MENTOR INSTITUTIONAL TRUST
SEMI-ANNUAL REPORT
MESSAGE FROM THE CHAIRMAN AND PRESIDENT
TO OUR SHAREHOLDERS:
Thank you for your investment in Mentor Institutional Trust. It is our privilege
to provide the Semi-Annual Report for the period ended April 30, 1996. The Trust
makes it possible for institutional and certain high-net-worth individuals
investing in advisory accounts, to participate in pooled investment programs for
cash management, and funds seeking total return.
Mentor Institutional Trust is part of Mentor Investment Group, a firm that
provides diversified investment management services to a broad range of
investors. Seven different investment styles are available to investors at
Mentor through retail mutual funds and the Institutional Trust, and through
separately-invested portfolios.
[GRAPH]
SEVEN INVESTMENT STYLES
REWARD
Higher Small/Mid-Capitalization Growth
Global/International Equity Growth
Large-Capitalization Quality Growth
Lower
RISK
Higher
Tactical Asset Allocation
Balanced Management
Active Fixed Income
Cash Management
Lower
1
<PAGE>
MENTOR INSTITUTIONAL TRUST
SEMI-ANNUAL REPORT
MESSAGE FROM THE CHAIRMAN AND PRESIDENT (CONTINUED)
The Trust is designed to fulfill a broad spectrum of investment needs for
clients that include public funds, municipalities, endowments, foundations, and
wealthy individuals. It offers investors the opportunity to own securities from
a wide variety of high-quality sectors of the bond market, and to obtain the
economies, efficiencies, and diversification that investing in large pools of
securities can provide.
In the commentaries that follow, the management teams of the Trust Portfolios
present their perspectives on the markets and their strategies for investing
your assets. Complete performance information for each Portfolio, relative to
the appropriate index, is also included in the reports.
Please review the information carefully. Should you have questions, please call
your financial consultant, or call us directly, (800)382-0016. We welcome your
communications.
On behalf of all of us at Mentor Investment Group, we thank you for your
investment in the Portfolios of Mentor Institutional Trust.
Sincerely,
/s/ DANIEL J. LUDEMAN /s/ PAUL F. COSTELLO
Daniel J. Ludeman Paul F. Costello
CHAIRMAN AND CEO PRESIDENT
[MENTOR FUNDS LOGO]
THE MENTOR MISSION
To maintain an investment management firm that is second to none in the quality
of its investment process, the skill and training of its associates, and the
shared commitment among all to provide the highest level of service and ethical
behavior to clients.
FOR MORE INFORMATION AND A PROSPECTUS FOR MENTOR FUNDS AND MENTOR INSTITUTIONAL
TRUST, PLEASE CALL US, (800)382-0016, OR CONTACT YOUR FINANCIAL CONSULTANT. THE
PROSPECTUSES CONTAIN COMPLETE INFORMATION REGARDING ADVISORY FEES, SALES
CHARGES, AND EXPENSES. PLEASE READ THEM CAREFULLY BEFORE INVESTING OR SENDING
MONEY.
2
<PAGE>
MANAGER'S COMMENTARY
MENTOR INSTITUTIONAL TRUST
CASH MANAGEMENT PORTFOLIO
Mentor Institutional Trust Cash Management Portfolio has reached the half-way
point of its second year of operation, and market conditions continue as
challenging as ever. Indeed, the past 18 months have witnessed virtually a full
cycle in the economy and in interest rates.
With the economy strengthening, the Federal Reserve raised short rates to a peak
of 6.00% in early 1995; however, the spring of that year brought a slow-down in
economic trends which continued into the summer. The result was a reversal of
Fed policy and a reduction of rates in July, 1995. A poor Christmas season,
severe winter weather, and a partial government shut-down added to the problems,
and additional reductions were initiated in December and February, to a level of
5.25%. No sooner had this been done than economic indicators again reversed
themselves and began to reflect stronger growth. It is now anticipated that the
Federal Reserve will once again raise rates some time in the near future, thus
completing the cycle.
Such quick and severe short-term swings in the market are very difficult to
forecast and plan for in advance, and present an exceptional challenge to the
skills of portfolio managers, especially in the areas of market-timing and
selectivity. The Cash Portfolio's conservative investment policies enabled it to
provide satisfactory current income while maintaining high quality standards and
meeting all client liquidity needs. Our philosophy is that the Fund's primary
purpose is to assure its shareholders safety of principal, and to provide funds
when needed.
Accordingly, our primary emphasis will always be on safety and liquidity.
Sincerely,
/s/ R. PRESTON NUTTALL
R. Preston Nuttall
Portfolio Manager
DIRECTOR OF CASH MANAGEMENT
3
<PAGE>
MANAGERS COMMENTARY
MENTOR INSTITUTIONAL TRUST
INTERMEDIATE-DURATION AND FIXED-INCOME PORTFOLIOS
The six-month period ended April 30, 1996 proved to be a turbulent environment
for fixed-income investors. From November, 1995, through January, 1996, the bond
market continued its trend toward lower interest rates. This trend was based
upon continued Federal Reserve monetary accommodation, generally weak economic
statistics and low inflationary expectations. By year-end 1995, the 30-year
treasury was yielding under 6.00% for the first time since October, 1993.
However, late February marked a significant turning point in investor
psychology, the effects of which would be felt throughout the financial markets
for the remainder of the semi-annual period. Federal Reserve Chairman Alan
Greenspan's February Humphrey-Hawkins testimony and a February employment number
showing the largest monthly job growth in over 12 years convinced market
participants that further interest rate cuts would not be forthcoming.
Annualized first quarter GDP growth of 2.30% combined with continued strong
employment growth and healthy construction spending gains have served to confirm
that perception. By April 30 long-bond rates were poised to pierce the 7.00%
level.
During the course of the November-April period the durations of the Portfolios
were adjusted periodically in response to rapidly changing market conditions. At
period's end we maintained a market neutral duration relative to our Lehman
Brothers Government/Corporate Bond and Intermediate Government/Corporate Bond
Index benchmarks.*
The Intermediate-Duration Portfolio returned 1.06% for the six-month period,
0.10% less than its Lehman Brothers Intermediate Government/Corporate Bond Index
benchmark.* For the twelve months ending April 30, the Intermediate-Duration
Portfolio returned 7.92%, 0.07% above its benchmark. The Fixed-Income Portfolio
returned -0.16% for the six months ending April 30, 0.20% less than its Lehman
Brothers Government/Corporate Bond Index benchmark.* For the twelve month
period, the Fixed-Income Portfolio returned 8.94%, 0.29% above its benchmark.
4
<PAGE>
MANAGERS COMMENTARY
MENTOR INSTITUTIONAL TRUST
INTERMEDIATE-DURATION AND FIXED-INCOME PORTFOLIOS (CONTINUED)
We continue to feel that the long-term prospects for the bond market are quite
good. Our research supports the conclusion that present conditions are
demonstrably different from those existing in 1994, when the Fed chose to
aggressively raise rates. However, the economy's recent strength and the
prospect of a presidential election centered around economic growth strategies
rather than fiscal responsibilities makes the near-term outlook for the market
far more risky. This conflict between our long-term outlook and the short-term
risks means that we will be quite cautious and selective in seeking
opportunities to lengthen the duration of the Portfolios.
Sincerely,
/s/ P. MICHAEL JONES, CFA
P. Michael Jones, CFA
CHIEF FIXED-INCOME OFFICER
* The Lehman Brothers Government/Corporate Bond Index and the Lehman Brothers
Intermediate Government/Corporate Bond Index are commonly used to compare
performance of fixed-income portfolios. They include treasuries, agencies, and
publicly-issued, fixed-rate, non-convertible, investment-grade, dollar-
denominated debt. Investors cannot invest in the Indexes. Because shares of
the Portfolios of the Trust can only be purchased in individually-managed
accounts, the performance return information does not reflect the investment
advisory fees charged at each account level.
5
<PAGE>
MENTOR INSTITUTIONAL TRUST
PERFORMANCE COMPARISONS
MENTOR INTERMEDIATE-DURATION
PORTFOLIO
[GRAPH]
Mentor Intermediate-Duration Portfolio
12/94 $10,000
10/95 $11,238
4/96 $11,357
Lehman Brothers Intermediate Gov't Corporate Bond Index
12/94 $10,000
10/95 $11,303
4/96 $11,435
Average Annual Returns as of 4/30/96
Including Sales Charges
1-Year Since Inception+
7.92% 9.77%
MENTOR FIXED-INCOME
PORTFOLIO
[GRAPH]
Mentor Fixed-Income Portfolio
12/94 $10,000
10/95 $11,590
4/96 $11,575
Lehman Brothers Gov't Corporate Bond Index
12/94 $10,000
10/95 $11,637
4/96 $11,641
Average Annual Returns as of 4/30/96
Including Sales Charges
1-Year Since Inception++
8.94% 11.01%
The graphs compare the investment performance of each Portfolio, from inception,
to an appropriate broad-based securities index. Each graph reflects the
performance of a $10,000 investment from the date of inception through April 30,
1996. Returns do not reflect taxes payable on distributions.
In comparing the performance of a Portfolio to an index, please recognize that
market indexes do not take into account brokerage commissions that would be
incurred if the individual securities of the index were purchased. They also do
not include taxes payable on dividends and interest payments, or operating
expenses necessary to maintain a portfolio investing in the index.
The performance data quoted in this report are historical and do not predict
future investment results. Investment return and principal value will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Performance is cited as of April 30, 1996, and includes changes in share price
and reinvestment of dividends and capital gains. Because shares of the
Portfolios of the Trust can only be purchased in individually-managed accounts,
the performance return information does not reflect the investment advisory fees
charged at each account level.
+ Reflects operations of Mentor Intermediate-Duration Portfolio from the date
of initial public investment on 12/19/94 through 4/30/96.
++ Reflects operations of Mentor Fixed-Income Portfolio from the date of initial
public investment on 12/6/94 through 4/30/96.
6
<PAGE>
MENTOR CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Principal
Net Assets Amount Value
<S> <C> <C> <C>
BANK NOTES 15.38%
Bank of America, Illinois, 5.09%, 5/16/96 $ 3,000,000 $ 3,000,000
First of America, 4.98%, 12/19/96 4,000,000 3,984,252
First Union Bank, 5.30%, 5/23/96 4,000,000 4,000,000
Harris Trust, 5.34%, 5/13/96 4,000,000 4,000,000
Total Bank Notes 14,984,252
BANKERS ACCEPTANCES 26.13%
Bank of New York, 5.19%, 5/2/96-5/9/96 2,000,000 1,998,703
Chase Manhattan Bank, 5.30%, 5/29/96 2,263,481 2,254,151
Chemical Bank, 5.07%-5.09%, 7/9/96-7/22/96 2,250,000 2,225,808
Citibank Corporation, 5.32%, 7/5/96 1,000,000 990,394
Corestates Bank, 5.20%, 9/11/96 3,000,000 2,942,367
First Bank Systems, 5.12%-5.20%, 5/13/96-5/28/96 4,000,000 3,988,853
Mellon Bank, 5.32%, 6/14/96 1,000,000 993,498
Nationsbank, 5.02%-5.33%, 8/14/96-10/7/96 4,240,000 4,160,121
Seattle First National Bank, 5.12%, 5/29/96 4,000,000 3,984,071
Swiss Bank, 5.59%, 5/20/96 1,925,000 1,919,321
Total Bankers Acceptances 25,457,287
COMMERCIAL PAPER 32.83%
Bear Stearns Company, 5.32%, 6/7/96 4,000,000 3,978,129
CS First Boston, Inc., 5.33%, 5/16/96-5/24/96 4,000,000 3,988,747
Ciesco Limited Partnership, 5.11%, 5/6/96 3,000,000 2,997,871
Corestates Capital Corporation, 5.13%, 6/13/96 1,000,000 993,872
Internationale Nederlanden Funding Corporation, 5.10%,
5/23/96 3,000,000 2,990,650
Merrill Lynch & Company, Inc., 5.15%-5.29%,
5/31/96-6/27/96 4,000,000 3,978,621
National Rural Utilities Cooperative Finance
Corporation, 5.15%, 5/3/96 4,000,000 3,998,856
Pemex Capital, Inc., 5.33%, 6/19/96 4,000,000 3,970,981
Rincon Securities, Inc., 5.37%, 5/3/96 1,100,000 1,099,672
Svenska Handelsbanken, 5.32%, 5/20/96 4,000,000 3,988,769
Total Commercial Paper 31,986,168
</TABLE>
7
<PAGE>
MENTOR CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Principal
Net Assets Amount Value
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES AND AGENCIES 10.13%
Federal Home Loan Mortgage Corporation, 1.54%
5.15%-5.25%, 5/13/96-1/13/97 $ 1,500,000 $ 1,497,658
Federal National Mortgage Association, 1.35%
5.15%, 5/9/96 1,320,000 1,318,489
Student Loan Marketing Association, 4.11%
5.28%-5.38%, 8/9/96-8/4/97 (a) 4,000,000 3,999,206
U.S. Treasury Securities 3.13%
U.S. Treasury Note, 7.50%, 1/31/97 3,000,000 3,049,344
Total U.S. Government Securities and Agencies 9,864,697
REPURCHASE AGREEMENT 15.65%
Goldman, Sachs & Company
Dated 4/30/96, 5.34%, due 5/1/96, collateralized
by $14,887,914 Federal National Mortgage Association,
9.00%, 12/1/24 15,246,423 15,246,423
TOTAL INVESTMENTS (COST $97,538,827) 100.12% 97,538,827
OTHER ASSETS LESS LIABILITIES (0.12%) (113,628)
NET ASSETS 100.00% $97,425,199
</TABLE>
(a) Floating Rate Securities -- The rates shown are the effective rates at April
30, 1996. The dates shown represent the demand date or next interest rate
change date.
Securities shown without a date are payable within five business days and are
backed by credit support agreements from banks or insurance institutions.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
MENTOR INTERMEDIATE-DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Principal Market
Net Assets Amount Value
<S> <C> <C> <C>
ASSET-BACKED SECURITY
Advanta Mortgage Loan Trust 1993-3, 4.75% 3.81%
2/25/10 (COST $477,352) $ 500,000 $ 475,212
CORPORATE BONDS 13.44%
Abbey National PLC, 6.69%, 10/17/05 200,000 192,879
Merrill Lynch, 6.64%, 9/19/02 200,000 196,015
Salomon, Inc., MTN, 9.75%, 7/15/97 300,000 311,284
Salomon, Inc., 6.00%, 1/12/98 250,000 246,696
Sears Roebuck Company, 8.45%, 3/1/02 200,000 213,676
Service Corporation International, 6.88%, 10/1/07 200,000 192,508
Sunamerica, Inc., 7.34%, 8/30/05 200,000 197,559
Travelers, Inc., 6.88%, 6/1/25 125,000 123,437
Total Corporate Bonds (cost $1,699,635) 1,674,054
U.S. GOVERNMENT SECURITIES AND AGENCIES 77.84%
Federal National Mortgage Association, 1.64%
7.80%, 3/29/05 200,000 204,128
TREASURY SECURITIES 76.20%
U.S. Treasury Note, 7.38%, 11/15/97 1,100,000 1,122,198
U.S. Treasury Note, 5.00%, 1/31/98 1,170,000 1,150,157
U.S. Treasury Note, 5.50%, 2/28/99 2,900,000 2,846,350
U.S. Treasury Note, 7.50%, 11/15/01 2,615,000 2,735,682
U.S. Treasury Note, 5.88%, 2/15/04 350,000 333,449
U.S. Treasury Note, 6.50%, 8/15/05 1,325,000 1,305,893
9,493,729
Total U.S. Government Securities and Agencies
(cost $9,943,189) 9,697,857
</TABLE>
9
<PAGE>
MENTOR INTERMEDIATE-DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Principal Market
Net Assets Amount Value
<S> <C> <C> <C>
SHORT-TERM INVESTMENT 4.79%
Federal Home Loan Mortgage Corporation,
5.30%, 5/1/96 (cost $596,000) $ 596,000 $ 596,000
TOTAL INVESTMENTS (COST $12,716,176) 99.88% 12,443,123
OTHER ASSETS LESS LIABILITIES 0.12% 15,390
NET ASSETS 100.00% $12,458,513
</TABLE>
MTN - Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
MENTOR FIXED-INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Principal Market
Net Assets Amount Value
<S> <C> <C> <C>
ASSET-BACKED SECURITY 4.25%
Advanta Mortgage Loan Trust 1993-3,
4.75%, 2/25/10 (cost $1,432,058) $ 1,500,000 $ 1,425,636
CORPORATE BONDS 19.74%
Abbey National PLC, 6.69%, 10/17/05 800,000 771,517
Merrill Lynch, 6.64%, 9/19/02 700,000 686,054
New York Telephone, 5.63%, 11/1/03 1,000,000 920,939
Salomon, Inc., MTN, 9.75%, 7/15/97 700,000 726,329
Salomon, Inc., 6.00%, 1/12/98 750,000 740,087
Sears Roebuck Company, 8.45%, 3/1/02 800,000 854,704
Service Corporation International, 6.88%, 10/1/07 800,000 770,032
Sunamerica Inc., 7.34%, 8/30/05 800,000 790,238
Travelers, Inc., 6.88%, 6/1/25 375,000 370,309
Total Corporate Bonds (cost $6,777,738) 6,630,209
U.S. GOVERNMENT SECURITIES AND AGENCIES 68.73%
Federal Home Loan Mortgage Corporation, 4.62%
8.19%, 10/6/04 1,500,000 1,551,680
Federal National Mortgage Association, 2.43%
7.80%, 3/29/05 800,000 816,513
U.S. TREASURY SECURITIES 61.68%
U.S. Treasury Note, 5.00%, 1/31/98 2,050,000 2,015,232
U.S. Treasury Note, 6.13%, 5/15/98 1,850,000 1,852,535
U.S. Treasury Note, 5.50%, 2/28/99 1,950,000 1,913,925
U.S. Treasury Note, 7.75%, 2/15/01 4,400,000 4,636,368
U.S. Treasury Note, 6.50%, 8/15/05 3,725,000 3,671,285
U.S. Treasury Bond, 7.13%, 2/15/23 2,450,000 2,461,245
U.S. Treasury Bond, 7.50%, 11/15/24 3,950,000 4,164,485
20,715,075
Total U.S. Government Securities and Agencies
(cost $23,541,818) 23,083,268
</TABLE>
11
<PAGE>
MENTOR FIXED-INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Principal Market
Net Assets Amount Value
<S> <C> <C> <C>
SHORT-TERM INVESTMENT 7.24%
REPURCHASE AGREEMENT
Goldman Sachs & Company
Dated 4/30/96, 5.34%, due 5/1/96, collateralized by
$2,512,666 Federal National Mortgage Association, 7.50%,
3/1/26 (cost $2,431,203) $ 2,431,203 $ 2,431,203
TOTAL INVESTMENTS (COST $34,182,817) 99.96% 33,570,316
OTHER ASSETS LESS LIABILITIES 0.04% 12,597
NET ASSETS 100.00% $33,582,913
</TABLE>
MTN - Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Mentor Mentor Mentor
Cash Intermediate- Fixed-
Management Duration Income
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
ASSETS
Investments, at market value * (Note 2)
Investment securities $82,292,404 $11,847,123 $31,139,113
Repurchase agreements 15,246,423 596,000 2,431,203
Total investments 97,538,827 12,443,123 33,570,316
Receivables
Interest 199,453 215,045 506,577
Fund shares sold - - 340,000
Due from management company (Note 4) 80,810 19,732 46,094
Deferred expenses (Note 2) 40,224 7,534 36,002
Total assets 97,859,314 12,685,434 34,498,989
LIABILITIES
Payables
Investments purchased - 216,082 864,329
Fund shares redeemed - - 300
Dividends 426,605 - -
Accrued expenses and other liabilities 7,510 10,839 51,447
Total liabilities 434,115 226,921 916,076
NET ASSETS $97,425,199 $12,458,513 $33,582,913
Net Assets represented by:
Additional paid-in capital $97,425,199 $12,509,369 $33,585,338
Accumulated net investment income - 57,472 186,503
Accumulated net realized gain on investment
transactions - 164,725 423,573
Net unrealized depreciation of investments - (273,053) (612,501)
Net Assets $97,425,199 $12,458,513 $33,582,913
Shares Outstanding 97,425,199 994,703 2,657,905
NET ASSET VALUE PER SHARE $ 1.00 $ 12.52 $ 12.64
</TABLE>
* Investments at cost $97,538,827, $12,716,176 and $34,182,817 respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Mentor Mentor Mentor
Cash Intermediate- Fixed-
Management Duration Income
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
INVESTMENT INCOME
Interest (Note 2) $2,437,328 $ 369,577 $ 1,006,812
EXPENSES
Custodian fees 19,527 4,730 7,725
Transfer agent fees 16,598 2,936 6,180
Registration expenses 12,692 2,610 6,335
Legal fees 4,882 913 1,854
Organizational expenses (Note 2) 4,177 1,094 4,356
Audit fees 2,587 457 1,030
Shareholder reports and postage expenses 976 196 386
Directors' fees and expenses 342 65 129
Miscellaneous 536 97 155
Total expenses 62,317 13,098 28,150
Deduct
Reimbursement of expenses by management
company (Note 4) 44,827 10,030 19,959
Net expenses 17,490 3,068 8,191
Net investment income 2,419,838 366,509 998,621
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments (Note 2) - 182,210 523,760
Change in unrealized appreciation (depreciation)
of investments - (429,063) (1,659,894)
Net realized and unrealized loss on investments - (246,853) (1,136,134)
Net increase (decrease) in net assets
resulting from operations $2,419,838 $ 119,656 $ (137,513)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Mentor Cash Mentor Intermediate-
Management Portfolio Duration Portfolio
Six Months Six Months
Ended Period Ended Period
4/30/96 Ended 4/30/96 Ended
(Unaudited) 10/31/95* (Unaudited) 10/31/95**
<S> <C> <C> <C> <C>
NET INCREASE IN NET ASSETS
OPERATIONS
Net investment income $ 2,419,838 $ 2,422,801 $ 366,509 $ 663,645
Net realized gain on investments - - 182,210 468,099
Change in unrealized appreciation
(depreciation) of investments - - (429,063) 156,010
Increase in net assets
from operations 2,419,838 2,422,801 119,656 1,287,754
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (2,419,838) (2,422,801) (363,477) (600,070)
Net realized gain on investments - - (494,719) -
Net decrease from distributions (2,419,838) (2,422,801) (858,196) (600,070)
CAPITAL SHARE TRANSACTIONS (NOTE 7)
Net proceeds from sale of shares 88,337,787 137,216,173 375,232 10,710,006
Reinvested distributions 2,001,599 2,407,807 856,024 599,637
Cost of shares redeemed (62,911,166) (69,627,001) - (31,530)
Change in net assets from capital
share transactions 27,428,220 69,996,979 1,231,256 11,278,113
Increase in net assets 27,428,220 69,996,979 492,716 11,965,797
NET ASSETS
Beginning of period 69,996,979 - 11,965,797 -
End of period $ 97,425,199 $ 69,996,979 $12,458,513 $11,965,797
</TABLE>
* For the period from December 5, 1994 (commencement of operations) to October
31, 1995.
** For the period from December 19, 1994 (commencement of operations) to October
31, 1995.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Mentor Fixed-
Income Portfolio
Six Months
Ended Period
4/30/96 Ended
(Unaudited) 10/31/95***
<S> <C> <C>
NET INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 998,621 $ 1,785,304
Net realized gain on investments 523,760 1,341,178
Change in unrealized appreciation (depreciation)
of investments (1,659,894) 1,047,393
Increase (decrease) in net assets from operations (137,513) 4,173,875
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (984,472) (1,600,958)
Net realized gain on investments (1,453,358) -
Net decrease from distributions (2,437,830) (1,600,958)
CAPITAL SHARE TRANSACTIONS (NOTE 7)
Net proceeds from sale of shares 5,453,115 34,992,343
Reinvested distributions 2,437,529 1,600,958
Cost of shares redeemed (5,785,847) (5,112,759)
Change in net assets from capital
share transactions 2,104,797 31,480,542
Increase (decrease) in net assets (470,546) 34,053,459
NET ASSETS
Beginning of period 34,053,459 -
End of period $ 33,582,913 $34,053,459
</TABLE>
*** For the period from December 6, 1994 (commencement of operations) to October
31, 1995.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
MENTOR INSTITUTIONAL TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Mentor Cash Mentor Intermediate- Mentor Fixed-
Management Portfolio Duration Portfolio Income Portfolio
Six Months Six Months Six Months
Ended Period Ended Period Ended Period
4/30/96 Ended 4/30/96 Ended 4/30/96 Ended
(Unaudited) 10/31/95* (Unaudited) 10/31/95** (Unaudited) 10/31/95***
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 13.31 $ 12.50 $ 13.71 $ 12.50
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.03 0.05 0.38 0.77 0.40 0.81
Net realized and unrealized
gain (loss) on investments - - (0.24) 0.75 (0.41) 1.14
Total from investment
operations 0.03 0.05 0.14 1.52 (0.01) 1.95
LESS DISTRIBUTIONS
Dividends from income (0.03) (0.05) (0.38) (0.71) (0.40) (0.74)
Distributions from capital
gains - - (0.55) - (0.66) -
Total distributions (0.03) (0.05) (0.93) (0.71) (1.06) (0.74)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 12.52 $ 13.31 $ 12.64 $ 13.71
Total Return 2.79% 5.06% 1.06% 12.38% (0.16%) 15.90%
Ratios/Supplemental Data
Net assets, end of period (in
thousands) $97,425 $69,997 $12,459 $ 11,966 $33,583 $34,053
Ratio of expenses to average net
assets 0.04%(a) 0.04%(a) 0.05%(a) 0.05%(a) 0.05%(a) 0.05%(a)
Ratio of expenses to average net
assets excluding waiver 0.14%(a) 0.18%(a) 0.21%(a) 0.25%(a) 0.17%(a) 0.22%(a)
Ratio of net investment income
to average net assets 5.40%(a) 5.56%(a) 5.94%(a) 6.52%(a) 6.02%(a) 6.75%(a)
Portfolio turnover rate - - 116% 307% 128% 302%
</TABLE>
(a) Annualized.
* For the period from December 5, 1994 (commencement of operations) to October
31, 1995.
** For the period from December 19, 1994 (commencement of operations) to
October 31, 1995.
*** For the period from December 6, 1994 (commencement of operations) to October
31, 1995.
SEE NOTES TO FINANCIAL STATEMENTS.
17
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MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996 (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 Trust was changed to Mentor Institutional Trust ("Trust"). On May
29, 1996, Mentor Perpetual International Portfolio commenced operations. The
Trust consists of five separate diversified portfolios (hereinafter each
individually referred to as a "Portfolio" or collectively as the "Portfolios").
These financial statements include the following Portfolios:
Mentor Cash Management Portfolio
("Cash Management Portfolio")
Mentor Intermediate-Duration Portfolio
("Intermediate-Duration Portfolio")
Mentor Fixed-Income Portfolio
("Fixed-Income Portfolio")
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 Portfolios in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles which
required management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of 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 1.00%
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
18
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MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 reviewed 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 the
Board of Trustees.
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 possession 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
19
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MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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. 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.
F. When-Issued and Delayed Delivery Transactions
Fixed-Income Portfolio and Intermediate-Duration Portfolio may engage in when-
issued or delayed delivery transactions. To the extent the Portfolios engage in
such transactions, they will do so for the purpose of acquiring portfolio
securities consistent with their investment objectives and policies and not for
the purpose of investment leverage. The Portfolios will record a when-issued
security and the related liability on the trade date. Until the securities are
received and paid for, the Portfolios will maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
G. Deferred Expenses
Costs incurred by the Portfolios in connection with their initial share
20
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
registration and organization costs were deferred by the Portfolios and are
being amortized on a straight-line basis over a five-year period.
H. Distributions
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to deferral of wash sales.
NOTE 3: DIVIDENDS
Dividends will be declared daily and paid monthly by the Cash Management
Portfolio. Dividends are declared and paid quarterly by the Fixed-Income
Portfolio and Intermediate-Duration Portfolio. Capital gains realized by each
Portfolio, if any, will be distributed annually.
NOTE 4: 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 Portfolios. 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 bear certain expenses incurred in connection with the operation of the
Portfolios. For the six months ended April 30, 1996, Commonwealth bore expenses
of $44,827, $10,030 and $19,959 respectively, for the Cash Management Portfolio,
Intermediate-Duration Portfolio and Fixed Income Portfolio.
Mentor Investment Group, Inc. ("Mentor") provides administrative personnel and
services to each Portfolio, pursuant to an Administration Agreement. Mentor
receives no compensation for such services.
21
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5: INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments), for the
six months ended April 30, 1996, were as follows:
Portfolio Purchases Sales
Cash Management - -
Intermediate-Duration $ 40,537,215 $30,926,612
Fixed-Income 108,125,131 81,374,809
NOTE 6: UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS
The cost of investments for federal income tax purposes amounted to $97,538,827
for the Cash Management, $12,716,176 for the Intermediate-Duration and
$34,182,817 for the Fixed-Income at April 30, 1996. Gross unrealized
appreciation and depreciation of investments at April 30, 1996 were as follows:
Gross Gross Net
Unrealized Unrealized Unrealized
Portfolio Appreciation Depreciation Appreciation
Cash Management - - -
Intermediate-Duration $ 5,489 $278,542 $ (273,053)
Fixed-Income 227,178 839,679 (612,501)
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:
<TABLE>
<CAPTION>
Mentor Cash Management Portfolio
Six Months Period Ended
Ended 4/30/96 10/31/95*
<S> <C> <C>
Shares sold 88,337,787 137,216,173
Shares issued upon reinvestment of distributions 2,001,599 2,407,807
Shares redeemed (62,911,166) (69,627,001)
Change in net assets from capital share transactions 27,428,220 69,996,979
</TABLE>
22
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
Mentor Intermediate-Duration Portfolio
Six Months Period Ended
Ended 4/30/96 10/31/95**
<S> <C> <C>
Shares sold 28,907 855,389
Shares issued upon reinvestment of distributions 67,055 45,840
Shares redeemed - (2,488)
Change in net assets from capital
share transactions 95,962 898,741
</TABLE>
<TABLE>
<CAPTION>
Mentor Fixed-Income Portfolio
Six Months Period Ended
Ended 4/30/96 10/31/95***
<S> <C> <C>
Shares sold 414,522 2,759,545
Shares issued upon reinvestment of distributions 186,810 120,672
Shares redeemed (427,565) (396,079)
Change in net assets from capital
share transactions 173,767 2,484,138
</TABLE>
* For the period from December 5, 1994 (commencement of operations) to October
31, 1995.
** For the period from December 19, 1994 (commencement of operations) to October
31, 1995.
*** For the period from December 6, 1994 (commencement of operations) to October
31, 1995.
23
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INVESTMENT MANAGER
CORPORATE OFFICE
Commonwealth Investment Counsel, Inc.
Riverfront Plaza, 901 East Byrd Street
Richmond, Virginia 23219
TRUSTEES
Daniel J. Ludeman, TRUSTEE & CHAIRMAN
Chairman and Chief Executive Officer
Mentor Investment Group, Inc.
Arnold H. Dreyfuss, TRUSTEE
Former Chairman and Chief Executive Officer
Hamilton Beach/Proctor-Silex, Inc.
Thomas F. Keller, TRUSTEE
Dean, Fuqua School of Business
Duke University
Louis W. Moelchert, Jr., TRUSTEE
Vice President for Business & Finance
University of Richmond
Stanley F. Pauley, Jr., TRUSTEE
Chairman and Chief Executive Officer
Carpenter Company
Troy A. Peery, Jr., TRUSTEE
President
Heilig-Meyers Company
OFFICERS
Paul F. Costello, PRESIDENT
Managing Director
Mentor Investment Group, Inc.
Terry L. Perkins, TREASURER
Senior Vice President
Mentor Investment Group, Inc.
John M. Ivan, SECRETARY
Managing Director/Assistant General Counsel
Wheat First Butcher Singer, Inc.
Michael A. Wade, ASSISTANT TREASURER
Associate Vice President
Mentor Investment Group, Inc.
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MENTOR INSTITUTIONAL TRUST
SEMI-ANNUAL REPORT
APRIL 30, 1996
