MENTOR INSTITUTIONAL TRUST
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
SEMI-ANNUAL REPORT, APRIL 30, 1997
MESSAGE FROM THE CHAIRMAN AND PRESIDENT
- --------------------------------------------------------------------------------
It is our privilege to send you the Mentor Institutional Trust
Semi-Annual Report for the International Portfolio for the six-month
period ended April 30, 1997.
The Trust is part of Mentor Investment Group, a firm that provides
diversified investment management services to a broad range of investors
including corporations, foundations, endowments, municipalities, public
funds, and individual investors. Seven different investment styles are
available to investors through Mentor, in both mutual funds and
separately-invested portfolios.
The Semi-Annual Report that follows provides commentary from the
management team of the Portfolio's
MENTOR INVESTMENT GROUP
SEVEN INVESTMENT STYLES
[GRAPH]
Higher
Small/Mid-Capitalization Growth
Global/International Equity Growth
Large-Capitalization Quality Growth
Reward Tactical Asset Allocation
Balanced Management
Active Fixed Income
Cash Management
Lower Risk Higher
1
<PAGE>
MENTOR INSTITUTIONAL TRUST
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
SEMI-ANNUAL REPORT, APRIL 30, 1997
MESSAGE FROM THE CHAIRMAN AND PRESIDENT (CONTINUED)
- --------------------------------------------------------------------------------
manager -- the award-winning British investment firm, Perpetual. In the
commentary Perpetual's management teams present their perspectives on
the markets and their strategies for investing your assets in
international securities. Complete performance information for the
Portfolio, relative to the EAFE (Europe, Australia, and the Far East)
Index, is also included.
Please review the information carefully. Should you have questions,
please call your financial consultant, or call us directly, (800)
382-0016. On behalf of all of us at Mentor Investment Group, we thank
you for your investment in the International Portfolio of Mentor
Institutional Trust.
Sincerely,
/s/ Daniel J. Ludeman /s/ Paul F. Costello
- --------------------- --------------------
Daniel J. Ludeman Paul F. Costello
Chairman and CEO President
[LOGO]
THE MENTOR MISSION
Our mission is to provide professional investment management services
through a firm that is second to none in the quality of its investment
process, the skill and training of its professionals, and the
commitment, shared by all its associates, to deliver the highest level
of service and ethical behavior to clients.
FOR MORE INFORMATION AND PROSPECTUSES FOR MENTOR FUNDS AND THE
PORTFOLIOS OF MENTOR INSTITUTIONAL TRUST, PLEASE CALL US, (800)382-0016,
OR CONTACT YOUR FINANCIAL CONSULTANT. THE PROSPECTUSES CONTAIN COMPLETE
INFORMATION REGARDING FEES, SALES CHARGES, AND EXPENSES. PLEASE READ
THEM CAREFULLY BEFORE INVESTING OR SENDING MONEY.
2
<PAGE>
MANAGERS' COMMENTARY
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
- --------------------------------------------------------------------------------
In general, world markets were strong during the six-month period ended
April 30, 1997, although the returns achieved in some overseas markets
were reduced by the considerable strength of the dollar. The Morgan
Stanley Capital EAFE Index was held back for much of the period by poor
Japanese performance, but rose by 1.72% for the six months ended April
30, 1997.
EUROPE
Most European markets were strong, with several factors at work. Central
banks kept monetary policy loose as economies were sluggish and
unemployment high. Bond markets received a further boost as investors
became more convinced that EMU -- European monetary union -- was a
likelihood. Throughout the region bond yields converged on German rates
- -- traditionally the lowest on the Continent, except Switzerland's,
because of the Bundesbank's success in holding inflation down. While
interest rates fell, corporate earnings rose. The strength of the dollar
improved export profitability. Moreover, many European companies began
to enjoy the benefits of restructuring as management, at last, tried to
come to grips with inflated payrolls. Over the period the MSCI Europe
ex. United Kingdom Index was up 11.61% in dollar terms.
UNITED KINGDOM
British equities did not have the benefit of falling interest rates and
strong bond markets. Investors also had to come to terms with the almost
certain advent of a Labor government after 18 years of pro-free market
Tory rule, an eventuality that came true in the May elections. A strong
sterling damaged manufacturing sector profits as well. Even so, British
shares moved ahead as the economy enjoyed the highest rate of growth,
the lowest unemployment, and the strongest currency of any major
European economy -- an experience unique in post-war history.
Consequently, in dollar terms the MSCI UK Index rose 12.66%.
3
<PAGE>
MANAGERS' COMMENTARY
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
JAPAN
Unlike the stock markets of the industrialized West, the Tokyo Stock
Exchange slumped. Economic growth appeared to have peaked in the first
half of 1996, and investors began to fear the economy would slide back
into recession in 1997 after the government introduced a
fiscally-contractionary budget. The pace of corporate profit recovery
was very disappointing, particularly given the major boost exporters
received from the weak yen -- evidence that companies had abandoned any
pretense at restructuring as soon as the economy showed any signs of
life. Furthermore, the weakness of the financial sector, a significant
factor for the past five years, continued to drain investor confidence.
With property prices falling back to 1986 levels, a huge number of real
estate and construction companies were pushed to the brink of collapse,
jeopardizing the survival of much of the banking system, which is
heavily exposed to property. Two of Japan's leading twenty banks -- the
group which the Bank of Japan has identified as "too big to fail" --
were forced to seek restructuring. The month of April was somewhat more
positive for the Japanese market. Nevertheless, against this otherwise
gloomy background, it is hardly surprising that the MSCI Japan Index
fell by 13.23% in dollar-adjusted terms over the six-month period.
ASIA (EXCLUDING JAPAN)
Asian stock markets were mixed. The largest, Hong Kong, was relatively
strong, with the Hang Seng index up by 4.8% in dollar terms. The market
was boosted by the revival of the Chinese economy and by the easing of
Chinese monetary policy, especially as an increasing amount of Chinese
money found its way into Hong Kong stocks and property. The
China-related Taiwanese market was also strong. In contrast, Singapore
and Korea were listless, both afflicted by an over- commitment to the
electronics industry. Thailand was in a virtual state of collapse, as
efforts to maintain a stable currency brought bust conditions to the
property market after years of boom. Much of Thailand's finance and
banking sectors was brought to its knees as a result. Malaysia and the
Philippines enjoyed bullish stock markets for most of the period,
although more recently,
4
<PAGE>
MANAGERS' COMMENTARY
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
investors began to fear that property bubbles might burst there as well.
Overall the MSCI Pacific ex. Japan Free Index fell by 0.87%.
LATIN AMERICA
Latin American markets were virtually all strong. As they were in 1993,
Latin American markets were buoyed by an influx of foreign capital; but
unlike 1993, fundamentals looked much better balanced. Corporate profit
growth was strong, and P/Es were among the lowest internationally.
Governments were successful in getting public sector expenditure under
control, and in reducing inflation rates to less than 10% per annum in
contrast to the 10% per month more typically experienced in the past.
Currencies, with the possible exception of the Mexican peso, looked
well-supported, as exports grew. All this good news was reflected in a
rise of 25.86% in the MSCI EMF Latin America Index.
OUTLOOK
Given the tremendous gains on Wall Street between last July's low point
and this February's high, a period of correction to American stock
prices is hardly unexpected, particularly given the rich valuation of
many stocks and the prospect that the Fed will tighten again. The
question for investors must be whether or not weakness in Wall Street
must inevitably bring down markets in London or Frankfurt, Kuala Lumpur
or Santiago. We are optimistic that markets can de-couple from Wall
Street to a large extent.
The industrialized economy, and stock market, nearest in cyclical terms
to America's is the UK's. In contrast to the US where stocks look
expensive relative to bond yields, UK stocks look cheap relative to UK
bond yields, and UK bonds themselves are among the most attractively
valued bonds available globally. Elsewhere in Europe the cycle of
economic and corporate recovery has only just begun. In particular,
corporate re-structuring, which has done so much to fuel the American
bull market of the '90s, has only started to affect profits and stock
values on continental Europe.
5
<PAGE>
MANAGERS' COMMENTARY
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
Japan, if anything, has been negatively correlated with Wall Street in
recent years. While serious structural problems remain and will put a
relatively low ceiling on stock prices, a sell-off in American
securities prices might actually be to Tokyo's benefit. Japanese
institutions might be inclined to bring home some of the billions
invested abroad over the past year or so.
The emerging markets in the short term will necessarily be affected by
movements in US interest rates and stock prices. Most of these countries
link their currencies to a greater or lesser extent to the dollar, and
portfolio flows from the US are one of the principal sources of buying
demand in their stock markets. However, most Asian and Latin American
markets have seen their P/E multiples decline considerably since 1993,
making them less vulnerable to a sell-off by disenchanted foreign
investors as in 1994 when the Fed tightened. In general, stock
valuations are well below those prevailing in the industrialized
nations. Today emerging markets offer superior rates of growth at
discount valuations -- a compelling opportunity for long-term investors.
Sincerely,
Global/International Growth
Management Team
6
<PAGE>
MANAGERS' COMMENTARY
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
[GRAPH]
Mentor Perpetual Morgan Stanley Capital International
International Portfolio (EAFE) World Index*
5/96 10,000 10,000
6/96 10,064 10,052
7/96 9,736 9,699
8/96 9,816 9,812
9/96 9,920 10,198
10/96 9,696 10,271
11/96 10,104 10,849
12/96 10,153 10,677
1/97 10,153 10,807
2/97 10,506 10,933
3/97 10,522 10,719
4/97 10,627 11,071
The graph compares the investment performance of the Mentor Perpetual
International Portfolio, from its inception date to the index that is
most representative of the Portfolio. The graph reflects the performance
of a $10,000 investment form the date the Portfolio started through
April 30, 1997. Returns do not reflect taxes payable on distributions.
In comparing the performance of a portfolio to an index, you should keep
in mind that market indexes do not take into account brokerage
commissions that would be incurred if you purchased the individual
securities that make up the index. 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, 1997, and includes changes in share
price and reinvestment of dividends and capital gains.
* The Morgan Stanley Capital International (MSCI) EAFE (Europe,
Australia, and Far East) World Index is an unmanaged index of
approximately 1119 securities issued by companies listed on European,
Australian, and Far Eastern stock exchanges. It contains no US
equities and is therefore a broadly diversified proxy for
international performance. This is a total return index with gross
dividends reinvested. The Index is not adjusted to reflect sales
loads, expenses, or other fees that the SEC requires to be reflected
in the Portfolio's performance. Investors cannot invest in the index.
The performance of countries and unmanaged indexes does not reflect
expenses and may not correspond to the performance of Mentor
Perpetual International Portfolio, which is actively managed and
incurs expenses.
** Reflects operations of Mentor Perpetual International Portfolio
Institutional Class from the date of initial public investment on
5/29/96 through 4/30/97.
7
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS 98.85%
- -----------------------------------------------------------------------------------------------------------
ARGENTINA 0.84%
Banco Galicia~ 740 $ 18,003
Central Costanera-Class B~ 620 22,010
Perez Company~ 2,000 31,260
Telecom Argentina~ 450 22,500
YPF AS-Class D~ 780 21,547
- -----------------------------------------------------------------------------------------------------------
115,320
- -----------------------------------------------------------------------------------------------------------
BRAZIL 4.39%
Brahma CIA Cerveo~ 3,600 49,950
Brazil Fund, Inc. 1,520 38,760
Cemig CIA Energetic~ (a)* 1,300 59,161
CESP CIA Energ~ 680 10,937
CESP CIA Energ~ 1,900 30,561
Eletrobas Centrais~ 2,880 66,240
Klabin Fabricadora~* 2,800 27,720
Lojas Arapua (b) 1,200 24,828
Pao De Acucar (b) 1,500 30,000
Perdigao~ 2,400 24,720
Petrol Brasileiro~* 2,630 54,901
Telebras~ 740 84,915
Usiminas 3,600 40,950
Vale Do Rio Doche~ 2,370 60,167
- -----------------------------------------------------------------------------------------------------------
603,810
- -----------------------------------------------------------------------------------------------------------
CHILE 1.45%
Banco BHIF~ 800 15,800
Banco De A Edwards~ 1,710 35,910
Chile Fund, Inc. 2,400 58,200
Chilectra~ 420 26,880
EMP NAC Electricida~ 1,000 19,250
Enersis~ 550 17,325
Telecom de Chile~ 800 25,900
- -----------------------------------------------------------------------------------------------------------
199,265
- -----------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
FINLAND 2.09%
Huhtamaki OY 2,150 $ 93,358
Nokia OY 2,000 124,933
Cultor OY 1,280 69,506
- -----------------------------------------------------------------------------------------------------------
287,797
- -----------------------------------------------------------------------------------------------------------
FRANCE 6.39%
Axime (Ex Segin)* 1,110 133,668
BOE Natl Paris 3,500 149,498
Carbone Lorraine* 430 102,162
Generale Des Eaux 780 108,781
Lafarge Coppee SA 950 62,383
PIN-Printemps 300 126,340
Total SA-Class B 1,000 83,026
Valeo 1,850 114,247
- -----------------------------------------------------------------------------------------------------------
880,105
- -----------------------------------------------------------------------------------------------------------
GERMANY 5.92%
Daimler Benz AG* 1,623 118,431
Degussa 1,300 57,734
Fried, Krupp AG Hoes 500 92,234
Pfeiffer Vacuum Technologies~ 4,900 113,925
VIAG AG* 400 178,570
Volkswagen AG* 400 253,976
- -----------------------------------------------------------------------------------------------------------
814,869
- -----------------------------------------------------------------------------------------------------------
GREAT BRITAIN 28.25%
B.A.T. Industries PLC 21,900 185,445
British Aerospace PLC 7,000 149,154
British Airways 10,000 114,746
British Biotech* 20,000 78,502
British Gas PLC 20,200 58,768
British Telecom 15,100 111,053
Burnah Castrol* 5,000 82,281
Centrica* 80,200 73,974
Coats Viyella* 25,000 53,432
</TABLE>
9
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
GREAT BRITAIN (CONTINUED)
Enterprise Oil 5,000 $ 49,287
General Accident 7,000 100,119
Glaxo Wellcome 6,700 132,144
Granada Group* 5,000 72,326
Grand Metropolitan 10,000 83,865
Guinness 10,000 82,891
Inchcape PLC 20,000 89,066
Lloyds TSB Group 10,000 91,667
Medeva 18,300 89,229
Mirror Group 30,000 102,150
National Westminster 37,600 446,112
Northern Foods 20,000 68,100
Prudential Corporation PLC 10,000 97,599
Rank Group 15,000 103,369
Reckitt & Colman 7,500 102,089
Rolls-Royce 25,000 98,534
Royal Sun Alliance 10,000 79,396
Safeway 17,000 94,080
Scotia Holdings* 10,000 69,075
Smith (W.H.) Group 15,000 111,658
Standard Chartered 3,500 53,103
Tate & Lyle PLC 10,000 74,683
Tesco PLC 18,300 106,182
Unigate 8,800 66,507
Unilever PLC 8,800 232,060
United Utilities 9,300 102,557
UTD Assurance 5,000 40,145
UTD Assurance Group 15,000 975
Vickers 25,000 86,141
Whitbread PLC 4,500 56,170
- -----------------------------------------------------------------------------------------------------------
3,888,634
- -----------------------------------------------------------------------------------------------------------
HONG KONG 6.39%
CDL Hotels International 50,500 22,002
Cheung Kong Holdings 16,000 140,449
Citic Pacific Limited* 4,000 21,635
</TABLE>
10
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
HONG KONG (CONTINUED)
Dah Sing Financial 8,000 $ 33,253
GZI Transport-Warrants 16,000 2,561
Hon Kwok Land 100,000 33,563
Hong Kong Electric 20,000 70,741
Hong Kong Telecom, Ltd.~ 20,520 35,231
HSBC Holdings PLC 5,149 130,277
Hutchison Whampoa, Ltd. 16,000 118,762
Lai Sun Development 5,000 6,099
Lai Sun Development-Warrants* 2,007 193
National Mutual Asia 50,000 51,636
New World Development 12,231 70,576
Sino Land Company 50,000 47,440
Swire Pacific Limited-Class A 8,000 61,704
Television Broadcast, Ltd. 8,000 32,840
- -----------------------------------------------------------------------------------------------------------
878,962
- -----------------------------------------------------------------------------------------------------------
INDIA 0.30%
India Cement (b)* 15,000 41,250
- -----------------------------------------------------------------------------------------------------------
INDONESIA 0.27%
BDNI (Bank Dagang)-Warrants* 7,500 2,392
Bank Dagang Nasnl 20,000 16,460
Bank Dagang NIL/PD 22,500 18,519
- -----------------------------------------------------------------------------------------------------------
37,371
- -----------------------------------------------------------------------------------------------------------
IRELAND 1.26%
Bank of Ireland 10,150 105,909
Elan Corporation 2,000 68,000
- -----------------------------------------------------------------------------------------------------------
173,909
- -----------------------------------------------------------------------------------------------------------
ITALY 1.65%
Seat SPA* 12,000 3,677
Stet-Societa Finanz* 6,000 28,404
Telecom Italia Mobile* 62,200 195,882
- -----------------------------------------------------------------------------------------------------------
227,963
- -----------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
JAPAN 15.22%
Canon, Inc. 9,000 $ 213,358
DAI Nippon Printing 15,000 270,536
DDI 30 199,181
Fuji Photo Film 5,000 190,990
Fujitsu 20,000 207,923
Nippon Electric Glass 14,000 215,012
Rohm Company 2,000 154,997
Toyoda Automatic 12,000 215,484
Uni-Charm Corporation 7,000 214,460
Yamanouchi Pharmaceutical 10,000 213,436
- -----------------------------------------------------------------------------------------------------------
2,095,377
- -----------------------------------------------------------------------------------------------------------
KOREA 0.64%
Atlantis Korea 5,000 37,050
Schroder Korea Fund 7,000 51,625
- -----------------------------------------------------------------------------------------------------------
88,675
- -----------------------------------------------------------------------------------------------------------
MALAYSIA 1.81%
Affin Holdings Berhad* 20,000 48,211
Arab-Malaysian Corporation 5,000 20,719
Boustead Holdings 10,000 21,914
Genting BHD 5,000 26,696
Malaysian Plantation 16,000 23,970
Nanyang Press 8,000 28,687
Public Finance BHD* 24,000 36,720
Suremax Group 8,000 42,712
- -----------------------------------------------------------------------------------------------------------
249,629
- -----------------------------------------------------------------------------------------------------------
MEXICO 2.77%
Apasco SA~ 550 18,837
Bufete Industrial~* 1,500 28,875
CEMEX SA~ 3,200 24,100
CIFRA SA~ 20,150 30,426
Coca Cola Feh SA~ 650 22,669
DESC SA~* 1,262 32,509
</TABLE>
12
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
MEXICO (CONTINUED)
EMP ICI~ 1,270 $ 18,733
Empresas La Modern~* 1,620 33,615
Fomento Economic~* 6,260 29,440
Geo Corporation SA (b) 1,100 19,049
GPO Carso~ 2,640 30,541
Kimberly Clark Mex~ 1,730 31,572
Panamericana Beverages 1,160 33,640
Mexico Fund, Inc. 1,700 26,988
- -----------------------------------------------------------------------------------------------------------
380,994
- -----------------------------------------------------------------------------------------------------------
NETHERLANDS 5.53%
ABN Amro Holdings NV 2,000 137,655
IHC Caland NV 3,000 148,346
ING Groep NV* 5,000 196,613
Royal Dutch Petroleum* 619 110,790
VNU-Ver Ned Uitgevers 8,110 167,998
- -----------------------------------------------------------------------------------------------------------
761,402
- -----------------------------------------------------------------------------------------------------------
NORWAY 0.65%
Orkla A/S* 1,060 88,998
- -----------------------------------------------------------------------------------------------------------
PERU 0.39%
Minas Buenaventura~ 1,120 24,360
Telefonica del Peru 1,200 28,800
- -----------------------------------------------------------------------------------------------------------
53,160
- -----------------------------------------------------------------------------------------------------------
PHILIPPINES 0.15%
Ayala Corporation 30,000 21,047
- -----------------------------------------------------------------------------------------------------------
SINGAPORE 1.18%
City Developments* 8,000 64,699
Development Bank Singapore* 4,000 47,557
Informatics Holdings 100,000 49,768
- -----------------------------------------------------------------------------------------------------------
162,024
- -----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
SPAIN 2.71%
Continente Cent 5,100 $ 86,308
Corporacion Financiera Alba 1,185 121,784
Viscofan Envolturas Celulos 8,590 165,379
- -----------------------------------------------------------------------------------------------------------
373,471
- -----------------------------------------------------------------------------------------------------------
SWEDEN 4.15%
Celsius Industriar-Class B* 6,500 116,146
Electrolux AB-Class B* 900 51,691
NCC-Class B* 3,700 41,557
Securitas AB-Class B* 2,330 56,205
Skand Enskilda-Class A* 4,000 40,842
Skandia Forsakring 2,187 63,363
Svenska Handels Bank-Class A* 6,000 165,412
Volvo AB-Class B* 1,435 36,173
- -----------------------------------------------------------------------------------------------------------
571,389
- -----------------------------------------------------------------------------------------------------------
SWITZERLAND 3.08%
Credit Suisse Group* 1,300 146,703
Nestle SA 130 158,192
Roche Holding AG 14 118,490
- -----------------------------------------------------------------------------------------------------------
423,385
- -----------------------------------------------------------------------------------------------------------
TAIWAN 0.51%
Taipei Fund~ (c) 6 70,050
- -----------------------------------------------------------------------------------------------------------
THAILAND 0.74%
Bangkok Bank 2,000 18,530
Banpu Coal Company 2,000 32,465
Tipco Asphalt 10,000 50,536
- -----------------------------------------------------------------------------------------------------------
101,531
- -----------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Shares or
Principal
Percent of Net Assets Amount Market Value
- -----------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------------------
VENEZUELA 0.10%
Sider Venezolana~ 4,800 $ 14,400
- -----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $12,764,980) 13,604,788
- -----------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 2.42%
- -----------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Goldman Sachs & Company
Dated 4/30/97, 5,50%, due 5/01/97,
collateralized by Federal Home
Loan Mortgage Corporation, $351,137
7.00%, 10/01/26, market value
$341,152 (cost $333,147) $333,147 333,147
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $13,098,127) 101.27% 13,937,935
- -----------------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES (1.27%) (175,147)
- -----------------------------------------------------------------------------------------------------------
NET ASSETS 100.00% $13,762,788
===========================================================================================================
</TABLE>
* Non-income producing.
~ American Depository Receipts.
(a) These are securities that may be resold to "qualified institutional buyers"
under Rule 144A or securities offered pursuant to Section 4 (2) of the
Securities Act of 1933, as amended. These securities have been determined to
be liquid under guidelines established by the Board of Trustees.
(b) Global Depository Receipts.
(c) International Depository Receipts.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at market value* (Note 2)
Investment securities $ 13,604,788
Repurchase agreements 333,147
- ---------------------------------------------------------------------------------------------------------------
Total investments 13,937,935
- ---------------------------------------------------------------------------------------------------------------
Receivables
Dividends and interest 57,417
Investments sold 49,001
Forward foreign currency exchange contracts held (Note 8) 52,642
Deferred expenses (Note 2) 16,565
- ---------------------------------------------------------------------------------------------------------------
Total assets 14,113,560
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Investments purchased 349,469
Accrued expenses and other liabilities 1,303
- ---------------------------------------------------------------------------------------------------------------
Total liabilities 350,772
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 13,762,788
===============================================================================================================
Net Assets represented by:
Additional paid-in capital $ 13,181,600
Accumulated net investment income 20,106
Accumulated net realized loss on investment transactions (331,349)
Net unrealized appreciation of investments and foreign currency
related transactions 892,431
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 13,762,788
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
Institutional Class $ 13.23
Class A Shares $ 13.23
Class B Shares $ 13.23
OFFERING PRICE PER SHARE
Institutional Class $ 13.23
Class A Shares $ 14.04(a)
Class B shares $ 13.23
SHARES OUTSTANDING
Institutional Class 1,040,132
Class A Shares 80
Class B Shares 80
- ---------------------------------------------------------------------------------------------------------------
Total Shares Outstanding 1,040,292
===============================================================================================================
</TABLE>
* Investment at cost is $13,098,127.
(a) Computation of offering price: 100/94.25 of net asset value.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest $ 16,236
Dividends 82,464*
- --------------------------------------------------------------------------------------------------------------
Total investment income (Note 2) 98,700
- --------------------------------------------------------------------------------------------------------------
EXPENSES
Management fee (Note 4) 50,135
Custodian fees 13,966
Registration expenses 4,970
Shareholder reports and postage expenses 1,811
Organizational expenses (Note 2) 935
Transfer agent fees 639
Audit fees 139
Legal fees 133
Directors' fees and expenses 11
Miscellaneous 12
- --------------------------------------------------------------------------------------------------------------
Total expenses 72,751
- --------------------------------------------------------------------------------------------------------------
Deduct
Waiver of management fee 17,555
- --------------------------------------------------------------------------------------------------------------
NET EXPENSES 55,196
- --------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 43,504
- --------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
RELATED TRANSACTIONS
Net realized loss on investments and foreign currency
related transactions (Note 2) (207,773)
Change in unrealized appreciation (depreciation) of investments
and foreign currency related transactions 1,041,403
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency related
transactions 833,630
- --------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 877,134
==============================================================================================================
</TABLE>
* Net of withholding taxes of $12,056
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Period
4/30/97 Ended
(Unaudited) 10/31/96(a)
- ------------------------------------------------------------------------------------------------------------
<S> <C>
NET INCREASE IN NET ASSETS
OPERATIONS
Net investment income $ 43,504 $ 30,313
Net realized loss on investments and foreign currency
related transactions (207,773) (141,811)
Change in unrealized appreciation (depreciation) of investments and
foreign currency related transactions 1,041,403 (148,973)
- ------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 877,134 (260,471)
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (36,224) -
- ------------------------------------------------------------------------------------------------------------
Net decrease from distributions (36,224) -
- ------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 9)
Net proceeds from sale of shares 4,144,271 9,001,925
Reinvested distributions 36,772 -
Cost of shares redeemed (619) -
- ------------------------------------------------------------------------------------------------------------
Change in net assets from capital share transactions 4,180,424 9,001,925
- ------------------------------------------------------------------------------------------------------------
Increase in net assets 5,021,334 8,741,454
NET ASSETS
Beginning of period 8,741,454 -
- ------------------------------------------------------------------------------------------------------------
End of period $ 13,762,788 $ 8,741,454
============================================================================================================
</TABLE>
(a) For the period May 29, 1996 (commencement of operations) to October 31,
1996.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Institutional Class Class A Class B
-------------------------- ----------- ------------------
Six Months Period Period
Ended Period Ended Ended
4/30/97 Ended 4/30/97** 4/30/97**
(Unaudited) 10/31/96* (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.12 $ 12.50 $ 12.53 $ 12.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.07 0.04 0.13 0.13
Net realized and unrealized gain (loss)
on investments and foreign currency
related transactions 1.09 (0.42) 0.57 0.57
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.16 (0.38) 0.70 0.70
LESS DISTRIBUTIONS
Dividends from income (0.05) - - -
Tax basis return of capital - - - -
- ----------------------------------------------------------------------------------------------------------
Total distributions (0.05) - - -
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.23 $ 12.12 $ 13.23 $ 13.23
==========================================================================================================
Total Return 9.60% (3.04%) 6.58% 6.58%
==========================================================================================================
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period $13,760,660 $8,741,454 $ 1,064 $ 1,064
Ratio of expenses to average net assets 1.10%(a) 1.10%(a) 0.00%(b) 0.00%(b)
Ratio of expenses to average net assets
excluding waiver 1.43%(a) 1.75%(a) 0.00%(b) 0.00%(b)
Ratio of net investment income to average
net assets 0.86%(a) 0.89%(a) 2.84%(a) 2.84%(a)
Portfolio turnover rate 66% 59% 66% 66%
Average commission rate on portfolio
transactions $ 0.0288 $ 0.0295 $0.0288 $ 0.0288
=========================================================================================================
</TABLE>
(a) Annualized.
(b) Expenses for Class A and Class B shares were waived for the period ended
April 30, 1997.
* For the period from May 29, 1996 (commencement of operations) to October 31,
1996.
** For the period from December 27, 1996 (initial offering of Class A and Class
B shares) to April 30, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997 (UNAUDITED)
NOTE 1: ORGANIZATION
Mentor 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. The Trust consists of five
separate diversified portfolios (hereinafter each individually referred
to as a "Portfolio" or collectively as the "Portfolios") at April 30,
1997:
Mentor U.S. Government
Cash Management Portfolio
("Cash Management Portfolio")
Mentor Intermediate Duration Portfolio
("Intermediate Duration Portfolio")
Mentor Fixed-Income Portfolio
("Fixed-Income Portfolio")
Mentor Perpetual International Portfolio
("International Portfolio")
SNAP Fund
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.
These financial statements include only the International Portfolio.
The International Portfolio currently issues four classes of shares.
Class A shares are sold subject to a maximum sales charge of 5.75%
payable at the time of purchase. Class B shares are sold subject to a
contingent deferred sales charge payable upon redemption which decreases
depending on when shares were purchased and how long they have been
held. The Class E shares and the Institutional Class shares are not
subject to any sales charges.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Portfolio in the preparation of its
financial statements. The policies are in conformity with generally
accepted accounting principles which require management to make
estimates and assumptions that affect amounts reported 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
Listed securities held by the International Portfolio traded on national
stock
20
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
exchanges and over-the-counter securities quoted on the NASDAQ National
Market System are valued at the last reported sales price or, lacking
any sales, at the last available bid price. In cases where securities
are traded on more than one exchange, the securities are valued on the
exchange designated by the Board of Trustees of the Portfolios as the
primary market. Securities traded in the over-the-counter market, other
than those quoted on the NASDAQ National Market System, are valued at
the last available bid price.
Foreign currency amounts are translated into United States dollars as
follows: market value of investments, assets and liabilities at the
daily rate of exchange, purchases and sales of investments, income and
expenses at the rate of exchange prevailing on the respective dates of
such transactions. Net unrealized foreign exchange gains/losses are a
component of unrealized appreciation/depreciation of investments.
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 than the repurchase
price on the sale of collateral securities.
21
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
C. Security Transactions and Interest Income
Security transactions for the Portfolio 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. Dividends
are recorded on ex-dividend date. 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. Deferred Expenses
Costs incurred by the Portfolios in connection with their initial share
registration and organization costs were deferred by the Portfolios and
are being amortized on a straight-line basis over a five-year period.
G. 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 are declared and paid annually by the International Portfolio.
Capital gains realized by the Portfolio, if any, will be distributed
annually.
NOTE 4: INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS
The International Portfolio has entered into
22
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
an Investment Advisory Agreement with Mentor Perpetual Advisors, LLC
("Mentor Perpetual"). Mentor Perpetual is owned equally by Mentor
Investment Advisors, LLC ("Mentor Advisors") and Perpetual plc., a
diversified financial services holding company. Mentor Advisors is a
wholly-owned subsidiary of Mentor Investment Group LLC ("Mentor") which
is a subsidiary of Wheat First Butcher Singer, Inc. and EVEREN Captial
Corporation which has a 20% ownership in Mentor. Under this agreement,
Mentor Perpetual's management fee is accrued daily and paid monthly at
an annual rate of 1.00% applied to the average daily net assets of the
Portfolio. For the six months ended April 30, 1997, Mentor Perpetual
earned advisory fees of $50,135 and waived $17,555 of those fees.
Mentor provides administrative personnel and services to the Portfolio,
pursuant to an Administration Agreement. Mentor receives no compensation
for such services.
NOTE 5: DISTRIBUTION AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has adopted a Distribution Plan ("the Plan") with respect
to its Class B shares pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Under a Distribution Agreement between the
Portfolio and Mentor Distributors, LLC ("Mentor Distributors") a
wholly-owned subsidiary of Mentor, Mentor Distributors was appointed
distributor of the Portfolio. To compensate Mentor Distributors for the
services it provides and for the expenses it incurs under the
Distribution Agreement, the Portfolio pay a distribution fee, which is
accrued daily and paid monthly at the annual rate of 0.75% of the
Portfolio's average daily net assets.
Mentor Distributors may select financial institutions, such as
investment dealers and banks to provide sales support services as agents
for their clients or customers who beneficially own Class B shares of
the Portfolio. Financial institutions will receive fees from Mentor
Distributors based upon Class B shares owned by their clients or
customers.
The Trust has adopted a Shareholder Servicing Plan (the "Service Plan")
with respect to Class A, Class B and Class E
23
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
shares of the Portfolio. Under the Service Plan, financial institutions
will enter into shareholder service agreements with the Portfolio to
provide administrative support services to their customers who from time
to time may be owners of record or beneficial owners of Class A, Class B
or Class E shares of the Portfolio. In return for providing these
support services, a financial institution may receive payments from the
Portfolio at a rate not exceeding 0.25% of the average daily net assets
of the Class A, Class B or Class E shares.
Presently, the Portfolio's class specific expenses are limited to
expenses incurred by a class of shares pursuant to its respective
Distribution Plan. For the period ended April 30, 1997, distribution
fees and shareholder servicing fees were waived.
NOTE 6: INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments),
for the six months ended April 30, 1997, were $11,527,337 and $6,489,142
respectively.
NOTE 7: UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS
At April 30, 1997, the cost of investments for federal income tax
purposes amounted to $13,098,127 and net unrealized appreciation
aggregated $839,808 of which $1,193,730 related to appreciated
securities and $353,922 related to depreciated securities.
24
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 8: FORWARD CONTRACTS
In connection with portfolio purchases and sales of securities
denominated in a foreign currency, the International Portfolio may enter
into forward foreign currency exchange contracts ("contracts").
Additionally, from time to time the International Portfolio may enter
into contracts to hedge certain foreign currency assets. Contracts are
recorded at market value. Realized gains and losses arising from such
transactions are included in net gain (loss) on investments and forward
foreign currency exchange contracts. The Portfolio is subject to the
credit risk that the other party will not complete the obligations of
the contract. At April 30, 1997, the International Portfolio had
outstanding forward contracts as set forth below.
Net Unrealized
Contracts to In Exchange Appreciation/
SETTLEMENT DATE Deliver/Receive For (Depreciation)
- --------------------------------------------------------------------------------
PURCHASES
5/21/97 French Frank 485,406 $ 83,267 $86,000 $ (2,733)
5/21/97 German Mark 931,427 538,615 557,000 (18,385)
5/21/97 Swiss Frank 377,903 256,902 264,000 (7,098)
SALES
5/21/97 French Frank 462,809 86,000 79,391 6,609
7/15/97 French Frank 2,838,220 500,000 492,075 7,925
5/21/97 German Mark 888,081 557,000 513,549 43,451
5/21/97 Swiss Frank 362,076 264,000 246,143 17,857
7/15/97 Swiss Frank 683,991 470,000 464,984 5,016
- --------------------------------------------------------------------------------
Net Unrealized Appreciation on Forward Contracts $52,642
- --------------------------------------------------------------------------------
25
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 9: 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>
Six Months
Ended
4/30/97
----------------------- Period Ended
Shares Dollar 10/31/96(a)
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Shares sold
Institutional Class 315,882 $4,142,271 721,208
Class A* 80 1,000 -
Class B* 80 1,000 -
Shares issued upon reinvestment of distributions
Institutional Class 3,002 36,772 721,208
Shares redeemed - - -
Institutional Class (51) (619) 721,208
- ----------------------------------------------------------------------------------------------------------
Change in net assets from capital share transactions 318,993 $4,180,424 1,442,416
-----------------------------------------
</TABLE>
(a) For the period from May 29, 1996 (commencement of operations) to
October 31, 1996.
* For the period from December 27, 1996 (initial offering of Class A and
Class B shares) to April 30, 1997.
26
<PAGE>
INVESTMENT MANAGER
CORPORATE OFFICE
Mentor Investment Advisors, LLC
Riverfront Plaza, 901 East Byrd Street
Richmond, Virginia 23219
TRUSTEES
Daniel J. Ludeman, TRUSTEE & CHAIRMAN
Chairman and Chief Executive Officer
Mentor Investment Group, LLC
Arnold H. Dreyfuss, TRUSTEE
Former Chairman and Chief Executive Officer
Hamilton Beach/Proctor-Silex, Inc.
Thomas F. Keller, TRUSTEE
Former 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, LLC
Terry L. Perkins, TREASURER
Senior Vice President
Mentor Investment Group, LLC
John M. Ivan, SECRETARY
Managing Director/Assistant General Counsel
Wheat First Butcher Singer, Inc.
Michael A. Wade, ASSISTANT TREASURER
Vice President
Mentor Investment Group, LLC
MENTOR PERPETUAL
INTERNATIONAL
PORTFOLIO
---------------------------------
SEMI-ANNUAL REPORT
---------------------------------
April 30, 1997
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