As filed with the Securities and Exchange Commission on July 24, 1995
Registration No. 33-80784
File No. 811-8484
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. 2
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 5 (X)
(Check appropriate box or boxes)
MENTOR INSTITUTIONAL TRUST
(Exact name of registrant as specified in charter)
P.O. Box 1357
Richmond, Virginia 23286
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code: (804) 782-3647
Paul F. Costello
President
Mentor Institutional Trust
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)
( ) 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
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act
of 1940, the Registrant has previously elected to register an indefinite
number of shares. The $500 registration fee has previously been paid.
<PAGE>
MENTOR INSTITUTIONAL TRUST
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Part A - Mentor Institutional Trust
N-1A Item No. Location
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . Cover Page; Expense
summary
3. Condensed Financial Information . . . . . . Expense summary
4. General Description of Registrant . . . . . Cover Page;
Investment
objectives and
policies; Mentor
Institutional Trust;
Investment practices
and risks
5. Management of the Fund . . . . . . . . . . . Investment
objectives and
policies; Investment
practices and risks;
Management of the
Portfolios; Mentor
Institutional Trust;
How the Portfolios
value their 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 of the
Portfolios; Mentor
Institutional Trust;
Purchase of shares;
How distributions
are made; tax
information;
Performance
information
<PAGE>
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . . . Management of the
Trust; Purchase of
shares
8. Redemption or Repurchase . . . . . . . . . . Purchase of shares;
Redemption of
shares;
9. Pending Legal Proceedings . . . . . . . . . Not Applicable
<PAGE>
Part A - Mentor Fixed-Income Portfolio
N-1A Item No. Location
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . Cover Page; Expense
summary
3. Condensed Financial Information . . . . . . Expense summary
4. General Description of Registrant . . . . . Cover Page;
Investment
objectives and
policies; Other
investment practices
and risks
5. Management of the Fund . . . . . . . . . . . Investment
objectives and
policies; Other
investment practices
and risks;
Management of the
Portfolio; Mentor
Institutional Trust;
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 of the
Portfolio; Mentor
Institutional Trust;
Purchase of shares;
How distributions
are made; Taxes;
Performance
information
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . . . Management of the
Portfolio; Purchase
of shares
8. Redemption or Repurchase . . . . . . . . . . Purchase of shares;
Redemption of
shares;
9. Pending Legal Proceedings . . . . . . . . . Not Applicable
<PAGE>
Part A - Mentor Intermediate Duration Portfolio
N-1A Item No. Location
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . Cover Page; Expense
summary
3. Condensed Financial Information . . . . . . Expense summary
4. General Description of Registrant . . . . . Cover Page;
Investment
objectives and
policies; Other
investment practices
and risks
5. Management of the Fund . . . . . . . . . . . Investment
objectives and
policies; Other
investment practices
and risks;
Management of the
Portfolio; Mentor
Institutional Trust;
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 of the
Portfolio; Mentor
Institutional Trust;
Purchase of shares;
How distributions
are made; Taxes;
Performance
information
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . . . Management of the
Portfolio; Purchase
of shares
<PAGE>
8. Redemption or Repurchase . . . . . . . . . . Purchase of shares;
Redemption of
shares;
9. Pending Legal Proceedings . . . . . . . . . Not Applicable
Part A - Mentor Cash Management Portfolio
N-1A Item No. Location
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . Cover Page; Expense
summary
3. Condensed Financial Information . . . . . . Expense summary
4. General Description of Registrant . . . . . Cover Page;
Investment objective
and policies; Other
investment practices
and risks
5. Management of the Fund . . . . . . . . . . . Investment objective
and policies; Other
investment practices
and risks;
Management of the
Portfolio; Mentor
Institutional Trust;
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 of the
Portfolio; Mentor
Institutional Trust;
Purchase of shares;
Dividends; Taxes;
Performance
information
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . . . Management of the
Portfolio; Purchase
of shares
8. Redemption or Repurchase . . . . . . . . . . Purchase of shares;
Redemption of
shares;
9. Pending Legal Proceedings . . . . . . . . . Not Applicable
<PAGE>
Part A - SNAP Fund
N-1A Item No. Location
1. Cover Page . . . . . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . . . . . Cover Page; Expense
summary
3. Condensed Financial Information . . . . . . Expense summary
4. General Description of Registrant . . . . . Cover Page;
Investment objective
and policies
5. Management of the Fund . . . . . . . . . . . Investment objective
and policies;
Management of the
Fund; Mentor
Institutional
Trust; How the Fund
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 of the
Fund; Mentor
Institutional Trust;
How to participate
in the Fund; How
distributions are
made; Performance
information
7. Purchase of Securities Being
Offered . . . . . . . . . . . . . . . . . Management of the
Portfolio; How to
participate in the
Fund
8. Redemption or Repurchase . . . . . . . . . . How to participate
in the Fund; How to
redeem shares
9. Pending Legal Proceedings . . . . . . . . . Not Applicable
<PAGE>
Part B - Mentor Fixed-Income, Mentor Intermediate Duration, and
Mentor Cash Management Portfolios.
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;
Certain 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
17. Brokerage 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
<PAGE>
20. Tax Status . . . . . . . . . . . . . . . . . Investment
Restrictions; Tax
Status
21. Underwriters . . . . . . . . . . . . . . . . The Distributor
22. Calculations of Performance Data . . . . . . Performance
Information
<PAGE>
Part B - SNAP Fund
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
14. Management of the Fund . . . . . . . . . . . Management of the
Trust; Investment
Advisory and Other
Services
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
Custodian
17. Brokerage Allocation . . . . . . . . . . . . Brokerage
18. Capital Stock and Other
Securities . . . . . . . . . . . . . . . . Determination of Net
Asset Value; Tax
Status; Shareholder
Liability
19. Purchase, Redemption and Pricing
of Securities Being Offered . . . . . . . Brokerage;
Determination of Net
Asset Value
20. Tax Status . . . . . . . . . . . . . . . . . Investment
Restrictions; Tax
Status
21. Underwriters . . . . . . . . . . . . . . . . Not Applicable
22. Calculations of Performance Data . . . . . . Performance
Information
23. Financial Statements . . . . . . . . . . . . Not Applicable
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
<PAGE>
PROSPECTUS September , 1995
MENTOR INSTITUTIONAL TRUST
Mentor Institutional Trust is a diversified, open-end series management
investment company. Shares of the Trust are being offered principally to
institutional and high net-worth individual investors. The Trust offers
investors an opportunity to design a fixed-income investment program by
investing in one or more different investment portfolios offered by the
Trust. Commonwealth Investment Counsel, Inc. is the investment adviser for
each of the Portfolios.
Mentor Cash Management Portfolio is a "money market" fund, seeking as high
a rate of current income as Commonwealth Investment Counsel, Inc. believes
is consistent with preservation of capital and maintenance of liquidity.
An investment in that Portfolio is neither insured nor guaranteed by the
U.S. Government. There can be no assurance that the Portfolio will be able
to maintain a stable net asset value of $1.00 per share.
Mentor Intermediate Duration Portfolio and Mentor Fixed-Income Portfolio
seek a high level of long-term total return by investing in diversified
portfolios of investment-grade, fixed-income securities. Preservation of
capital is a secondary objective to the extent consistent with a
Portfolio's primary objective of seeking a high level of long-term total
return. There is no limit on the average weighted portfolio maturity
either of these Portfolios may maintain, and a Portfolio's average weighted
maturity will likely be longer than its portfolio duration. Mentor
Intermediate Duration Portfolio will normally maintain a portfolio duration
of from two to five years. Mentor Fixed-Income Portfolio will normally
maintain a portfolio duration of from four to seven years.
This Prospectus sets forth concisely the information about the Trust that a
prospective investor should know before investing. Please read this
Prospectus and retain it for future reference. Investors can find more
detailed information in the September , 1995 Statement of Additional
Information, as amended from time to time. For a free copy of the
Statement, call Mentor Distributors, 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. The Trust's address is
P.O. Box 1357, Richmond, Virginia 23286-0109.
MENTOR DISTRIBUTORS, INC.
Distributor
SHARES OF THE TRUST 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
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION 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 an investor's maximum
transaction costs from investing in the Portfolios and expenses the
Portfolios expect to incur in their first full fiscal year. The Example
shows the cumulative expenses attributable to a hypothetical $1,000
investment in each Portfolio over specified periods.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchase None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses
(as a percentage of average net assets)
<TABLE>
Mentor Mentor Mentor
Cash Intermediate Fixed
Management Duration Income
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Management Fees 0.00% 0.00% 0.00%
12b-1 Fees 0.00% 0.00% 0.00%
Other Expenses (after voluntary
expense limitation)* 0.04% 0.05% 0.05%
Total Fund Operating Expenses* 0.04% 0.05% 0.05%
</TABLE>
_______________
* Other Expenses reflect a voluntary expense limitation currently
in effect. In the absence of the expense limitation, Other
Expenses and Total Fund Operating Expenses would have been
0.099% for Mentor Cash Management Portfolio, 0.108% for Mentor
Intermediate Duration Portfolio, and 0.107% for Mentor Fixed-
Income Portfolio.
Examples
An investment of $1,000 in a Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each
period:
1 year 3 years
Mentor Cash Management
Portfolio $1 $1
Mentor Intermediate
Duration Portfolio 1 2
Mentor Fixed-Income Portfolio 1 2
This information is provided to help investors understand the
expenses of investing in each of the Portfolios and an investor's share of
the estimated operating expenses of the Portfolios. The information is
estimated based on the expenses the Portfolios expect to incur during their
first full fiscal year. The Examples should not be considered
representations of future performance; actual expenses may be more or less
than those shown.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights presented below have been prepared by the
Trust and are unaudited.
<TABLE>
<CAPTION>
Mentor
Mentor Cash Intermediate Mentor
Management Duration Fixed-Income
Period Ended April 30, 1995 Portfolio* Portfolio** Portfolio***
<S> <C> <C> <C>
Per Share Operating Performance $ 12.50
$ 12.50
Net asset value, beginning of period $ 1.00
Income from investment operations
Net investment income 0.02 0.38
Net realized and unrealized 0.33
gain on investments -- 0.40
Total from investment operations 0.02 0.32 0.78
0.65
Less distributions
Dividends from income (0.02) (0.30)
(0.25)
Net asset value, end of period $ 1.00 $ 12.98
$ 12.90
Total Return 2.00% 6.25%
5.24%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 47,955 $26,952
$10,911
Ratio of expenses to average net assets 0.04%(a) 0.05%(a)
0.05%(a)
Ratio of net investment income to
average net assets 6.00%(a) 7.38%(a)
7.11%(a)
Portfolio turnover rate -- 408%(a)
398%(a)
(a) Annualized.
* For the period from December 5, 1994 (commencement of operations) to
April 30, 1995.
** For the period from December 19 (commencement of operations) to
April 30, 1995
*** For the period from December 6, 1994 (commencement of operations) to
April 30, 1995.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Mentor Cash Management Portfolio.
Mentor Cash Management Portfolio's investment objective is to seek as high
a rate of current income as Commonwealth Investment Counsel, Inc.
("Commonwealth") believes is consistent with preservation of capital and
maintenance of liquidity. The Portfolio will invest in high-quality short-
term instruments including U.S. Government securities, banker's
acceptances, prime commercial paper, fixed-income securities of
corporations and other private issuers, and money market instruments.
There can, of course, be no assurance that the Portfolio will achieve its
investment objective.
The Portfolio will invest in a portfolio of high-quality short-term
instruments consisting of any or all of the following:
(bullet) 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.
(bullet) 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.
(bullet) 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.
(bullet) Other short-term obligations: high-quality, short-term obligations
of corporate issuers.
(bullet) Repurchase agreements: with respect to U.S. Government or agency
securities.
The 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" are (i) commercial paper or other short-term
obligations rated A-1 by Standard & Poor's Corporation and P-1 by Moody's
Investors Service, Inc., and (ii) obligations rated AAA or AA by Standard &
Poor's and Aaa or Aa by Moody's at the time of investment. The Portfolio will
not invest more than 5% (determined at the time of investment) of its total
assets in securities rated below A-1 or P-1 (or securities not so rated whose
issuer does not have outstanding short-term debt obligations, of comparable
priority and security, rated A-1 or P-1). The 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 thirteen months. The
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. The Portfolio will not purchase securities of any issuer if,
immediately thereafter, more than 5% of its total assets would be invested in
securities of that issuer, nor will the Portfolio make an investment in
commercial paper if, immediately thereafter, more than 35% of its total assets
would be invested in commercial paper. The Portfolio 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 the
Portfolio may not necessarily invest in money market instruments paying the
highest available yield at a particular time. Consistent with its
investment objective, the 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. The Portfolio may also invest to take advantage of
what Commonwealth believes to be temporary disparities in 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 Portfolio,
may result in frequent changes in the securities held by the Portfolio.
The Portfolio will not usually pay brokerage commissions in connection with
the purchase or sale of portfolio securities.
The Portfolio's securities will be affected by general changes in
interest rates resulting in increases or decreases in the values of the
obligations held by the Portfolio. The value of the 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.
Mentor Intermediate Duration Portfolio and Mentor Fixed-Income Portfolio.
The investment objective of each of these Portfolios is to seek a
high level of long-term total return. Preservation of capital is a
secondary objective to the extent consistent with a Portfolio's primary
objective of seeking a high level of long-term total return. The Portfolios
will invest in U.S. Government securities, fixed-income securities of
corporations and other private issuers, mortgage-backed securities, and
other asset-backed securities. Each of the Portfolios may also hold a
portion of its assets in cash or money market instruments. There can, of
course, be no assurance that the Portfolios will achieve their investment
objectives.
Mentor Intermediate Duration Portfolio will normally maintain a
portfolio duration of from two to five years.
Mentor Fixed-Income Portfolio will normally maintain a portfolio
duration of from four to seven years.
A Portfolio's "portfolio duration" at any time is the dollar-weighted
average duration of its portfolio securities at that time. In general, the
net asset value of a Portfolio with a longer portfolio duration will
increase or decrease to a greater degree in response to changes in interest
rates than will the net asset value of a Portfolio with a shorter portfolio
duration. (Typically, for example, the value of a security with a three-
year duration will increase by approximately three percent in response to a
one-percent decline in interest rates, and will decline by approximately
three percent in response to a one-percent rise in interest rates;
similarly, the value of a security with a seven-year duration will increase
by approximately seven percent in response to a one-percent decline in
interest rates, and will decline by approximately seven percent in response
to a one-percent rise in interest rates; and so on.) However, because
issuers of securities with longer durations typically pay interest on those
securities at rates higher than in the case of securities with shorter
durations, the current income of a Portfolio with a longer portfolio
duration will typically be greater than that of a Portfolio with a shorter
portfolio duration.
Commonwealth may take full advantage of the entire range of
maturities of the securities in which a Portfolio may invest and may,
through the purchase and sale of securities with different durations,
adjust each Portfolio's portfolio duration from time to time, depending on
its assessment of the relative values of securities of different durations
and maturities and expectations of future changes in interest rates. There
can be no assurance that either Portfolio will be able to maintain any
particular portfolio duration.
A Portfolio's "total return" consists of current income, including
interest payments and discount accruals, plus any increases in the values
of the Portfolio's investments (less any decreases in the values of any of
its investments and amortizations of premiums). A Portfolio may seek to
increase its total return by investing in investment-grade securities which
Commonwealth believes may appreciate in value as a result of changes in
interest rates or other market factors.
Traditionally, a debt security's "term to maturity" has been used to
evaluate the sensitivity of the security's price to changes in interest
rates (the security's interest-rate "volatility"). However, a security's
term to maturity measures only the period of time until the last payment of
principal or interest on the security, and does not take into account the
timing of the various payments of principal or interest to be made prior to
the instrument's maturity. By contrast, "duration" is a measure of the
full stream of payments to be received on a debt instrument, including both
interest and principal payments, based on their present values. Duration
measures the periods of time between the present time and the time when the
various interest and principal payments are scheduled or, in the case of a
callable bond, expected to be received, and weights them by their present
values. Duration can be a more accurate measure of interest rate
volatility than term-to-maturity. There is no limit on the average
weighted maturity either Portfolio may maintain, and a Portfolio's average
weighted maturity will likely be longer than its portfolio duration.
There are some situations where the standard duration calculation
does not properly reflect the interest-rate volatility of a security. For
example, floating and variable rate securities often have final maturities
of ten years or more; however, their interest-rate volatility is determined
based principally on the period of time until their interest rates are
reset and on the terms on which they may be reset. Another example where a
security's interest-rate volatility is not properly measured by the
standard duration calculation is in the case of mortgage securities. The
stated final maturity of such securities may be up to 30 years, but the
actual cash flow on the securities will be determined by the prepayment
rates on the underlying mortgage loans. Therefore, the duration of such a
security can change if prepayment rates change. In these and other similar
situations, Commonwealth will estimate a security's duration using
sophisticated analytical techniques that take into account such factors as
the expected prepayment rate on the security and how the prepayment rate
might change under various market conditions. Because calculation of a
security's duration may be based in part on estimates such as these made by
Commonwealth, a Portfolio's ability to maintain a particular portfolio
duration will depend on Commonwealth's ability to make those estimates
accurately.
Mentor Fixed-Income Portfolio will normally invest at least 65% of
its total assets, determined at the time of investment, in fixed-income
securities. A fixed-income security is a debt security paying interest at
a rate specified in the terms of the security or determined based on a
formula or factors specified in the terms of the security.
The Portfolios will only invest in securities of investment grade. A
security will be deemed to be of "investment grade" if, at the time of
investment by a Portfolio, the security is rated at least Baa3 by Moody's
or BBB- by Standard & Poor's, or at a comparable rating by another
nationally recognized rating organization. Securities rated Baa or BBB
lack outstanding investment characteristics and have speculative
characteristics and are subject to greater credit and market risks than
higher-rated securities. A Portfolio will not be required to dispose of a
security held by it if the security's rating falls below investment grade,
although Commonwealth will consider whether continued investment in the
security is consistent with the Portfolio's investment objectives. See the
Statement of Additional Information for descriptions of securities ratings
assigned by Moody's and Standard & Poor's.
Commonwealth may under unusual circumstances implement temporary
"defensive" strategies in order to reduce fluctuations in the value of a
Portfolio's assets. At those times, a Portfolio may invest any portion of
its assets in cash or cash equivalents, money market instruments, or other
short-term, high-quality investments Commonwealth considers consistent with
such defensive strategies, and may maintain a portfolio duration shorter
than would otherwise be consistent with its basic investment strategy.
Other investment practices and risks
Each of the Portfolios (except as noted below) may engage in the
other investment practices described below. See the Statement of
Additional Information for a more detailed description of these practices
and certain risks they may involve.
Mortgage-backed securities. Each Portfolio (other than Mentor Cash
Management Portfolio) may invest in mortgage-backed certificates and other
securities representing ownership interests in mortgage pools, including
collateralized mortgage obligations. Interest and principal payments on
the mortgages underlying mortgage-backed securities are passed through to
the holders of the mortgage-backed securities. Mortgage-backed securities
currently offer yields higher than those available from many other types of
fixed-income securities but because of their prepayment aspects, their
price volatility and yield characteristics will change based on changes in
prepayment rates. Generally, prepayment rates increase if interest rates
fall and decrease if interest rates rise. For many types of mortgage-
backed securities, this can result in unfavorable changes in price and
yield characteristics in response to changes in interest rates and other
market conditions. For example, as a result of their prepayment aspects,
the Portfolios' mortgage-backed securities have less potential for capital
appreciation during periods of declining interest rates than other fixed-
income securities of comparable maturities, although such obligations may
have a comparable or greater risk of decline in market value during periods
of rising interest rates.
Mortgage-backed securities have yield and maturity characteristics
that are dependent on the mortgages underlying them. Thus, unlike
traditional debt securities, which may pay a fixed rate of interest until
maturity when the entire principal amount comes due, payments on these
securities include both interest and a partial payment of principal. In
addition to scheduled loan amortization, payments of principal may result
from the voluntary prepayment, refinancing, or foreclosure of the
underlying mortgage loans. Such prepayments may significantly shorten the
effective durations of mortgage-backed securities, especially during
periods of declining interest rates. Similarly, during periods of rising
interest rates, a reduction in the rate of prepayments may significantly
lengthen the effective durations of such securities.
Other asset-backed securities. A Portfolio (other than Mentor Cash
Management Portfolio) may invest in securities representing interests in
other types of financial assets, such as automobile-finance receivables or
credit-card receivables. Such securities are subject to many of the same
risks as are mortgage-backed securities, including prepayment risks,
refinancing risks, and risks of foreclosure. They may or may not be
secured by the receivables themselves or may be unsecured obligations of
their issuers.
When-issued securities and forward commitments. Each of the
Portfolios (other than Mentor Cash Management Portfolio) may purchase
securities on a "when-issued" basis. The price of such securities is fixed
at the time the commitment to purchase is made, but delivery and payment
for the when-issued securities take place at a later date (normally within
one month of purchase). Each of the Portfolios may also purchase
securities for future delivery. "When-issued" securities and forward
commitments may increase a Portfolio's overall investment exposure and may
result in losses.
Repurchase agreements. The Portfolios may enter into 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
Commonwealth 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 the Portfolio may be treated as
an unsecured creditor and be required to return the underlying collateral
to the other party's estate.
As a matter of policy, the Trustees will not materially change a
Portfolio's investment objectives without shareholder approval. (Any such
change could, of course, result in a change in the nature of the securities
in which a Portfolio may invest and the risks involved in an investment in
that Portfolio.)
Management of the Portfolios
The Trustees of the Trust are responsible for generally overseeing
the conduct of the Trust's business. Commonwealth Investment Counsel,
Inc., located at 901 East Byrd Street, Richmond, Virginia 23219, acts as
investment adviser to the Portfolios pursuant to a Management Contract with
the Trust. Mentor Investment Group, Inc. ("Mentor") (formerly Investment
Management Group, Inc.) serves as administrator to the Portfolios. Neither
Commonwealth nor Mentor receives compensation from the Portfolios for the
performance of such services. Mentor has agreed to bear certain expenses
of the Portfolios pursuant to a voluntary expense limitation currently in
effect. This limitation may be terminated at any time. Commonwealth is a
wholly owned subsidiary of Mentor, which is a wholly owned subsidiary of
Wheat First Butcher Singer, Inc. ("Wheat First Butcher Singer"). Wheat
First Butcher Singer, through other subsidiaries, also engages in
securities brokerage, investment banking, and related businesses.
Commonwealth currently has assets under management of approximately $4
billion, and serves as investment adviser to Cash Resource Trust, an open-
end series investment company, Mentor Balanced Portfolio, Mentor Short-
Duration Income Portfolio, and SNAP Fund, each of which is an open-end
investment company, and Mentor Income Fund, Inc., a closed-end investment
company.
Subject to the general oversight of the Trustees, Commonwealth, as
investment adviser, manages the Portfolios in accordance with the stated
policies of each Portfolio. A team of fixed-income professionals made up
of Mr. P. Michael Jones, Mr. William H. West, Jr., Mr. Stephen R.
McClelland, and Mr. Steven C. Henderson manages Mentor Intermediate
Duration Portfolio and Mentor Fixed-Income Portfolio for Commonwealth.
Mr. Jones is a Senior Vice President and Director of Investment Research of
Commonwealth and has eight years of investment experience. He served
previously as Senior Vice President of Ryland Capital Management, Inc. and
as Vice President of Alliance Capital Management. Mr. West is a Vice
President and Portfolio Manager at Commonwealth and has six years of
investment experience. He served previously as Vice President and
Portfolio Manager at Ryland Capital Management, Inc. Mr. McClelland is a
Vice President and Portfolio Manager at Commonwealth and has four years of
investment experience. Mr. McClelland served previously as Associate Vice
President and Budget Analyst for Wheat First Butcher Singer. Mr. Henderson
is Portfolio Manager at Commonwealth and has six years of investment
experience. He served previously as Senior Portfolio Analyst at Ryland
Capital Management, Inc. A separate group of investment professionals,
made up of Mr. R. Preston Nuttall and Mr. Hubert R. White, III, manage
Mentor Cash Management Portfolio for Commonwealth. Mr. Nuttall is a Senior
Vice President at Commonwealth and has more than 30 years of investment
management experience. Mr. White is a Vice President and Portfolio Manager
at Commonwealth and has more than 12 years of investment management
experience.
Commonwealth makes investment decisions for the Portfolios and places
the purchase and sale orders for each Portfolio's portfolio transactions.
In selecting broker-dealers, Commonwealth may consider research and
brokerage services furnished to it and its affiliates. Subject to seeking
the best overall terms available, Commonwealth may consider sales of shares
of a Portfolio (and, if permitted by law, of other funds in the Mentor
family) as a factor in the selection of broker-dealers to execute portfolio
transactions for that Portfolio.
Portfolio turnover (Portfolios other than Mentor Cash Management
Portfolio). The length of time a Portfolio has held a particular security
is not generally a consideration in investment decisions. A change in the
securities held by a Portfolio is known as "portfolio turnover." As a
result of each Portfolio's investment policies, under certain market
conditions the Portfolio's portfolio turnover rate may be higher than that
of other mutual funds. Portfolio turnover generally involves some expense
to a Portfolio, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and reinvestment in other
securities. Such transactions may result in realization of taxable capital
gains. Although it is impossible to predict a Portfolio's portfolio
turnover, Commonwealth expects that the portfolio turnover rate for each
Portfolio for its first full fiscal year will not exceed 400%.
How the Portfolios value their shares
Each of Mentor Fixed-Income Portfolio and Mentor Limited Duration
Portfolio calculates the net asset value of its shares by dividing the
total value of its assets, less liabilities, by the number of its shares
outstanding. Shares are valued as of the close of regular trading on the
New York Stock Exchange each day the Exchange is open. Portfolio
securities for which market quotations are readily available are stated at
market value. Short-term investments that will mature in 60 days or less
are stated at amortized cost, which has been determined to approximate the
fair market value of such investments. All other securities and assets are
valued at their fair values.
Mentor Cash Management Portfolio values its shares twice each day,
once at 12:00 noon and again at the close of regular trading on the
Exchange. The Portfolio's investments are valued at amortized cost
according to Securities and Exchange Commission Rule 2a-7. The Portfolio
will not normally have unrealized gains or losses so long as it values its
investments by the amortized cost method.
How distributions are made
Mentor Fixed-Income Portfolio and Mentor Intermediate Duration
Portfolio distribute net investment income quarterly and any net realized
capital gains at least annually. Distributions from capital gains are made
after applying any available capital loss carryovers.
Mentor Cash Management Portfolio determines its net income as of the
close of regular trading on the New York Stock Exchange each day the
Exchange is open. Each determination of the 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.
Mentor Cash Management Portfolio declares all of its net interest
income as a distribution on each day the New York Stock Exchange is open
for business, as a dividend to shareholders of record immediately prior to
the close of regular trading on the Exchange. Shareholders who purchase
shares of the Portfolio as of 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 day after the
Portfolio accepts their order. The Portfolio's net income for Saturdays,
Sundays, and holidays is declared as a dividend on the preceding business
day. Dividends for the immediately preceding month will be paid on the
last business day of each calendar month (or, if that day is not a business
day, on the next business day), except that the 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 that
withdraws the entire balance of an account at any time during the month
will be paid all dividends declared through the date immediately prior to
the withdrawal. Since the net income of the Portfolio is declared as a
dividend each day, the net asset value per share of the Portfolio normally
remains at $1 per share immediately after each determination and dividend
declaration.
All Portfolio distributions will be invested in additional Portfolio
shares, unless the shareholder instructs a Portfolio otherwise.
Taxes
Each of the Portfolios 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 taxes on income and
gains it distributes to shareholders. The Portfolios will distribute
substantially all of their net investment income and capital gain net
income on a current basis.
The following is intended principally for shareholders subject to
federal income taxation:
All Portfolio distributions, other than exempt-interest dividends,
will be taxable to shareholders as ordinary income, except that any
distributions of net capital gain will be taxed as long-term capital gain,
regardless of how long a shareholder has held the shares (although the loss
on a sale of shares held for six months or less will be treated as long-
term capital loss to the extent of any capital gain distribution received
with respect to those shares). Distributions will be taxable as described
above whether received in cash or in shares through the reinvestment of
distributions. Early in each year the Trust will notify shareholders of
the amount and tax status of distributions paid by the Portfolio for the
preceding year. In buying or selling securities for a Portfolio,
Commonwealth will not normally take into account the effect any purchase or
sale of securities will have on the tax positions of the Portfolio's
shareholders.
The foregoing is a summary of certain federal income tax consequences
of investing in a Portfolio. Dividends and distributions also may be
subject to state and local taxes. Shareholders are urged to consult their
tax advisers regarding specific questions as to federal, state, or local
taxes. 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).
Purchase of shares
Shares of Mentor Fixed-Income Portfolio and Mentor Intermediate
Duration Portfolio are sold at the net asset value next determined after a
purchase order is received by a Portfolio. Purchase orders that are
received prior to the close of trading on the New York Stock Exchange on a
particular day are priced according to the net asset value determined on
that day.
Mentor Cash Management Portfolio offers its shares continuously at a
price of $1.00 per share. Because the Portfolio seeks to be fully invested
at all times, investments must be in Same Day Funds to be accepted. "Same
Day Funds" are funds credited by the applicable regional Federal Reserve
Bank to the account of the Portfolio at its designated bank.
Mentor Distributors, Inc. ("Mentor Distributors"), 901 East Byrd
Street, Richmond, Virginia 23219, serves as distributor of the Portfolios'
shares. Mentor Distributors is not obligated to sell any specific amount
of shares of any of the Portfolios.
An investor may make an initial purchase of shares of any of the
Portfolios by submitting a completed Trust application along with its
purchase order, and by making payment to Mentor Distributors. Investors
will be required to make minimum initial investments of $500,000 in the
Portfolios and minimum subsequent investments of $25,000. Investments made
through advisory accounts maintained with investment advisers registered
under the Investment Advisers Act of 1940 (including "wrap" accounts) are
not subject to these minimum investment requirements. The Portfolios
reserve the right at any time to change the initial and subsequent
investment minimums required of investors.
Shares of the Portfolios may be purchased by (i) paying cash, (ii)
exchanging securities acceptable to Commonwealth, or (iii) a combination of
such securities and cash. Purchase of shares of a Portfolio in exchange
for securities is subject in each case to the determination by Commonwealth
that the securities to be exchanged are acceptable for purchase by the
Portfolio. Securities accepted by Commonwealth in exchange for Fund shares
will be valued in the same manner as the Fund's assets as of the time of
the Portfolio's next determination of net asset value after such
acceptance. All dividends and subscription or other rights which are
reflected in the market price of accepted securities at the time of
valuation become the property of the Portfolio and must be delivered to the
Portfolio upon receipt by the investor from the issuer. A gain or loss for
federal income tax purposes would be realized upon the exchange by an
investor that is subject to federal income taxation, depending upon the
investor's basis in the securities tendered. A shareholder who wishes to
purchase shares by exchanging securities should obtain instructions by
calling Mentor Distributors at 1-800-869-6042.
In all cases Commonwealth or Mentor Distributors reserves the right
to reject any particular investment.
Redemption of shares
A shareholder may redeem all or any portion of its shares in a
Portfolio at any time upon request, by following the procedures set forth
below. Redemptions will be effected at the net asset value per share of a
Portfolio next determined after the receipt by the Portfolio of redemption
instructions in "good order" as described below. Shares may be redeemed by
submitting a written request for redemption to Mentor Distributors, or to
the Trust at the following address:
Mentor Institutional Trust
P.O. Box 1357
Richmond, Virginia 23286-0109
Upon receipt of a request in "good order," the Trust will determine
the amount of the net asset value of the redeemed shares, based upon the
net asset value of the Portfolio next determined after the redemption
request has been received. A check for the proceeds will normally be
mailed on the next business day.
If shares of a Portfolio to be redeemed represent an investment made
by check, the Trust reserves the right not to transmit the redemption
proceeds to the shareholder until the check has been collected, which may
take up to 15 days after the purchase date.
A redemption request will be considered to have been made in "good
order" if the following conditions are satisfied:
(1) the request is in writing, states
the number of shares to be
redeemed, and identifies the
shareholder's Portfolio account
number;
(2) the request is signed by each
registered owner exactly as the
shares are registered; and
(3) if the shares to be redeemed were issued in
certificate form, the certificates are endorsed
for transfer (or are accompanied by an endorsed
stock power) and accompany the redemption
request.
Each Portfolio reserves the right to require signature guarantees. A
guarantor of a signature must be an eligible guarantor institution, which
term includes most banks and trust companies, savings associations, credit
unions, and securities brokers or dealers. The purpose of a signature
guarantee is to protect Portfolio shareholders against the possibility of
fraud.
Mentor Distributors may facilitate any redemption request. There is
no extra charge for this service.
Other information concerning redemption. Under unusual circumstances,
a Portfolio may suspend repurchases, or postpone payment for more than
seven days, as permitted by federal securities laws. In addition, each
Portfolio reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole
or in part by securities valued in the same way as they would be valued for
purposes of computing the Portfolio's per share net asset value. If
payment is made in securities, a shareholder may incur brokerage expenses
in converting those securities into cash.
Exchange privilege. Shareholders may exchange their shares in a
Portfolio for shares of any other Portfolio offered by this Prospectus at
their respective net asset values beginning 15 days after purchase. Shares
of certain of the Portfolios are not available in all states. To exchange
shares, simply complete an exchange authorization form and send it to
Mentor Distributors. Exchange authorization forms are available from the
Trust and from Mentor Distributors. The Trust reserves the right to change
or suspend the exchange privilege at any time. Shareholders would be
notified before any such change or suspension. Consult Mentor Distributors
before requesting an exchange.
Mentor Institutional Trust
Mentor Institutional Trust is a Massachusetts business trust organized
on February 8, 1994. 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, diversified, series 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. Any such series of shares may be further divided without
shareholder approval into two or more classes of shares having such
preferences and special or relative rights and privileges as the Trustees
determine. The Trust's shares are currently divided into four series,
three of which represent the Portfolios, and one of which represents an
additional portfolio not offered by this Prospectus. Each share has one
vote, with fractional shares voting proportionally. Shares of each class
will vote together as a single class except when required by law or
determined by the Trustees. Shares of the Portfolios 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 at any time and may
refuse any order to purchase shares. 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.
In the interest of economy and convenience, a Portfolio will not issue
certificates for its shares except at the shareholder's request.
Custodian and transfer and dividend agent
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as the Portfolios' custodian. The Shareholder
Services Group, Inc., P.O. Box 9653, Providence, Rhode Island 02940,
serves as the Portfolios' transfer and dividend agent.
Performance information
Mentor Intermediate Duration Portfolio and Mentor Fixed-Income
Portfolio. Yield and total return data may from time to time be included
in advertisements about the Portfolios. Each Portfolio's "yield" is
calculated by dividing the Portfolio's annualized net investment income per
share during a recent 30-day period by its net asset value on the last day
of that period. "Total return" for the life of a Portfolio through the
most recent calendar quarter represents the actual rate of return on an
investment of $1,000 in the Portfolio over the period.
Mentor Cash Management Portfolio. Yield and total return data may
from time to time be included in advertisements about the Portfolio. The
Portfolio's "yield" is calculated 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). The Portfolio's "effective yield"
represents a compounding of the yield by adding 1 to the number
representing the percentage change in the value of the investment during
the base period, raising that sum to a power equal to 365/7, and
subtracting 1 from the result.
A Portfolio's performance may be compared to various indices. See the
Statement of Additional Information. Information may be presented in
advertisements about the Portfolios describing the background and
professional experience of the Portfolios' investment adviser or any
portfolio manager.
All data is based on each 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
each Portfolio's investments, and that Portfolio's operating expenses.
Investment performance also often reflects the risks associated with a
Portfolio's investment objectives and policies. These factors should be
considered when comparing a Portfolio's investment results to those of
other mutual funds and other investment vehicles.
<PAGE>
No person has been MENTOR
authorized to give any INSTITUTIONAL
information or to make any TRUST
representations other than
those contained in this
Prospectus and, if given or
made, such other information
or representations must not be
relied upon as having been
authorized by the Trust. 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 Pro-
spectus omits certain PROSPECTUS
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. Mentor Distributors, Inc.
Additional information
concerning the securities
offered hereby and the Trust
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.
<PAGE>
PROSPECTUS September , 1995
MENTOR FIXED-INCOME PORTFOLIO
Mentor Fixed-Income Portfolio seeks a high level of long-term total
return by investing in a diversified portfolio of investment-grade, fixed-
income securities of varying maturities with a portfolio duration of from
four to seven years. As a secondary objective, the Portfolio seeks to
preserve capital to the extent consistent with seeking a high level of
long-term total return. There is no limit on the average weighted maturity
the Portfolio may maintain, and the Portfolio's average weighted maturity
will likely be no longer than its portfolio duration. Commonwealth
Investment Counsel, Inc. is the Portfolio's investment adviser. Shares of
the Portfolio are being offered principally to institutions and high net-
worth individual investors.
This Prospectus sets forth concisely the information about the
Portfolio that a prospective investor should know before investing. Please
read this Prospectus and retain it for future reference. Investors can
find more detailed information in the September , 1995 Statement of
Additional Information, as amended from time to time. For a free copy of
the Statement, call Mentor Distributors, 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. The Portfolio's address is
P.O. Box 1357, Richmond, Virginia 23286-0109.
_________________________
MENTOR DISTRIBUTORS, INC.
Distributor
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION 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 an investor's maximum
transaction costs from investing in the Portfolio and expenses the
Portfolio expects to incur in its first full fiscal year. The Example
shows the cumulative expenses attributable to a hypothetical $1,000
investment in the Portfolio over specified periods.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees 0.00%
12b-1 Fees 0.00%
Other Expenses (after voluntary
expense limitation)* 0.05%
Total Fund Operating Expenses* 0.05%
____________________
*Other Expenses reflect a voluntary expense limitation currently in
effect. In the absence of the expense limitation, Other Expenses and Total
Fund Operating Expenses would have been 0.107%.
Example
An investment of $1,000 in the Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each
period:
1 year $1
3 years $2
This information is provided to help investors understand the expenses
of investing in the Portfolio and an investor's share of the estimated
operating expenses of the Portfolio. The information is based on the
expenses the Portfolio expects to incur in its first full fiscal year. The
Example should not be considered a representation of future performance;
actual expenses may be more or less than those shown.
Financial Highlights
The financial highlights presented below for the Portfolio have been
prepared by Mentor Institutional Trust and are unaudited.
<PAGE>
Financial Highlights (Unaudited)
Mentor
Fixed-Income
Period Ended April 30, 1995 Portfolio***
Per Share Operating Performance $ 12.50
Net asset value, beginning of period
Income from investment operations
Net investment income 0.38
Net realized and unrealized
gain on investments 0.40
Total from investment operations 0.78
Less distributions
Dividends from income (0.30)
Net asset value, end of period $ 12.98
Total Return 6.25%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $26,952
Ratio of expenses to average net assets 0.05%(a)
Ratio of net investment income to
average net assets 7.38%(a)
Portfolio turnover rate 408%(a)
(a) Annualized.
*** For the period from December 6, 1994 (commencement of operations) to
April 30, 1995.
<PAGE>
Investment objectives and policies
The investment objective of Mentor Fixed-Income Portfolio is to seek a
high level of long-term total return. Preservation of capital is a
secondary objective to the extent consistent with the Portfolio's primary
objective of seeking a high level of long-term total return. The Portfolio
will invest in U.S. Government securities, fixed-income securities of
corporations and other private issuers, mortgage-backed securities, and
other asset-backed securities. The Portfolio may also hold a portion of
its assets in cash or money market instruments. There can, of course, be
no assurance that the Portfolio will achieve its investment objectives.
The Portfolio is a series of Mentor Institutional Trust (the "Trust"), a
diversified, series management investment company.
The Portfolio will normally maintain a portfolio duration of from four
to seven years. The Portfolio's "portfolio duration" at any time is the
dollar-weighted average duration of its portfolio securities at that time.
In general, the net asset value of a portfolio with a longer portfolio
duration will increase or decrease to a greater degree in response to
changes in interest rates than will the net asset value of a portfolio with
a shorter portfolio duration. (Typically, for example, the value of a
security with a four-year duration will increase by approximately four
percent in response to a one-percent decline in interest rates, and will
decline by approximately four percent in response to a one-percent rise in
interest rates; similarly, the value of a security with a seven-year
duration will increase by approximately seven percent in response to a one-
percent decline in interest rates, and will decline by approximately seven
percent in response to a one-percent rise in interest rates; and so on.)
However, because issuers of securities with longer durations typically pay
interest on those securities at rates higher than in the case of securities
with shorter durations, the current income of a portfolio with a longer
portfolio duration will typically be greater than that of a portfolio with
a shorter portfolio duration.
Commonwealth Investment Counsel, Inc., the Portfolio's investment
adviser ("Commonwealth"), may take full advantage of the entire range of
maturities of the securities in which the Portfolio may invest and may,
through the purchase and sale of securities with different durations,
adjust the Portfolio's portfolio duration from time to time, depending on
its assessment of the relative values of securities of different durations
and maturities and expectations of future changes in interest rates. There
can be no assurance that the Portfolio will be able to maintain any
particular portfolio duration.
The Portfolio's "total return" consists of current income, including
interest payments and discount accruals, plus any increases in the values
of the Portfolio's investments (less any decreases in the values of any of
its investments and amortizations of premiums). The Portfolio may seek to
increase its total return by investing in investment-grade securities which
Commonwealth believes may appreciate in value as a result of changes in
interest rates or other market factors.
Traditionally, a debt security's "term to maturity" has been used to
evaluate the sensitivity of the security's price to changes in interest
rates (the security's interest-rate "volatility"). However, a security's
term to maturity measures only the period of time until the last payment of
principal or interest on the security, and does not take into account the
timing of the various payments of principal or interest to be made prior to
the instrument's maturity. By contrast, "duration" is a measure of the
full stream of payments to be received on a debt instrument, including both
interest and principal payments, based on their present values. Duration
measures the periods of time between the present time and the time when the
various interest and principal payments are scheduled or, in the case of a
callable bond, expected to be received, and weights them by their present
values. Duration can be a more accurate measure of interest rate
volatility than term-to-maturity. There is no limit on the average
weighted maturity the Portfolio may maintain, and the Portfolio's average
weighted maturity will likely be longer than its portfolio duration.
There are some situations where the standard duration calculation does
not properly reflect the interest-rate volatility of a security. For
example, floating and variable rate securities often have final maturities
of ten years or more; however, their interest-rate volatility is determined
based principally on the period of time until their interest rates are
reset and on the terms on which they may be reset. Another example where a
security's interest-rate volatility is not properly measured by the
standard duration calculation is in the case of mortgage securities. The
stated final maturity of such securities may be up to 30 years, but the
actual cash flow on the securities will be determined by the prepayment
rates on the underlying mortgage loans. Therefore, the duration of such a
security can change if prepayment rates change. In these and other similar
situations, Commonwealth will estimate a security's duration using
sophisticated analytical techniques that take into account such factors as
the expected prepayment rate on the security and how the prepayment rate
might change under various market conditions. Because calculation of a
security's duration may be based in part on estimates such as these made by
Commonwealth, the Portfolio's ability to maintain a particular portfolio
duration will depend on Commonwealth's ability to make those estimates
accurately.
The Portfolio will normally invest at least 65% of its total assets,
determined at the time of investment, in fixed-income securities. A fixed-
income security is a debt security paying interest at a rate specified in
the terms of the security or determined based on a formula or factors
specified in the terms of the security.
The Portfolio will only invest in securities of investment grade. A
security will be deemed to be of "investment grade" if, at the time of
investment by the Portfolio, the security is rated at least Baa3 by Moody's
Investors Service, Inc. or BBB- by Standard & Poor's Corporation, or at a
comparable rating by another nationally recognized rating organization.
Securities rated Baa or BBB lack outstanding investment characteristics and
have speculative characteristics and are subject to greater credit and
market risks than higher-rated securities. The Portfolio will not be
required to dispose of a security held by it if the security's rating falls
below investment grade, although Commonwealth will consider whether
continued investment in the security is consistent with the Portfolio's
investment objectives. See the Statement of Additional Information for
descriptions of securities ratings assigned by Moody's and Standard &
Poor's.
Commonwealth may under unusual circumstances implement temporary
"defensive" strategies in order to reduce fluctuations in the value of the
Portfolio's assets. At those times, the Portfolio may invest any portion
of its assets in cash or cash equivalents, money market instruments, or
other short-term, high-quality investments Commonwealth considers
consistent with such defensive strategies, and may maintain a portfolio
duration shorter than would otherwise be consistent with its basic
investment strategy.
Other investment practices and risks
The Portfolio may engage in the other investment practices described
below. See the Statement of Additional Information for a more detailed
description of these practices and certain risks they may involve.
Mortgage-backed securities. The Portfolio may invest in mortgage-
backed certificates and other securities representing ownership interests
in mortgage pools, including collateralized mortgage obligations. Interest
and principal payments on the mortgages underlying mortgage-backed
securities are passed through to the holders of the mortgage-backed
securities. Mortgage-backed securities currently offer yields higher than
those available from many other types of fixed-income securities but
because of their prepayment aspects, their price volatility and yield
characteristics will change based on changes in prepayment rates.
Generally, prepayment rates increase if interest rates fall and decrease if
interest rates rise. For many types of mortgage-backed securities, this
can result in unfavorable changes in price and yield characteristics in
response to changes in interest rates and other market conditions. For
example, as a result of their prepayment aspects, the Portfolio's mortgage-
backed securities have less potential for capital appreciation during
periods of declining interest rates than other fixed-income securities of
comparable maturities, although such obligations may have a comparable or
greater risk of decline in market value during periods of rising interest
rates.
Mortgage-backed securities have yield and maturity characteristics
that are dependent on the mortgages underlying them. Thus, unlike
traditional debt securities, which may pay a fixed rate of interest until
maturity when the entire principal amount comes due, payments on these
securities include both interest and a partial payment of principal. In
addition to scheduled loan amortization, payments of principal may result
from the voluntary prepayment, refinancing, or foreclosure of the
underlying mortgage loans. Such prepayments may significantly shorten the
effective durations of mortgage-backed securities, especially during
periods of declining interest rates. Similarly, during periods of rising
interest rates, a reduction in the rate of prepayments may significantly
lengthen the effective durations of such securities.
Other asset-backed securities. The Portfolio may invest in securities
representing interests in other types of financial assets, such as
automobile-finance receivables or credit-card receivables. Such securities
are subject to many of the same risks as are mortgage-backed securities,
including prepayment risks, refinancing risks, and risks of foreclosure.
They may or may not be secured by the receivables themselves or may be
unsecured obligations of their issuers.
When-issued securities and forward commitments. The Portfolio may
purchase securities on a "when-issued" basis. The price of such securities
is fixed at the time the commitment to purchase is made, but delivery and
payment for the when-issued securities take place at a later date (normally
within one month of purchase). The Portfolio may also purchase securities
for future delivery. "When-issued" securities and forward commitments may
increase the Portfolio's overall investment exposure and may result in
losses.
Repurchase agreements. The Portfolio may enter into repurchase
agreements. Under a repurchase agreement, the 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. The 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
Commonwealth will monitor repurchase agreement transactions to ensure that
they will be fully collateralized at all times, the 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 the Portfolio may be treated as
an unsecured creditor and be required to return the underlying collateral
to the other party's estate.
As a matter of policy, the Trustees will not materially change the
Portfolio's investment objectives without shareholder approval. (Any such
change could, of course, result in a change in the nature of the securities
in which the Portfolio may invest and the risks involved in an investment
in the Portfolio.)
Management of the Portfolio
The Trustees of the Trust are responsible for generally overseeing the
conduct of the Trust's business. Commonwealth Investment Counsel, Inc.,
located at 901 East Byrd Street, Richmond, Virginia 23219, acts as
investment adviser to the Portfolio pursuant to a Management Contract
between the Trust and Commonwealth. Mentor Investment Group, Inc.
("Mentor") serves as administrator to the Portfolio. Neither Commonwealth
nor Mentor receives compensation from the Portfolio for the performance of
such services. Mentor has agreed to bear certain expenses of the Portfolio
pursuant to a voluntary expense limitation currently in effect. This
limitation may be terminated at any time. Commonwealth is a wholly owned
subsidiary of Mentor, which is a wholly owned subsidiary of Wheat First
Butcher Singer, Inc. ("Wheat First Butcher Singer"). Wheat First Butcher
Singer, through other subsidiaries, also engages in securities brokerage,
investment banking, and related businesses. Commonwealth currently has
assets under management of approximately $4 billion, and serves as
investment adviser to Cash Resource Trust, an open-end series investment
company, Mentor Balanced Portfolio, Mentor Quality Income Portfolio, Mentor
Short-Duration Income Portfolio, and SNAP Fund, each of which is an open-
end investment company, and Mentor Income Fund, Inc., a closed-end
investment company.
Subject to the general oversight of the Trustees, Commonwealth, as
investment adviser, manages the Portfolio in accordance with the stated
policies of the Portfolio. A team of fixed-income professionals made up of
Mr. P. Michael Jones, Mr. William H. West, Jr., Mr. Stephen R. McClelland,
and Mr. Steven C. Henderson manages the Portfolio for Commonwealth. Mr.
Jones is a Senior Vice President and Director of Investment Research of
Commonwealth and has eight years of investment experience. He served
previously as Senior Vice President of Ryland Capital Management, Inc and
as Vice President of Alliance Capital Management. Mr. West is a Vice
President and Portfolio Manager at Commonwealth and has six years of
investment experience. He served previously as Vice President and
Portfolio Manager at Ryland Capital Management, Inc. Mr. McClelland is a
Vice President and Portfolio Manager at Commonwealth and has four years of
investment experience. He served previously as Associate Vice President
and Budget Analyst for Wheat First Butcher Singer. Mr. Henderson is
Portfolio Manager at Commonwealth and has six years of investment
experience. He served previously as Senior Portfolio Analyst at Ryland
Capital Management, Inc.
Commonwealth makes investment decisions for the Portfolio and places
the purchase and sale orders for the Portfolio's portfolio transactions.
In selecting broker-dealers, Commonwealth may consider research and
brokerage services furnished to it and its affiliates. Subject to seeking
the best overall terms available, Commonwealth may consider sales of shares
of the Portfolio (and, if permitted by law, of other portfolios in the
Mentor family) as a factor in the selection of broker-dealers to execute
portfolio transactions for the Portfolio.
Portfolio Turnover. The length of time the Portfolio has held a
particular security is not generally a consideration in investment
decisions. A change in the securities held by the Portfolio is known as
"portfolio turnover." As a result of the Portfolio's investment policies,
under certain market conditions the Portfolio's portfolio turnover rate may
be higher than that of other mutual funds. Portfolio turnover generally
involves some expense to the Portfolio, including brokerage commissions or
dealer mark-ups and other transaction costs on the sale of securities and
reinvestment in other securities. Such transactions may result in
realization of taxable capital gains. Although it is impossible to predict
the Portfolio's portfolio turnover, Commonwealth expects that the portfolio
turnover rate for the Portfolio for its first full fiscal year will not
exceed 400%. The portfolio turnover rate for the six months ended March
31, 1995 for the Portfolio is contained in the section "Financial
Highlights."
How the Portfolio values its shares
The Portfolio calculates the net asset value of its shares by dividing
the total value of its assets, less liabilities, by the number of its
shares outstanding. Shares are valued as of the close of regular trading
on the New York Stock Exchange each day the Exchange is open. Portfolio
securities for which market quotations are readily available are stated at
market value. Short-term investments that will mature in 60 days or less
are stated at amortized cost, which has been determined to approximate the
fair market value of such investments. All other securities and assets are
valued at their fair values.
How distributions are made
The Portfolio distributes net investment income quarterly and any net
realized capital gains at least annually. Distributions from capital gains
are made after applying any available capital loss carryovers. All
Portfolio distributions will be invested in additional Portfolio shares,
unless the shareholder instructs the Portfolio otherwise.
Taxes
The 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 taxes on income and gains it
distributes to shareholders. The Portfolio will distribute substantially
all of its net investment income and capital gain net income on a current
basis.
The following is intended principally for shareholders subject to
federal income taxation:
All Portfolio distributions, other than exempt-interest dividends,
will be taxable to shareholders as ordinary income, except that any
distributions of net capital gain will be taxed as long-term capital gain,
regardless of how long a shareholder has held the shares (although the loss
on a sale of shares held for six months or less will be treated as long-
term capital loss to the extent of any capital gain distribution received
with respect to those shares). Distributions will be taxable as described
above whether received in cash or in shares through the reinvestment of
distributions. Early in each year the Trust will notify shareholders of
the amount and tax status of distributions paid by the Portfolio for the
preceding year. In buying or selling securities for the Portfolio,
Commonwealth will not normally take into account the effect any purchase or
sale of securities will have on the tax positions of the Portfolio's
shareholders.
The foregoing is a summary of certain federal income tax consequences
of investing in the Portfolio. Dividends and distributions also may be
subject to state and local taxes. Shareholders are urged to consult their
tax advisers regarding specific questions as to federal, state, or local
taxes. Non-U.S. investors should consult their tax advisers concerning the
tax consequences of ownership of shares of the 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).
Purchase of shares
Shares of the Portfolio are sold at the net asset value next
determined after a purchase order is received by the Portfolio. Purchase
orders that are received prior to the close of trading on the New York
Stock Exchange on a particular day are priced according to the net asset
value determined on that day.
Mentor Distributors, Inc. ("Mentor Distributors"), 901 East Byrd
Street, Richmond, Virginia 23219, serves as distributor of the Portfolio's
shares. Mentor Distributors is not obligated to sell any specific amount
of shares of the Portfolio.
An investor may make an initial purchase of shares of the Portfolio by
submitting a completed Trust application along with a purchase order, and
by making payment to Mentor Distributors. Investors will be required to
make minimum initial investments of $500,000 in the Portfolio and minimum
subsequent investments of $25,000. Investments made through advisory
accounts maintained with investment advisers registered under the
Investment Advisers Act of 1940 (including "wrap" accounts) are not subject
to these minimum investment requirements. The Portfolio reserves the right
at any time to change the initial and subsequent investment minimums
required of investors.
Shares of the Portfolio may be purchased by (i) paying cash, (ii)
exchanging securities acceptable to Commonwealth, or (iii) a combination of
such securities and cash. Purchase of shares of the Portfolio in exchange
for securities is subject in each case to the determination by Commonwealth
that the securities to be exchanged are acceptable for purchase by the
Portfolio. Securities accepted by Commonwealth in exchange for Portfolio
shares will be valued in the same manner as the Portfolio's assets as of
the time of the Portfolio's next determination of net asset value after
such acceptance. All dividends and subscription or other rights which are
reflected in the market price of accepted securities at the time of
valuation become the property of the Portfolio and must be delivered to the
Portfolio upon receipt by the investor from the issuer. A gain or loss for
federal income tax purposes would be realized upon the exchange by an
investor that is subject to federal income taxation, depending upon the
investor's basis in the securities tendered. A shareholder who wishes to
purchase shares by exchanging securities should obtain instructions by
calling Mentor Distributors at 1-800-869-6042.
In all cases Commonwealth or Mentor Distributors reserves the right to
reject any particular investment.
Redemption of shares
A shareholder may redeem all or any portion of its shares in the
Portfolio at any time upon request, by following the procedures set forth
below. Redemptions will be effected at the net asset value per share of
the Portfolio next determined after the receipt by the Portfolio of
redemption instructions in "good order" as described below. Shares may be
redeemed by submitting a written request for redemption to Mentor
Distributors, or to the Trust at the following address:
Mentor Institutional Trust
P.O. Box 1357
Richmond, Virginia 23286-0109
Upon receipt of a request in "good order," the Trust will determine
the amount of the net asset value of the redeemed shares, based upon the
net asset value of the Portfolio next determined after the redemption
request has been received. A check for the proceeds will normally be
mailed on the next business day.
If shares of the Portfolio to be redeemed represent an investment made
by check, the Trust reserves the right not to transmit the redemption
proceeds to the shareholder until the check has been collected, which may
take up to 15 days after the purchase date.
A redemption request will be considered to have been made in "good
order" if the following conditions are satisfied:
(1) the request is in writing, states
the number of shares to be
redeemed, and identifies the
shareholder's Portfolio account
number;
(2) the request is signed by each
registered owner exactly as the
shares are registered; and
(3) if the shares to be redeemed were issued in
certificate form, the certificates are endorsed
for transfer (or are accompanied by an endorsed
stock power) and accompany the redemption
request.
The Portfolio reserves the right to require signature guarantees. A
guarantor of a signature must be an eligible guarantor institution, which
term includes most banks and trust companies, savings associations, credit
unions, and securities brokers or dealers. The purpose of a signature
guarantee is to protect Portfolio shareholders against the possibility of
fraud.
Mentor Distributors may facilitate any redemption request. There is
no extra charge for this service.
Other information concerning redemption. Under unusual circumstances,
the Portfolio may suspend repurchases, or postpone payment for more than
seven days, as permitted by federal securities laws. In addition, the
Portfolio reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole
or in part by securities valued in the same way as they would be valued for
purposes of computing the Portfolio's per share net asset value. If
payment is made in securities, a shareholder may incur brokerage expenses
in converting those securities into cash.
Exchange privilege. Shareholders may exchange their shares in the
Portfolio for shares of certain other Portfolios comprising the Trust at
their respective net asset values beginning 15 days after purchase.
Contact Mentor Distributors for a prospectus of any of those Portfolios.
Shares of certain of the Portfolios are not available in all states. To
exchange shares, simply complete an exchange authorization form and send it
to Mentor Distributors. Exchange authorization forms are available from
the Trust and from Mentor Distributors. The Trust reserves the right to
change or suspend the exchange privilege at any time. Shareholders would
be notified before any such change or suspension. Consult Mentor
Distributors before requesting an exchange.
Mentor Institutional Trust
Mentor Institutional Trust is a Massachusetts business trust organized
on February 8, 1994 as IMG Institutional Trust. 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, diversified, series 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. Any such series of shares may be further divided without
shareholder approval into two or more classes of shares having such
preferences and special or relative rights and privileges as the Trustees
determine. The Trust's shares are currently divided into four series, one
representing the Portfolio, the others representing other Portfolios with
varying investment objectives and policies. Each share has one vote, with
fractional shares voting proportionally. Shares of each class will vote
together as a single class except when required by law or determined by the
Trustees. Shares of the Portfolio are freely transferable, are entitled to
dividends as declared by the Trustees, and, if the Portfolio were
liquidated, would receive the net assets of the Portfolio. The Trust may
suspend the sale of shares at any time and may refuse any order to purchase
shares. 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.
In the interest of economy and convenience, the Portfolio will not
issue certificates for its shares except at the shareholder's request.
Custodian and transfer and dividend agent
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as the Portfolio's custodian. The Shareholder
Services Group, Inc., P.O. Box 9653, Providence, Rhode Island 02940,
serves as the Portfolio's transfer and dividend agent.
Performance Information
Yield and total return data may from time to time be included in
advertisements about the Portfolio. The Portfolio's "yield" is calculated
by dividing the Portfolio's annualized net investment income per share
during a recent 30-day period by its net asset value on the last day of
that period. "Total return" for the life of the Portfolio through the most
recent calendar quarter represents the actual rate of return on an
investment of $1,000 in the Portfolio over the period. The Portfolio's
performance may be compared to various indices. See the Statement of
Additional Information. Information may be presented in advertisements
about the Portfolio describing the background and professional experience
of the Portfolio's investment adviser or any portfolio manager.
All data is based on the 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
the Portfolio's investments, and the Portfolio's operating expenses.
Investment performance also often reflects the risks associated with the
Portfolio's investment objectives and policies. These factors should be
considered when comparing the Portfolio's investment results to those of
other mutual funds and other investment vehicles.
<PAGE>
No person has been MENTOR
authorized to give any FIXED-INCOME
information or to make any PORTFOLIO
representations other than
those contained in this
Prospectus 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. PROSPECTUS
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 Mentor Distributors, Inc.
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.
<PAGE>
PROSPECTUS September , 1995
MENTOR INTERMEDIATE DURATION PORTFOLIO
Mentor Intermediate Duration Portfolio seeks a high level of long-term
total return by investing in a diversified portfolio of investment-grade,
fixed-income securities, with a portfolio duration of from two to five
years. As a secondary objective, the Portfolio seeks to preserve capital
to the extent consistent with seeking a high level of long-term total
return. There is no limitation on the average weighted portfolio maturity
the Portfolio may maintain, and the Portfolio's average weighted maturity
will likely be longer than its portfolio duration. Commonwealth Investment
Counsel, Inc. is the Portfolio's investment adviser. Shares of the
Portfolio are being offered principally to institutional and high net-worth
individual investors.
This Prospectus sets forth concisely the information about the
Portfolio that a prospective investor should know before investing. Please
read this Prospectus and retain it for future reference. Investors can
find more detailed information in the September , 1995 Statement of
Additional Information, as amended from time to time. For a free copy of
the Statement, call Mentor Distributors, 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. The Portfolio's address is
P.O. Box 1357, Richmond, Virginia 23286-0109.
_________________________
MENTOR DISTRIBUTORS, INC.
Distributor
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION 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 an investor's maximum
transaction costs from investing in the Portfolio and expenses the
Portfolio expects to incur in its first full fiscal year. The Example
shows the cumulative expenses attributable to a hypothetical $1,000
investment in the Portfolio over specified periods.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed
on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees 0.00%
12b-1 Fees 0.00%
Other Expenses (after voluntary
expense limitation)* 0.05%
Total Fund Operating Expenses* 0.05%
____________________
*Other Expenses reflect a voluntary expense limitation currently in
effect. In the absence of the expense limitation, Other Expenses and Total
Fund Operating Expenses would have been 0.108%.
Example
An investment of $1,000 in the Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each
period:
1 year $1
3 years $2
This information is provided to help investors understand the expenses
of investing in the Portfolio and an investor's share of the estimated
operating expenses of the Portfolio. The information is based on the
expenses the Portfolio expects to incur during its first full fiscal year.
The Example should not be considered a representation of future
performance; actual expenses may be more or less than those shown.
Financial Highlights
The financial highlights presented below for the Portfolio have been
prepared by Mentor Institutional Trust and are unaudited.
<PAGE>
Financial Highlights (Unaudited)
Mentor
Intermediate
Duration
Period Ended April 30, 1995 Portfolio**
Per Share Operating Performance $ 12.50
Net asset value, beginning of period
Income from investment operations
Net investment income 0.33
Net realized and unrealized
gain on investments 0.32
Total from investment operations 0.65
Less distributions
Dividends from income (0.25)
Net asset value, end of period $ 12.90
Total Return 5.24%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $10,911
Ratio of expenses to average net assets 0.05%(a)
Ratio of net investment income to
average net assets 7.11%(a)
Portfolio turnover rate 398%(a)
(a) Annualized.
** For the period from December 19, 1994 (commencement of operations) to
April 30, 1995.
<PAGE>
Investment objectives and policies
The investment objective of Mentor Intermediate Duration Portfolio is
to seek a high level of long-term total return. Preservation of capital is
a secondary objective to the extent consistent with the Portfolio's primary
objective of seeking a high level of long-term total return. The Portfolio
will invest in U.S. Government securities, fixed-income securities of
corporations and other private issuers, mortgage-backed securities, and
other asset-backed securities. The Portfolio may also hold a portion of
its assets in cash or money market instruments. There can, of course, be
no assurance that the Portfolio will achieve its investment objectives.
The Portfolio is a series of Mentor Institutional Trust (the "Trust"), a
diversified, series management investment company.
The Portfolio will normally maintain a portfolio duration of from two
to five years. The Portfolio's "portfolio duration" at any time is the
dollar-weighted average duration of its portfolio securities at that time.
In general, the net asset value of a portfolio with a longer portfolio
duration will increase or decrease to a greater degree in response to
changes in interest rates than will the net asset value of a portfolio with
a shorter portfolio duration. (Typically, for example, the value of a
security with a two-year duration will increase by approximately two
percent in response to a one-percent decline in interest rates, and will
decline by approximately two percent in response to a one-percent rise in
interest rates; similarly, the value of a security with a five-year
duration will increase by approximately five percent in response to a one-
percent decline in interest rates, and will decline by approximately five
percent in response to a one-percent rise in interest rates; and so on.)
However, because issuers of securities with longer durations typically pay
interest on those securities at rates higher than in the case of securities
with shorter durations, the current income of a portfolio with a longer
portfolio duration will typically be greater than that of a portfolio with
a shorter portfolio duration.
Commonwealth Investment Counsel, Inc., the Portfolio's investment
adviser ("Commonwealth"), may take full advantage of the entire range of
maturities of the securities in which the Portfolio may invest and may,
through the purchase and sale of securities with different durations,
adjust the Portfolio's portfolio duration from time to time, depending on
its assessment of the relative values of securities of different durations
and maturities and expectations of future changes in interest rates. There
can be no assurance that the Portfolio will be able to maintain any
particular portfolio duration.
The Portfolio's "total return" consists of current income, including
interest payments and discount accruals, plus any increases in the values
of the Portfolio's investments (less any decreases in the values of any of
its investments and amortizations of premiums). The Portfolio may seek to
increase its total return by investing in investment-grade securities which
Commonwealth believes may appreciate in value as a result of changes in
interest rates or other market factors.
Traditionally, a debt security's "term to maturity" has been used to
evaluate the sensitivity of the security's price to changes in interest
rates (the security's interest-rate "volatility"). However, a security's
term to maturity measures only the period of time until the last payment of
principal or interest on the security, and does not take into account the
timing of the various payments of principal or interest to be made prior to
the instrument's maturity. By contrast, "duration" is a measure of the
full stream of payments to be received on a debt instrument, including both
interest and principal payments, based on their present values. Duration
measures the periods of time between the present time and the time when the
various interest and principal payments are scheduled or, in the case of a
callable bond, expected to be received, and weights them by their present
values. Duration can be a more accurate measure of interest rate
volatility than term-to-maturity. There is no limitation on the average
weighted maturity the Portfolio may maintain, and the Portfolio's average
weighted maturity will likely be longer than its portfolio duration.
There are some situations where the standard duration calculation does
not properly reflect the interest-rate volatility of a security. For
example, floating and variable rate securities often have final maturities
of ten years or more; however, their interest-rate volatility is determined
based principally on the period of time until their interest rates are
reset and on the terms on which they may be reset. Another example where a
security's interest-rate volatility is not properly measured by the
standard duration calculation is in the case of mortgage securities. The
stated final maturity of such securities may be up to 30 years, but the
actual cash flow on the securities will be determined by the prepayment
rates on the underlying mortgage loans. Therefore, the duration of such a
security can change if prepayment rates change. In these and other similar
situations, Commonwealth will estimate a security's duration using
sophisticated analytical techniques that take into account such factors as
the expected prepayment rate on the security and how the prepayment rate
might change under various market conditions. Because calculation of a
security's duration may be based in part on estimates such as these made by
Commonwealth, the Portfolio's ability to maintain a particular portfolio
duration will depend on Commonwealth's ability to make those estimates
accurately.
The Portfolio will normally invest in fixed-income securities. A
fixed-income security is a debt security paying interest at a rate
specified in the terms of the security or determined based on a formula or
factors specified in the terms of the security.
The Portfolio will only invest in securities of investment grade. A
security will be deemed to be of "investment grade" if, at the time of
investment by the Portfolio, the security is rated at least Baa3 by Moody's
Investors Service, Inc. or BBB- by Standard & Poor's Corporation, or at a
comparable rating by another nationally recognized rating organization.
Securities rated Baa or BBB lack outstanding investment characteristics and
have speculative characteristics and are subject to greater credit and
market risks than higher-rated securities. The Portfolio will not be
required to dispose of a security held by it if the security's rating falls
below investment grade, although Commonwealth will consider whether
continued investment in the security is consistent with the Portfolio's
investment objectives. See the Statement of Additional Information for
descriptions of securities ratings assigned by Moody's and Standard &
Poor's.
Commonwealth may under unusual circumstances implement temporary
"defensive" strategies in order to reduce fluctuations in the value of the
Portfolio's assets. At those times, the Portfolio may invest any portion
of its assets in cash or cash equivalents, money market instruments, or
other short-term, high-quality investments Commonwealth considers
consistent with such defensive strategies, and may maintain a portfolio
duration shorter than would otherwise be consistent with its basic
investment strategy.
Other investment practices and risks
The Portfolio may engage in the other investment practices described
below. See the Statement of Additional Information for a more detailed
description of these practices and certain risks they may involve.
Mortgage-backed securities. The Portfolio may invest in mortgage-
backed certificates and other securities representing ownership interests
in mortgage pools, including collateralized mortgage obligations. Interest
and principal payments on the mortgages underlying mortgage-backed
securities are passed through to the holders of the mortgage-backed
securities. Mortgage-backed securities currently offer yields higher than
those available from many other types of fixed-income securities but
because of their prepayment aspects, their price volatility and yield
characteristics will change based on changes in prepayment rates.
Generally, prepayment rates increase if interest rates fall and decrease if
interest rates rise. For many types of mortgage-backed securities, this
can result in unfavorable changes in price and yield characteristics in
response to changes in interest rates and other market conditions. For
example, as a result of their prepayment aspects, the Portfolio's mortgage-
backed securities have less potential for capital appreciation during
periods of declining interest rates than other fixed-income securities of
comparable maturities, although such obligations may have a comparable or
greater risk of decline in market value during periods of rising interest
rates.
Mortgage-backed securities have yield and maturity characteristics
that are dependent on the mortgages underlying them. Thus, unlike
traditional debt securities, which may pay a fixed rate of interest until
maturity when the entire principal amount comes due, payments on these
securities include both interest and a partial payment of principal. In
addition to scheduled loan amortization, payments of principal may result
from the voluntary prepayment, refinancing, or foreclosure of the
underlying mortgage loans. Such prepayments may significantly shorten the
effective durations of mortgage-backed securities, especially during
periods of declining interest rates. Similarly, during periods of rising
interest rates, a reduction in the rate of prepayments may significantly
lengthen the effective durations of such securities.
Other asset-backed securities. The Portfolio may invest in securities
representing interests in other types of financial assets, such as
automobile-finance receivables or credit-card receivables. Such securities
are subject to many of the same risks as are mortgage-backed securities,
including prepayment risks, refinancing risks, and risks of foreclosure.
They may or may not be secured by the receivables themselves or may be
unsecured obligations of their issuers.
When-issued securities and forward commitments. The Portfolio may
purchase securities on a "when-issued" basis. The price of such securities
is fixed at the time the commitment to purchase is made, but delivery and
payment for the when-issued securities take place at a later date (normally
within one month of purchase). The Portfolio may also purchase securities
for future delivery. "When-issued" securities and forward commitments may
increase the Portfolio's overall investment exposure and may result in
losses.
Repurchase agreements. The Portfolio may enter into repurchase
agreements. Under a repurchase agreement, the 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. The 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
Commonwealth will monitor repurchase agreement transactions to ensure that
they will be fully collateralized at all times, the 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 the Portfolio may be treated as
an unsecured creditor and be required to return the underlying collateral
to the other party's estate.
As a matter of policy, the Trustees will not materially change the
Portfolio's investment objectives without shareholder approval. (Any such
change could, of course, result in a change in the nature of the securities
in which the Portfolio may invest and the risks involved in an investment
in the Portfolio.)
Management of the Portfolio
The Trustees of the Trust are responsible for generally overseeing the
conduct of the Trust's business. Commonwealth Investment Counsel, Inc.,
located at 901 East Byrd Street, Richmond, Virginia 23219, acts as
investment adviser to the Portfolio pursuant to a Management Contract
between the Trust and Commonwealth. Mentor Investment Group, Inc.
("Mentor") serves as administrator to the Portfolio. Neither Commonwealth
nor Mentor receives compensation from the Portfolio for the performance of
such services. Mentor has agreed to bear certain expenses of the Portfolio
pursuant to a voluntary expense limitation currently in effect. This
limitation may be terminated at any time. Commonwealth is a wholly owned
subsidiary of Mentor, which is a wholly owned subsidiary of Wheat First
Butcher Singer, Inc. ("Wheat First Butcher Singer"). Wheat First Butcher
Singer, through other subsidiaries, also engages in securities brokerage,
investment banking, and related businesses. Commonwealth currently has
assets under management of approximately $4 billion, and serves as
investment adviser to Cash Resource Trust, an open-end series investment
company, Mentor Balanced Portfolio, Mentor Quality Income Portfolio, Mentor
Short-Duration Income Portfolio, and SNAP Fund, each of which is an open-
end investment company, and Mentor Income Fund, Inc., a closed-end
investment company.
Subject to the general oversight of the Trustees, Commonwealth, as
investment adviser, manages the Portfolio in accordance with the stated
policies of the Portfolio. A team of fixed-income professionals made up of
Mr. P. Michael Jones, Mr. William H. West, Jr., Mr. Stephen R. McClelland,
and Mr. Steven C. Henderson manages the Portfolio for Commonwealth. Mr.
Jones is a Senior Vice President and Director of Investment Research of
Commonwealth and has eight years of investment experience. He served
previously as Senior Vice President of Ryland Capital Management, Inc. and
as Vice President of Alliance Capital Management. Mr. West is a Vice
President and Portfolio Manager at Commonwealth and has six years of
investment experience. He served previously as Vice President and
Portfolio Manager at Ryland Capital Management, Inc. Mr. McClelland is a
Vice President and Portfolio Manager at Commonwealth and has four years of
investment experience. He served previously as Associate Vice President
and Budget Analyst for Wheat First Butcher Singer. Mr. Henderson is
Portfolio Manager at Commonwealth and has fourteen years of investment
experience. He served previously as Senior Portfolio Analyst at Ryland
Capital Management, Inc.
Commonwealth makes investment decisions for the Portfolio and places
the purchase and sale orders for the Portfolio's portfolio transactions.
In selecting broker-dealers, Commonwealth may consider research and
brokerage services furnished to it and its affiliates. Subject to seeking
the best overall terms available, Commonwealth may consider sales of shares
of the Portfolio (and, if permitted by law, of other portfolios in the
Mentor family) as a factor in the selection of broker-dealers to execute
portfolio transactions for the Portfolio.
Portfolio Turnover. The length of time the Portfolio has held a
particular security is not generally a consideration in investment
decisions. A change in the securities held by the Portfolio is known as
"portfolio turnover." As a result of the Portfolio's investment policies,
under certain market conditions the Portfolio's portfolio turnover rate may
be higher than that of other mutual funds. Portfolio turnover generally
involves some expense to the Portfolio, including brokerage commissions or
dealer mark-ups and other transaction costs on the sale of securities and
reinvestment in other securities. Such transactions may result in
realization of taxable capital gains. Although it is impossible to predict
the Portfolio's portfolio turnover, Commonwealth expects that the portfolio
turnover rate for the Portfolio for its first full fiscal year will not
exceed 400%. The portfolio turnover rate for the six months ended March
31, 1995 for the Portfolio is contained in the section "Financial
Highlights."
How the Portfolio values its shares
The Portfolio calculates the net asset value of its shares by dividing
the total value of its assets, less liabilities, by the number of its
shares outstanding. Shares are valued as of the close of regular trading
on the New York Stock Exchange each day the Exchange is open. Portfolio
securities for which market quotations are readily available are stated at
market value. Short-term investments that will mature in 60 days or less
are stated at amortized cost, which has been determined to approximate the
fair market value of such investments. All other securities and assets are
valued at their fair values.
How distributions are made
The Portfolio distributes net investment income quarterly and any net
realized capital gains at least annually. Distributions from capital gains
are made after applying any available capital loss carryovers. All
Portfolio distributions will be invested in additional Portfolio shares,
unless the shareholder instructs the Portfolio otherwise.
Taxes
The 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 taxes on income and gains it
distributes to shareholders. The Portfolio will distribute substantially
all of its net investment income and capital gain net income on a current
basis.
The following is intended principally for shareholders subject to
federal income taxation:
All Portfolio distributions, other than exempt-interest dividends,
will be taxable to shareholders as ordinary income, except that any
distributions of net capital gain will be taxed as long-term capital gain,
regardless of how long a shareholder has held the shares (although the loss
on a sale of shares held for six months or less will be treated as long-
term capital loss to the extent of any capital gain distribution received
with respect to those shares). Distributions will be taxable as described
above whether received in cash or in shares through the reinvestment of
distributions. Early in each year the Trust will notify shareholders of
the amount and tax status of distributions paid by the Portfolio for the
preceding year. In buying or selling securities for the Portfolio,
Commonwealth will not normally take into account the effect any purchase or
sale of securities will have on the tax positions of the Portfolio's
shareholders.
The foregoing is a summary of certain federal income tax consequences
of investing in the Portfolio. Dividends and distributions also may be
subject to state and local taxes. Shareholders are urged to consult their
tax advisers regarding specific questions as to federal, state, or local
taxes. Non-U.S. investors should consult their tax advisers concerning the
tax consequences of ownership of shares of the 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).
Purchase of shares
Shares of the Portfolio are sold at the net asset value next
determined after a purchase order is received by the Portfolio. Purchase
orders that are received prior to the close of trading on the New York
Stock Exchange on a particular day are priced according to the net asset
value determined on that day.
Mentor Distributors, Inc. ("Mentor Distributors"), 901 East Byrd
Street, Richmond, Virginia 23219, serves as distributor of the Portfolio's
shares. Mentor Distributors is not obligated to sell any specific amount
of shares of the Portfolio.
An investor may make an initial purchase of shares of the Portfolio by
submitting a completed Trust application along with a purchase order, and
by making payment to Mentor Distributors. Investors will be required to
make minimum initial investments of $500,000 in the Portfolio and minimum
subsequent investments of $25,000. Investments made through advisory
accounts maintained with investment advisers registered under the
Investment Advisers Act of 1940 (including "wrap" accounts) are not subject
to these minimum investment requirements. The Portfolio reserves the right
at any time to change the initial and subsequent investment minimums
required of investors.
Shares of the Portfolio may be purchased by (i) paying cash, (ii)
exchanging securities acceptable to Commonwealth, or (iii) a combination of
such securities and cash. Purchase of shares of the Portfolio in exchange
for securities is subject in each case to the determination by Commonwealth
that the securities to be exchanged are acceptable for purchase by the
Portfolio. Securities accepted by Commonwealth in exchange for Portfolio
shares will be valued in the same manner as the Portfolio's assets as of
the time of the Portfolio's next determination of net asset value after
such acceptance. All dividends and subscription or other rights which are
reflected in the market price of accepted securities at the time of
valuation become the property of the Portfolio and must be delivered to the
Portfolio upon receipt by the investor from the issuer. A gain or loss for
federal income tax purposes would be realized upon the exchange by an
investor that is subject to federal income taxation, depending upon the
investor's basis in the securities tendered. A shareholder who wishes to
purchase shares by exchanging securities should obtain instructions by
calling Mentor Distributors at 1-800-869-6042.
In all cases Commonwealth or Mentor Distributors reserves the right to
reject any particular investment.
Redemption of shares
A shareholder may redeem all or any portion of its shares in the
Portfolio at any time upon request, by following the procedures set forth
below. Redemptions will be effected at the net asset value per share of
the Portfolio next determined after the receipt by the Portfolio of
redemption instructions in "good order" as described below. Shares may be
redeemed by submitting a written request for redemption to Mentor
Distributors, or to the Trust at the following address:
Mentor Institutional Trust
P.O. Box 1357
Richmond, Virginia 23286-0109
Upon receipt of a request in "good order," the Trust will determine
the amount of the net asset value of the redeemed shares, based upon the
net asset value of the Portfolio next determined after the redemption
request has been received. A check for the proceeds will normally be
mailed on the next business day.
If shares of the Portfolio to be redeemed represent an investment made
by check, the Trust reserves the right not to transmit the redemption
proceeds to the shareholder until the check has been collected, which may
take up to 15 days after the purchase date.
A redemption request will be considered to have been made in "good
order" if the following conditions are satisfied:
(1) the request is in writing, states
the number of shares to be
redeemed, and identifies the
shareholder's Portfolio account
number;
(2) the request is signed by each
registered owner exactly as the
shares are registered; and
(3) if the shares to be redeemed were issued in
certificate form, the certificates are endorsed
for transfer (or are accompanied by an endorsed
stock power) and accompany the redemption
request.
The Portfolio reserves the right to require signature guarantees. A
guarantor of a signature must be an eligible guarantor institution, which
term includes most banks and trust companies, savings associations, credit
unions, and securities brokers or dealers. The purpose of a signature
guarantee is to protect Portfolio shareholders against the possibility of
fraud.
Mentor Distributors may facilitate any redemption request. There is
no extra charge for this service.
Other information concerning redemption. Under unusual circumstances,
the Portfolio may suspend repurchases, or postpone payment for more than
seven days, as permitted by federal securities laws. In addition, the
Portfolio reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole
or in part by securities valued in the same way as they would be valued for
purposes of computing the Portfolio's per share net asset value. If
payment is made in securities, a shareholder may incur brokerage expenses
in converting those securities into cash.
Exchange privilege. Shareholders may exchange their shares in the
Portfolio for shares of certain other Portfolios comprising the Trust at
their respective net asset values beginning 15 days after purchase.
Contact Mentor Distributors for a prospectus of any of those Portfolios.
Shares of certain of the Portfolios are not available in all states. To
exchange shares, simply complete an exchange authorization form and send it
to Mentor Distributors. Exchange authorization forms are available from
the Trust and from Mentor Distributors. The Trust reserves the right to
change or suspend the exchange privilege at any time. Shareholders would
be notified before any such change or suspension. Consult Mentor
Distributors before requesting an exchange.
Mentor Institutional Trust
Mentor Institutional Trust is a Massachusetts business trust organized
on February 8, 1994 as IMG Institutional Trust. 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, diversified, series 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. Any such series of shares may be further divided without
shareholder approval into two or more classes of shares having such
preferences and special or relative rights and privileges as the Trustees
determine. The Trust's shares are currently divided into four series, one
representing the Portfolio, the others representing other Portfolios with
varying investment objectives and policies. Each share has one vote, with
fractional shares voting proportionally. Shares of each class will vote
together as a single class except when required by law or determined by the
Trustees. Shares of the Portfolio are freely transferable, are entitled to
dividends as declared by the Trustees, and, if the Portfolio were
liquidated, would receive the net assets of the Portfolio. The Trust may
suspend the sale of shares at any time and may refuse any order to purchase
shares. 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.
In the interest of economy and convenience, the Portfolio will not
issue certificates for its shares except at the shareholder's request.
Custodian and transfer and dividend agent
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as the Portfolio's custodian. The Shareholder
Services Group, Inc., P.O. 9653, Providence, Rhode Island 02940, serves as
the Portfolio's transfer and dividend agent.
Performance Information
Yield and total return data may from time to time be included in
advertisements about the Portfolio. The Portfolio's "yield" is calculated
by dividing the Portfolio's annualized net investment income per share
during a recent 30-day period by its net asset value on the last day of
that period. "Total return" for the life of the Portfolio through the most
recent calendar quarter represents the actual rate of return on an
investment of $1,000 in the Portfolio over the period. The Portfolio's
performance may be compared to various indices. See the Statement of
Additional Information. Information may be presented in advertisements
about the Portfolio describing the background and professional experience
of the Portfolio's investment adviser or any portfolio manager.
All data is based on the 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
the Portfolio's investments, and the Portfolio's operating expenses.
Investment performance also often reflects the risks associated with the
Portfolio's investment objectives and policies. These factors should be
considered when comparing the Portfolio's investment results to those of
other mutual funds and other investment vehicles.
<PAGE>
No person has been MENTOR
authorized to give any INTERMEDIATE
information or to make any DURATION
representations other than PORTFOLIO
those contained in this
Prospectus 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 PROSPECTUS
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. Mentor Distributors, Inc.
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.
<PAGE>
PROSPECTUS September , 1995
MENTOR CASH MANAGEMENT PORTFOLIO
Mentor Cash Management Portfolio is a "money market" fund, seeking as
high a rate of current income as Commonwealth Investment Counsel, Inc.
believes is consistent with preservation of capital and maintenance of
liquidity. Shares of the Portfolio are being offered principally to
institutional and high net-worth individual investors.
An investment in the Portfolio is neither insured nor guaranteed by
the U.S. Government. There can be no assurance that the Portfolio will be
able to maintain a stable net asset value of $1.00 per share.
This Prospectus sets forth concisely the information about the
Portfolio that a prospective investor should know before investing. Please
read this Prospectus and retain it for future reference. Investors can
find more detailed information in the September , 1995 Statement of
Additional Information, as amended from time to time. For a free copy of
the Statement, call Mentor Distributors, 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. The Portfolio's address is
P.O. Box 1357, Richmond, Virginia 23286-0109.
_________________________
MENTOR DISTRIBUTORS, INC.
Distributor
SHARES OF THE PORTFOLIO 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
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION 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 an investor's maximum
transaction costs from investing in the Portfolio and expenses the
Portfolio expects to incur in its first full fiscal year. The Example
shows the cumulative expenses attributable to a hypothetical $1,000
investment in the Portfolio over specified periods.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees 0.00%
12b-1 Fees 0.00%
Other Expenses (after voluntary
expense limitation)* 0.04%
Total Fund Operating Expenses* 0.04%
____________________
*Other Expenses reflect a voluntary expense limitation currently in
effect. In the absence of the expense limitation, Other Expenses and Total
Fund Operating Expenses would have been 0.099%.
Example
An investment of $1,000 in the Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each
period:
1 year $1
3 years $1
This information is provided to help investors understand the expenses
of investing in the Portfolio and an investor's share of the estimated
operating expenses of the Portfolio. The information is based on the
expenses the Portfolio expects to incur during its first full fiscal year.
The Example should not be considered a representation of future
performance; actual expenses may be more or less than those shown.
<PAGE>
Financial Highlights
The financial highlights presented below for the Portfolio have been
prepared by Mentor Institutional Trust and are unaudited.
Financial Highlights (Unaudited)
Mentor Cash
Management
Period Ended April 30, 1995 Portfolio*
Per Share Operating Performance
Net asset value, beginning of period $ 1.00
Income from investment operations
Net investment income 0.02
Net realized and unrealized
gain on investments --
Total from investment operations 0.02
Less distributions
Dividends from income (0.02)
Net asset value, end of period $ 1.00
Total Return 2.00%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 47,955
Ratio of expenses to average net assets 0.04%(a)
Ratio of net investment income to
average net assets 6.00%(a)
Portfolio turnover rate --
(a) Annualized.
* For the period from December 5, 1994 (commencement of operations) to
April 30, 1995.
<PAGE>
Investment objective and policies
Mentor Cash Management Portfolio's investment objective is to seek as
high a rate of current income as Commonwealth Investment Counsel, Inc.
("Commonwealth") believes is consistent with preservation of capital and
maintenance of liquidity. The Portfolio will invest in high-quality short-
term instruments including U.S. Government securities, banker's
acceptances, prime commercial paper, fixed-income securities of
corporations and other private issuers, and money market instruments.
There can, of course, be no assurance that the Portfolio will achieve its
investment objective. The Portfolio is a series of Mentor Institutional
Trust, a diversified, open-end series management investment company.
The Portfolio will invest in a portfolio of high-quality short-term
instruments consisting of any or all of the following:
(bullet) 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.
(bullet) Bankers' 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.
(bullet) 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.
(bullet) Other short-term obligations: high-quality, short-term obligations
of corporate issuers.
(bullet) Repurchase agreements: with respect to U.S. Government or agency
securities.
The 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" are (i) commercial paper or other short-
term obligations rated A-1 by Standard & Poor's Corporation and P-1 by
Moody's Investors Service, Inc., and (ii) obligations rated AAA or AA by
Standard & Poor's and Aaa or Aa by Moody's at the time of investment. The
Portfolio will not invest more than 5% (determined at the time of
investment) of its total assets in securities rated below A-1 or P-1 (or
securities not so rated whose issuer does not have outstanding short-term
debt obligations, of comparable priority and security, rated A-1 or P-1).
The 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 thirteen months. The 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. The
Portfolio will not purchase securities of any issuer if, immediately
thereafter, more than 5% of its total assets would be invested in
securities of that issuer, nor will the Portfolio make an investment in
commercial paper if, immediately thereafter, more than 35% of its total
assets would be invested in commercial paper. The Portfolio 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 the
Portfolio may not necessarily invest in money market instruments paying the
highest available yield at a particular time. Consistent with its
investment objective, the 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. The Portfolio may also invest to take advantage of
what Commonwealth believes to be temporary disparities in 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 Portfolio,
may result in frequent changes in the securities held by the Portfolio.
The Portfolio will not usually pay brokerage commissions in connection with
the purchase or sale of portfolio securities.
The Portfolio's securities will be affected by general changes in
interest rates resulting in increases or decreases in the values of the
obligations held by the Portfolio. The value of the 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.
Other investment practices and risks
The Portfolio may engage in the other investment practices described
below. See the Statement of Additional Information for a more detailed
description of these practices and certain risks they may involve.
Repurchase agreements. Under a repurchase agreement, the 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. The 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 Commonwealth will monitor repurchase agreement transactions to
ensure that they will be fully collateralized at all times, the 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 the Portfolio may be treated as
an unsecured creditor and be required to return the underlying collateral
to the other party's estate.
___________________
As a matter of policy, the Trustees will not materially change the
Portfolio's investment objective without shareholder approval. (Any such
change could, of course, result in a change in the nature of the securities
in which the Portfolio may invest and the risks involved in an investment
in the Portfolio.)
Management of the Portfolio
The Trustees of the Trust are responsible for generally overseeing the
conduct of the Trust's business. Commonwealth Investment Counsel, Inc.,
located at 901 East Byrd Street, Richmond, Virginia 23219, acts as
investment adviser to the Portfolio pursuant to a Management Contract
between the Trust and Commonwealth. Mentor Investment Group, Inc.
("Mentor") serves as administrator to the Portfolio. Neither Commonwealth
nor Mentor receives compensation from the Portfolio for the performance of
such services. Mentor has agreed to bear certain expenses of the Portfolio
pursuant to a voluntary expense limitation currently in effect. This
limitation may be terminated at any time. Commonwealth is a wholly owned
subsidiary of Mentor, which is a wholly owned subsidiary of Wheat First
Butcher Singer, Inc. ("Wheat First Butcher Singer"). Wheat First Butcher
Singer, through other subsidiaries, also engages in securities brokerage,
investment banking, and related businesses. Commonwealth currently has
assets under management of approximately $4 billion, and serves as
investment adviser to Cash Resource Trust, an open-end series investment
company, Mentor Balanced Portfolio, Mentor Quality Income Portfolio, Mentor
Short-Duration Income Portfolio, and SNAP Fund, each of which is an open-
end investment company, and Mentor Income Fund, Inc., a closed-end
investment company.
Subject to the general oversight of the Trustees, Commonwealth, as
investment adviser, manages the Portfolio in accordance with the stated
policies of the Portfolio. A team of fixed-income professionals manages
the Portfolio for Commonwealth. Mr. R. Preston Nuttall is a Senior Vice
President at Commonwealth and has more than 30 years of investment
management experience. Mr. Hubert R. White, III, is a Vice President and
Portfolio Manager at Commonwealth and has more than 12 years of investment
management experience.
Commonwealth makes investment decisions for the Portfolio and places
the purchase and sale orders for the Portfolio's portfolio transactions.
In selecting broker-dealers, Commonwealth may consider research and
brokerage services furnished to it and its affiliates. Subject to seeking
the best overall terms available, Commonwealth may consider sales of shares
of the Portfolio (and, if permitted by law, of other portfolios in the
Mentor family) as a factor in the selection of broker-dealers to execute
portfolio transactions for the Portfolio.
How the Portfolio Values its Shares and Distributes Income
The Portfolio values its shares twice each day the New York Stock
Exchange is open, once at 12:00 noon and again at the close of regular
trading on the Exchange. The Portfolio's investments are valued at
amortized cost according to Securities and Exchange Commission Rule 2a-7.
The Portfolio will not normally have unrealized gains or losses so long as
it values its investments by the amortized cost method.
The Portfolio determines its net income as of the close of regular
trading on the Exchange each day the Exchange is open. Each determination
of the Portfolio's net income includes (i) all accrued interest in 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.
The Portfolio declares all of its net interest income as a
distribution on each day the Exchange is open for business, as a dividend
to shareholders of record immediately prior to the close of regular trading
on the Exchange. Shareholders who purchase shares of the Portfolio as of
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 day after the Portfolio accepts their order. The
Portfolio's net income for Saturdays, Sundays, and holidays is declared as
a dividend on the preceding business day. Dividends for the immediately
preceding month will be paid on the last business day of each calendar
month (or, if that day is not a business day, on the next business day),
except that the 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 that withdraws the entire balance
of an account at any time during the month will be paid all dividends
declared through the date immediately prior to the withdrawal. Since the
net income of the Portfolio is declared as a dividend each day, the net
asset value per share of the Portfolio normally remains at $1 per share
immediately after each determination and dividend declaration.
______________________
All Portfolio distributions will be invested in additional Portfolio
shares, unless the shareholder instructs the Portfolio otherwise.
Taxes
The 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 taxes on income and gains it
distributes to shareholders. The Portfolio will distribute substantially
all of its net investment income and capital gain net income on a current
basis.
The following is intended principally for shareholders subject to
federal income taxation:
All Portfolio distributions, other than exempt-interest dividends,
will be taxable to shareholders as ordinary income, except that any
distributions of net capital gain will be taxed as long-term capital gain,
regardless of how long a shareholder has held the shares (although the loss
on a sale of shares held for six months or less will be treated as long-
term capital loss to the extent of any capital gain distribution received
with respect to those shares). Distributions will be taxable as described
above whether received in cash or in shares through the reinvestment of
distributions. Early in each year the Trust will notify shareholders of
the amount and tax status of distributions paid by the Portfolio for the
preceding year. In buying or selling securities for the Portfolio,
Commonwealth will not normally take into account the effect any purchase or
sale of securities will have on the tax positions of the Portfolio's
shareholders.
The foregoing is a summary of certain federal income tax consequences
of investing in the Portfolio. Dividends and distributions also may be
subject to state and local taxes. Shareholders are urged to consult their
tax advisers regarding specific questions as to federal, state, or local
taxes. Non-U.S. investors should consult their tax advisers concerning the
tax consequences of ownership of shares of the 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).
Purchase of shares
The Portfolio offers its shares continuously at a price of $1.00 per
share. Because the Portfolio seeks to be fully invested at all times,
investments must be in Same Day Funds to be accepted. "Same Day Funds" are
funds credited by the applicable regional Federal Reserve Bank to the
account of the Portfolio at its designated bank.
Mentor Distributors, Inc. ("Mentor Distributors"), 901 East Byrd
Street, Richmond, Virginia 23219, serves as distributor of the Portfolio's
shares. Mentor Distributors is not obligated to sell any specific amount
of shares of the Portfolio.
An investor may make an initial purchase of shares of the Portfolio by
submitting a completed Trust application along with its purchase order, and
by making payment to Mentor Distributors. Investors will be required to
make minimum initial investments of $500,000 in the Portfolio and minimum
subsequent investments of $25,000. Investments made through advisory
accounts maintained with investment advisers registered under the
Investment Advisers Act of 1940 (including "wrap" accounts) are not subject
to these minimum investment requirements. The Portfolio reserves the right
at any time to change the initial and subsequent investment minimums
required of investors.
Shares of the Portfolio may be purchased by (i) paying cash, (ii)
exchanging securities acceptable to Commonwealth, or (iii) a combination of
such securities and cash. Purchase of shares of the Portfolio in exchange
for securities is subject in each case to the determination by Commonwealth
that the securities to be exchanged are acceptable for purchase by the
Portfolio. Securities accepted by Commonwealth in exchange for Portfolio
shares will be valued in the same manner as the Portfolio's assets as of
the time of the Portfolio's next determination of net asset value after
such acceptance. All dividends and subscription or other rights which are
reflected in the market price of accepted securities at the time of
valuation become the property of the Portfolio and must be delivered to the
Portfolio upon receipt by the investor from the issuer. A gain or loss for
federal income tax purposes would be realized upon the exchange by an
investor that is subject to federal income taxation, depending upon the
investor's basis in the securities tendered. A shareholder who wishes to
purchase shares by exchanging securities should obtain instructions by
calling Mentor Distributors at 1-800-869-6042.
In all cases Commonwealth or Mentor Distributors reserves the right to
reject any particular investment.
Redemption of shares
A shareholder may redeem all or any portion of its shares in the
Portfolio at any time upon request, by following the procedures set forth
below. Redemptions will be effected at the net asset value per share of
the Portfolio next determined after the receipt by the Portfolio of
redemption instructions in "good order" as described below. A check for
the proceeds will normally be mailed on the next business day. Shares may
be redeemed by submitting a written request for redemption to Mentor
Distributors, or to the Trust at the following address:
Mentor Institutional Trust
P.O. Box 1357
Richmond, Virginia 23286-0109
If shares of the Portfolio to be redeemed represent an investment made
by check, the Trust reserves the right not to transmit the redemption
proceeds to the shareholder until the check has been collected, which may
take up to 15 days after the purchase date.
A redemption request will be considered to have been made in "good
order" if the following conditions are satisfied:
(1) the request is in writing, states
the number of shares to be
redeemed, and identifies the
shareholder's Portfolio account
number;
(2) the request is signed by each
registered owner exactly as the
shares are registered; and
(3) if the shares to be redeemed were issued in
certificate form, the certificates are endorsed
for transfer (or are accompanied by an endorsed
stock power) and accompany the redemption
request.
The Portfolio reserves the right to require signature guarantees. A
guarantor of a signature must be an eligible guarantor institution, which
term includes most banks and trust companies, savings associations, credit
unions, and securities brokers or dealers. The purpose of a signature
guarantee is to protect Portfolio shareholders against the possibility of
fraud.
Mentor Distributors may facilitate any redemption request. There is
no extra charge for this service.
Other information concerning redemption. Under unusual circumstances,
the Portfolio may suspend repurchases, or postpone payment for more than
seven days, as permitted by federal securities laws. In addition, the
Portfolio reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole
or in part by securities valued in the same way as they would be valued for
purposes of computing the Portfolio's per share net asset value. If
payment is made in securities, a shareholder may incur brokerage expenses
in converting those securities into cash.
Exchange privilege. Shareholders may exchange their shares in the
Portfolio for shares of certain other Portfolios comprising the Trust at
their respective net asset values beginning 15 days after purchase.
Contact Mentor Distributors for a prospectus of any of those Portfolios.
Shares of certain of the Portfolios are not available in all states. To
exchange shares, simply complete an exchange authorization form and send it
to Mentor Distributors. Exchange authorization forms are available from
the Trust and from Mentor Distributors. The Trust reserves the right to
change or suspend the exchange privilege at any time. Shareholders would
be notified before any such change or suspension. Consult Mentor
Distributors before requesting an exchange.
Mentor Institutional Trust
Mentor Institutional Trust is a Massachusetts business trust organized
on February 8, 1994 as IMG Institutional Trust. 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, diversified, series 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. Any such series of shares may be further divided without
shareholder approval into two or more classes of shares having such
preferences and special or relative rights and privileges as the Trustees
determine. The Trust's shares are currently divided into four series, one
representing the Portfolio, the others representing other Portfolios with
varying investment objectives and policies. Each share has one vote, with
fractional shares voting proportionally. Shares of each class will vote
together as a single class except when required by law or determined by the
Trustees. Shares of the Portfolio are freely transferable, are entitled to
dividends as declared by the Trustees, and, if the Portfolio were
liquidated, would receive the net assets of the Portfolio. The Trust may
suspend the sale of shares at any time and may refuse any order to purchase
shares. 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.
In the interest of economy and convenience, the Portfolio will not
issue certificates for its shares except at the shareholder's request.
Custodian and transfer and dividend agent
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as the Portfolio's custodian. The Shareholder
Services Group, Inc., P.O. 9653, Providence, Rhode Island, 02940, serves as
the Portfolio's transfer and dividend agent.
Performance information
Yield and total return data may from time to time be included in
advertisements about the Portfolio. The Portfolio's "yield" is calculated
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). The
Portfolio's "effective yield" represents a compounding of the yield by
adding 1 to the number representing the 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 Portfolio's performance may
be compared to various indices. See the Statement of Additional
Information. Information may be presented in advertisements about the
Portfolio describing the background and professional experience of the
Portfolio's investment adviser or any portfolio manager.
All data is based on the 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
the Portfolio's investments, and the Portfolio's operating expenses.
Investment performance also often reflects the risks associated with the
Portfolio's investment objective and policies. These factors should be
considered when comparing the Portfolio's investment results to those of
other mutual funds and other investment vehicles.
MENTOR
No person has been CASH MANAGEMENT
authorized to give any PORTFOLIO
information or to make any
representations other than
those contained in this
Prospectus 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 PROSPECTUS
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 Mentor Distributors, Inc.
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.
<PAGE>
P R O S P E C T U S July 24, 1995
SNAP FUND
SNAP Fund is a "money-market" fund, seeking as high a rate of
current income as Commonwealth Investment Counsel, Inc., its investment
adviser ("CIC"), believes is consistent with preservation of capital and
maintenance of liquidity. The Fund currently offers its shares only to
participants in the Commonwealth of Virginia State Non-Arbitrage Program
(the "SNAP Program"). The Fund is a series of shares of Mentor
Institutional Trust.
An investment in the Fund is neither insured nor guaranteed by
the U.S. Government. There can be no assurance that the Fund will be able
to maintain a stable net asset value of $1.00 per share.
This Prospectus sets forth concisely the information about the
Fund and Mentor Institutional Trust that a prospective investor should
know before investing. Please read this Prospectus and retain it for
future reference. Investors can find more detailed information in the September
22, 1995 Statement of Additional Information, as amended from time to time.
For a free copy of the Statement, call 1-800-570-SNAP. The Statement has
been filed with the Securities and Exchange Commission and is incorporated
into this Prospectus by reference. The Fund's address is P.O. Box 1357,
Richmond, Virginia 23286-0109.
-------------------------
SHARES OF THE FUND 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 COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Expense summary
Expenses are one of several factors to consider when
investing in the Fund. The following table summarizes an investor's
maximum transaction costs from investing in the Fund and expenses the Fund
expects to incur in its first fiscal year. The Example shows the
cumulative expenses attributable to a hypothetical $1,000 investment in the
Fund over specified periods. Shares of the Fund are currently being
offered to investors through the Commonwealth of Virginia State Non-
Arbitrage Program (the "SNAP Program"). Only expenses incurred by the Fund
are reflected in the tables and Example below; other expenses incurred by
the SNAP Program, or by participants in the SNAP Program, are not
reflected.
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees 0.09%
12b-1 Fees 0.00%
Other Expenses 0.04%
Total Fund Operating Expenses 0.13%
Example
An investment of $1,000 in the Fund would incur the
following expenses, assuming 5% annual return and redemption at the end of
each period:
1 year $2
3 years $6
This information is provided to help investors
understand the operating expenses of the Fund. The information is based on
the expenses the Fund expects to incur during its first fiscal year. The
Example should not be considered a representation of future performance;
actual expenses may be more or less than those shown.
Investment objective and policies
SNAP Fund's investment objective is to seek as high a
rate of current income as CIC believes is consistent with preservation of
capital and maintenance of liquidity. There can, of course, be no
assurance that the Fund will achieve its investment objective. As a matter
of policy, the Trustees will not change the Fund's investment objective
without shareholder approval.
The Fund will invest in a portfolio of high-quality
short-term instruments consisting of any or all of the following:
(bullet) U.S. Government securities: U.S. Treasury bills,
notes, and bonds, and securities unconditionally
guaranteed as to payment of principal and interest by
the United States or any agency of the United States.
(bullet) Obligations of the Commonwealth of Virginia and of its
local governments and of other states: high-quality
evidences of indebtedness of the Commonwealth of
Virginia, and obligations of any county, city, town,
district, authority, or other public body of the
Commonwealth. The Fund may also invest in high-
quality-obligations of any other state or of any
county, city, town, or district located in any other
state.
(bullet) Bankers' acceptances: negotiable drafts or bills of
exchange, which have been "accepted" by a bank,
meaning, in effect, that the bank has unconditionally
agreed to pay the face value of the instrument on
maturity. The Fund will only purchase bankers'
acceptances issued by a bank organized in the U.S. or
by a foreign bank with an agency domiciled in the U.S.
(bullet) Certificates of deposit and interest-bearing time
deposits: of national banks or of banks chartered by
the Commonwealth of Virginia or of banks chartered by
other states and authorized to operate branches in the
Commonwealth of Virginia (if such banks chartered by
the Commonwealth or other states are under the
supervision of the Commonwealth of Virginia and the
deposits are secured as provided by the Virginia
Security for Public Deposits Act). The amount of any
deposit must be insured in its entirety by the Federal
Deposit Insurance Corporation, except to the extent
any such amount is collateralized by eligible
collateral as prescribed by law. Any time deposits
made by the Fund must mature in seven days or less.
(bullet) Prime commercial paper: high-quality, short-term
obligations issued by banks, corporations, and other
issuers organized under the laws of the United States
or of any state.
(bullet) Other short-term obligations: high-quality, short-term
obligations of corporate issuers.
(bullet) Repurchase agreements: with respect to U.S. Government
or agency securities. Under a repurchase agreement,
the Fund purchases a U.S. Government security 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 Fund's cost plus
interest. The Fund will enter into repurchase
agreements only with commercial banks having assets of
more than $1 billion and with "primary dealers" in
U.S. Government securities. Although CIC will monitor
repurchase agreement transactions to ensure that they
will be fully collateralized at all times, the Fund
bears a risk of loss if the other party defaults on
its obligation and the Fund 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 the Fund may be treated as an unsecured
creditor and be required to return the underlying
collateral to the other party's estate. The Fund
requires any U.S. Government securities serving as
collateral for a repurchase agreement to be delivered
to the Fund's custodian (or any approved
subcustodian).
The Fund 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" are (i) commercial paper or
other short-term obligations rated A-1 by Standard & Poor's Corporation and
P-1 by Moody's Investors Service, Inc., and (ii) other obligations rated
AAA or AA by Standard & Poor's and Aaa or Aa by Moody's at the time of
investment. The Fund will not purchase securities of any issuer (other than
U.S. Government securities) if, immediately thereafter, more than 5% of the
Fund's total assets would be invested in securities of that issuer (or 1%
of the Fund's total assets, or $1 million, whichever is greater, if the
securities of such issuer owned by the Fund are not rated in the highest
rating category by a nationally recognized statistical rating
organization), nor will the Fund make an investment in commercial paper if,
immediately thereafter, more than 35% of its total assets would be invested
in commercial paper.
The Fund 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. The Fund
will maintain a dollar-weighted average maturity of 90 days or less and
will not invest in securities with remaining maturities of more than one
year. The Fund 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.
Considerations of liquidity and preservation of
capital mean that the Fund may not necessarily invest in money market
instruments paying the highest available yield at a particular time.
Consistent with its investment objective, the Fund 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. The Fund may also invest to take advantage of what
CIC believes to be temporary disparities in 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 Fund, may result in frequent
changes in the Fund's portfolio. The Fund will not usually pay brokerage
commissions in connection with the purchase or sale of portfolio
securities.
The Fund's portfolio will be affected by general
changes in interest rates resulting in increases or decreases in the values
of the obligations held by the Fund. The value of the securities in the
Fund's portfolio can be expected to vary inversely to the 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.
The Fund will not lend money, other than by investment
in the instruments described above and through entry into repurchase
agreements, nor will it borrow money or pledge, hypothecate, or mortgage
its assets. The Fund will not invest in securities of an issuer if any
employee of the Fund or CIC (or, to the knowledge of the Fund or CIC, any
affiliated person of the Fund or CIC) is an officer or director of that
issuer or holds 10% of the outstanding voting securities of that issuer,
unless the investment is approved or ratified by the Trustees.
The Fund will not be responsible for determining
whether income or gains from any investment by the Fund will be excludable
from the income of participants in the SNAP Program for tax purposes, or
will otherwise be subject to or exempt from taxation under federal or state
law or be subject to rebate by participants under federal law.
------------------
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.
Management of the Fund
The Trustees of Mentor Institutional Trust are
responsible for generally overseeing the conduct of the Trust's business.
Commonwealth Investment Counsel, Inc., located at 901 East Byrd Street,
Richmond, Virginia 23219, acts as investment adviser to the Fund pursuant
to a Management Contract between the Fund and CIC. Subject to the general
oversight of the Trustees, CIC, as investment adviser, manages the Fund's
portfolio in accordance with the stated policies of the Fund. CIC makes
investment decisions for the Fund and places the purchase and sale orders
for the Fund's portfolio transactions. As compensation for CIC's services
under the Management Contract, the Fund pays a fee, accrued daily and paid
monthly, at the following annual rate: .09% of the first $500 million of
average net assets; .08% of the next $250 million; .07% of the next $250
million; .06% of the next $250 million; and .05% of any amount over $1.25
billion. CIC is a wholly owned subsidiary of Mentor Investment Group,
Inc., which is a wholly owned subsidiary of Wheat First Butcher Singer,
Inc. ("Wheat First Butcher Singer"). Wheat First Butcher Singer, through
other subsidiaries, also engages in securities brokerage, investment
banking, and related businesses. CIC currently has assets under management
of approximately $4 billion, and serves as investment adviser to Cash
Resource Trust, an open-end series investment company, Mentor Balanced
Portfolio, Mentor Cash Management Portfolio, Mentor Fixed-Income Portfolio,
Mentor Intermediate Duration Portfolio, Mentor Quality Income Portfolio,
and Mentor Short-Duration Income Portfolio, each of which is an open-end
investment company, and Mentor Income Fund, Inc., a closed-end investment
company. The Fund pays all of its own expenses, including, among other
things, Trustees' fees, and auditing, legal, and custodial expenses.
Subject to the general oversight of the Trustees, CIC,
as investment adviser, manages the Fund in accordance with its stated
investment objective and policies. A team of investment professionals
manages the Fund for CIC.
Mr. R. Preston Nuttall is a Senior Vice President at
Commonwealth and has more than 30 years of investment management experience.
Mr. Hubert R. White, III, is a Vice President and Portfolio Manager at
Commonwealth and has more than 12 years of investment management experience.
How the Fund values its shares
The Fund values its shares twice each day, once at
12:00 noon and again at the close of regular trading on the New York Stock
Exchange. The Fund's investments are valued at amortized cost according to
Securities and Exchange Commission Rule 2a-7. The Fund will not normally
have unrealized gains or losses so long as it values its investments by the
amortized cost method.
How distributions are made
The Fund declares all of its net interest income as a
distribution on each day the New York Stock Exchange is open for business,
as a dividend to shareholders of record immediately prior to the close of
regular trading on the Exchange. Shareholders who purchase shares of the
Fund as of 12:00 noon on any day will receive the dividend declared by the
Fund for that day; shareholders who purchase shares after 12:00 noon will
begin earning dividends on the day after the Fund accepts their order. The
Fund's net income for Saturdays, Sundays, and holidays is declared as a
dividend on the preceding business day. Dividends for any month will be
paid on the last day of that month (or, if that day is not a business day,
on the preceding business day), except that the Fund's schedule for
payment of dividends during the month of December may be adjusted to assist
in the Fund's tax reporting and distribution requirements. All
distributions will be reinvested automatically in Fund shares as of the
payment date, unless the shareholder instructs the Fund to pay
distributions to it in cash. Since the net income of the Fund is declared
as dividend each time it is determined, the net asset value per share of
the Fund normally remains at $1 per share immediately after each
determination and dividend declaration.
The Fund intends to qualify as a "regulated investment
company" for federal income tax purposes to be relieved of federal taxes on
income and gains it distributes to shareholders. The Fund will distribute
substantially all of its net investment income and capital gain net income
on a current basis. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state, or local taxes.
How to participate in the Fund
Shares of the Fund are currently being offered only to
participants in the Commonwealth of Virginia State Non-Arbitrage Program
(the "SNAP Program"). Participants in the SNAP Program wishing to purchase
shares of the Fund should consult the Information Statement of the SNAP
Program, as it may be amended from time to time (the "Information
Statement"), or should contact the SNAP Program directly, for information
as to the procedures they should follow in order to purchase shares of the
Fund through the Program.
All Fund shares owned beneficially by participants in
the SNAP Program are owned of record by the Treasury Board, an agency of
the Commonwealth of Virginia, for the benefit of participants. Because the
Treasury Board will be the record owner of all shares of the Fund owned
beneficially by SNAP Program participants, a Program participant should
follow the procedures described in the Information Statement of the SNAP
Program to ensure that all instructions as to any investment by it in the
Fund--including instructions as to the purchase or sale of shares of the
Fund--are timely carried out by the SNAP Program.
Purchase orders; purchase price. The Fund offers its
shares continuously at a price of $1.00 per share. Shares of the Fund are
sold at the net asset value next determined after a purchase order is
received by the Fund from the SNAP Program. The Fund determines its net
asset value at 12:00 noon on each day the New York Stock Exchange is open.
Purchase orders that are received prior to 12:00 noon on a particular day
are priced according to the net asset value determined at that time, and
the shares purchased at that time will earn the dividend declared for that
day. Purchase orders that are received after 12:00 noon are priced based
on the net asset value determined as of the close of the New York Stock
Exchange on that day, and begin to earn dividends on the next day.
Because the Fund seeks to be fully invested at all
times, investments must be in Same Day Funds to be accepted. "Same Day
Funds" are funds credited by the applicable regional Federal Reserve Bank
to the account of the Fund at Central Fidelity National Bank. A
participant in the SNAP Program wishing to invest in the Fund must ensure
that Central Fidelity National Bank, as Depository for the SNAP Program,
receives Same Day Funds at or prior to the time the participant wishes to
invest in the Fund. Consult the Information Statement or contact the
investment manager for the SNAP Program directly for information.
How to redeem shares
Shares of the Fund may be redeemed on any day when the
New York Stock Exchange is open. Redemptions will be effected at the net
asset value per share of the Fund next determined after receipt of the
redemption request in good order. Shares redeemed at the Fund's 12:00 noon
price do not earn the income dividend declared on the day of redemption.
Participants should consult the Information Statement or contact the SNAP
Program directly to ensure that all necessary steps are taken to effect the
timely redemption of their shares.
Redemptions by check. SNAP Program participants may
elect to have a special checking account with Central Fidelity National
Bank. Checks may be drawn on the account for any amount. Upon receipt of
a completed signature card, Central Fidelity National Bank will provide the
participant with a supply of checks drawn on the account. Additional
supplies of checks are available, upon request. When a check is presented
to Central Fidelity National Bank, a number of shares in the Fund owned
beneficially by the checkwriter will be redeemed in order to pay the full
amount of the check.
Redemption by check is not appropriate for a complete
liquidation of an account. If the amount of a redemption check is greater
than the value of the shares owned beneficially by the checkwriter, the
check will be returned to the depositor due to an insufficient account
balance. The checkwriting privilege may be suspended at any time. Consult
the Information Statement or contact the SNAP Program for additional
information.
---------------
The Fund will normally redeem shares for cash;
however, the Fund reserves the right to pay the redemption price wholly or
partly in kind if the Trustees determine it to be advisable in the interest
of the remaining shareholders. If portfolio securities are distributed in
lieu of cash, the shareholder will normally incur brokerage commissions
upon subsequent disposition of any such securities.
If shares of the Fund to be redeemed represent an
investment made by check, the Fund reserves the right not to transmit the
redemption proceeds to the shareholder until the check has been collected
which may take up to 15 days after the purchase date.
Mentor Institutional Trust
Mentor Institutional Trust is a Massachusetts business
trust organized on February 8, 1994. 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, diversified, series
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. Any such series of shares may be further
divided without shareholder approval into two or more classes of shares
having such preferences and special or relative rights and privileges as
the Trustees determine. The Trust's shares are currently divided into four
series, one representing the Fund, the others representing other funds with
varying investment objectives and policies. Each share has one vote, with
fractional shares voting proportionally. Shares of each class will vote
together as a single class except when required by law or determined by the
Trustees. Shares of the Fund are freely transferable, are entitled to
dividends as declared by the Trustees, and, if the Fund were liquidated,
would receive the net assets of the Fund. The Trust may suspend the sale
of shares at any time and may refuse any order to purchase shares.
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.
In the interest of economy and convenience, the Fund
will not issue certificates for its shares except at the shareholder's
request.
Custodian and Transfer and Dividend Agent
Central Fidelity National Bank serves as the Fund's
custodian and transfer and dividend agent. The address of Central Fidelity
National Bank is 1021 East Cary Street, P.O. Box 27602, Richmond, Virginia
23261.
Performance Information
The Fund's "yield" is computed by determining the
percentage net change, excluding capital changes, in the value of an
investment in one share of the Fund over the base period, and multiplying
the net change by 365/7 (or approximately 52 weeks). The Fund's "effective
yield" represents a compounding of the yield by adding 1 to the number
representing the 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.
Past performance does not predict future results.
Investment performance, which will vary, is based on many factors,
including market conditions, the composition of the Fund's portfolio, and
the Fund's operating expenses. Investment performance also often reflects
the risks associated with the Fund's investment objective and policies.
These factors should be considered when comparing the Fund's investment
results to those of other mutual funds and other investment vehicles.
SNAP Fund
Prospectus
An Open-End Management
Investment Company
July 24, 1995
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MENTOR INSTITUTIONAL TRUST
(Mentor Cash Management Portfolio,
Mentor Intermediate Duration Portfolio, and
Mentor Fixed-Income Portfolio)
July 24, 1995
Mentor Institutional Trust (the "Trust") is a diversified, open-end
series investment company. This Statement of Additional Information
relates to Mentor Cash Management Portfolio, Mentor Intermediate Duration
Portfolio, and Mentor Fixed-Income Portfolio, and is not a prospectus and
should be read in conjunction with a prospectus of the Trust or any
Portfolio of the Trust. A separate Statement of Additional Information
relates to the SNAP Fund (the "SNAP Statement"). A copy of any prospectus
or of the SNAP Statement can be obtained upon request made to Mentor
Distributors, Inc., the Trust's distributor, at P.O. Box 1357, Richmond,
Virginia 23286-0109, or calling Mentor Distributors at 1-(800) 869-6042.
TABLE OF CONTENTS
CAPTION PAGE
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
CERTAIN INVESTMENT TECHNIQUES . . . . . . . . . . . . . . . . . . . . . 4
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . 7
PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . . . . . . . . . . 10
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . 11
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . 14
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 18
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 19
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 23
RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
GENERAL
Mentor Institutional Trust (the "Trust") is a diversified, open-end
investment company. The Trust is a Massachusetts business trust organized
on February 8, 1994 as IMG Institutional Trust.
Commonwealth Investment Counsel, Inc. ("Commonwealth") serves as
investment adviser to each of the Portfolios of the Trust. Mentor
Investment Group, Inc. ("Mentor") serves as administrator to each of the
Portfolios. Commonwealth is a wholly owned subsidiary of Mentor, which is
a wholly owned subsidiary of Wheat First Butcher Singer Inc. ("Wheat First
Butcher Singer").
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 Mentor Cash Management
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 securities on margin (but a Portfolio may obtain
such short-term credits as may be necessary for the clearance of
transactions). (Margin payments in connection with transactions
in futures contracts, options, and other financial instruments
are not considered to constitute the purchase of securities on
margin for this purpose.)
6. 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.)
7. 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.
8. Pledge, hypothecate, mortgage, or otherwise encumber its assets
in excess of 15% of its total assets (taken at current value) and
then only to secure borrowings permitted by these investment
restrictions.
9. 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.
10. Make loans, except by purchase of debt obligations in which the
Portfolio may invest consistent with its investment policies or
by entering into repurchase agreements.
In addition, it is contrary to the current policy of each of the
Portfolios, which policy may be changed without shareholder approval, to:
1. Invest in oil, gas, or other mineral leases, rights, or royalty
contracts or in real estate (although the Portfolio may invest in
securities of issuers that invest or deal in the foregoing types
of assets or securities that are secured by or represent
interests in real estate).
2. Invest in (a) securities which at the time of such investment are
not readily marketable, (b) securities restricted as to resale,
and (c) repurchase agreements maturing in more than seven days,
if, as a result, more than 15% (10% with respect to Mentor Cash
Management Portfolio) of the Portfolio's net assets (taken at
current value) would then be invested in securities described in
(a), (b), and (c).
3. Invest in securities of other registered investment companies,
except by purchases in the open market involving only customary
brokerage commissions and as a result of which not more than 5%
of its total assets (taken at current value) would be invested in
such securities, or except as part of a merger, consolidation, or
other acquisition.
4. Make short sales or purchase puts, calls, straddles, spreads, or
any combination thereof.
5. Invest in securities of any issuer if, to the knowledge of the
Portfolio, officers and Trustees of the Portfolio and officers
and directors of Commonwealth who beneficially own more than 0.5%
of the shares or securities of that issuer together own more than
5%.
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. As a matter of policy, the Trustees would not
materially change a Portfolio's investment objectives without shareholder
approval.
With respect to fundamental restriction 1, Mentor Cash Management
Portfolio currently expects to invest in certificates of deposit,
commercial paper, and banker's acceptances issued by issuers in the banking
industry. All of these investments will comply with applicable investment
policies of the Trust set out in its prospectus.
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 one or more of the Portfolios may engage, and certain
of the risks they may entail. Certain of the investment techniques may not
be available to a Portfolio. See "Investment objective(s) and policies"
in the Trust's Prospectuses.
Forward Commitments
A Portfolio may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") if the Portfolio holds, and maintains until the settlement
date in a segregated account, cash or high-grade debt obligations in an
amount sufficient to meet the purchase price, or if the Portfolio enters
into offsetting contracts for the forward sale of other securities it owns.
Forward commitments may be considered securities in themselves, and involve
a risk of loss if the value of the security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of decline in
the value of the Portfolio's other assets. Where such purchases are made
through dealers, the Portfolios rely on the dealer to consummate the sale.
The dealer's failure to do so may result in the loss to the Portfolio of an
advantageous yield or price.
Although a Portfolio will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or for
delivery pursuant to options contracts it has entered into, a Portfolio may
dispose of a commitment prior to settlement if its investment adviser deems
it appropriate to do so. A Portfolio may realize short-term profits or
losses upon the sale of forward commitments.
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 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. Commonwealth
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.
When-Issued Securities
A Portfolio may from time to time purchase securities on a "when-
issued" basis. Debt securities are often issued on this basis. The price
of such securities, which may be expressed in yield terms, is fixed at the
time a commitment to purchase is made, but delivery and payment for the
when-issued securities take place at a later date. Normally, the
settlement date occurs within one month of the purchase. During the period
between purchase and settlement, no payment is made by a Portfolio and no
interest accrues to the Portfolio. To the extent that assets of a
Portfolio are held in cash pending the settlement of a purchase of
securities, that Portfolio would earn no income. While a Portfolio may
sell its right to acquire when-issued securities prior to the settlement
date, a Portfolio intends actually to acquire such securities unless a sale
prior to settlement appears desirable for investment reasons. At the time
a Portfolio makes the commitment to purchase a security on a when-issued
basis, it will record the transaction and reflect the amount due and the
value of the security in determining the Portfolio's net asset value. The
market value of the when-issued securities may be more or less than the
purchase price payable at the settlement date. A Portfolio will establish
a segregated account in which it will maintain cash and U.S. Government
Securities or other high-grade debt obligations at least equal in value to
commitments for when-issued securities. Such segregated securities either
will mature or, if necessary, be sold on or before the settlement date.
Collateralized mortgage obligations; other mortgage-
related securities
Collateralized mortgage obligations or "CMOs" are debt obligations or
pass-through certificates collateralized by mortgage loans or mortgage
pass-through securities. Typically, CMOs are collateralized by
certificates issued by the Government National Mortgage Association,
("GNMA"), the Federal National Mortgage Association ("FNMA"), or the
Federal Home Loan Mortgage Corporation ("FHLMC"), but they also may be
collateralized by whole loans or private pass-through certificates (such
collateral collectively hereinafter referred to as "Mortgage Assets").
CMOs may be issued by agencies or instrumentalities of the U.S. Government,
or by private originators of, or investors in, mortgage loans.
In a CMO, a series of bonds or certificates is generally issued in
multiple classes. Each class of CMOs is issued at a specific fixed or
floating rate coupon and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final
distribution dates. Interest is paid or accrues on most classes of the
CMOs on a monthly, quarterly, or semi-annual basis. The principal of and
interest on the Mortgage Assets may be allocated among the several classes
of a series of a CMO in innumerable ways. In a CMO, payments of principal,
including any principal prepayments, on the Mortgage Assets are applied to
the classes of the series in a pre-determined sequence.
Zero-Coupon Securities
Zero-coupon securities in which a Portfolio may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior
to maturity. Zero-coupon securities usually trade at a deep discount from
their face or par value and are subject to greater market value
fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest. As a
result, the net asset value of shares of a Portfolio investing in zero-
coupon securities may fluctuate over a greater range than shares of other
mutual funds investing in securities making current distributions of
interest and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term
bonds or notes and their unmatured interest coupons which have been
separated by their holder, typically a custodian bank or investment
brokerage firm. A number of securities firms and banks have stripped the
interest coupons from the underlying principal (the "corpus") of U.S.
Treasury securities and resold them in custodial receipt programs with a
number of different names, including Treasury Income Growth Receipts
("TIGRS") and Certificates of Accrual on Treasuries ("CATS"). The
underlying U.S. Treasury bonds and notes themselves are held in book-entry
form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial
ownership of particular interest coupons and corpus payments on Treasury
securities through the Federal Reserve book-entry record-keeping system.
The Federal Reserve program as established by the Treasury Department is
known as "STRIPS" or "Separate Trading of Registered Interest and Principal
of Securities." Under the STRIPS program, a Portfolio will be able to have
its beneficial ownership of U.S. Treasury zero-coupon securities recorded
directly in the book-entry record-keeping system in lieu of having to hold
certificates or other evidences of ownership of the underlying U.S.
Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The
principal or corpus is sold at a deep discount because the buyer receives
only the right to receive a future fixed payment on the security and does
not receive any rights to periodic cash interest payments. Once stripped
or separated, the corpus and coupons may be sold separately. Typically,
the coupons are sold separately or grouped with other coupons with like
maturity dates and sold in such bundled form. Purchasers of stripped
obligations acquire, in effect, discount obligations that are economically
identical to the zero-coupon securities issued directly by the obligor.
Zero-coupon securities allow an issuer to avoid the need to generate
cash to meet current interest payments. Even though zero-coupon securities
do not pay current interest in cash, a Portfolio is nonetheless required to
accrue interest income on them and to distribute the amount of that
interest at least annually to shareholders. Thus, a Portfolio could be
required at times to liquidate other investments in order to satisfy its
distribution requirement.
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.
Position Held Principal Occupation
Name and Address with Portfolio During Past 5 Years
Stanley F. Pauley Trustee Chairman and Chief
Executive Officer, E.R.
Carpenter Company
Incorporated; Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
Louis W. Moelchert, Jr. Trustee Vice President of Business
and Finance, University of
Richmond; Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
Thomas F. Keller Trustee Dean, Fuqua School of
Business, Duke University;
Trustee, The Mentor Funds;
Trustee, Cash Resource
Trust.
Arnold H. Dreyfuss Trustee Retired. Formerly,
Chairman and Chief
Executive Officer,
Hamilton Beach/Proctor-
Silex, Inc.; Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
*Daniel J. Ludeman Chairman; Chairman and Chief
Trustee Executive Officer since
July 1991, Mentor
Investment Group, Inc.;
Managing Director of
Wheat, First Securities,
Inc. since August 1989;
Managing Director of Wheat
First Butcher Singer since
June 1991; Director,
Mentor Income Fund, Inc.;
Chairman and Trustee, The
Mentor Funds; Chairman and
Trustee, Cash Resource
Trust.
Troy A. Peery, Jr. Trustee President, Heilig-Meyers
Company. Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
Paul F. Costello President Managing Director, Mentor
Investment Group, Inc. and
Wheat First Butcher
Singer; President, Mentor
Income Fund, The Mentor
Funds, and Cash Resource
Trust; Senior Vice
President, Commonwealth
Advisors, Inc.; formerly,
Director, President and
Chief Executive Officer,
First Variable Life
Insurance Company;
President and Chief
Financial Officer,
Variable Investors Series
Trust; President and
Treasurer, Atlantic
Capital & Research, Inc.;
Vice President and
Treasurer, Variable Stock
Portfolio, Inc., Monarch
Investment Series Trust,
and GEICO Tax Advantage
Series Trust; Vice
President, Monarch Life
Insurance Company, GEICO
Investment Services
Company, Inc., Monarch
Investment Services
Company, Inc., and
Springfield Life Insurance
Company.
Terry L. Perkins Treasurer Vice President, Mentor
Investment Group, Inc.;
Treasurer, Cash Resource
Trust; Treasurer, Mentor
Income Fund Inc.;
formerly, Treasurer and
Comptroller, Ryland
Capital Management, Inc.
John M. Ivan Clerk Managing Director since
October 1992, Director of
Compliance since October
1992, Senior Vice
President from 1990 to
October 1992, and
Assistant General Counsel
since 1985, Wheat, First
Securities, Inc.; Clerk,
Cash Resource Trust;
Secretary, The Mentor
Funds.
The Trust pays each Trustee who is not an officer, director, or
employee of Wheat First Butcher Singer, Commonwealth, Mentor, or any of
their affiliates $100 per annum plus $25 per meeting attended and
reimburses each such Trustee for travel and out-of-pocket expenses. The
mailing address of each of the Trustees and officers is 901 East Byrd
Street, Richmond, Virginia 23219. The principal occupations of the
Trustees and officers for the last five years have been with the employers
as shown above, although in some cases they have held different positions
with such employers.
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.
PRINCIPAL HOLDERS OF SECURITIES
As of June 20, 1995, 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 owns more than 5% of the
outstanding shares of any Portfolio as of that date, except the following
record holders:
Shareholder Percentage Shares
Cash Management Portfolio:
County of Augusta 13.13% 6,649,905
Stafford County 10.03% 5,079,259
Heilig Meyers 9.01% 4,562,165
Farmers Telephone Coop., Inc. 7.66% 3,880,859
Intermediate Duration Portfolio:
NationsBank C/F McQuire 78.65% 666,562
Woods & Battle Pension Plan
Longwood College Foundation, Inc. 21.13% 179,050
Fixed Income Portfolio:
Wheat First Butcher Singer 98.17% 2,070,809
INVESTMENT ADVISORY AND OTHER SERVICES
Commonwealth, the investment advisor to each of the Portfolios, is a
wholly-owned subsidiary of Mentor, which is a wholly-owned subsidiary of
Wheat First Butcher Singer. Mentor serves as administrator of each of the
Portfolios. Mentor Distributors, Inc. ("Mentor Distributors") is the
Trust's distributor and service agent and is also a wholly-owned subsidiary
of Wheat First Butcher Singer.
Commonwealth acts as investment adviser to each Portfolio pursuant to
a Management Contract with the Trust. Mentor acts as administrator to each
of the Portfolios pursuant to an Administration Agreement with the Trust.
Subject to the supervision and direction of the Trustees, Commonwealth, as
investment adviser, manages the a Portfolio's portfolio in accordance with
the stated policies of that Portfolio and of the Trust. Commonwealth makes
investment decisions for the Portfolios and places the purchase and sale
orders for portfolio transactions. Mentor furnishes each of the Portfolios
with certain statistical and research data, clerical help, and certain
accounting, data processing, and other services required by the Portfolios,
assists in preparation of certain reports to shareholders of the
Portfolios, tax returns, and filings with the SEC and state Blue Sky
authorities, and generally assists in all aspects of the Portfolios'
operations. Commonwealth and Mentor bear all their expenses in connection
with the performance of their services. In addition, Commonwealth and
Mentor pay the salaries of all officers and employees who are employed by
them and the Trust.
Commonwealth provides the Trust with investment officers who are
authorized to execute purchases and sales of securities. Investment
decisions for the Trust and for the other investment advisory clients of
Commonwealth 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 manner which in Commonwealth'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. Commonwealth employs
professional staffs of portfolio managers who draw upon a variety of
resources, including Wheat, First Securities, for research information for
the Trust.
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 any two or more Portfolios may be allocated in
proportion to the net asset values of the respective Portfolios 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 of the Management Contract and the Administration Agreement is
subject to annual approval commencing in 1996 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,
Commonwealth, or Mentor, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Management Contracts are
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 Commonwealth, as
applicable. The Administration Agreement is terminable without penalty,
immediately upon notice, by the Trustees or by vote of the holders of a
majority of the affected Portfolio's shares, and on not less than thirty
days' notice by Mentor. Each of the Agreements will terminate
automatically in the event of its assignment.
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 Trust usually includes
an undisclosed dealer commission or mark-up. In underwritten offerings,
the price paid by the Trust includes a disclosed, fixed commission or
discount retained by the underwriter or dealer. It is anticipated that
most purchases and sales of securities by Portfolios investing primarily in
certain fixed-income securities will be with the issuer or with
underwriters of or dealers in those securities, acting as principal.
Accordingly, those 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, Commonwealth
receives brokerage and research services and other similar services from
many broker-dealers with which it places a Portfolio's 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 Commonwealth's managers and analysts. Where the
services referred to above are not used exclusively by Commonwealth for
research purposes. Commonwealth, 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 Commonwealth 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.
Commonwealth 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.
Commonwealth seeks the best overall terms available for each of the
Portfolios, except to the extent Commonwealth may be permitted to pay
higher brokerage commissions as described below. In doing so,
Commonwealth, 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
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
Contracts, Commonwealth may cause a Portfolio to pay a broker-dealer which
provides "brokerage and research services" (as defined in the 1934 Act) to
Commonwealth an amount of disclosed commission for effecting securities
transactions on stock exchanges and other transactions for the Portfolio on
an agency basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Commonwealth's
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.
Commonwealth does not currently intend to cause the Portfolios 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, Commonwealth 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, Commonwealth 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.
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.
Mentor Intermediate Duration Portfolio and Mentor Fixed-Income
Portfolio. In respect of Mentor Intermediate Duration Portfolio and Mentor
Fixed-Income Portfolio, securities for which market quotations are readily
available are valued at prices which, in the opinion of the Trustees or
Commonwealth, most nearly represent the market values of such securities.
Currently, such prices are determined using the last reported sale price
or, if no sales are reported (as in the case of some securities traded
over-the-counter), the last reported bid price, except that certain U.S.
Government securities are stated at the mean between the last reported bid
and asked prices. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market value.
All other securities and assets are valued at their fair value following
procedures approved by the Trustees. Liabilities are deducted from the
total, and the resulting amount is divided by the number of shares of the
Portfolio outstanding.
Reliable market quotations are not considered to be readily available
for long-term corporate bonds and notes, certain preferred stocks, tax-
exempt securities, or certain foreign securities. These investments are
stated at fair value on the basis of valuations furnished by pricing
services approved by the Trustees, which determine valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships
between securities which are generally recognized by institutional traders.
If any securities held by a Portfolio are restricted as to resale,
Commonwealth determines their fair values. The fair value of such
securities is generally determined as the amount which a Portfolio could
reasonably expect to realize from an orderly disposition of such securities
over a reasonable period of time. The valuation procedures applied in any
specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer
and other fundamental analytical data relating to the investment and to the
nature of the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Portfolio in connection
with such disposition). In addition, specific factors are also generally
considered, such as the cost of the investment, the market value of any
unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any
recent transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of
the Exchange. The values of these securities used in determining the net
asset value of a Portfolio's shares are computed as of such times. Also,
because of the amount of time required to collect and process trading
information as to large numbers of securities issues, the values of certain
securities (such as convertible bonds, U.S. Government securities, and tax-
exempt securities) are determined based on market quotations collected
earlier in the day at the latest practicable time prior to the close of the
Exchange. Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will not be
reflected in the computation of a Portfolio's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value following
procedures approved by the Trustees.
Mentor Cash Management Portfolio only. The valuation of Mentor Cash
Management 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, the
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 the Portfolio would receive if it sold the instrument.
During periods of declining interest rates, the quoted yield on shares of
the 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 the 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 the 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 the 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, the Portfolio's price per share as computed for the
purpose of distribution, redemption and repurchase at $1.00. These
procedures include review of the 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 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 the Portfolio is declared as a dividend each
time it is determined, the net asset value per share of the 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 the Portfolio representing the reinvestment of dividend
income is reflected by an increase in the number of shares of the 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 the
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
the Portfolio determined at any time is a negative amount, the 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 the 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, the 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 the Portfolio.
Should the 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 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; (b) derive less than 30% of its gross income
from the sale or other disposition of certain assets (including stock and
securities) held less than three months; (c) 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
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 the
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, Inc. is the distributor of the Trust's shares in
the continuous offering and is acting on a best efforts basis.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, located at One Boston Place, Boston,
Massachusetts 02108, are the Portfolio's independent auditors, providing
audit services, tax return review, and other tax consulting services and
assistance and consultation in connection with the review of various
Securities and Exchange Commission filings.
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
Mentor Intermediate Duration Portfolio and Mentor Fixed-Income
Portfolio. With respect to Mentor Intermediate Duration Portfolio and
Mentor Fixed Income Portfolio, total return for the life of a Portfolio
through the most recent calendar quarter is determined by calculating the
actual investment return on a $1,000 investment in the Portfolio over that
period. Total return may also be presented for other periods. Total
return calculations assume reinvestment of all Portfolio distributions at
net asset value on their respective reinvestment dates. The cumulative
total return for the life of Mentor Intermediate Duration Portfolio and
Mentor Fixed-Income Portfolio through April 30, 1995 was 5.24% and 6.25%,
respectively.
Each Portfolio's yield is presented for a specified thirty-day period
(the "base period"). Yield is based on the amount determined by (i)
calculating the aggregate amount of dividends and interest earned by a
Portfolio during the base period less expenses accrued for that period, and
(ii) dividing that amount by the product of (A) the average daily number of
shares of the Portfolio outstanding during the base period and entitled to
receive dividends and (B) the net asset value per share on the last day of
the base period. The result is annualized on a compounding basis to
determine the yield. For this calculation, interest earned on debt
obligations held by a Portfolio is generally calculated using the yield to
maturity (or first expected call date) of such obligations based on their
market values (or, in the case of receivables-backed securities such as
GNMA's, based on cost). Dividends on equity securities are accrued daily
at their stated dividend rates. The yield for the Mentor Intermediate
Duration Portfolio for the thirty-day period ended April 30, 1995 was
7.39%. The yield for the Mentor Fixed-Income Portfolio for the thirty-day
period ended April 30, 1995 was 7.43%.
Mentor Cash Management Portfolio only. The yield of Mentor Cash
Management 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). The Portfolio's effective yield represents a
compounding of the yield by adding 1 to the number representing the
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.
Based on the seven-day period ended April 30, 1995, the Mentor Cash
Management Portfolio's yield was 6.11% and its effective yield was 6.30%.
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 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.
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 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 five-
point 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 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.
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 Corporation:
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.
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:
(bullet) liquidity ratios are adequate to meet cash requirements;
(bullet) long-term senior debt is rated "A" or better;
(bullet) the issuer has access to at least two additional channels of
borrowing;
(bullet) basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances;
(bullet) typically, the issuer's industry is well established and the
issuer has a strong position within the industry; and
(bullet) 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:
(bullet) evaluation of the management of the issuer;
(bullet) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in
certain areas;
(bullet) evaluation of the issuer's products in relation to competition
and customer acceptance;
(bullet) liquidity;
(bullet) amount and quality of long-term debt;
(bullet) trend of earnings over a period of ten years;
(bullet) financial strength of parent company and the relationships
which exist with the issuer; and
(bullet) or may arise as a result of public interest questions and
preparations to meet such obligations.
<PAGE>
Mentor Cash Management Portfolio
Portfolio of Investments
April 30, 1995 (Unaudited)
</TABLE>
<TABLE>
Percent of Principal Market
Net Asset Amount Value
<S> <C> <C> <C>
Bankers Acceptances-Domestic 12.4%
Bank of New York, 6.06%, 5/9/95 $1,000,000 $ 998,653
First Union Corporation, 6.03% - 6.09%,
5/2/95 - 10/3/95 2,000,000 1,973,612
Nationsbank Corporation, 6.10%, 8/30/95 1,000,000 979,497
Republic Bank, 5.96%, 5/22/95 1,000,000 996,523
Wachovia Corporation Bank, 6.06%, 5/1/95 1,000,000 1,000,000
Total Bankers Acceptances-Domestic 5,948,285
Bankers Acceptances-Foreign 15.9%
Bank of Tokyo, 6.05% - 6.11%,
6/5/95 - 10/16/95 2,000,000 1,965,827
Dai-ichi Kangyo Bank, 6.02% - 6.11%,
5/30/95 - 10/16/95 2,000,000 1,966,985
European American Bank, 6.07% - 6.09%,
7/10/95 - 8/28/95 1,699,481 1,672,836
Mitsubishi Bank, 6.06%, 5/16/95 1,000,000 997,475
Sanwa Bank, 6.05%, 5/8/95 1,000,000 998,823
Total Bankers Acceptances-Foreign 7,601,946
Commercial Paper 32.9%
Bellsouth Capital, 6.09%, 10/2/95 2,000,000 1,947,897
Chase Manhattan Bank, 6.12%, 8/2/95 1,000,000 984,190
CIESCO Limited Partnership, 6.02%, 5/31/95 1,000,000 994,983
CS First Boston, 6.11% - 6.13%, 7/24/95 -
8/31/95 2,000,000 1,964,991
Ford Motor Credit Company, 6.09% - 6.12%,
5/30/95 - 7/28/95 2,000,000 1,980,183
General Electric Capital Corporation, 6.02% -
6.03%, 6/1/95 - 9/18/95 2,000,000 1,971,366
Merrill Lynch & Company, Inc., 6.12% - 6.15%,
6/6/95 - 9/11/95 2,000,000 1,963,010
Minolta Corporation, 6.06%, 7/7/95 1,000,000 988,722
National Rural Utilities, 5.97%, 5/12/95 1,000,000 998,176
Rincon Securities, Inc., 6.08%, 5/8/95 1,000,000 998,818
State Street Bank &Trust Company, 6.03%, 5/2/95 1,000,000 999,833
Total Commercial Paper 15,792,169
U.S. Government Agencies 16.7%
Federal Home Loan Bank, 5.93%, 5/1/95 6,000,000 6,000,000
Student Loan Market Agency, 5.89%, 9/14/95 2,000,000 2,000,000
Total U.S. Government Agencies 8,000,000
</TABLE>
<PAGE>
Mentor Cash Management Portfolio
Portfolio of Investments
April 30, 1995 (Unaudited)
<TABLE>
Percent of Principal Market
Net Asset Amount Value
<S> <C> <C> <C>
Repurchase Agreement 22.5%
Goldman, Sachs & Company
Dated 4/28/95, 5.90%, due 5/1/95,
collateralized by $14,086,000
Federal National Mortgage Association,
7.50%, 7/1/23 $10,813,866 $10,813,866
Total Investments (cost $48,156,266) 100.4% 48,156,266
Other Assets less Liabilities (0.4%) (201,521)
Net Assets 100.0% $47,954,745
</TABLE>
See notes to financial statements.
<PAGE>
Mentor Intermediate Duration Portfolio
Portfolio of Investments
April 30, 1995 (Unaudited)
<TABLE>
Percent of Principal Market
Net Asset Amount Value
<S> <C> <C> <C>
U.S. Government Securities and Agencies 74.0%
Federal Home Loan Bank, 7.90%, 12/20/96 $ 1,000,000 $ 1,007,870
Federal Home Loan Bank, 8.18%, 12/22/97 600,000 605,436
Federal Home Loan Mortgage Corporation, 10.50%, 2/1/03 491,271 515,849
Federal Home Loan Mortgage Corporation, 7.00%, 10/15/07 500,000 471,305
Federal National Mortgage Association, 11.00%, 7/1/01 400,434 425,466
Federal National Mortgage Association, 6.00%, 3/25/09 500,000 437,675
U.S. Treasury Note, 7.50%, 1/31/97 400,000 406,056
U.S. Treasury Note, 6.50%, 8/15/97 250,000 249,233
U.S. Treasury Note, 7.38%, 11/15/97 820,000 832,677
U.S. Treasury Note, 7.13%, 2/29/00 200,000 201,832
U.S. Treasury Note, 5.50%, 4/15/00 1,000,000 942,990
U.S. Treasury Note, 7.50%, 11/15/01 1,000,000 1,028,350
U.S. Treasury Note, 7.25%, 8/15/04 500,000 505,995
U.S. Treasury Note, 7.50%, 2/15/05 250,000 257,663
U.S. Treasury Bond, 7.50%, 11/15/24 180,000 182,456
Total U.S. Government Securities and Agencies
(cost $7,980,477) 8,070,853
Corporate Bonds 17.5%
American Home Products, 7.70%, 2/15/00 400,000 405,000
Capital One, 8.63%, 1/15/97 500,000 509,375
Lehman Brothers, Inc., 8.63%, 2/26/99 525,000 533,531
Salomon Inc., 6.00%, 1/12/98 250,000 238,125
WMX Technologies, 6.38%, 12/1/03 250,000 228,750
Total Corporate Bonds (cost $ 1,895,251) 1,914,781
Short-Term Investment 9.3%
Repurchase Agreement
NationsBank Corporation
Dated 4/28/95, 5.90%, due 5/1/95, collateralized by
$1,040,000 U.S. Treasury Note, 8.00%, 10/31/96
(cost $1,016,744) 1,016,744 1,016,744
Total Investments (cost $10,892,472) 100.8% 11,002,378
Other Assets less Liabilities (0.8%) (91,870)
Net Assets 100.0% $10,910,508
</TABLE>
See notes to financial statements.
<PAGE>
Mentor Fixed-Income Portfolio
Portfolio of Investments
April 30, 1995 (Unaudited)
<TABLE>
Percent of Principal Market
Net Asset Amount Value
<S> <C> <C> <C>
U.S. Government Securities and Agencies 72.8%
Federal Home Loan Bank, 8.22%, 12/22/97 $ 500,000 $ 504,655
Federal Home Loan Mortgage Corporation, 8.26%, 1/5/98 1,550,000 1,562,539
Federal Home Loan Mortgage Corporation, 10.50%, 2/1/03 491,271 515,849
Federal Home Loan Mortgage Corporation, 7.00%, 10/15/07 1,500,000 1,413,915
Federal National Mortgage Association, 11.00%, 7/1/01 576,236 612,256
Federal National Mortgage Association, 6.00%, 3/25/09 1,500,000 1,313,025
Student Loan Mortgage Association, 8.04%, 15/15/97 1,500,000 1,509,225
U.S. Treasury Note, 6.50%, 4/30/99 1,250,000 1,235,762
U.S. Treasury Note, 7.13%, 2/29/00 1,850,000 1,866,946
U.S. Treasury Note, 7.50%, 5/15/02 2,500,000 2,576,600
U.S. Treasury Note, 7.25%, 8/15/04 600,000 607,194
U.S. Treasury Note, 7.50%, 2/15/05 750,000 772,988
U.S. Treasury Bond, 7.25%, 5/15/16 250,000 244,815
U.S. Treasury Bond, 7.13%, 2/15/23 2,700,000 2,604,663
U.S. Treasury Bond, 7.50%, 11/15/24 2,260,000 2,290,849
Total U.S. Government Securities and Agencies 19,631,281
(cost $19,415,492)
Corporate Bonds 22.0%
American Home Products, 7.70%, 2/15/00 1,000,000 1,012,500
Capital One, 8.63%, 1/15/97 1,000,000 1,018,750
Commonwealth Edison, 6.50%, 7/15/97 1,000,000 986,250
Lehman Brothers, Inc., 8.63%, 2/26/99 1,475,000 1,498,969
Salomon Inc., 6.00%, 1/12/98 750,000 714,375
WMX Technologies, 6.38%, 12/1/03 750,000 686,250
Total Corporate Bonds (cost $5,866,629) 5,917,094
Short-Term Investment 6.1%
Repurchase Agreement
NationsBank Corporation
Dated 4/28/95, 5.90%, due 5/1/95, collateralized by
$1,730,000 U.S. Treasury Bill, 10/26/95 (cost $1,639,503) 1,639,503 1,639,503
Total Investments (cost $26,921,624) 100.9% 27,187,878
Other Assets less Liabilities (0.9%) (236,363)
Net Assets 100.0% $26,951,515
</TABLE>
See notes to financial statements.
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1995 (UNAUDITED)
[CAPTION]
<TABLE>
MENTOR MENTOR MENTOR
CASH INTERMEDIATE FIXED-
MANAGEMENT DURATION INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
ASSETS
Investments, at market value * (Note 2) $48,156,266 $11,002,378 $27,187,878
Receivables
Interest 22,598 190,455 532,874
Due from management company 21,998 6,638 12,571
Deferred expenses 95,500 42,237 68,904
Total assets 48,296,362 11,241,708 27,802,227
LIABILITIES
Payables
Investments purchased - 285,323 752,217
Fund shares redeemed - - 40,000
Dividends 238,333 - -
Accrued expenses and other liabilities 103,284 45,877 58,495
Total liabilities 341,617 331,200 850,712
NET ASSETS $47,954,745 $10,910,508 $26,951,515
Net Assets represented by:
Additional paid-in capital $47,954,745 $10,573,788 $25,916,845
Undistributed net investment income - 65,314 164,675
Undistributed realized gain on
investment transactions - 161,500 603,741
Net unrealized appreciation of investments - 109,906 266,254
Net Assets $47,954,745 $10,910,508 $26,951,515
Shares Outstanding 47,954,745 845,612 2,075,636
NET ASSET VALUE PER SHARE $ 1.00 $ 12.90 $ 12.98
</TABLE>
*Investments at cost $48,156,266, $10,892,472 and $26,921,624 respectively.
See notes to financial statements.
Mentor Institutional Trust
Statements of Operations
Period Ended April 30, 1995 (Unaudited)
<TABLE>
Mentor Mentor Mentor
Cash Intermediate Fixed-
Management Duration Income
Portfolio* Portfolio** Portfolio***
<S> <C> <C> <C>
Investment Income
Interest $740,989 $275,448 $ 778,881
Expenses
Organizational expenses 10,611 4,693 7,656
Custodian fees 5,628 1,309 3,506
Audit expense 4,899 1,143 3,051
Legal expense 3,499 816 2,179
Shareholder reports 482 110 292
Directors fees and expenses 233 54 145
Printing and postage expenses 119 8 11
Miscellaneous expenses 1,398 326 873
Total expenses 26,869 8,459 17,713
Deduct
Reimbursement of expenses by
management company 21,998 6,638 12,567
Net expenses 4,871 1,821 5,146
Net investment income 736,118 273,627 773,735
Realized and Unrealized Gain on Investments
Net realized gain on investments (Note 2) -- 161,500 603,741
Change in unrealized appreciation of investments -- 109,906 266,254
Net realized and unrealized gain
on investments -- 271,406 869,995
Net increase in net assets
resulting from operations $736,118 $545,033 $1,643,730
</TABLE>
* For the period from December 5, 1994 (commencement of operations) to
April 30, 1995.
** For the period from December 19, 1994 (commencement of operations) to
April 30, 1995.
*** For the period from December 6, 1994 (commencement of operations) to
April 30, 1995.
See notes to financial statements.
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
[CAPTION]
<TABLE>
MENTOR MENTOR MENTOR
CASH INTERMEDIATE FIXED-
MANAGEMENT DURATION INCOME
PERIOD ENDED APRIL 30, 1995 PORTFOLIO* PORTFOLIO** PORTFOLIO***
<S> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net investment income $ 736,118 $ 273,627 $ 773,735
Net realized gain on investments - 161,500 603,741
Net unrealized appreciation of investments - 109,906 266,254
Increase in net assets from operations 736,118 545,033 1,643,730
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (736,118) (208,312) (609,060)
CAPITAL SHARE TRANSACTIONS (NOTE 7)
Net proceeds from sale of shares 74,118,432 10,397,006 29,173,726
Reinvested distributions 497,785 208,312 609,060
Cost of shares redeemed (26,661,472) (31,530) (3,865,941)
Change in net assets from capital
share transactions 47,954,745 10,573,788 25,916,845
Increase in net assets 47,954,745 10,910,509 26,951,515
NET ASSETS
Beginning of period - - -
End of period $ 47,954,745 $10,910,509 $26,951,515
</TABLE>
* For the period from December 5, 1994 (commencement of operations) to
April 30, 1995.
** For the period from December 19, 1994 (commencement of operations) to
April 30, 1995.
*** For the period from December 6, 1994 (commencement of operations) to
April 30, 1995.
See notes to financial statements.
MENTOR INSTITUTIONAL TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
Mentor Mentor Mentor
Cash Intermediate Fixed-
Management Duration Income
Period Ended April 30, 1995 Portfolio* Portfolio** Portfolio***
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 1.00 $ 12.50 $ 12.50
Income from investment operations
Net investment income 0.02 0.33 0.38
Net realized and unrealized
gain on investments - 0.32 0.40
Total from investment operations 0.02 0.65 0.78
Less distributions
Dividends from income (0.02) (0.25) (0.30)
Net asset value, end of period $ 1.00 $ 12.90 $ 12.98
Total Return 2.00% 5.24% 6.25%
Ratios/Supplemental Data
Net assets, end of period (in thousands) $47,955 $ 10,911 $26,952
Ration of expenses to average net assets 0.04%(a) 0.05%(a) 0.05%(a)
Ration of net investment income
to average net assets 6.00%(a) 7.11%(a) 7.38%(a)
Portfolio turnover rate - 398%(a) 408%(a)
</TABLE>
(a) Annualized.
* For the period from December 5, 1994 (commencement of operations) to
April 30, 1995.
** For the period from December 19, 1994 (commencement of operations) to
April 30, 1995.
*** For the period from December 6, 1994 (commencement of operations) to
April 30, 1995.
See notes to financial statements.
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995 (UNAUDITED)
NOTE 1: ORGANIZATION
Mentor Institutional Trust, formerly IMG Institutional Trust, was organized on
February 8, 1994, and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. On June 27, 1995, the
name of the the Trust was changed to Mentor Institutional Trust ("Trust"). The
Trust consists of three separate diversified portfolios (hereinafter each
individually referred to as a "Portfolio" or collectively as the "Portfolios")
at April 30, 1995 as follows:
Mentor Cash Management Portfolio (Cash Management)
Mentor Intermediate Duration Portfolio (Intermediate Duration)
Mentor Fixed-Income Portfolio (Fixed-Income)
The assets of each Portfolio of the Trust are segregated and a shareholder's
interest is limited to the Portfolio in which shares are held.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolio:
A. Valuation of Securities
Securities held by the Cash Management Portfolio are stated at amortized cost,
which approximates market value. In the event that a deviation of 1/2 of 1% or
more exists between the Portfolio's $1.00 per share net asset value, calculated
at amortized cost, and the net asset value calculated by reference to
market-based values, or if there is any other deviation that the Board of
Trustees believes would result in a material dilution to shareholders or
purchasers, the Board of Trustees will promptly consider what action should be
initiated.
U.S. Government obligations held by the Intermediate Duration Portfolio and the
Fixed Income Portfolio are valued at the mean between the over-the-counter bid
and asked prices as furnished by an independent pricing service. Listed
corporate bonds, other fixed income securities, mortgage backed securities,
mortgage related and other related securities are valued at the prices provided
by an independent pricing service. Security valuations not available from an
independent pricing service are provided by dealers approved by the Board of
Trustees. In determining value, the dealers use information with respect to
transactions in such securities, market transactions in comparable securities,
various relationships between securities, and yield to maturity. Any securities
for which current market quotations are not readily available are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision and responsibility of the Trust's Board of
Directors.
B. Repurchase Agreements
It is the policy of the Trust to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book entry system, or to have
segregated within the custodian bank's vault all securities held as collateral
in support of repurchase agreement investments. Additionally, procedures have
been established by the Trust to monitor, on a daily basis, the market value of
each repurchase agreement's underlying securities to ensure the existence of a
proper level of collateral.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by the
Trust's adviser to be creditworthy pursuant to guidelines established by the
Trustees. Risks may arise from the potential inability of counterparties to
honor the terms of the repurchase agreement. Accordingly, the Trust could
receive less than the repurchase price on the sale of collateral securities.
C. Security Transactions and Interest Income
Security transactions for the Portfolios are accounted for on a trade date
basis. Interest income is recorded on the accrual basis and includes
amortization of premium and discount on investments. Realized and unrealized
gains and losses on investment security transactions are calculated on an
identified cost basis.
D. Expenses
Expenses arising in connection with a Portfolio are allocated to that Portfolio.
Other Trust expenses are allocated among the Portfolios in proportion to their
relative net assets.
E. Dividends
Dividends will be declared daily and paid monthly to all shareholders who
invested in the Cash Management Portfolio. Dividends are declared and paid
quarterly to shareholders invested in the Fixed-Income Portfolio and
Intermediate Duration Portfolio. Capital gains realized by each Portfolio, if
any, will be distributed at least once every 12 months.
F. Federal Taxes
No provision for federal income taxes has been made since it is each Portfolio's
intent to comply with the provisions applicable to regulated investment
companies under the Internal Revenue Code and to distribute to its shareholders
within allowable time limit substantially all taxable income and realized
capital gains.
NOTE 3: INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS
Each Portfolio has entered into an Investment Management Agreement with
Commonwealth Investment Counsel, Inc. ("Commonwealth") to provide investment
advisory services to each of the Portfolio. Pursuant to this agreement,
Commonwealth receives no compensation for its services. Commonwealth is a
wholly-owned subsidiary of Mentor Investment Group, Inc. (formerly Investment
Management Group, Inc.), which is a wholly-owned subsidiary of Wheat First
Butcher Singer, Inc.
In order to limit the annual operating expenses of the Portfolios, Commonwealth
may reimburse the Portfolios for a certain amount of these expenses. A
potential expense reimbursement of $21,998, $6,638 and $12,567 respectively, for
the Cash Management Portfolio, Intermediate Duration Portfolio and Fixed Income
Portfolio was entered for the period ended April 30, 1995.
Mentor Investment Group, Inc. ("Mentor Group") provides administrative personnel
and services to each Portfolio, pursuant to an Administration Agreement. Mentor
Group receives no compensation for such services.
NOTE 4: DISTRIBUTION AGREEMENT
Under a Distribution Agreement between the Portfolios and Wheat, First
Securities, Inc. (Wheat), a wholly-owned subsidiary of Wheat First Butcher
Singer, Inc., Wheat serves as Distributor of the Portfolios.
NOTE 5: INVESTMENT TRANSACTIONS
Purchases, and sales of investments (excluding short-term investments), for the
period ended April 30, 1995, were as follows:
Portfolio Purchases Sales
Cash Management - -
Intermediate Duration $25,232,434 $15,361,337
Fixed-Income 68,094,119 42,821,911
NOTE 6: UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS
The cost of investments for federal income tax purposes amounted to $48,156,266
for the Cash Management, $10,892,472 for the Intermediate Duration and
$26,921,624 for the Fixed-Income at April 30, 1995. Gross unrealized
appreciation and depreciation of investments at April 30, 1995 were as follows:
[CAPTION]
<TABLE>
Gross Gross Net
Unrealized Unrealized Unrealized
Portfolio Appreciation Depreciation Appreciation
<S> <C> <C> <C>
Cash Management - - -
Intermediate Duration $117,309 $ 7,403 $109,906
Fixed-Income 293,959 27,705 266,254
</TABLE>
NOTE 7: CAPITAL SHARE TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest. Transactions in Portfolio
shares were as follows:
Mentor Cash Management
Portfolio
Period Ended
4/30/95*
Shares outstanding, beginning of period -
Shares sold 74,118,432
Shares issued upon reinvestment of distributions 497,785
Shares redeemed (26,661,472)
Shares outstanding, end of period 47,954,745
Mentor Intermediate
Duration Portfolio
Period Ended
4/30/95**
Shares outstanding, beginning of period -
Shares sold 831,756
Shares issued upon reinvestment of distributions 16,344
Shares redeemed (2,488)
Shares outstanding, end of period 845,612
Mentor Fixed-Income
Portfolio
Period Ended
4/30/95***
Shares outstanding, beginning of period -
Shares sold 2,331,660
Shares issued upon reinvestment of distributions 47,639
Shares redeemed (303,663)
Shares outstanding, end of period 2,075,636
* For the period from December 5, 1994 (commencement of operations) to
April 30, 1995.
** For the period from December 19, 1994 (commencement of operations) to
April 30, 1995.
*** For the period from December 6, 1994 (commencement of operations) to
April 30, 1995.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholder
IMG Institutional Trust
We have audited the accompanying statements of assets and liabilities of
Cash Management Fund, Limited Duration Fund, Intermediate Duration Fund,
and Fixed Income Fund, portfolios of IMG Institutional Trust, as of
November 7, 1994. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We Conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of assets and
liabilities are free of material misstatement. An audit of a statement of
assets and liabilities includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit of a statement of assets and liabilities also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of assets
and liabilities presentation. We believe that our audits of the statements
of assets and liabilities provide a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of Cash
Management Fund, Limited Duration Fund, Intermediate Duration Fund and
Fixed Income Fund, at November 7, 1994 in a conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 8, 1994
<PAGE>
IMG INSTITUTIONAL TRUST
Statements of Assets and Liabilities
November 7, 1994
Cash Limited Intermediate Fixed
Management Duration Duration Income
Fund Fund Fund Fund
ASSETS:
Cash $ 0 $ 0 $ 0 $100,000
Deferred Organization
Expenses (Note B) 73,000 36,500 18,250 54,750
Total Assets 73,000 36,500 18,250 154,750
LIABILITIES:
Accrued Organization
Expenses (Note B) 73,000 36,500 18,250 54,750
NET ASSETS: $ 0 $ 0 $ 0 $100,000
Shares Outstanding - - - 8,000
Net Asset Value Per Share
(Note E) $ 1.00 $ 12.50 $ 12.50 $ 12.50
See accompanying notes to financial statements.
<PAGE>
IMG INSTITUTIONAL TRUST
Notes to Financial Statements
November 7, 1994
(A) IMG Institutional Trust (the "Trust') was organized as a business
trust under the laws of the Commonwealth of Massachusetts on February
8, 1994. The Trust has an unlimited number of authorized shares,
which are divided into four series - Cash Management Fund, Limited
Duration Fund, Intermediate Duration Fund and Fixed Income Fund (the
Funds). The Trust has had no operations prior to November 4, 1994
other than organizational matters and activities in connection with
the purchase of 8,000 shares of the Trust by Wheat First Butcher
Singer, Inc. It is currently intended that, upon the effectiveness of
the Trust's registration statement, shares will be offered to the
public.
(B) The Trust will bear the cost of all organizational expenses including
the fees for registering and qualifying the Trust's shares for
distribution. Fees and expenses for the organization and registration
of shares of the Trust are estimated to be $182,500 and will be
amortized over the period of benefit not to exceed 60 months. In the
event any of the initial shares are redeemed by any holder thereof
during the five year amortization period or the life of a Fund,
whichever is shorter, redemption proceeds will be reduced by any
unamortized organizational expenses in the same proportion as the
number of initial shares of a Fund being redeemed bears to the number
of initial shares of a Fund outstanding at the time of the redemption.
(C) Each Fund of the Trust 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).
Thus, the Funds are relieved of any federal income tax liability by
distributing virtually all of their net investment income and capital
gains, if any, to their shareholders. The Funds intend to avoid
excise tax liability by making the required distributions under the
Code.
(D) Under the terms of the Management Contract, Commonwealth Investment
Counsel, Inc. (Commonwealth) serves as investment manager to each of
the Funds, providing investment advisory services.
(E) The net asset value per share at November 4, 1994 for the Cash
Management Fund, Limited Duration Fund and Intermediate Duration Fund
are the expected per share offering prices for the portfolios' shares
upon their initial public offering.
<PAGE>
SNAP FUND
STATEMENT OF ADDITIONAL INFORMATION
September , 1995
SNAP Fund (the "Fund") is a series of shares of beneficial interest of
Mentor Institutional Trust (the "Trust"), a diversified, open-end series
investment company. This Statement of Additional Information is not a
prospectus and should be read in conjunction with the prospectus of the
Fund dated September , 1995. A copy of the prospectus can be obtained
upon request made to Mentor Investment Group, Inc. ("Mentor") at P.O. Box
1357, Richmond, Virginia 23286-0109, or by calling Mentor at 1-800-570-
SNAP.
TABLE OF CONTENTS
CAPTION PAGE
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 4
PRINCIPAL HOLDERS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . 7
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . 9
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 13
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 13
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 13
RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
GENERAL
SNAP Fund (the "Fund") is a series of shares of beneficial interest of
Mentor Institutional Trust (the "Trust"), a diversified, open-end
investment company. Until July 1995, the Fund was known as Mentor Limited
Duration Income Portfolio. The Trust is a Massachusetts business trust
organized on February 8, 1994 as IMG Institutional Trust.
Commonwealth Investment Counsel, Inc. ("CIC") serves as investment
adviser to the Fund. CIC is a wholly owned subsidiary of Mentor Investment
Group Inc., which is a wholly owned subsidiary of Wheat First Butcher
Singer Inc. ("Wheat First Butcher Singer").
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be changed with
respect to the Fund without approval by the holders of a majority of the
outstanding shares of the Fund, the Fund may not:
1. Purchase any security (other than U.S. Government securities) if
as a result: (i) as to 75% of the Fund's total assets, more than
5% of the Fund's total assets (taken at current value) would then
be invested in securities of a single issuer, or (ii) more than
25% of the Fund's total assets would be invested in a single
industry, except that the Fund 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 Fund's
shares of beneficial interest.
5. Purchase or sell securities on margin (but the Fund may obtain
such short-term credits as may be necessary for the clearance of
transactions). (Margin payments in connection with transactions
in futures contracts, options, and other financial instruments
are not considered to constitute the purchase of securities on
margin for this purpose.)
6. 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 the Fund 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.)
7. 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.
8. Pledge, hypothecate, mortgage, or otherwise encumber its assets
in excess of 15% of its total assets (taken at current value) and
then only to secure borrowings permitted by these investment
restrictions.
9. Purchase or sell commodities or commodity contracts, except that
the Fund 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.
10. Make loans, except by purchase of debt obligations or other
instruments in which the Fund may invest consistent with its
investment policies or by entering into repurchase agreements.
In addition, it is contrary to the current policy of the Fund, which
policy may be changed without shareholder approval, to:
1. Invest in (a) securities which at the time of such investment are
not readily marketable, (b) securities restricted as to resale,
and (c) repurchase agreements maturing in more than seven days,
if, as a result, more than 15% of the Fund's net assets (taken at
current value) would then be invested in securities described in
(a), (b), and (c).
2. Invest in securities of other registered investment companies,
except by purchases in the open market involving only customary
brokerage commissions and as a result of which not more than 5%
of its total assets (taken at current value) would be invested in
such securities, or except as part of a merger, consolidation, or
other acquisition.
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 the Fund, the other investment policies described in this
Statement or in a prospectus are not fundamental and may be changed by
approval of the Trustees. As a matter of policy, the Trustees would not
materially change the Fund's investment objective without shareholder
approval.
The Investment Company Act of 1940, as amended (the "1940 Act"),
provides that a "vote of a majority of the outstanding voting securities"
of the Fund means the affirmative vote of the lesser of (1) more than 50%
of the outstanding shares of the Fund, 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.
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.
Position Held Principal Occupation
Name and Address with Fund During Past 5 Years
Stanley F. Pauley Trustee Chairman and Chief
Executive Officer, E.R.
Carpenter Company
Incorporated; Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
Louis W. Moelchert, Jr. Trustee Vice President of Business
and Finance, University of
Richmond; Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
Thomas F. Keller Trustee Dean, Fuqua School of
Business, Duke University;
Trustee, The Mentor Funds;
Trustee, Cash Resource
Trust.
Arnold H. Dreyfuss Trustee Retired. Formerly,
Chairman and Chief
Executive Officer,
Hamilton Beach/Proctor-
Silex, Inc.; Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
*Daniel J. Ludeman Chairman; Chairman and Chief
Trustee Executive Officer since
July 1991, Mentor
Investment Group, Inc.;
Managing Director of
Wheat, First Securities,
Inc. since August 1989;
Managing Director of Wheat
First Butcher Singer since
June 1991; Director,
Mentor Income Fund, Inc.;
Chairman and Trustee, The
Mentor Funds; Chairman and
Trustee, Cash Resource
Trust.
Troy A. Peery, Jr. Trustee President, Heilig-Meyers
Company. Trustee, The
Mentor Funds; Trustee,
Cash Resource Trust.
Paul F. Costello President Managing Director, Mentor
Investment Group, Inc. and
Wheat First Butcher
Singer; President, Mentor
Income Fund, The Mentor
Funds, and Cash Resource
Trust; formerly, Director,
President and Chief
Executive Officer, First
Variable Life Insurance
Company; President and
Chief Financial Officer,
Variable Investors Series
Trust; President and
Treasurer, Atlantic
Capital & Research, Inc.;
Vice President and
Treasurer, Variable Stock
Fund, Inc., Monarch
Investment Series Trust,
and GEICO Tax Advantage
Series Trust; Vice
President, Monarch Life
Insurance Company, GEICO
Investment Services
Company, Inc., Monarch
Investment Services
Company, Inc., and
Springfield Life Insurance
Company.
Terry L. Perkins Treasurer Vice President, Mentor
Investment Group, Inc.;
Treasurer, Cash Resource
Trust; Treasurer, Mentor
Income Fund Inc.;
formerly, Treasurer and
Comptroller, Ryland
Capital Management, Inc.
John M. Ivan Clerk Managing Director since
October 1992, Director of
Compliance since October
1992, Senior Vice
President from 1990 to
October 1992, and
Assistant General Counsel
since 1985, Wheat, First
Securities, Inc.; Clerk,
Cash Resource Trust;
Secretary, The Mentor
Funds.
The Trust pays each Trustee who is not an officer, director, or
employee of Wheat First Butcher Singer, CIC, Mentor, or any of their
affiliates $100 per annum plus $25 per meeting attended and reimburses each
such Trustee for travel and out-of-pocket expenses. The mailing address of
each of the Trustees and officers is 901 East Byrd Street, Richmond,
Virginia 23219. The principal occupations of the Trustees and officers
for the last five years have been with the employers as shown above,
although in some cases they have held different positions with such
employers.
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.
PRINCIPAL HOLDERS OF SECURITIES
As of July 1, 1994, the officers and Trustees of the Trust owned as a
group less than one percent of the outstanding shares of the Fund. To the
knowledge of the Fund, no person owns more than 5% of the outstanding
shares of the Fund as of that date. It is anticipated that, following the
initial offering of shares of the Fund, all of the shares of the Fund will
be owned by the Treasury Board, an agency of the Commonwealth of Virginia.
INVESTMENT ADVISORY AND OTHER SERVICES
CIC acts as investment adviser to the Fund pursuant to a Management
Contract with the Trust. Subject to the supervision and direction of the
Trustees, CIC, as investment adviser, manages the Fund's portfolio in
accordance with the stated policies of the Fund and of the Trust. CIC
makes investment decisions for the Fund and places the purchase and sale
orders for portfolio transactions. CIC bears all expenses in connection
with the performance of its services. In addition, CIC pays the salaries
of all officers and employees who are employed by it and the Trust.
CIC provides the Trust on behalf of the Fund with investment officers
who are authorized to execute purchases and sales of securities.
Investment decisions for the Fund and for the other investment advisory
clients of CIC 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 manner which in CIC'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. CIC employs professional staffs of
portfolio managers who draw upon a variety of resources for research
information for the Fund.
The proceeds received by the Fund 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 the
Fund, and constitute the underlying assets of the Fund. The underlying
assets of the Fund will be segregated on the Trust's books of account, and
will be charged with the liabilities in respect of the Fund and with a
share of the general liabilities of the Trust. Expenses with respect to
any two or more series of the Trust, including the Fund, may be allocated
in proportion to the net asset values of the respective series except where
allocations of direct expenses can otherwise be fairly made.
Expenses incurred in the operation of the Fund or otherwise allocated
to the Fund, 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 Fund.
The Management Contract entered into by the Trust in respect of the
Fund is subject to annual approval commencing in 1997 by (i) the Trustees
or (ii) vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Fund, 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 CIC, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The 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 Fund's shares, or by
CIC, as applicable.
BROKERAGE
Transactions on U.S. stock exchanges, commodities markets, and futures
markets and other agency transactions involve the payment by the Fund 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 Fund usually includes
an undisclosed dealer commission or mark-up. In underwritten offerings,
the price paid by the Fund includes a disclosed, fixed commission or
discount retained by the underwriter or dealer. It is anticipated that
most purchases and sales of securities by the Fund investing primarily in
certain fixed-income securities will be with the issuer or with
underwriters of or dealers in those securities, acting as principal.
Accordingly, the Fund 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, CIC receives
brokerage and research services and other similar services from many
broker-dealers with which it places the Fund's 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 CIC's managers and analysts. Where the services referred to above are
not used exclusively by CIC for research purposes, CIC, 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 CIC and its affiliates in advising various of its
clients (including the Fund), although not all of these services are
necessarily useful and of value in managing the Fund.
CIC places all orders for the purchase and sale of portfolio
investments for the Fund and buys and sells investments for the Fund
through a substantial number of brokers and dealers. CIC seeks the best
overall terms available for the Fund, except to the extent CIC may be
permitted to pay higher brokerage commissions as described below. In doing
so, CIC, having in mind the Fund'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 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, CIC may cause the Fund to pay a broker-dealer which provides
"brokerage and research services" (as defined in the 1934 Act) to CIC an
amount of disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the Fund on an agency basis in
excess of the commission which another broker-dealer would have charged for
effecting that transaction. CIC's authority to cause the Fund to pay any
such greater commissions is also subject to such policies as the Trustees
may adopt from time to time. CIC does not currently intend to cause the
Fund 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, CIC 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, CIC may consider sales of shares of the Fund (and,
if permitted by law, of other Mentor funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
DETERMINATION OF NET ASSET VALUE
The Trust determines net asset value per share of the Fund twice each
day the New York Stock Exchange (the "Exchange") is open, once at 12:00
noon and again at the close of regular trading on the New York Stock
Exchange. 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 the Fund'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,
the Fund 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 the Fund would receive if it sold the instrument. During
periods of declining interest rates, the quoted yield on shares of the Fund
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 the Fund resulted in a lower aggregate
portfolio value on a particular day, a prospective investor in the Fund
would be able to obtain a somewhat higher yield if he purchased shares of
the Fund on that day, than would result from investment in a fund utilizing
solely market values, and existing investors in the Fund would receive less
investment income. The converse would apply on a day when the use of
amortized cost by the Fund 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 the Fund'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,
the Fund 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, the
Fund's price per share as computed for the purpose of distribution,
redemption and repurchase at $1.00. These procedures include review of the
Fund's portfolio holdings by the Trustees, at such intervals as they may
deem appropriate, to determine whether the Fund'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 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 the Fund is declared as a dividend each time
it is determined, the net asset value per share of the Fund remains at
$1.00 per share immediately after such determination and dividend
declaration. Any increase in the value of a shareholder's investment in
the Fund representing the reinvestment of dividend income is reflected by
an increase in the number of shares of the Fund 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 the Fund'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 the Fund
determined at any time is a negative amount, the Fund 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 the Fund (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, the Fund
will reduce the number of outstanding shares by treating the shareholder as
having contributed to the capital of the Fund 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 the Fund.
Should the Fund incur or anticipate any unusual or unexpected
significant expense or loss which would affect disproportionately the
Fund'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
The Fund 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, the Fund will not be subject to federal
income tax on any of its net investment income or net realized capital
gains that are distributed to shareholders. As a series of Massachusetts
business trust, the Fund will not under present law be subject to any
excise or income taxes in Massachusetts.
In order to qualify as a "regulated investment company," the Fund
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 but not limited to gains from options, futures,
or forward contracts) derived with respect to its business of investing in
such stock, securities, or currencies; (b) derive less than 30% of its
gross income from the sale or other disposition of certain assets
(including stock and securities and certain options, futures contracts,
forward contracts, and foreign currencies) held less than three months; (c)
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, securities of other regulated
investment companies, and other securities limited generally with respect
to any one issuer to not more than 5% of the value of the total assets of
the Fund 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 (other than U.S. Government securities or securities of
other regulated investment companies) of any issuer or two or more issuers
which the Fund controls and which are engaged in the same, similar, or
related trades or businesses. In order to receive the favorable tax
treatment accorded regulated investment companies and their shareholders,
moreover, the Fund 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 the Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund'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 Fund so elects) plus undistributed amounts from prior
years. The Fund intends to make distributions sufficient to avoid
imposition of the excise tax. Distributions declared by the Fund during
October, November, or December to shareholders of record on a date in any
such month and paid by the Fund during the following January will be
treated for federal tax purposes as paid by the Fund and received by
shareholders on December 31 of the year in which declared.
The Fund is required to withhold 31% of all income dividends and
capital gain distributions, and 31% of the gross proceeds of all
redemptions of Fund shares, in the case of any shareholder who does not
provide a correct taxpayer identification number, about whom the Fund is
notified that the shareholder has under reported income in the past, or who
fails to certify to the Fund 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 Fund with a proper
certification.
As stated above, it is a policy of the Fund to meet the requirements
of the code to qualify as a regulated investment company that is taxed
pursuant to Subchapter M of the Code. One of these requirements is that
less than 30% of the Fund's gross income must be derived from gains from
sale or other disposition of securities held for less than three months.
Accordingly, the Fund will be restricted in selling securities held or
considered under Code rules to have been held less than three months.
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 the
Fund, including the possibility that distributions may be subject to a 30%
United States withholding tax (or a reduced rate of withholding provided by
treaty).
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, located at One Boston Place, Boston,
Massachusetts 02108, are the Trust's independent auditors, providing audit
services, tax return review, and other tax consulting services and
assistance and consultation in connection with the review of various
Securities and Exchange Commission filings. The audited financial
statements incorporated by reference into or included in the Trust's
prospectuses and Statement of Additional Information have been so included
and incorporated in reliance upon the report of KPMG Peat Marwick LLP, the
independent auditors, given on the authority of said firm as experts in
auditing and accounting.
CUSTODIAN
The custodian of the Fund, Central Fidelity National Bank, is located
at 1021 East Cary Street, P.O. Box 27602, Richmond, Virginia 23261. Its
responsibilities include generally safeguarding and controlling the Fund's
cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Fund's investments.
PERFORMANCE INFORMATION
The yield of the Fund is computed by determining the percentage net
change, excluding capital changes, in the value of an investment in one
share of the Fund over the base period, and multiplying the net change by
365/7 (or approximately 52 weeks). The Fund's effective yield represents a
compounding of the yield by adding 1 to the number representing the
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.
All data for the Fund is based on past performance and does not
predict future results.
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 the Trust or the Trustees. The Agreement and
Declaration of Trust provides for indemnification out of the Fund's
property for all loss and expense of any shareholder held personally liable
for the obligations of the Fund. Thus the risk of a shareholder's
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its obligations.
<PAGE>
RATINGS
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:
(bullet) liquidity ratios are adequate to meet cash requirements;
(bullet) long-term senior debt is rated "A" or better;
(bullet) the issuer has access to at least two additional channels of
borrowing;
(bullet) basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances;
(bullet) typically, the issuer's industry is well established and the
issuer has a strong position within the industry; and
(bullet) 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:
(bullet) evaluation of the management of the issuer;
(bullet) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in
certain areas;
(bullet) evaluation of the issuer's products in relation to competition
and customer acceptance;
(bullet) liquidity;
(bullet) amount and quality of long-term debt;
(bullet) trend of earnings over a period of ten years;
(bullet) financial strength of parent company and the relationships
which exist with the issuer; and
(bullet) recognition by the management of obligations which may be
present or may arise as a result of public interest questions
and preparations to meet such obligations.
<PAGE>
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholder
IMG Institutional Trust
We have audited the accompanying statements of assets and liabilities of
Cash Management Fund, Limited Duration Fund, Intermediate Duration Fund,
and Fixed Income Fund, portfolios of IMG Institutional Trust, as of
November 7, 1994. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We Conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of assets and
liabilities are free of material misstatement. An audit of a statement of
assets and liabilities includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit of a statement of assets and liabilities also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement of assets
and liabilities presentation. We believe that our audits of the statements
of assets and liabilities provide a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of Cash
Management Fund, Limited Duration Fund, Intermediate Duration Fund and
Fixed Income Fund, at November 7, 1994 in a conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
November 8, 1994
<PAGE>
IMG INSTITUTIONAL TRUST
Statements of Assets and Liabilities
November 7, 1994
Cash Limited Intermediate Fixed
Management Duration Duration Income
Fund Fund Fund Fund
ASSETS:
Cash $ 0 $ 0 $ 0 $100,000
Deferred Organization
Expenses (Note B) 73,000 36,500 18,250 54,750
Total Assets 73,000 36,500 18,250 154,750
LIABILITIES:
Accrued Organization
Expenses (Note B) 73,000 36,500 18,250 54,750
NET ASSETS: $ 0 $ 0 $ 0 $100,000
Shares Outstanding - - - 8,000
Net Asset Value Per Share
(Note E) $ 1.00 $ 12.50 $ 12.50 $ 12.50
See accompanying notes to financial statements.
<PAGE>
IMG INSTITUTIONAL TRUST
Notes to Financial Statements
November 7, 1994
(A) IMG Institutional Trust (the "Trust') was organized as a business
trust under the laws of the Commonwealth of Massachusetts on February
8, 1994. The Trust has an unlimited number of authorized shares,
which are divided into four series - Cash Management Fund, Limited
Duration Fund, Intermediate Duration Fund and Fixed Income Fund (the
Funds). The Trust has had no operations prior to November 4, 1994
other than organizational matters and activities in connection with
the purchase of 8,000 shares of the Trust by Wheat First Butcher
Singer, Inc. It is currently intended that, upon the effectiveness of
the Trust's registration statement, shares will be offered to the
public.
(B) The Trust will bear the cost of all organizational expenses including
the fees for registering and qualifying the Trust's shares for
distribution. Fees and expenses for the organization and registration
of shares of the Trust are estimated to be $182,500 and will be
amortized over the period of benefit not to exceed 60 months. In the
event any of the initial shares are redeemed by any holder thereof
during the five year amortization period or the life of a Fund,
whichever is shorter, redemption proceeds will be reduced by any
unamortized organizational expenses in the same proportion as the
number of initial shares of a Fund being redeemed bears to the number
of initial shares of a Fund outstanding at the time of the redemption.
(C) Each Fund of the Trust 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).
Thus, the Funds are relieved of any federal income tax liability by
distributing virtually all of their net investment income and capital
gains, if any, to their shareholders. The Funds intend to avoid
excise tax liability by making the required distributions under the
Code.
(D) Under the terms of the Management Contract, Commonwealth Investment
Counsel, Inc. (Commonwealth) serves as investment manager to each of
the Funds, providing investment advisory services.
(E) The net asset value per share at November 4, 1994 for the Cash
Management Fund, Limited Duration Fund and Intermediate Duration Fund
are the expected per share offering prices for the portfolios' shares
upon their initial public offering.
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements (Included in Parts A and B)
(b) Exhibits
(1)
(A) - Agreement and Declaration of Trust.(1)
(B) - Amendment to Agreement and Declaration of Trust.(4)
(2) - Bylaws.(1)
(3) - Inapplicable.
(4)
(A) - Form of certificate representing shares of beneficial
interest for each of the Portfolios.(1)
(B) - Portions of Agreement and Declaration of Trust
Relating to Shareholders' Rights.(1)
(C) - Portions of Bylaws Relating to Shareholders' Rights.(1)
(5)
(A) - Form of Management Contract.(1)
(B) - Form of Management Contract (SNAP Fund).(6)
(5)
(B) - Form of Administration Agreement.(1)
(6)(A) - Form of Distribution Agreement.(2)
(6)(B) - Form of Assignment of Distribution Agreement.(6)
(7) - Inapplicable.
(8)
(A) - Form of Custody Agreement.(1)
(B) - Form of Custody Agreement (SNAP Fund).(6)
(C) - Form of Transfer Agency and Services Agreement.(3)
(D) - Form of Transfer Agency and Services Agreement (SNAP Fund).(6)
(9) - Inapplicable.
(10) - Opinion of counsel, including consent.(5)
(11) - Consent of Independent Accountants.(5)
(12) - Inapplicable.
(1) Incorporated herein by reference to the Registrant's initial
Registration Statement on Form N-1A under the Investment Company Act of
1940 filed on April 15, 1994.
(2) Incorporated herein by reference to Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A filed on June 28, 1994.
(3) Incorporated herein by reference to Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A filed on November 18, 1994.
(4) Incorporated herein by reference to Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A filed on July 3, 1995.
(5) Previously filed.
(6) Filed herewith.
(13) - Inapplicable.
(14) - Inapplicable.
(15) - Inapplicable.
(16) - Inapplicable.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Record Holders of Securities
The following table shows the number of holders of record of shares of
beneficial interest of each series of shares of beneficial interest of
Mentor Institutional Trust as of June 30, 1995.
Number of Record
Series Holders
Mentor Cash Management Portfolio 44
SNAP Fund 1
Mentor Intermediate Duration
Portfolio 3
Mentor Fixed-Income Portfolio 3
Item 27. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
provides as follows:
SECTION 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses, including but
not limited to amounts paid in satisfaction of judgments, in compromise or
as fines and penalties, and counsel fees reasonably incurred by any Covered
Person in connection with the defense of disposition of any action, suit or
other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such Covered
Person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Covered Person except with respect
to any matter as to which such Covered Person shall have been finally
adjudicated in any such action, suit or other proceeding (a) not to have
acted in good faith in the reasonable belief that such Covered Person's
action was in the best interests of the Trust or (b) to be liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees
so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), shall
be paid from time to time by the Trust in advance of the final disposition
of any such action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Covered Person to repay amounts so paid to the Trust if
it is ultimately determined that indemnification of such expenses is not
authorized under this Article, provided, however, that either (a) such
Covered Person shall have provided appropriate security for such
undertaking, (b) the Trust shall be insured against losses arising from any
such advance payments or (c) either a majority of the disinterested
Trustees acting on the matter (provided that a majority of the uninterested
Trustees then in office act on the matter), or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a full trial type inquiry), that there is
reason to believe that such Covered Person will be found entitled to
indemnification under this Article.
SECTION 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an adjudication
by a court, or by any other body before which the proceeding was brought,
that such Covered Person either (a) did not act in good faith in the
reasonable belief that his or her action was in the best interests of the
Trust or (b) is liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, indemnification
shall be provided if (a) approved as in the best interests of the Trust,
after notice that it involves such indemnification, by at least a majority
of the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the matter)
upon a determination, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that such Covered Person acted in
good faith in the reasonable belief that his or her action was in the best
interests of the Trust and is not liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office, or
(b) there has been obtained an opinion in writing of independent legal
counsel, based upon a review of readily available facts (as opposed to a
full trial type inquiry), to the effect that such Covered Person appears to
have acted in good faith in the reasonable belief that his or her action
was in the best interests of the Trust and that such indemnification would
not protect such Covered Person against any liability to the Trust to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. Any approval pursuant to this Section shall
not prevent the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that
such Covered Person's action was in the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
SECTION 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall
include such person's heirs, executors and administrators, and a
"disinterested Trustee" is a Trustee who is not an "interested person" of
the Trust as defined in Section 2(a)(19) of the 1940 Act (or who has been
exempted from being an "interested person" by any rule, regulation or order
of the Securities and Exchange Commission) and against whom none of such
actions, suits or other proceedings or another action, suit or other
proceeding on the same of similar grounds is then or has been pending.
Nothing contained in this Article shall affect any rights to
indemnification to which personnel of the trust, other than Trustees or
officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such person.
Item 28. Business and Other Connections of Investment Adviser
Commonwealth Investment Counsel, Inc., the investment adviser of the
Registrant, serves as investment adviser to Cash Resource Trust, Mentor
Balanced Portfolio, Mentor Quality Income Portfolio, and Mentor Short-
Duration Portfolio, each of which is an open-end investment company, and
Mentor Income Fund, Inc., a closed-end investment company.
The following is additional information with respect to the directors
and officers of Commonwealth Investment Counsel, Inc.:
Other Substantial
Business, Profession,
Position with the Vocation or Employment
Name Investment Adviser during the past two fiscal years
John G. Davenport President; None
Director
William F. Senior Vice None
Johnston, III President
P. Michael Jones Senior Vice None
President
R. Preston Nuttall Senior Vice Formerly, Senior
President Vice President,
Capitoline
Investment
Services, 919 East
Main Street,
Richmond, VA 23219
Mary A. Beeghly Vice President None
John J. Kelly Vice President None
William H. West, Jr. Vice President Vice President,
Mentor Income
Fund, Inc., 901
East Byrd Street,
Richmond, VA
23219; formerly,
Vice President of
Ryland Capital
Management, Inc.,
11000 Broken Land
Parkway, Columbia,
MD 21044;
formerly, Vice
President, RAC
Income Fund, Inc.,
11000 Broken Land
Parkway, Columbia,
MD 21044
Steven C. Henderson Vice President None
Stephen R. McClelland Associate Vice Formerly, Associate Vice President,
President Mentor Investment Group, Inc.,
901 East Byrd Street, Richmond,
VA 23219
Thomas Lee Souders Treasurer Managing Director
and Chief
Financial Officer,
Wheat, First
Securities, Inc.,
901 East Byrd
Street, Richmond,
VA 23219; Trustee,
Mentor Series
Trust, 901 East
Byrd Street,
Richmond, VA
23219; formerly,
Manager of
Internal Audit,
Heilig-Myers;
formerly, Manager,
Peat Marwick &
Mitchell & Company
John Michael Ivan Secretary Managing Director,
Senior Vice
President and
Assistant General
Counsel, Wheat,
First Securities,
Inc., 901 East
Byrd Street,
Richmond, VA
23219; Managing
Director and
Assistant
Secretary, Wheat
First Butcher
Singer, Inc.
(formerly WFS
Financial
Corporation), 901
East Byrd Street,
Richmond, VA
23219; Clerk, Cash
Resource Trust,
901 East Byrd
Street, Richmond,
VA 23219;
Secretary, The
Mentor Funds, 901
East Byrd Street,
Richmond, VA 23219
Item 29. Principal Underwriters
(a) Mentor Distributors, Inc. currently is acting as principal
underwriter for The Mentor Funds and Cash Resource Trust.
(b) The following is information concerning officers and directors of
Mentor Distributors, Inc.
Name and Principal Position and Offices Positions and
Business Address with Underwriters Offices with Registrant
Peter J. Quinn, Jr. President and --
901 East Byrd Street Director, Mentor
Richmond, VA 23219 Distributors, Inc.
Paul F. Costello Senior Vice President, President
901 East Byrd Street Mentor Distributors,
Richmond, VA 23219 Inc.
Thomas Lee Souders Treasurer, Mentor --
901 East Byrd Street Distributors, Inc.
Richmond, VA 23219
John Mark Harris Secretary, Mentor --
901 East Byrd Street Distributors, Inc.
Richmond, VA 23219
John Michael Ivan Assistant Secretary, Secretary
901 East Byrd Street Mentor Distributors,
Richmond, VA 23219 Inc.
(c) Registrant has no principal underwriter who is not an affiliate
of the Registrant.
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and
other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder are
Registrant's Secretary, John M. Ivan, Registrant's custodians, Investors
Fiduciary Trust Company ("IFTC") (all Portfolios other than SNAP Fund), and
Central Fidelity National Bank (SNAP Fund only), and Registrant's transfer
agents, The Shareholder Services Group, Inc. ("TSSG") (all Portfolios other
than SNAP Fund), and Central Fidelity National Bank (SNAP Fund only). The
address of the Secretary is 901 East Byrd Street, Richmond, Virginia,
23219. The address of TSSG is P.O. Box 9653, Providence, Rhode Island
02940-9653. The address of IFTC is 127 West 10th Street, Kansas City,
Missouri, 64105. The address of Central Fidelity National Bank is 1021
East Cary Street, P.O. Box 27602, Richmond, Virginia 23261.
Item 31. Management Services
None.
Item 32. Undertakings
(a) Inapplicable.
(b) Inapplicable.
(c) Inapplicable.
(d) The undersigned Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting on the removal of a trustee
or trustees when requested in writing to do so by the holders of at
least 10% of the Registrant's outstanding voting securities and in
connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
NOTICE
A copy of the Agreement and Declaration of Trust of Mentor
Institutional Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Registrant by an officer of the
Registrant as an officer and not individually and that the obligations of
or arising out of this instrument are not binding upon any of the Trustees,
officers, or shareholders individually but are binding only upon the assets
and property of the Registrant.
<PAGE>
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 the Registration Statement to be signed on behalf of the
undersigned, thereunto duly authorized, in the City of Richmond, and the
Commonwealth of Virginia on this 24th day of July, 1995.
MENTOR INSTITUTIONAL TRUST
By: /s/ Paul F. Costello
Paul F. Costello
Title: President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities indicated on the dates indicated.
Signature Title Date
Trustee
Arnold H. Dreyfuss
Trustee
Thomas F. Keller
* Trustee July 24, 1995
Daniel J. Ludeman
* Trustee July 24, 1995
Louis W. Moelchert, Jr.
* Trustee July 24, 1995
Stanley F. Pauley
* Trustee July 24, 1995
Troy A. Peery, Jr.
/s/ Paul F. Costello President July 24, 1995
Paul F. Costello (Principal Executive Officer)
/s/ Terry L. Perkins Treasurer July 24, 1995
Terry L. Perkins (Principal Financial and
Accounting Officer)
*By /s/ Paul F. Costello July 24, 1995
Paul F. Costello
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit Page
(5)(B) Form of Management
Contract (SNAP
Fund)
(6)(B) Form of Assignment of
Distribution
Agreement
(8)(B) Form of Custody
Agreement (SNAP
Fund)
(8)(D) Form of Transfer
Agency and
Services
Agreement (SNAP
Fund)
<PAGE>
MENTOR INSTITUTIONAL TRUST
MANAGEMENT CONTRACT
This Management Contract dated as of July , 1995 between MENTOR
INSTITUTIONAL TRUST, a Massachusetts business trust (the "Trust"), on
behalf of SNAP Fund (the "Fund"), a series of shares of beneficial interest
of Trust, and COMMONWEALTH INVESTMENT COUNSEL, INC., a Virginia corporation
(the "Manager")
WITNESSETH:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY THE MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously an
investment program for the Fund, will determine what investments shall be
purchased, held, sold, or exchanged by the Fund and what portion, if any,
of the assets of the Fund shall be held uninvested and shall, on behalf of
the Fund, make changes in the Fund's investments. In the performance of
its duties, the Manager will comply with the provisions of the Agreement
and Declaration of Trust and Bylaws of the Trust and the Fund's stated
investment objectives, policies, and restrictions, and will use its best
efforts to safeguard and promote the welfare of the Trust and to comply
with other policies which the Trustees may from time to time determine and
shall exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, will furnish (i) all necessary
investment and related management facilities, including, salaries of
personnel, required for it to execute its duties faithfully, (ii) suitable
office space for the Trust, and (iii) administrative facilities, including
bookkeeping, clerical personnel, and equipment necessary for the efficient
performance of its obligations. The Manager will pay the compensation, if
any, of certain officers of the Trust.
(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Fund's account with
brokers or dealers selected by the Manager. In the selection of such
brokers or dealers and the placing of such orders, the Manager shall give
primary consideration to securing for the Fund the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described
below. In doing so, the Manager, bearing in mind the Trust's best
interests at all times, shall consider all factors it deems relevant,
including, by way of illustration, price, the size of the transaction, the
nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience, and financial stability of the broker or dealer
involved, and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees of the Trust
may determine, the Manager shall not be deemed to have acted unlawfully or
to have breached any duty created by this Contract or otherwise solely by
reason of its having caused the Fund to pay a broker or dealer that
provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of
the amount of commission that another broker or dealer would have charged
for effecting that transaction, if the Manager determines in good faith
that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Manager's
overall responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment discretion.
(d) The Trust, on behalf of the Fund, hereby authorizes any entity or
person associated with the Manager which is a member of a national
securities exchange to effect any transaction on the exchange for the
account of the Fund which is permitted by Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Fund hereby
consents to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee
of, or be otherwise interested in, the Manager, and in any person
controlled by or under common control with the Manager, and that the
Manager and any person controlled by or under common control with the
Manager may have an interest in the Trust. It is also understood that the
Manager and any person controlled by or under common control with the
Manager have and may have advisory, management, service, or other contracts
with other organizations and persons, and may have other interests and
business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
As compensation for the services performed and the facilities
furnished and expenses assumed by the Manager, including the services of
any consultants retained by the Manager, the Fund shall pay the Manager,
promptly (but in any event within three business days) after the last day
of each calendar month, a fee, calculated daily, at an annual rate as
follows: for the first $500 million of assets under management, .09% of
the average daily net assets in the Fund; for the next $250 million under
management, .08% of the average daily net assets in the Fund; for the next
$250 million under management, .07% of the average daily net assets in the
Fund; for the next $250 million under management, .06% of the average daily
net assets in the Fund; and for any amounts over $1.25 billion under
management, .05% of the average daily net assets in the Fund.
If this Contract is terminated as of any date not the last day of a
calendar month, the fee payable to the Manager shall be paid promptly (but
in any event within three business days) after such date of termination.
The average daily net assets of the Fund shall in all cases be based
only on business days and be computed as of the time of the regular close
of business of the New York Stock Exchange, or such other time as may be
determined by the Board of Directors. Each such payment shall be
accompanied by a report of the Fund prepared either by the Fund or by a
reputable firm of independent accountants which shall show the amount
properly payable to the Manager under this Contract and the detailed
computation thereof.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment be approved at a meeting by the affirmative
vote of a majority of the outstanding shares of the Fund, and by the vote,
cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution and shall
remain in full force and effect continuously thereafter until the close of
business on July , 1997 (unless terminated automatically as set forth in
Section 4), and shall continue for successive one-year periods thereafter,
if approved in accordance with Section 6, until terminated by either party
hereto at any time by not more than sixty days nor less than thirty days
written notice delivered or mailed by registered mail, postage prepaid, to
the other party. Such action by the Trust with respect to termination may
be taken either (i) by vote of a majority of its Trustees, or (ii) by the
affirmative vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will be
without the payment of any penalty.
6. ANNUAL APPROVAL.
For additional terms after the initial term of this Contract, this
Contract shall be submitted for approval to the Trustees annually and shall
continue in effect only so long as specifically approved annually by vote
of a majority of the Trustees of the Trust who are not interested persons
of the Trust or of the Manager, by vote cast in person at a meeting called
for the purpose of voting on such approval.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of
67% or more of the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting are present
in person or by proxy, or (b) of the holders of more than 50% of the
outstanding shares of the Fund entitled to vote at such meeting, whichever
is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their
respective meanings defined in the Investment Company Act of 1940, as
amended, and the Rules and Regulations thereunder, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission
under said Act; the term "specifically approve at least annually" shall be
construed in a manner consistent with the Investment Company Act of 1940,
as amended, and the Rules and Regulations thereunder; and the term
"brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934, as amended, and the Rules and Regulations
thereunder.
8. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and
duties hereunder, the Manager shall not be subject to any liability to the
Trust or to any shareholder of the Trust for any act or omission in the
course of, or connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the
obligations of this instrument are not binding upon any of the Trustees,
officers, or shareholders of the Trust but are binding only upon the assets
and property of the Trust.
IN WITNESS WHEREOF, MENTOR INSTITUTIONAL TRUST and COMMONWEALTH
INVESTMENT COUNSEL, INC., have each caused this instrument to be signed in
duplicate in its behalf by its President or Vice President thereunto duly
authorized, all as of the day and year first above written. This document
is executed by each of the parties hereto under seal. This Agreement shall
be governed and construed in accordance with the laws (other than conflict
of laws rules) of The Commonwealth of Massachusetts.
MENTOR INSTITUTIONAL TRUST
On behalf of SNAP Fund
By:___________________________________
COMMONWEALTH INVESTMENT
COUNSEL, INC.
By:___________________________________
<PAGE>
July , 1995
Mentor Distributors, Inc.
901 East Byrd Street
Richmond, Virginia 23219
Re: Assignment of Distribution Agreement
Dear Sirs:
Reference is made to that Distribution Agreement (the "Agreement")
currently in effect between Mentor Institutional Trust and Wheat, First
Securities, Inc. ("Wheat") in respect of Mentor Institutional Trust, formerly
IMG Institutional Trust. Wheat hereby assigns to you all of its rights under the
Agreement and delegates to you all of its obligations under the Agreement, in
each case from and after the date of this letter agreement, and you hereby agree
to and accept such assignment and delegation. This letter agreement is governed
by the laws of The Commonwealth of Massachusetts, and is executed under seal.
If this letter sets forth accurately your understanding of our
agreement, please sign it on the space below in which it shall become a binding
agreement between us.
Very truly yours,
WHEAT, FIRST SECURITIES, INC.
By:
Accepted and agreed:
MENTOR DISTRIBUTORS, INC.
By
CUSTODY AGREEMENT
THIS AGREEMENT made the _____ day of ___________, 1995, by and
between CENTRAL FIDELITY NATIONAL BANK, located at 1021 E. Cary Street,
Richmond, Virginia ("Custodian"), and the SNAP Fund, a series of shares of
MENTOR INSTITUTIONAL TRUST, a Massachusetts business trust having its
principal office and place of business at 901 East Byrd Street, Richmond,
Virginia 23219 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Central Fidelity National Bank as
custodian of the securities and monies of the SNAP Fund (the "Series"); and
WHEREAS, Central Fidelity National Bank is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally bound,
mutually covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN.
Fund hereby constitutes and appoints Custodian as custodian of the
assets of the Series, which is to include:
A. Appointment as custodian of the securities and monies at any time
owned by the Series; and
B. Appointment as agent to perform certain accounting and record
keeping functions required of a registered investment company in
compliance with applicable provisions of federal, state and local
laws, rules and regulations including, as may be required:
1. Providing information necessary for Fund and the Series to
file required financial reports; maintaining and preserving
required books, accounts and records as the basis for such
reports; and preforming certain daily functions in
connection with such accounts and records;
2. Acting as liaison with independent auditors.
2. DELIVERY OF CORPORATE DOCUMENTS.
Fund has delivered or will deliver to Custodian, prior to the
effective date of this Agreement, copies of the following documents
and all amendments or supplements thereto, properly certified or
authenticated:
A. Resolutions of the Trustees of Fund appointing Custodian as
custodian hereunder and approving the form of this Agreement; and
B. Resolutions of the Trustees of Fund designating certain persons
to give instructions on behalf of Fund to Custodian and
authorizing Custodian to rely upon written instructions over
their signatures.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, all portfolio
securities acquired by it and monies then owned by it or from
time to time coming into its possession during the time this
Agreement shall continue in effect, except in any case as
permitted by the Investment Company Act of 1940 (the "1940 Act").
Custodian shall have no responsibility or liability whatsoever
for or on account of securities or monies not so delivered. All
securities so delivered to Custodian (other than bearer
securities) shall be registered in the name of Fund or its
nominee, or of a nominee of Custodian in which no assets in which
the Custodian has any direct or indirect beneficial interest are
registered, or, if certificated securities, shall be properly
endorsed and in form for transfer satisfactory to Custodian.
B. Delivery of Accounts and Records
Fund shall, upon request of Custodian, turn over or cause to be
turned over to Custodian originals or copies of any of the Fund's
relevant accounts and records previously maintained which are
necessary to the proper performance of the Custodian's duties
hereunder. Custodian shall be entitled to rely conclusively on
the completeness and correctness of the accounts and records
turned over to it, and Fund shall indemnify and hold harmless
Custodian of and from any and all expenses, damages and losses
whatsoever arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such accounts and
records or in the failure of Fund to provide, or to provide in a
timely manner, any accounts, records or information needed by the
Custodian knowledgeably to perform its function hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of
Fund delivered to it from time to time and the assets of the
Series segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any
person except as permitted by the provisions of this Agreement or
any agreement executed by it according to the terms of Section
3.S. of this Agreement. Upon delivery of any such assets to a
subcustodian pursuant to Section 3.S. of this Agreement,
Custodian will create and maintain records identifying those
assets which have been delivered to the subcustodian as belonging
to the Series. The Custodian is responsible for the safekeeping
of the securities and monies of Fund only until they have been
transmitted to and received by other persons as permitted under
the terms of this Agreement except for securities and monies
transmitted to subcustodians appointed under Section 3.S. of this
Agreement, for which Custodian remains responsible to the extent
provided in Section 3.S. hereof. Custodian may participate
directly or indirectly through a subcustodian in the Depository
Trust Company, Treasury/Federal Reserve Book Entry System,
Participant Trust Company or other depository approved by the
Fund (as such entities are defined at 17 CFR Section 270.17f-
4(b)).
D. Registration of Securities
Custodian will hold stocks and other registrable portfolio
securities of Fund registered in the name of Fund or in the name
of any nominee of Custodian for whose fidelity and liability
Custodian will be fully responsible, or in street certificate
form, so-called, with or without any indication of fiduciary
capacity. Unless otherwise instructed, Custodian will register
all such portfolio securities in the name of its authorized
nominee. Notwithstanding the foregoing, the Custodian shall not
register in the name of such nominee any assets of the Custodian
other than assets held as a fiduciary, custodian or otherwise for
customers. All securities, and the ownership thereof by Fund,
which are held by Custodian hereunder shall at all times be
identifiable on the records of the Custodian. The Fund agrees to
hold Custodian and its nominee harmless for any liability as a
record holder of securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A.,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other
securities or cash issued or paid in connection with any
reorganization, recapitalization, merger, consolidation, split-up
of shares, change of par value, conversion or otherwise, and will
deposit any such securities in accordance with the terms of any
reorganization or protective plan. Without instructions,
Custodian is authorized to exchange securities held by it in
temporary form for securities in definitive form, to effect an
exchange of shares when the par value of the stock is changed,
and, upon receiving payment therefor, to surrender bonds or other
securities held by it at maturity or when advised of earlier call
for redemption, except that Custodian shall receive instructions
prior to surrendering any convertible security.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which
shall specify with respect to each such purchase:
1. The name of the Series;
2. The name of the issuer and description of the security;
3. The number of shares or principal amount purchases, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the
purchase;
7. The total amount payable upon such purchase; and
8. The name of the person from whom or the broker or dealer
through whom the purchase was made.
In accordance with such instructions, Custodian will pay for out
of monies held for the account of Fund, but only insofar as
monies are available therein for such purpose, and receive the
portfolio securities so purchased by or for the account of Fund
except the Custodian may in its sole discretion advance funds to
the Fund which may result in an overdraft because the monies held
by the Custodian on behalf of the Fund are insufficient to pay
the total amount payable upon such purchase. Such payment will
be made only upon receipt by Custodian of the securities so
purchased.
G. Sales and Deliveries of Investment of the Fund - Other than
Options and Futures
Fund will, on each business day on which a sale of investment
securities of Fund has been made, deliver to Custodian
instructions specifying with respect to each such sale:
1. The name of the Series;
2. The name of the issuer and description of the securities;
3. The name of the shares or principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or
other information identifying the securities sold and to be
delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commissions, taxes
or other expenses payable in connection with such sale;
8. The total amount to be received by Series upon such sale;
and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or
cause to be delivered the securities thus designated as sold for
the account of Fund to the broker or other person specified in
the instructions relating to such sale, such delivery to be made
only upon receipt of payment therefor in such form as is
satisfactory to Custodian, with the understanding that Custodian
may deliver or cause to be delivered securities for payment in
accordance with the customs prevailing among dealers in
securities.
H. Purchases or Sales of Security Options, Options on Indices and
Security Index Futures Contracts
Fund will, on each business day on which a purchase or sale of
the following options and/or futures shall be made by it, deliver
to Custodian instructions which shall specify with respect to
each such purchase or sale:
1. The name of the Series;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom
the sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through
whom the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the contract and,
when available, the closing level thereof;
b. The index level on the date the contract is entered
into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin amount (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete
and executed custodial safekeeping account and
procedural agreement which shall be incorporated by
reference into this Custody Agreement); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
5. Options on Index Futures Contracts
a. The underlying index futures contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Deposit of Fund Assets in Securities Systems
The Custodian may directly or through a subcustodian deposit
and/or maintain securities owned by the Series in a clearing
agency registered with the Securities and Exchange Commission
under Section 17A of the Securities and Exchange Act of 1934,
which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and
certain federal agencies (each referred to herein as a
"Securities System"), in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1. The Custodian may keep securities of the Series in a
Securities System provided that such securities are
represented in an account ("Securities System Account") of
the Custodian or its subcustodian in the Securities System
which shall not include any assets of the Custodian or its
subcustodian other than assets held as a fiduciary or
custodian or otherwise for customers;
2. The records of the Custodian with respect to securities of
the Series which are maintained in a Securities System shall
identify by book entry those securities belonging to the
Series;
3. The Custodian shall pay for securities purchased for the
account of the Series upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Securities System Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
payment and transfer for the account of the Series. The
Custodian shall transfer securities sold for the account of
the Series upon (i) receipt of advice from the Securities
System that payment for such securities have all been
transferred to the Securities Systems Account, and (ii) the
making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of the
Series. Copies of all advices from the Securities System of
transfers of securities for the account of a Series shall
identify the Series, be maintained for the Series by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of
the Series confirmation of each transfer to or from the
account of a Series in the form of a written advice or
notice and shall furnish to the Fund on behalf of the Series
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Series;
4. The Custodian shall provide to the Fund any report obtained
by the Custodian on the Securities System's accounting
system, internal account control, and procedures for
safeguarding securities deposited in the Securities System;
5. Subject to the terms of Section 3.S. hereof, the Custodian
shall be liable to the Series for any loss or damage to the
Series resulting from use of a Securities System to the
extent resulting from any negligence, misfeasance or
misconduct of the Custodian or its subcustodian or of any of
its or their employees, or from failure of the Custodian or
its subcustodian to enforce effectively such rights as it
may have against the Securities System; at the election of
the Fund, the Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that the Series has not been
made whole for any such loss or damage.
J. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund:
1. Upon receipt of instructions, Custodian will release or
cause to be released securities held in custody to the
pledgee designated in such instructions by way of pledge or
hypothecation to secure any loan incurred by Fund; provided,
however, that the securities shall be released only upon
payment to Custodian of the monies borrowed, except that in
cases where additional collateral is required to secure a
borrowing already made, further securities may be released
or caused to be released for that purpose upon receipt of
instructions. Upon receipt of instructions, Custodian will
pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release
securities held in custody to the borrower designated in
such instructions; provided, however, that the securities
will be released only upon deposit with Custodian of full
cash collateral as specified in such instructions, and the
Fund will retain the right to any dividends, interest or
distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will
release the cash collateral to borrower.
K. Routine Matters
Custodian will, in general, attended to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be otherwise
provided in this Agreement or directed from time to time by the
Trustees of Fund.
L. Deposit Account
Custodian will open and maintain one or more special purpose
deposit accounts in the name of Custodian in its capacity as
custodian for the Fund ("Accounts"), subject only to draft or
order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of the Series shall
be deposited in the appropriate Account. Barring events not in
the control of the Custodian such as strikes, lockouts or labor
disputes, riots, war or equipment or transmission failure or
damage, fire, flood, earthquake or other natural disaster, action
or inaction of governmental authority or other causes beyond its
control, at 9:00 a.m., Richmond time, on the second business day
after deposit of any check into an Account, Custodian agrees to
make Fed Funds available to the Fund in the amount of the check.
Deposits made by Federal Reserve wire will be available to the
Fund immediately and ACH wires will be available to the Fund on
the next business day. Income earned on the portfolio securities
will be credited to the Series of the Fund based on the schedule
attached at Exhibit A. The Custodian will be entitled to reverse
any credited amounts where credits have been made and monies are
not finally collected. If monies are collected after such
reversal, the Custodian will credit the Series in that amount.
Custodian may open and maintain Accounts in such other banks or
trust companies as may be designated by it or by properly
authorized resolution of the Trustees of Fund, such Account,
however, to be in the name of Custodian in its capacity as such
and subject only to its draft or order as such.
M. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of
Fund all income and other payments which become due and
payable on or after the effective date of this Agreement
with respect to the securities deposited under this
Agreement. If, for any reason, the Fund is credited with
income that is not subsequently collected, Custodian may
reverse that credited amount.
2. Execute ownership and other certificates and affidavits for
all federal, state and local tax purposes in connection with
the collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and
other payments, including but not limited to the
presentation for payment of:
(1) all coupons and other income items requiring
presentation; and
(2) all other securities which may mature or be
called, redeemed, retired or otherwise become
payable and regarding which the Custodian has
actual knowledge, or should reasonably be expected
to have knowledge; and
(i) the endorsement for collection, in the name
of Fund, of all checks, drafts or other
negotiable instruments.
Custodian, however, will not be required to
institute suit or take other extraordinary
action to enforce collection except upon
receipt of instructions and upon being
indemnified to its satisfaction against the
costs and expenses of such suit or other
actions. Custodian will receive, claim and
collect all stock dividends, rights and other
similar items and will deal with the same
pursuant to instructions. Unless prior
instructions have been received to the
contrary, Custodian will, without further
instructions, sell any rights held for the
account of Fund on the last trade date prior
to the date of expiration of such rights.
N. Payment of Dividends and other Distributions.
On the declaration of any dividend or other distribution on the
shares of beneficial interest of the Series ( Fund Shares ) by
the Trustees of Fund, Fund shall deliver to Custodian
instructions with respect thereto, including a copy of the
resolution of said Trustees certified by the Secretary or an
Assistant Secretary of Fund wherein there shall be set forth the
record date as of which shareholders entitled to receive such
dividend or other distribution shall be determined, the date of
payment of such dividend or distribution, and the amount payable
per share on such dividend or distribution.
Except if the ex-dividend date and the reinvestment date of any
dividend are the same, in which case funds shall remain in the
applicable Account, on the date specified in such resolution for
the payment of such dividend or other distribution, Custodian
will pay out of the monies held for the account of the Series,
insofar as the same shall be available for such purposes, and
credit to the account of the Dividend Disbursing Agent for Fund,
such amount as may be necessary to pay the amount per share
payable in cash on Fund Shares issued and outstanding on the
record date established by such resolution.
O. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund,
Fund or its agent shall advise Custodian of the aggregate dollar
amount to be paid for such shares and shall confirm such advice
in writing. Upon receipt of such advice, Custodian shall charge
such aggregate dollar amount to the account of the Series and
either deposit the same in the account maintained for the purpose
of paying for the repurchase or redemption of Fund Shares or
deliver the same in accordance with such advice.
Custodian shall not have any duty or responsibility to determine
that Fund Shares have been removed from the proper shareholder
account or accounts or that the proper number of Fund Shares have
been canceled and removed from the shareholder records.
P. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit
or cause to be deposited with Custodian the amount received for
such shares. Custodian shall not have any duty or responsibility
to determine that Fund Shares purchased from Fund have been added
to the proper shareholder account or accounts or that the proper
number of such shares have been added to the shareholder records.
Q. Proxies and Notices
The Custodian shall, with respect to securities held hereunder,
cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such proxies, all
proxy soliciting materials and all notices, requests, or
announcements relating to such securities. Except as provided in
this Agreement or pursuant to instructions hereafter received by
Custodian, neither it nor its nominee will exercise any power
inherent in any such securities, including any power to vote the
same, or execute any proxy, power of attorney, or other similar
instrument voting any of such securities, or give any consent,
approval or waiver with respect thereto, or take any other
similar action.
R. Disbursements
Custodian will pay or cause to be paid insofar as funds are
available for the purpose, bills, statements and other
obligations of Fund (including but not limited to obligations in
connection with the conversion, exchange or surrender of
securities owned by Fund, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal
fees, auditors fees, transfer agents fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth
the name of the person to whom payment is to be made, the amount
of the payment, and the purpose of the payment.
S. Statement of Accounts
Custodian will render to Fund monthly a detailed statement of the
securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are necessary
to enable it to do so and will permit such persons as are
authorized by Fund, including Fund s independent public
accountants, access to such records or, in the case of such
records maintained on any computer, computer system or computer
network, confirmation of the contents of such records. If
demanded by federal and state regulatory agencies or upon receipt
of instructions from Fund, Custodian will permit such agencies to
examine the securities, books and records. Upon the written
instruction of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to permit such
persons as are authorized by Fund, including Fund s independent
public accountants, access to such records or, in the case of
such records maintained on any computer, computer system or
computer network, confirmation of the contents of such records
and to permit such agencies to examine the books, records and
securities held by such subcustodian which relate to Fund.
T. Appointment of Subcustodian
1. Notwithstanding any other provisions of this Agreement, all
or any of the monies or securities of Fund may be held in
Custodian s own custody or in the custody of one or more
other banks or trust companies acting as subcustodians as
may be selected by Custodian. Custodian shall be
responsible for the actions of any subcustodian appointed by
Custodian (except any subcustodian appointed at the
instruction of the Fund as provided below and as provided in
Section S.2. below) to the same extent Custodian is
responsible to the Fund by Section 5. of this Agreement.
Any such subcustodian selected by the Custodian must have
the qualifications required for custodian under the 1940
Act, as amended. Custodian is not responsible for DTC, the
Treasury/Federal Reserve Book Entry System, and PTC except
to the extent such entities are responsible to Custodian;
provided, however, that the foregoing shall not relieve
Custodian of its liability hereunder to the extent
attributable to its own negligence or bad faith. Upon
instruction of the Fund, Custodian shall be willing to
contract with other subcustodians reasonably acceptable to
the Custodian for purposes of (i) effecting third-party
repurchase transactions with banks, brokers, dealers, or
other entities through the use of a common custodian or
subcustodian, or (ii) providing depository and clearing
agency services with respect to certain variable rate demand
note securities; provided, however, that the Custodian will
be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions
or omissions of any such subcustodian only to the same
extent such subcustodian is responsible to the Custodian;
and provided, further, however, that the foregoing shall not
relieve Custodian of its liability hereunder to the extent
attributable to its own negligence or bad faith. The Fund
shall be entitled to review Custodian's contracts with any
such subcustodian appointed at the instruction of Fund.
U. Accounts and Records
Custodian with the direction and as interpreted by the Fund,
Fund's accountants and/or other tax advisors will prepare and
maintain, in complete, accurate and current form, all accounts
and records (i) required to be maintained by Fund with respect to
portfolio transactions under Rule 31a of the 1940 Act, (ii)
required to be maintained as a basis for calculation of the
Series' net asset value, and (iii) as otherwise agreed upon
between the parties. Custodian will preserve said records in the
manner and for the periods prescribed in the 1940 Act or for such
longer period as is agreed upon by the parties.
Custodian relies upon Fund to furnish, in writing, accurate and
timely information to complete Fund's records.
Custodian shall incur no lability and Fund shall indemnify and
hold harmless Custodian from and against any liability arising
from any failure of Fund to furnish such information in a timely
and accurate manner, even if Fund subsequently provides accurate
but untimely information. It shall be the responsibility of Fund
to furnish Custodian with the declaration, record and payment
dates and amounts of any dividends or income and any other
special actions required concerning each of its securities when
Custodian may not reasonably be expected to have knowledge
thereof.
V. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records
maintained by Custodian pursuant to this Agreement are the
property of Fund, and will be made available to Fund for
inspection or reproduction within a reasonable period on time,
upon demand. Custodian will assist Fund's independent auditors,
or upon approval of Fund, or upon demand, any regulatory body,
having jurisdiction over the Fund or Custodian, in any requested
review of Fund's accounts and records but shall be reimbursed for
all reasonable expenses and employee time invested in any such
review outside of routine and normal periodic reviews. Upon
receipt from Fund of the necessary information, Custodian will
supply necessary data for Fund's completion of any necessary tax
returns, questionnaires, periodic reports to shareholders and
such other reports and information requests as Fund and Custodian
shall agree upon from time to time.
W. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no
procedure approved by Fund, or directed by Fund, conflicts with
or violates any requirements of its prospectus, Agreement and
Declaration of Trust, Bylaws, or any rule or regulation of any
regulatory body or governmental agency applicable to Fund. Fund
will be responsible to notify Custodian of any changes in
statutes, regulations, rules or policies applicable to Fund which
might necessitate changes in Custodian's responsibilities or
procedures.
X. Overdrafts
If Custodian shall in its sole discretion advance funds to the
account of the Series which results in an overdraft because the
monies held by Custodian on behalf of the Series are insufficient
to pay the total amount payable upon a purchase of securities as
specified in Fund's instructions or for some other reason, the
amount of the overdraft shall be payable by the Series to
Custodian upon demand. Custodian shall have a lien on the assets
of the Series in the amount of any outstanding overdraft.
Custodian shall be entitled to charge against any monies held by
it for the account of the appropriate Series the amount of any
such overdraft and accrued overdraft charges.
4. INSTRUCTIONS
A. The term "instructions," as used herein, means written or oral
instructions to Custodian from a designated representative of
Fund. Certified copies of resolutions of the Trustees of Fund
naming one or more designated representatives to give
instructions in the name and on behalf of Fund may be received
and accepted from time to time by Custodian as conclusive
evidence of the authority of any designated representative to act
for Fund and may be considered to be in full force and effect
(and Custodian will be fully protected in acting in reliance
thereon) until receipt by Custodian of notice to the contrary.
Unless the resolution delegating authority to any person to give
instructions specifically requires that the approval of anyone
else will first have been obtained, Custodian will be under no
obligation to inquire into the right of the person giving such
instructions to do so. Notwithstanding any of the foregoing
provisions of this Section 4. no authorizations or instructions
received by Custodian from Fund will be deemed to authorize or
permit any trustee, officer, employee, or agent of Fund to
withdraw any of the securities or similar investments of Fund
upon the mere receipt of such authorizations or instructions from
such trustee, officer, employee or agent.
B. No later than the next business day immediately following each
oral instruction, Fund will send Custodian written confirmation
of such oral instruction. At Custodian's sole discretion,
Custodian may record on tape, or otherwise, any oral instruction
whether given in person or via telephone, each such recording
identifying the parties, the date and the beginning and ending of
such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall hold harmless and indemnify Fund from and against
any loss or liability arising out of Custodian's negligence or
bad faith; provided, however, that Custodian shall not be liable
for consequential, special or punitive damages in any event.
Custodian may request and obtain the advice and opinion of
counsel for Fund, or its own counsel with respect to questions or
matters of law, and it shall be without liability to Fund for any
action reasonably taken or omitted by it in good faith, in
conformity with such advice or opinion. If Custodian reasonably
believes that it could not prudently act according to the
instructions of the Fund or the Fund's counsel, it may in its
discretion, with prior notice to the Fund, not act according to
such instructions.
B. Custodian may rely upon the advice of Fund and upon statements of
Fund's public accountants and other persons believed by it in
good faith to be expert in matters in which they are consulted,
and Custodian shall not be liable for any actions taken,
reasonably and in good faith, upon such statements.
C. If Fund requires Custodian in any capacity to take, with respect
to any securities, any action which involves the payment of money
by Custodian, or which in Custodian's opinion might make it or
its nominee liable for payment of monies or in any other way,
Custodian, upon notice to Fund given prior to such actions, shall
be and be kept indemnified by Fund in an amount and form
satisfactory to Custodian against any liability on account of
such action.
D. Custodian shall be entitled to receive, and Fund agrees to pay to
Custodian, on demand, reimbursement for such reasonable cash
disbursements, costs and expenses as may be agreed upon from time
to time by Custodian and Fund.
E. Custodian shall be protected in acting as custodian hereunder
upon any instructions, advice, notice, request, consent,
certificate or other instrument or paper reasonably appearing to
it to be genuine and to have been properly executed and shall,
unless otherwise specifically provided herein, be entitled to
receive as conclusive proof of any fact or matter required to be
ascertained from Fund hereunder, a certificate signed by the
Fund's President, or other officer specifically authorized for
such purpose.
F. Without limiting the generality of the foregoing, Custodian shall
be under no duty or obligation to inquire into, and shall not be
liable for:
1. The validity of the issue of any securities purchased by or
for Fund, the legality of the purchase thereof or the
legality of the evidence of ownership required by Fund to be
received by Custodian, or the propriety of the decision to
purchase or amount paid therefor;
2. The legality of the sale of any securities by or for Fund,
or the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund
Shares, or the propriety of the amount to be paid therefor;
or
5. The legality of the repurchase of any dividend by Fund, or
the legality of the issue of any Fund Shares in payment of
any stock dividend.
The foregoing shall not, however, relieve Custodian of any
liability it may incur in its capacity as the transfer agent of
the Fund pursuant to that certain Agency Agreement of even date
herewith by and between Fund and Custodian.
G. Custodian shall not be liable for, or considered to be Custodian
of, any money represented by a check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for payment
of money received by it on behalf of Fund, until Custodian
actually receives such money, provided only that it shall advise
Fund promptly if it fails to receive any such money in the
ordinary course of business, and use its best efforts and
cooperate with Fund toward the end that such money shall be
received.
H. Except as provided under Section 3.S., Custodian shall not be
responsible for loss occasioned by the acts, neglect, defaults or
insolvency of any broker, bank, trust company, or any other
person with whom Custodian may deal; provided, however, that the
foregoing shall not relieve Custodian of its liability hereunder
to the extent attributable to its own negligence or bad faith.
I. Custodian shall not be responsible or liable for the failure or
delay in performance of its obligations under this Agreement, or
those of any entity for which it is responsible hereunder, to the
extent arising out of or caused, directly or indirectly, by
circumstances beyond the affected entity's reasonable control,
including, without limitation: any interruption, loss or
malfunction of 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 the reasonable control of
Custodian or such entity.
6. COMPENSATION.
Fund will pay to Custodian such compensation as agreed under a
separate agreement.
7. TERMINATION.
Either party to this Agreement may terminate the same by notice in
writing, delivered or mailed, postage prepaid, to the other party
hereto and received not less than sixty (60) days prior to the date
upon which such termination will take effect, provided that the Fund
may at any time by action of its Trustees immediately terminate this
Agreement in the event of the bankruptcy or insolvency of or the
appointment of a conservator or receiver for the Custodian or upon the
happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction. Upon
termination of this Agreement, Fund will pay to Custodian such
compensation for its reimbursable disbursements, costs and expenses
paid or incurred to such date and Fund will use its best efforts to
obtain a successor custodian. Custodian will, upon termination of
this Agreement and payment of all sums due to Custodian hereunder,
deliver to the successor custodian at Custodian's office all
securities then held by Custodian hereunder, duly endorsed and in form
for transfer, all funds and other properties of Fund deposited with or
held by Custodian hereunder, or will cooperate in effecting changes in
book entries at the Depository Trust Company, Participants Trust
Company or in the Treasury/Federal Reserve Book-Entry System pursuant
to 31 CFR Sec. 306.118. In the event no written order designating a
successor custodian has been delivered to Custodian on or before the
date when such termination becomes effective, then Custodian may
deliver the securities, funds and properties of Fund to a bank or
trust company selected by Custodian and meeting the qualifications for
custodian, if any, set forth in the Bylaws of Fund and having not less
than Five Million Dollars ($5,000,000) in aggregate capital, surplus
and undivided profits, as shown by its last published report, or
Custodian may make any other delivery of the securities, funds and
properties of Fund which is permitted by the 1940 Act, Fund's Articles
of Incorporation and Bylaws then in effect or apply to a court of
competent jurisdiction for the appointment of a successor custodian.
Upon delivery to a successor custodian, Custodian will have no further
obligations or liabilities under this Agreement, other than such as
may have arisen prior to, or in respect of events occurring prior to,
such delivery. Thereafter such successor will be the successor
custodian under this Agreement and will be entitled to reasonable
compensation for its services. In the event that securities, funds
and other properties remain in the possession of the Custodian after
the date of termination hereof owing to failure of the Fund to appoint
a successor Custodian, the Custodian shall be entitled to compensation
in accordance with the then-current fee schedule for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Agreement relating to the duties and obligations of the Custodian
shall remain in full force and effect.
8. NOTICES.
Notices, requests, instructions and other writings addressed to Fund
at 901 East Byrd Street, Richmond, Virginia 23219, or at such other
address as Fund may have designated to Custodian in writing, will be
deemed to have been properly given to Fund hereunder; and notices,
requests, instructions and other writings addressed to Custodian at
its offices at 1021 East Cary Street, Richmond, Virginia, Attention
Institutional Custody Department, or to such other address as it may
have designated to Fund in writing, will be deemed to have been
properly given to Custodian hereunder.
9. DECLARATION OF TRUST.
A copy of the Agreement and Declaration of Trust of the Fund 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 the Fund 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.
10. 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 Virginia.
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 indemnifications
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 by each party hereto.
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 either party hereto without
prior written consent of the other party.
I. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
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 either party
hereunder shall not affect any rights or obligations of the other
party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
CENTRAL FIDELITY NATIONAL BANK
By:
Title:
MENTOR INSTITUTIONAL TRUST
By:
Title:
AGENCY AGREEMENT
THIS AGREEMENT made the ______ day of ____________, 1995, by and
between MENTOR INSTITUTIONAL TRUST, a Massachusetts business trust, having its
principal place of business at 901 East Byrd Street, Richmond, Virginia 23219
("Fund"), and CENTRAL FIDELITY NATIONAL BANK having its principal place of
business at 1021 East Cary Street, Richmond, Virginia ("CFNB"): WITNESSETH:
WHEREAS, Fund desires to appoint CFNB as Transfer Agent and Dividend
Disbursing Agent, and CFNB 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 CFNB as Transfer Agent and Dividend Disbursing Agent for
Fund, there will be filed with CFNB the following documents:
A. A certified copy of the resolutions of the Trustees of Fund
appointing CFNB as Transfer Agent and Dividend Disbursing
Agent, approving the form of 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
Fund and all amendments thereto;
C. A certified copy of the Bylaws of Fund;
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 Fund, with a certificate
of the Secretary of Fund, as to such approval;
F. Specimens of the signatures of the officers of the Fund
authorized to sign share certificates and individuals
authorized to sign written instructions and requests;
G. An opinion of counsel for Fund with respect to:
(1) Fund's 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. Certain Representations and Warranties of CFNB.
CFNB represents and warrants to Fund that:
A. It is a trust company duly organized and existing and in good
standing under the laws of Virginia.
B. It is duly qualified to carry on its business in the State of
Virginia.
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 the Agreement.
3. Certain Representations and Warranties of Fund.
Fund represents and warrants to CFNB 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 diversified 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.
D. All requisite steps have been or will be taken to register
Fund's shares for sale in all applicable states.
E. Fund 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, Fund
hereby appoints CFNB as Transfer Agent and Dividend Disbursing
Agent.
B. CFNB hereby accepts such appointment and agrees that it will
act as Fund's Transfer Agent and Dividend Disbursing Agent.
CFNB 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. CFNB agrees to provide the necessary facilities, equipment and
personnel to perform its duties and obligations hereunder in
accordance with industry practice.
D. Fund agrees to use its best efforts to deliver to CFNB in
Richmond, Virginia, as soon as they are available, originals or
copies of all of its shareholder account records.
E. CFNB agrees that it will perform the usual and ordinary
services as transfer, dividend disbursing and shareholders'
servicing agent for the Fund, and as agent of the Fund for
shareholder accounts thereof, in a timely manner, including
issuing (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 shareholders
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; maintaining those records necessary to
carry out CFNB'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 CFNB by the Fund's
principal underwriter or distributor (hereinafter "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 record keeping 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 request 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 from 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.
It is understood by CFNB that, under the current structure of
the Fund, CFNB will maintain records and perform the services
as detailed in this Agency Agreement for only one shareholder
account.
F. CFNB 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 in the Fund's prospectus as amended from time to time,
provided, however, that CFNB is advised in advance by the Fund
of any changes therein. If any addition to improvement of or
change in the features and functions currently provided by CFNB
requested by the Fund requires an enhancement or modification,
CFNB shall not be liable therefore until such modification or
enhancement is installed. If any new, additional function or
feature or change or improvement to existing functions or
features or new service measurably increases CFNB's cost of
performing the services required hereunder at the current level
of service, CFNB shall advise the Fund of amount of such
increase and if the Fund elects to utilize such function,
feature or service 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 CFNB as Transfer
Agent will be construed to cover the full amount of authorized shares
of the class or classes for which CFNB 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 CFNB from time
to time, as compensation for all services rendered as Agent,
the fees set forth in a separate schedule to be agreed to by
Fund and CFNB 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. If the Fund has not paid such
Compensation and Expenses to CFNB within a reasonable time,
CFNB 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 CFNB for all
reasonable out-of-pocket expenses or disbursements incurred by
CFNB 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 firms 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 transaction fees to the extent any
of the foregoing are paid by CFNB. The Fund agrees to pay
postage expenses at least one day in advance if so requested.
In addition, any other expenses incurred by CFNB at the request
or with the consent of the Fund will be promptly reimbursed by
the Fund.
7. Operation of CFNB System.
A. In connection with the performance of its services under this
Agreement, CFNB is responsible for such items as:
(1) The accuracy of entries in CFNB records reflecting
orders and instructions received by CFNB 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;
(6) The requiring of proper forms of instructions,
signatures and signature guarantees and any necessary
documents supporting the legality of transfers,
redemptions and other shareholder account
transactions, all in conformance with CFNB'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 breakdown or disaster disrupting its main
operation.
8. Indemnification.
A. CFNB 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 CFNB's bad faith
conduct, CFNB shall not be responsible for, and the Fund shall
indemnify and hold CFNB harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments,
expenses and liability which may be asserted against or for
which may be held to be liable, to the extent arising out of or
attributable to:
(1) All actions of CFNB required to be taken by CFNB
pursuant to this Agreement, provided that CFNB has
acted in good faith and with due diligence and
reasonable care;
(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 CFNB'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 CFNB'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);
(6) Errors, inaccuracies, and omissions in, or errors,
inaccuracies or omissions of CFNB arising out of or
resulting from such errors, inaccuracies and omissions
in, the Fund's records, shareholder and other records,
delivered to CFNB hereunder by the Fund or its prior
agent(s).
B. CFNB 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 CFNB's
failure to comply with the terms of this Agreement or arising
out of or attributable to CFNB's negligence or willful
misconduct or breach of any representation or warranty of CFNB
hereunder. In the event CFNB shall be liable under this
subsection, then the Fund shall (unless the liability arises
out of CFNB's willful misconduct) take reasonable steps with 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 ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF
ADVISED OF THE POSSIBILITY THEREOF.
9. Certain Covenants of CFNB 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
all 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 CFNB.
B. CFNB hereby agrees to perform such transfer agency functions as
are set forth in Section 4E, 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, CFNB agrees that
all records maintained by CFNB relating to the services to be
performed by CFNB under this Agreement are the property of Fund
and will be preserved and will be surrendered promptly to Fund
on request.
D. CFNB 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
CFNB's certified public accountants.
E. CFNB 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. CFNB 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, CFNB 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 the Fund's Agreement and
Declaration of Trust or other document effecting the change;
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 Fund, with a certificate of the Secretary of Fund
as to such approval;
E. Opinion of counsel for Fund 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 CFNB with a sufficient supply of blank share
certificates and from time to time will renew such supply upon the
request of CFNB. 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.
Fund will file promptly with CFNB written notice of any change in the
offices 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. CFNB 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 CFNB such approval, adoption,
or ratification as may be required by law.
13. Future Amendments of Charter and Bylaws.
Fund will promptly file with CFNB 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 CFNB may apply to any person authorized by the Fund to give
instructions to CFNB, 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. CFNB 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 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 Fund, 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 CFNB
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,
CFNB shall not have any role or responsibility in choosing, accepting
or rejecting prospective broker-dealer nominees. Accordingly, CFNB
shall have no responsibility or liability for the actions or omissions
of any such broker-dealer.
16. [Intentionally Omitted].
17. Records.
CFNB 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-1 under
the Investment Company Act of 1940, if any.
18. Disposition of Books, Records and Canceled Certificates.
CFNB will send periodically to Fund, or to where designated by the
Secretary or an Assistant Secretary of Fund, 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 CFNB
(which consent will not be unreasonably withheld), but will be safely
stored for possible future reference.
19. Provisions Relating to CFNB as Transfer Agent.
A. CFNB 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 1.D 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 CFNB with sufficient funds to pay all required taxes on
the original issue of the share, if any. Fund will furnish
CFNB such evidence as may be required by CFNB to show the
actual value of the shares.
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 CFNB properly endorsed for transfer or
redemption accompanied by such documents as CFNB 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. CFNB
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 CFNB or by a bank
or trust company approved by it. CFNB 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. CFNB 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 CFNB will
forward share certificates in "nonnegotiable" form by first
class or registered mail and share 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
CFNB.
E. CFNB will issue and mail subscription warrants, certificates
representing share dividends, exchanges or split ups, or act a
Conversion Agent upon receiving written instructions from any
officer of Fund and such other documents as CFNB deems
necessary.
F. CFNB 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 CFNB for that purpose upon receiving written
instructions from an officer of Fund and such other documents
as CFNB may deem necessary.
G. CFNB 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 CFNB 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 by the bylaws of Fund
governing such matter.
H. CFNB will supply a shareholder's list to Fund for any
shareholder meeting upon receiving a request from an officer of
Fund. It will also supply lists at such other times as may be
requested by an officer of Fund.
I. Upon receipt of written instructions of an officer of Fund,
CFNB 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
CFNB, CFNB will endeavor to notify Fund and to secure
instructions as to permitting or refusing such inspection. CFNB
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. CFNB 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 CFNB.
B. If Fund desires to include additional printed matter, financial
statements, etc., with the dividend checks, the same will be
furnished CFNB 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
CFNB but the size and form of said envelopes will be subject to
the approval of CFNB. 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.
D. CFNB will maintain one or more deposit accounts as Agent for
Fund, into which the monies received by CFNB 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 CFNB
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 CFNB, the amount of the overdraft shall be
payable on demand along with the overdraft fee provided for in
the then-current fee schedule. CFNB shall be entitled to
offset the amount owed for any such overdraft against any other
monies of Fund held by CFNB.
E. CFNB 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 CFNB 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 shareholder
instructions and transmitting orders based on such instructions to
CFNB, 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, CFNB
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 CFNB or
its assigns which materially interferes with the
business operation of Fund;
(2) The insolvency or bankruptcy of CFNB or the
appointment of a receiver for CFNB;
(3) Any merger, consolidation or sale of substantially all
the assets of CFNB;
(4) The acquisition of a controlling interest in CFNB by
any broker, dealer, investment adviser or investment
company except as may presently exist; or
(5) Failure by CFNB or its assigns to perform it 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 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 CFNB 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 CFNB all
amounts due to CFNB hereunder.
D. In the event of termination, (1) CFNB will transfer the books
and records of the Fund to the designated successor transfer
for reasonable compensation therefore, and (2) CFNB will
provide other reasonably necessary information relating to its
services provided hereunder other than CFNB Protected
Information (as defined in Section 23.C.) for reasonable
compensation therefore.
23. Confidentiality.
A. CFNB agrees that, except as provided in the last sentence of
Section 19.J. hereof, or as otherwise required by law, CFNB
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 CFNB or Fund
operations) and all manuals, systems and other technical
information and data not publicly disclosed, relating to CFNB's
operations and programs furnished to it by CFNB pursuant to the
Agreement and will not disclose the same to any person except
at the request or with the consent of CFNB.
C. 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 CFNB will use on behalf of
the Fund without additional cost all modifications,
enhancements, or changes which CFNB 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 CFNB
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 CFNB promptly for modifications and improvements
utilized by the Fund which are charged for separately at the
rate provided for in CFNB's standard pricing schedule which
shall be identical for substantially all clients, if a standard
pricing schedule shall exist, provided that CFNB shall give the
Fund ninety (90) days' advance written notice thereof. If
there is no standard pricing schedule, the parties shall
mutually agree upon the rates to be charged.
B. CFNB 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, CFNB shall give the Fund
ninety (90) days' advance written notice thereof.
25. Force Majeure.
CFNB 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 CFNB's reasonable control.
26. Declaration of Trust.
A copy of the Agreement and Declaration of Trust of the Fund 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 the Fund 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.
27. 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 Virginia.
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 by each party hereto.
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 CFNB.
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.
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 term, 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
parties 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, to be effective the
_______ day of ________________, 1995.
CENTRAL FIDELITY NATIONAL BANK
By:_________________________________
Title:______________________________
MENTOR INSTITUTIONAL TRUST
By:________________________________
Title:_____________________________
