to the maintenance of shareholder accounts and records, processing
of related information and generation of output (the MFS System),
including, without limitation any changes or modifications of the MFS
System and any other IFTC or DST programs, data bases, supporting
documentation, or procedures (collectively "IFTC Protected Information")
which the Fund's access to the MFS System or computer hardware or software
may permit the Fund or its employees or agents to become aware of or to
access and that the IFTC Protected Information constitutes confidential
material and trade secrets of IFTC. The Fund agrees to maintain the
confidentiality of the IFTC Protected Information. The Fund acknowledges
that any unauthorized use, misuse, disclosure or taking of IFTC Protected
Information which is confidential as provided by law, or which is a trade
secret, residing or existing internal or external to a computer, computer
system, or computer network, or the knowing and unauthorized accessing or
causing to be accessed of any computer,
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computer system, or computer network, may be subject to civil liabilities
and criminal penalties under applicable state law. The Fund will advise all
of its employees and agents who have access to any IFTC Protected
Information or to any computer equipment capable of accessing IFTC or DST
hardware or software of the foregoing. DST is intended to be, and shall be,
a third party beneficiary of the Fund's obligations and undertakings
contained in this Section.
D. If either party believes at any time that it is or may be required by
law to disclose confidential information of the other party, it shall
notify such other party thereof as promptly as possible and permit the
other party to contest the disclosure by appropriate legal proceedings or
other action.
24. Changes and Modifications.
A. During the term of this Agreement IFTC will use on behalf of the Fund
without additional cost all modifications, enhancements, or changes which
DST or IFTC may make to its shareholder/transfer agent processing system in
the normal course of its business and which are applicable to functions and
features offered by the Fund, unless substantially all DST or IFTC clients
are charged separately for such modifications, enhancements or changes,
including, without limitation, substantial system revisions or
modifications necessitated by changes in existing laws, rules or
regulations. The Fund agrees to pay IFTC promptly for modifications and
improvements utilized by the Fund which are charged for separately at the
rate provided for in DST's or IFTC's standard pricing schedule
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which shall be identical for substantially all clients, if a standard
pricing schedule shall exist, provided that IFTC shall give the Fund ninety
(90) days advance written notice thereof. If there is no standard pricing
schedule, the par- ties shall mutually agree upon the rates to be charged.
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B. IFTC shall have the right, at any time and from time to time, to alter
and modify any systems, programs, procedures or facilities used or employed
in performing its duties and obligations hereunder; provided that the Fund
will be notified as promptly as possible prior to implementation of such
alterations and modifications and that no such alteration or modification
or deletion shall materially adversely change or affect the operations and
procedures of the Fund unless the Fund is given sixty (60) days prior
notice to allow the Fund to change its procedures; and provided further,
that if any fee increase shall result therefrom, IFTC shall give the Fund
ninety (90) days advance written notice thereof. All enhancements,
improvements, changes, modifications or new features added to the DST
System however developed or paid for shall be, and shall remain, the
confidential and exclusive property of, and proprietary to, DST Systems,
Inc. Notwithstanding the foregoing, at the request of the Fund, all
enhancements, improvements, modifications or new features added to the DST
System developed at the expense of the Fund, may be subject to a period of
exclusivity as mutually agreed to by the Fund and IFTC, which period may
not exceed three (3) months.
25. Subcontractors.
The Fund acknowledges that IFTC intends to subcontract certain obligations
hereunder and consents to such subcontract on condition that IFTC shall
remain fully responsible and liable for the complete and proper performance
of IFTC's obligations hereunder,
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that all acts and omissions of any such subcontractor hereunder shall for
all purposes hereof be considered and deemed to be acts or omissions of
IFTC and that the Fund shall be fully responsible and liable hereunder to
IFTC as if no subcontract had occur- red and such obligations had been
performed by IFTC itself.
26. Force Majeure.
IFTC shall not be responsible or liable for its failure or delay in
performance of its obligations under this Agreement to the extent arising
out of or caused, directly or indirectly, by circumstances beyond its
reasonable control, including, without limitation: any interruption, loss
or malfunction or any utility, transportation, computer (hardware or
software) or communication service; inability to obtain labor, material,
equipment or transportation, or a delay in mails; governmental or exchange
action, statute, ordinance, rulings, regulations or direction; war, strike,
riot, emergency, civil disturbance, terrorism, vandalism, explosions, labor
disputes, freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection; or any other cause, contingency, circumstance
or delay not subject to IFTC's reasonable control.
27. Declaration of Trust. The parties agree that this Agreement shall constitute
a separate and discrete agreement between IFTC and each Fund, as if set out
in a separate writing executed by IFTC and Mentor Funds on behalf solely of
that Fund alone, and no other series of shares of Mentor Funds shall have
any obligation or incur any liability under or
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in respect of such agreement. Any reference in this Agreement to a "Fund" shall
be construed so as to give effect to the foregoing.
A copy of the Agreement and Declaration of Trust of Mentor Funds is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of Mentor Funds as
Trustees and not individually and that the obligations of or arising out of this
instrument are not binding upon any of the Trustees or beneficiaries
individually, but binding only upon the assets and property of the Fund in
question.
28. Miscellaneous.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of the
State of Missouri.
B. All terms and provisions of this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties, and the indemnification extended
hereunder, if any, are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed each party
hereto.
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<PAGE>
E. The captions in the Agreement are included for convenience of reference
only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
F. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the courts held
to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be affected, and
the rights and obligations of the parties shall be construed and enforced
as if the Agreement did not contain the particular part, term or provision
held to be illegal or invalid.
H. This Agreement may not be assigned by any party hereto without prior
written consent of the other parties.
I. Neither the execution nor performance of this Agreement shall be deemed
to create a partnership or joint venture by and between Fund and IFTC.
J. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto and
any actions taken or omitted by any party hereunder shall not affect any
rights or obligations of any other party hereunder.
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<PAGE>
K. The failure of either party to insist upon the performance of any terms
or conditions of this Agreement or to enforce any rights resulting from any
breach of any of the terms or conditions of this Agreement, including the
payment of damages, shall not be construed as a continuing or permanent
waiver of any such terms, conditions, rights or privileges, but the same
shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
L. This Agreement constitutes the entire agreement between the par-ties
hereto and supersedes any prior agreement, draft or agreement or proposal
with respect to the subject matter hereof, whether oral or written, and
this Agreement may not be modified except by written instrument executed by
both parties.
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<PAGE>
WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers, to be effective the ____ day of
_________, 1998.
INVESTORS FIDUCIARY TRUST COMPANY
By:____________________________________
Title:__________________________________
MENTOR FUNDS
By:____________________________________
Title:___________________________________
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DRAFT PROCESSING AGENCY AGREEMENT
This Draft Processing Agency Agreement ("Agreement") is hereby entered into
as of this ___ day of _________, 1998, by and between INVESTORS FIDUCIARY TRUST
COMPANY, a Missouri trust company having its principal offices at 127 West 10th
Street, Kansas City, Missouri 64105-1716 ("IFTC") and MENTOR FUNDS, a
Massachusetts business trust having its principal offices at 901 East Byrd
Street, Richmond, Virginia 23219, on behalf of each of Mentor Institutional
Money Market Portfolio and Mentor Institutional U.S. Government Money Market
Portfolio. (A reference to "Fund" shall be to Mentor Funds on behalf of each
such Portfolio, severally and not jointly).
WHEREAS, Fund desires to make available to its participating shareholders
("Shareholders") a feature by which such Shareholders may authorize the Fund to
redeem shares ("Shares") of the Fund owned by such Shareholder and may access
the proceeds of such redemptions through the use of drafts drawn on such Fund
and made payable through a financial institution that serves as the Fund's
paying, clearing, settlement and processing agent;
WHEREAS, in order to make such feature available to its Shareholders, Fund
desires to enter into an arrangement with a financial institution under which
such financial institution would perform certain payment, clearing, processing,
presentation, settlement and other services with respect to such drafts; and
WHEREAS, IFTC is willing to provide certain such services to the Fund, on
certain terms and conditions;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement, the parties hereby agree as follows:
1. Drafts. All drafts ("Drafts") to be processed by IFTC under this
Agreement shall conspicuously state that they are "payable through" IFTC and
shall contain such other identification, names, numbers, MICR codes and other
information as IFTC may from time to time reasonably specify. IFTC shall have no
obligation to perform any services hereunder with respect to any Draft that does
not contain all markings and information so specified by IFTC or is
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not in a form which has been expressly approved by IFTC. The cost of
designing, printing and distributing Drafts to Shareholders shall be borne
solely by the Fund.
2. Receipt of Drafts. Drafts shall contain names and MICR coding such that
they will be received by a bank ("Sub-Agent") designated by IFTC to act as
IFTC's sub-agent for purposes of receiving from the Federal Reserve Bank of
Kansas City Drafts payable through IFTC. For purposes of this Agreement, the
term "Banking Day" shall mean each day on which the Federal Reserve Bank of
Kansas City is open for business. All Drafts presented by the Federal Reserve
Bank of Kansas City to IFTC's Sub-Agent between 2:01 p.m. Central Time of each
Banking Day and 2:00 p.m. Central Time the next-following Banking Day shall be
batched and shall be deemed to have been presented to IFTC on such
next-following Banking Day.
3. Daily Report. Each Banking Day, IFTC shall prepare and transmit to the
Fund or a designated agent of the Fund an electronic data transmission (the
"Daily Report") containing the following information with respect to each Draft
in the batch presented to the Sub-Agent on that Banking Day: Draft number,
amount of Draft, Fund number, Fund account number, date of Draft, and all other
information contained on the MICR line supplied by the Federal Reserve Bank of
Kansas City. Additionally, each Daily Report shall reflect, with respect to each
Fund number, the total amounts of all Drafts contained in the batch received by
IFTC's -Sub-Agent on that Banking Day that were drawn on such Fund (the
"Settlement Amount"). IFTC shall cause the Daily Reports to be transmitted on an
overnight basis so as to be received by Fund prior to 8 a.m. Eastern Time on the
next Banking Day.
4. Review of Drafts. Fund shall at all times provide IFTC a current and
updated listing of all Fund accounts on which Draft privileges have been
extended to the respective Shareholders, the names of all Shareholders whose
signatures are required on such Drafts, and signature cards containing signature
specimens of such Shareholders. Fund will immediately notify IFTC in writing in
the event that Draft privileges are terminated on any such account or if the
account is closed or terminated; until the first Banking Day following IFTC's
receipt of such written notification, IFTC is authorized to continue to perform
its duties under this Agreement (including, without limitation, the honoring,
dishonoring, payment and settlement of Drafts of Shareholders whose Draft
privileges are canceled and/or accounts terminated) as if such
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<PAGE>
privileges had not been revoked and/or accounts terminated. If the Fund
does not furnish to IFTC a signature card with respect to a Shareholder whose
name appears on a Draft received by IFTC or its Sub-Agent, IFTC shall have no
duty whatsoever with respect to reviewing or comparing any signatures on such
Draft, but shall, if the amount of such Draft equals or exceeds the $5,000
threshold set forth below, list such Draft on the "Notification of Proposed
Dishonor" list provided by it to Fund pursuant to the provisions of section 6
below.
IFTC shall review each Draft in the amount of $5,000 or more in the batch
presented to its Sub-Agent on each Banking Day, for purposes of comparing the
signature(s) contained on the Draft against the applicable signature cards
furnished to IFTC by the Fund with respect to the Shareholder whose name(s) is
printed on such Draft, and to determine whether the Draft contains the purported
signature of all parties required by the applicable signature card. IFTC will
also review each such Draft for evidence of any "material alteration" (as
defined in the Uniform Commercial Code of the State of Missouri) to the Draft.
If, based upon such inspection, IFTC determines that the signature on a Draft
appears different from that on the respective signature card, or that there is
evidence of material alteration, IFTC shall so notify Fund in accordance with
the provisions of Section 6 below (by listing the Draft on the "Notification of
Proposed Dishonor") , shall send Fund a copy of such Draft and the applicable
signature card (if any) held by IFTC, and shall inform Fund that IFTC proposes
to dishonor the Draft for that reason. Unless IFTC is instructed by Fund in
accordance with the timetable and provisions of Section 6 below to honor such
Draft, IFTC is deemed to be authorized and instructed by Fund to dishonor each
such Draft on such Notification of Proposed Dishonor on the following Banking
Day and return it through such procedures and methods as IFTC deems proper.
The Fund acknowledges and agrees that the only duty or standard of care
that IFTC shall have with respect to comparison of signatures and determination
of material alterations, whether hereunder or under any provision of applicable
law, shall be to exercise reasonable care in an effort to determine that the
signature(s) on each Draft of $5,000 or more drawn on an account for which IFTC
has been provided a signature card reasonably appears to be the same as those
appearing on the respective signature card(s), and that the Draft does not
contain any obvious evidence of a material alteration. It is agreed that if IFTC
uses reasonable care in carrying out
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<PAGE>
such duties, it shall have no liability even if it is subsequently
established that there was a forgery or alteration on a Draft. Notwithstanding
anything contained above to the contrary, it is expressly agreed and understood
that IFTC shall have no duty or obligation whatsoever to review any Draft for
signature verification or material alteration if such Draft purports to be drawn
in an amount of less than $5,000 or if IFTC has not been provided a signature
card for all Shareholders whose name(s) appear on such Draft. IFTC is authorized
and instructed to cause each Draft under $5,000 to be honored and paid unless
instructed otherwise through an Exception Report or effective stop payment order
furnished to it pursuant to the provisions of, and within the deadlines
established by, this Agreement. IFTC shall also have no responsibility or
liability whatsoever with respect to the genuineness, effectiveness, sufficiency
or existence of any endorsements on any Draft, regardless of amount.
5. Stop Payment Orders. The Fund may send IFTC a stop payment order with
respect to any Draft. The Fund may also -instruct its Shareholders to send
directly to IFTC any stop payment orders that the Shareholder may wish to make
effective with respect to a Draft drawn by such Shareholder.
If IFTC receives a stop payment order from the Fund or from a Shareholder,
it is authorized to, and shall, act upon the stop payment order in accordance
with the following terms and conditions. Each stop payment order must contain
the following information: the name and number of the Fund on which the Draft
was drawn, the Draft number, the Shareholder's name and number that appears on
the Draft, the amount and date of the Draft, and such other information as IFTC
may reasonably from time to time request. Any stop payment order received by
IFTC in writing shall be effective for a period of six months, and any stop
payment order received by telephone shall be effective only for 14 days unless
written confirmation of same is received within such 14 day period, in which
case the total effective period of the stop order payment shall be six months.
Any stop payment order received by IFTC on a Banking Day prior to 10:30 a.m.
Central Time shall become effective on the same Banking Day; a stop payment
order received by IFTC after 10:30 a.m. Central Time shall not become effective
until the following Banking Day.
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<PAGE>
Notwithstanding the foregoing, IFTC is authorized, but not ,obligated, to
waive any requirement set forth above with respect to a stop payment order and
to act on any stop payment order that does not fully comply with the above
requirements, irrespective of whether the stop payment order has yet become
effective pursuant to the foregoing provisions. If a Daily Report reflects a
Draft with respect to which there is outstanding an effective stop payment order
or a stop payment order that IFTC has elected to honor (notwithstanding its
effectiveness or non- compliance with the requirements of this Section 5), IFTC
will so notify Fund either in the respective Daily Report or by separate
notification.
6. Notification of Dishonored Items and Items for Which no Signature Card
was Furnished. As early as reasonably possible each Banking Day IFTC shall
notify Fund of each Draft presented to it on the preceding Banking Day
(identifying it by Fund number, Shareholder number, date and amount) that it
proposes to dishonor as a result of the examination and review to be conducted
by it pursuant to the provisions of Section 4 above, or as a result of its
receipt of a stop payment order relating to such Draft, or as a result of its
not having been furnished with a signature card for the Shareholder(s) whose
name(s) appear on such Draft. Such notification ("Notification of Proposed
Dishonor") shall be by telephone or facsimile device sent to such place as the
Fund shall specify from time to time. A copy of the Draft and any signature card
applicable to the Shareholder whose name(s) are printed thereon that Bank has in
its possession shall also be sent to Fund at the same time. If IFTC receives
notice from the Fund pursuant to the provisions of Section 7 below or otherwise
notifying IFTC to honor a Draft notwithstanding the fact that IFTC had proposed
to dishonor it, Fund shall be deemed to have unconditionally honored and
approved the Draft for payment, and IFTC is authorized to cause the Draft to be
honored, and the Fund agrees to reimburse IFTC with respect to such Draft in
accordance with the schedule and procedures set forth in Section 10 hereof. If
by the later of (i) one hour after IFTC has given the Fund the Notification of
Proposed Dishonor or (ii) 10:30 a.m. Central Time on such Banking Day, Fund has
not notified IFTC pursuant to the provisions of Section 7 below or otherwise to
honor and pay such Draft, IFTC shall be deemed to be authorized and instructed
to dishonor the Draft.
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<PAGE>
7. Exception Report. Provided IFTC has met the deadline set forth in
Section 3 for transmission of the relevant Daily Report, no later than 10:30
a.m. Central Time each Banking Day (or, in the case of exceptions to the
Notification of Proposed Dishonor, no later than the time specified in the
immediately preceding Section) , the Fund shall, either by electronic data
transmission or written notice, deliver to IFTC a listing (the "Exception
Report") identifying each Draft listed in the Daily Report received by the Fund
with respect to the immediately-preceding Banking Day that the Fund desires to
dishonor and specifically identifying each Draft listed in the latest
Notification of Proposed Dishonor that Fund desires to have honored. Each Draft
shall be identified by the Fund number, Shareholder number, amount, date, Draft
number and such other information as IFTC may require from time to time. IFTC is
authorized and directed to cause all Drafts identified on each Exception Report
to be dishonored or honored, as Fund has indicated, and IFTC shall have no duty
to confirm, investigate or -take any other action with respect to any Draft
listed on the Exception Report, or to determine whether the dishonoring or
honoring of such Draft is appropriate under the circumstances.
8. Dishonor. Each Banking Day, IFTC shall initiate procedures to dishonor
and return all Drafts listed on the Daily Report sent by it to the Fund with
respect to the previous Banking Day, which: (i) were listed on the Exception
Report received by IFTC on such Banking Day as being Drafts to be dishonored,
(ii) for which stop payment orders became effective or on which IFTC elected to
act pursuant to its authority set forth in Section 5 hereof, or (iii) which were
listed on the Notice of Proposed Dishonor sent by IFTC to Fund and for which
IFTC did not receive an Exception Report or other notification authorizing and
instructing IFTC to honor such Drafts. All such Drafts will be returned by IFTC
with such notation as IFTC may from time to time deem appropriate. IFTC will
provide direct notice of dishonor to the depository bank for each dishonored
Draft if such notice is required pursuant to Regulation CC of the Board of
Governors of the Federal Reserve System.
9. Payment. Except for Drafts to be dishonored and returned by IFTC
pursuant to Section 8 above, all Drafts reflected on a Daily Report shall be
deemed to be unconditionally approved by the Fund for payment as of 10:30 a.m.
Central Time on the Banking Day immediately following the Banking Day as of
which the Daily Report reflecting such Draft was
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<PAGE>
prepared. IFTC is authorized, as Fund's agent, to cause all such approved
Drafts (the "Approved Drafts") to be paid and settled, and Fund shall pay to
IFTC in accordance with the procedures and schedule set out in Section 10
hereof, all sums required to fully reimburse IFTC for all amounts paid by IFTC
in connection with the settlement and payment of all Approved Drafts. Fund
acknowledges and agrees that its reimbursement obligation to IFTC is absolute,
and that it will reimburse IFTC irrespective of whether Fund is able to obtain
payment from its shareholder and irrespective of whether such shareholder has
adequate funds or shares in his/her account with Fund to facilitate such payment
to Fund.
10. Settlement. IFTC shall establish an agency settlement account (the
"Settlement Account") at IFTC over which IFTC has the sole power of withdrawal.
IFTC is authorized to debit the Settlement Account to effect payment of all
reimbursements, payments and other sums due it from Fund from time to time. No
later than 10:30 a.m. Central Time each Banking Day, the Fund shall transfer
immediately-available funds to the Settlement Account in an amount equal to the
Settlement Amount reflected in the Daily Report received by Fund with respect to
the immediately-preceding Banking Day, and IFTC is authorized to immediately
debit the Settlement Account an amount equal to such Settlement Amount. The
parties agree and understand that such debit is to be treated as preliminary
settlement with respect to the Drafts reflected on such Daily Report, and that
as a result of one or more of such Drafts being subsequently dishonored or other
occurrences, adjustments to such preliminary settlement may be required.
With respect to each Draft for which preliminary settlement was received by
IFTC pursuant to the immediately-preceding paragraph and which was subsequently
dishonored and returned pursuant to the provisions of Section 8 hereof, IFTC
shall reimburse the Fund the amount of such Draft as soon as IFTC's Sub-Agent
receives reimbursement therefor from the Federal Reserve Bank of Kansas City.
11. Settlement Account. In the event that Fund fails to transfer funds to
the Settlement Account in the full amount of the Settlement Amount, IFTC is
authorized to dishonor and return one or more of the Drafts (in such order as
IFTC may in its discretion determine) to
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which such Settlement Amount relates, to the extent that the balance of the
Settlement Account is insufficient to reimburse IFTC for such Drafts.
12. Overdrafts. Notwithstanding the fact that the balance in the Settlement
Account may be insufficient to enable IFTC to effect a debit sufficient to
reimburse IFTC for the payment of all Drafts reflected on a Daily Report, IFTC
may nevertheless in its sole discretion elect to honor and cause to be paid all
such Drafts reflected on the Daily Report that are otherwise deemed to have been
honored and accepted by Fund, by advancing IFTC's own funds. In such event, Fund
shall immediately pay to IFTC the amount of such deficiency, together with a
"Lost Earnings Feel' as provided for in the fee schedule set forth on Exhibit A
attached hereto and incorporated herein, as such Exhibit A may from time to time
be amended. IFTC shall be entitled to offset the amount owed for any overdraft
against any other monies of Fund held by IFTC.
13. Return of Drafts. All Approved Drafts shall be held by IFTC and sent to
Fund or, if Fund so instructs IFTC, to the respective Shareholder, on a monthly
basis.
14. Processing Fee. IFTC shall bill Fund, and Fund shall pay to IFTC, on a
monthly basis, all charges and fees applicable to IFTC's performance hereunder
in accordance with the aforesaid fee schedule.
15. Indemnification. Fund shall indemnify IFTC and hold IFTC harmless from
all liability, claims, losses, damages, expenses (including reasonable
attorneys' fees and disbursements incurred by IFTC in resisting claims for which
IFTC is indemnified hereunder or incurred by IFTC in enforcing the Fund's
obligations and agreements hereunder), suits and demands of every kind which may
be incurred by IFTC or that may be asserted against IFTC: (i) by Fund, any
Shareholder, any payee or endorser or endorsee or holder of any Draft, or any
other person or entity whomsoever, with respect to any Draft subject to this
Agreement or any Shareholder or any act or failure to act by the Fund or IFTC
under this Agreement, (ii) as a result of IFTC's causing any Draft to be honored
and paid, or to be dishonored, whether or not at the instruction or direction of
the Fund, in accordance with its authorization hereunder, or (iii) in connection
with any action taken or not taken by IFTC in accordance with this Agreement
with regard to a stop payment order received by it; provided, however, that the
Fund shall have no
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obligation to indemnify or hold IFTC harmless to the extent any such claim
arises out of negligence or willful misconduct or breach -of this Agreement by
IFTC.
IFTC shall indemnify Fund and hold Fund harmless from and against all
liabilities, claims, losses, suits and damages of any kind whatsoever which may
be incurred by or assessed against Fund as a result of (i) any act or failure to
act by IFTC which is in violation of the terms of this Agreement, or (ii) the
failure of IFTC to exercise the degree of care required by Section 4 with
respect to the duties of IFTC set forth therein or its negligence in the
performance of its other duties under this Agreement, or (iii) IFTC's willful
misconduct.
16. Special Damages. In no event shall either party be liable to the other
hereunder with respect to any consequential, incidental or punitive damages or
awards; provided, however, that the foregoing shall not affect the obligation of
either party (the "indemnifying party") to indemnify the other (the "indemnified
party") for damages or awards, however denominated, which the indemnified party
must pay to shareholders or other third parties as a result of occurrences or
circumstances which otherwise give rise to an obligation of the indemnifying
party to indemnify the indemnified party pursuant hereto.
17. Confidentiality. IFTC and Fund shall each have the right, in accordance
with applicable law, to record any and all communications and verbal
instructions as may be given by one of them to the other or by any Shareholder
during any telephone conversations. Fund shall immediately deliver to IFTC all
signature cards and copies of agreements and other relevant records (if any)
maintained by Fund with respect to Shareholders as may be necessary to IFTC in
performance of its obligations under this Agreement. IFTC shall be entitled to
rely conclusively on the completeness and correctness of such signature cards,
agreements and records, and Fund shall indemnify and hold IFTC harmless of and
from any and all expenses, damages and losses to the extent, but only to the
extent, they arise out of or in connection with any error, omission, inaccuracy
or other deficiency of or from such signature cards, agreements and records, or
from the failure of Fund to provide any signature card, agreement or record or
other information needed by IFTC to knowledgeably perform its functions
hereunder. IFTC agrees that all signature cards, agreements, records and
Shareholder lists and other compilations of the names or addresses of
Shareholders compiled or to which it has access during the term of this
Agreement
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are the property of the Fund and shall be used by IFTC solely for the
purpose of performing services under and relating to this Agreement, and that it
will not prepare, compile and utilize a list of Shareholders for any other
purpose.
18. Assignment. This Agreement shall be binding upon and inure to the
benefit of successors and permitted assigns of each party hereto, provided,
however, that neither party may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other, which
consent shall not be unreasonably withheld.
19. Governing Law; Time. This Agreement is entered into, and shall be
governed by and construed in accordance with, the laws of the State of Missouri,
as amended from time to time.
20. Notices. Any notice which may be given under or in connection with this
Agreement, other than the reports, notifications and notices specifically
provided for in the preceding sections of this Agreement and any other notices
where the timing or method or effective time or means of giving such notice is
expressly provided for herein, may be given and shall be effective three days
from the day deposited in the mail, certified or registered postage prepaid,
addressed as follows:
If to IFTC: Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105-1716
Attn: Moneycard Manager
If to Fund: Mentor Funds
901 East Byrd Street
Richmond, Virginia 23219
Attn: Paul F. Costello
or to any other address of the respective party for which notice has been
given by such party to the other party pursuant to the provisions hereof.
21. Term. Unless sooner terminated pursuant to the following provisions,
the initial term of this Agreement shall be for a period of one year from the
effective date hereof. Thereafter, the Agreement shall remain in effect until
terminated by either party hereto by the giving of six months' advance notice of
termination to the other party. Upon the occurrence of a material default by
either party hereunder in the performance of its respective duties and
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obligations under this Agreement and a failure to correct the condition or
pattern of conduct which resulted in such default -within 30 days after
receiving written notice of same to the satisfaction of the party giving such
notice, the party giving such notice of default may at any time thereafter
immediately terminate this Agreement, reserving all rights and remedies it may
have available hereunder or under applicable law. Either party shall
additionally have the right to immediately terminate this Agreement in the event
that the Federal Reserve Bank of Kansas City or IFTC's Sub-Agent is no longer
able to deliver Drafts to IFTC's Sub-Agent or to IFTC on a schedule which would
reasonably permit IFTC to give the notifications and deliver the notices and
Drafts and other data and take the other actions required herein in accordance
with the deadlines set forth or required herein, or if IFTC is unable, as a
result of any other change in circumstances not under its control, to perform in
accordance with the timetables and deadlines set forth herein. Additionally,
IFTC may immediately terminate this Agreement upon giving written notice to the
Fund in the event that the Fund uses any form of Draft in connection with this
Agreement that has not been previously approved by IFTC.
22. Effect of Termination. In the event this Agreement is terminated, IFTC
shall have the right at all times thereafter to return all Drafts received by it
or its Sub-Agent after the effective date of termination, and may mark such
Drafts as being dishonored by the Fund, or in IFTC's sole discretion, may bear
such other notations as IFTC deems appropriate. The respective rights and
obligations of the respective parties hereto with respect to Drafts that are
received by IFTC or its Sub-Agent prior to termination shall continue in effect
notwithstanding such termination. Each party's undertakings and agreements of
indemnification set forth herein or otherwise shall survive any termination of
this Agreement. Upon any termination of this Agreement, IFTC and Fund shall
immediately discuss procedures by which any Drafts that may thereafter be issued
by one or more Shareholders (irrespective of whether such Shareholders were
instructed to discontinue using such Drafts) may be processed in a manner to
reduce the inconvenience of the Fund and its Shareholders, it being understood
and agreed, however, that IFTC shall have no duty or obligation to undertake any
course of action or activity unless it elects to do so in its sole discretion,
reasonably exercised; provided, however, that IFTC shall take reasonable steps
reasonably requested by Fund to avoid substantial inconvenience to the Fund
-11-
<PAGE>
and its shareholders if such termination was as a result of IFTC's breach
or inability to perform any of its obligations hereunder, provided that such
steps do not involve any unreasonable burden or inconvenience for IFTC, IFTC is
reasonably able to perform such steps, and that the Fund agrees to compensate
IFTC reasonably therefor.
23. Force Majeure. In the event that either party fails to perform its
obligations under this Agreement in whole or in part as a consequence of acts of
God, fire, explosion, public utility failure, accident, strike, flood, embargo,
war, nuclear disaster, riot or civil insurrection, such failure to perform shall
not be considered a breach of this Agreement during the period of disability. In
the event of any force majeure occurrence set forth in this section, the
disabled party shall use its best efforts to meet its obligations as set forth
in the Agreement and shall promptly and in writing advise the other party of its
inability to perform due to such event, the expected duration of such inability,
and any developments (or changes therein) that appear likely to affect the
liability of that party to perform. If a party remains unable to perform due to
a continuation of the occurrence for a period of 30 continuous days, the other
party shall thereupon have the right to immediately terminate this Agreement,
reserving all of its rights and remedies. Without limitation on the foregoing,
it is expressly agreed that if the Fund is, by reason of the occurrence of an
event of force majeure described herein, unable to provide the Exception Report
required by Section 7 hereof or any other data or information or notices to IFTC
according to the timetable provided therein, IFTC is authorized to cause all
Drafts reflected on the relevant Daily Report to be honored and paid as if such
Exception Report had been transmitted to it by the Fund and reflected that no
Drafts were to be dishonored.
24. Obligations of Portfolios; Declaration of Trust. The parties agree that
this Agreement shall constitute a separate and discrete agreement between IFTC
and each Fund, as if set out in a separate writing executed by IFTC and Mentor
Funds on behalf solely of that Fund alone, and no other series of shares of
Mentor Funds shall have any obligation or incur any liability under or in
respect of such agreement. Any reference in this Agreement to a "Fund" shall be
construed so as to give effect to the foregoing.
-12-
<PAGE>
A copy of the Agreement and Declaration of Trust of Mentor Funds is on file
with the Secretary of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the Trustees of Mentor Funds
as Trustees and not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or beneficiaries
individually, but binding only upon the assets and property of the Portfolio in
question.
IN WITNESS WHEREOF, Fund and IFTC have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
"FUND"
-------------------------------
Mentor Funds
By:
Title:
"IFTC"
-------------------------------
Investors Fiduciary Trust Company
By:
Title:
-13-
EXHIBIT 11(i)
Consent of Independent Auditors
The Board of Trustees
Mentor Funds:
We consent to the use of our reports dated November 12, 1997 incorporated herein
by reference and to the references to our firm under the heading "Independent
Accountants" in the statement of additional information.
KPMG Peat Marwick LLP.
Boston, Massachusetts
July 10, 1998
Exhibit 15(ii)
EXHIBIT A
Class of Shares 12b-1 Fee
--------------- ---------
Mentor Growth Portfolio B 0.75%
Mentor Capital Growth Portfolio B 0.75%
Mentor Strategy Portfolio B 0.75%
Mentor Income and Growth Portfolio B 0.75%
Mentor Perpetual Global Portfolio B 0.75%
Mentor Quality Income Portfolio B 0.50%
Mentor Municipal Income Portfolio B 0.50%
Mentor Short-Duration Income Portfolio B 0.30%
Mentor Balanced Portfolio B 0.75%
Mentor Growth Opportunities Portfolio B 0.75%
Mentor High Income Portfolio B 0.50%
Mentor Asset Allocation Portfolio B 0.75%
Mentor Inst. U.S. Gov. MM Portfolio Retail 0.38%
Mentor Institution MM Portfolio Retail 0.38%
-1-
MENTOR FUNDS
Plan pursuant to Rule 18f-3(d) under the Investment Company Act of 1940
(Money Market Portfolios)
Effective August ___, 1998
Each series of shares of beneficial interest in Mentor Funds (the
"Trust") that is a money market fund (each a "Portfolio" and, together, the
"Portfolios") may from time to time issue one or more of the following classes
of shares: Retail Shares and Institutional Shares. Each class is subject to such
investment minimums and other conditions of eligibility as are set forth in the
prospectus in respect of any such Portfolio as from time to time in effect
(each, the "Prospectus"). The differences in expenses between these classes of
shares, and the conversion and exchange features of each class of shares, are
set forth below in this Plan. Except as noted below, expenses are allocated
between the classes of shares of each Portfolio based upon the expenses incurred
by each class or as otherwise determined to be fair and equitable by the
Trustees. This Plan is subject to change, to the extent permitted by law and by
the Declaration of Trust and By-laws of the Trust, by action of the Trustees of
the Trust.
RETAIL SHARES
Distribution and Service Fees
Retail Shares pay distribution fees pursuant to a plan (the "Plan")
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"). Retail Shares also bear any costs associated with
obtaining shareholder approval of the Plan (or an amendment to the Plan).
Pursuant to the Plan, Retail Shares may pay up to .38% of the relevant
Portfolio's average net assets attributable to Retail Shares. Amounts payable
under the Plan are subject to such further limitations as the Trustees may from
time to time determine and as set forth in the Prospectus.
Exchange Features
Retail Shares of any Portfolio may be exchanged, at the holder's
option, for Retail Shares of any other Portfolio that offers Retail Shares
without the payment of a sales charge beginning 15 days after purchase, provided
that Retail Shares of such other Portfolio are available to residents of the
relevant state.
<PAGE>
Conversion Features
Retail Shares do not convert into any other class of shares.
Initial Sales Charge
Retail Shares are offered at their net asset value, without an initial
sales charge.
Contingent Deferred Sales Charge
Retail shares are not subject to any contingent deferred sales charge.
INSTITUTIONAL SHARES
Distribution and Service Fees
Institutional Shares pay no Rule 12b-1 distribution fees.
Exchange Features
Institutional Shares of any Portfolio may be exchanged, at the holder's
option, for Institutional Shares of any other Portfolio without the payment of a
sales charge beginning 15 days after purchase, provided that such other shares
are available to residents of the relevant state.
Conversion Features
Institutional Shares do not convert into any other class of shares.
Initial Sales Charge
Institutional Shares are offered at their net asset value, without an
initial sales charge.
Contingent Deferred Sales Charge
Institutional Shares are not subject to any CDSC.
-2-
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<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> MENTOR INSTITUTIONAL U.S. GOVT MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
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<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
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<NET-INVESTMENT-INCOME> 2,105
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<NET-CHANGE-FROM-OPS> 2,105
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,105
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 64,441
<NUMBER-OF-SHARES-REDEEMED> 33,336
<SHARES-REINVESTED> 1,837
<NET-CHANGE-IN-ASSETS> 32,942
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> MENTOR INSTITUTIONAL MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
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<INVESTMENTS-AT-VALUE> 31,474
<RECEIVABLES> 97
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<TOTAL-LIABILITIES> 171
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<PAID-IN-CAPITAL-COMMON> 31,401
<SHARES-COMMON-STOCK> 31,401
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 46,673
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<SHARES-REINVESTED> 486
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</TABLE>
