Reg. No. 33-80784
File No. 811-8484
Rule 497(e)
PROSPECTUS November 1, 1996
Class A and B shares
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
Mentor Perpetual International Portfolio seeks long-term capital
appreciation by investing in a diversified portfolio of equity securities of
issuers outside the United States. The Portfolio is a diversified investment
portfolio of Mentor Institutional Trust. Mentor Perpetual Advisors, LLC is the
Portfolio's investment adviser. The Portfolio may use leverage - that is, it may
borrow money to purchase additional portfolio securities, which involves special
risks.
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 March 11, 1996 Statement of Additional Information, as
amended from time to time. For a free copy of the Statement, call Mentor
Distributors, LLC 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
23218-1357.
-------------------------
MENTOR DISTRIBUTORS, LLC
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
the Portfolio. Expenses shown reflect the expenses the Portfolio expects to
incur in its first fiscal year with respect to its Class A and Class B shares.
The Examples show the cumulative expenses attributable to a hypothetical $1,000
investment in the Class A and Class B shares of the Portfolio over specified
periods.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses: Class A Class B
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)(1) 5.75% None
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None(2) 4.0% in the first year,
(as a percentage of the lower of the original declining to 1.0% in the
purchase price or redemption proceeds)(3) fifth year, and eliminated
thereafter(4)
Redemption Fees None None
Exchange Fee None None
</TABLE>
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(1) Long-term Class B shareholders may pay more than the economic equivalent of
the maximum front-end sales charge permitted by the rules of the National
Association of Securities Dealers, Inc.
(2) A contingent deferred sales charge ("CDSC") of 1.00% is assessed on Class A
shares that were purchased without an initial sales charge as part of an
investment of over $1,000,000 that are redeemed within one year of purchase.
(3) The amount redeemed is computed as the lesser of the current net asset value
of the shares redeemed, and the original purchase price of the shares. See "How
to buy shares - Class B shares."
(4) Shares purchased as part of asset-allocation plans pursuant to the BL
Purchase Program are subject to a CDSC of 1.00%, if the shares are redeemed
within one year of purchase. See "How to Buy Shares -- the BL Purchase Program."
Annual Portfolio Operating Expenses:
(as a percentage of average net assets) Class A Class B
------- -------
Management Fees 1.00% 1.00%
12b-1 Fees 0.00% 0.75%
Shareholder Service Fee 0.25% 0.25%
Other Expenses (after expense limitation)* 0.20% 0.20%
---- ----
Total Portfolio Operating Expenses (after 1.45% 2.20%
expense limitation)*
- -----------------------------
* Other Expenses and Total Portfolio Operating Expenses reflect a voluntary
expense limitation currently in effect. In the absence of the expense
limitation, Other Expenses are expected to be 0.45% for Class A and Class B
shares and Total Portfolio Operating Expenses are expected to be 1.70% for Class
A shares and 2.45% for Class B shares.
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<PAGE>
Examples
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:
Class A Class B
1 year $ 71 $62
3 years $101 $99
An investment of $1,000 in the Portfolio would incur the following
expenses assuming 5% annual return and no redemption:
Class A Class B
1 year $ 71 $22
3 years $101 $69
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 for the Portfolio. The Examples should not be considered a
representation of future performance; actual expenses may be more or less than
those shown.
Investment objective and policies
Mentor Perpetual International Portfolio's investment objective is
long-term capital appreciation. The Portfolio is designed for investors who
believe that investment in a diversified portfolio of securities of issuers
located outside the U.S. offers the potential for long-term capital
appreciation.
The Portfolio invests in a diversified portfolio of securities of
issuers located outside the United States. The Portfolio's investments will
normally include common stocks, preferred stocks, securities convertible into
common stocks or preferred stocks, and warrants to purchase common stocks or
preferred stocks. The Portfolio may also invest to a lesser extent in debt
securities and other types of investments if Mentor Perpetual Advisors, LLC
("Mentor Perpetual"), the Portfolio's investment adviser, believes they would
help achieve the Portfolio's objective. The Portfolio may hold a portion of its
assets in cash or money market instruments.
The Portfolio will not limit its investments to any particular type of
company. The Portfolio may invest in companies, large or small, whose earnings
are believed to be in a relatively strong growth trend, or in companies in which
significant further growth is not anticipated but whose market value per share
is thought to be undervalued.
It is likely that, at times, a substantial portion of the Portfolio's
assets will be invested in securities of issuers in emerging markets, including
under-developed and developing nations. Investments in emerging markets are
subject to the same risks applicable to foreign investments generally, although
those risks may be increased due to conditions in such markets. For example, the
securities markets and legal systems in emerging markets may only be in a
developmental stage and may provide few, or none, of the advantages or
protections of markets or legal systems available in more developed countries.
Although many of the securities in which the Portfolio may invest are traded on
securities exchanges, they may trade in limited volume, and the exchanges may
not provide all of the conveniences or protections provided by securities
exchanges in more developed markets. The Portfolio may also invest a substantial
portion of its assets in securities traded in the over-the-counter markets and
not on any exchange, which may affect the liquidity of the investment and expose
the Portfolio to the credit risk of its counterparties in trading those
investments.
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<PAGE>
Fixed-income securities in which the Portfolio may invest will be 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, 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 Mentor Perpetual will consider whether continued investment in the
security is consistent with the Portfolio's investment objective. See the
Statement of Additional Information for descriptions of securities ratings
assigned by Moody's and Standard & Poor's.
Mentor Perpetual 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 Mentor Perpetual considers consistent with
such defensive strategies. At such times, the Portfolio may also invest without
limit in securities of issuers located in the United States. It is impossible to
predict when, or for how long, the Portfolio will use these defensive
strategies.
Investments in smaller companies. The Portfolio may invest a substantial
portion of its assets in securities issued by small companies. Such companies
may offer greater opportunities for capital appreciation than larger companies,
but investments in such companies may also involve certain special risks. Such
companies may have limited product lines, markets, or financial resources and
may be dependent on a limited management group. While the markets in securities
of such companies have grown rapidly in recent years, such securities may trade
less frequently and in smaller volume than more widely held securities. The
values of these securities may fluctuate more sharply than those of other
securities, and the Portfolio may experience some difficulty in establishing or
closing out positions in these securities at prevailing market prices. There may
be less publiclyavailable information about the issuers of these securities or
less market interest in such securities than in the case of larger companies,
and it may take a longer period of time for the prices of such securities to
reflect the full value of their issuers' underlying earnings potential or
assets.
Some securities of smaller issuers may be restricted as to resale or may
otherwise be highly illiquid. The ability of the Portfolio to dispose of such
securities may be greatly limited, and the Portfolio may have to continue to
hold such securities during periods when Mentor Perpetual would otherwise have
sold the security. It is possible that Mentor Perpetual or its affiliates or
clients may hold securities issued by the same issuers, and may in some cases
have acquired the securities at different times, on more favorable terms, or at
more favorable prices, than the Portfolio.
Foreign securities. Investments in foreign securities entail certain
risks. Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio's assets may be affected favorably or
unfavorably by currency exchange rates and exchange control regulations. There
may be less information publicly available about a foreign company than about a
U.S. company, and foreign companies are not generally subject to accounting,
auditing, and financial reporting standards and practices comparable to those in
the United States. The securities of some foreign companies are less liquid and
at times more volatile than securities of comparable U.S. companies. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Portfolio's assets held abroad) and expenses not present in the
settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange controls, confiscatory
taxation, political or financial instability, and diplomatic developments which
could affect the value of the Portfolio's investments in certain foreign
countries. Legal remedies available to investors in certain foreign countries
may be more limited than those available with respect to investments in the
United States or in other foreign countries. In the case of securities issued by
a foreign governmental entity, the issuer may in certain circumstances be unable
or unwilling to meet its obligations on the securities in accordance with their
terms, and the Portfolio may have limited recourse available to it in the event
of default. The laws of some foreign countries may limit the Portfolio's ability
to invest in securities of certain issuers located in those foreign countries.
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<PAGE>
Special tax considerations apply to foreign securities. The Portfolio may buy or
sell foreign currencies and options and futures contracts on foreign currencies
for hedging purposes in connection with its foreign investments.
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 certain of these practices and risks they may involve.
Borrowing and leverage. The Portfolio may borrow money to invest in
additional portfolio securities. This practice, known as "leverage", increases
the Portfolio's market exposure and its risk. When the Portfolio has borrowed
money for leverage and its investments increase or decrease in value, the
Portfolio's net asset value will normally increase or decrease more than if it
had not borrowed money. The interest the Portfolio must pay on borrowed money
will reduce the amount of any potential gains or increase any losses. The extent
to which the Portfolio will borrow money, and the amount it may borrow, depend
on market conditions and interest rates. Successful use of leverage depends on
Mentor Perpetual's ability to predict market movements correctly.
Options and futures. The Portfolio may buy and sell call and put options
to hedge against changes in net asset value or to realize a greater current
return. In addition, through the purchase and sale of futures contracts and
related options, the Portfolio may at times seek to hedge against fluctuations
in net asset value and, to the extent consistent with applicable law, to
increase its investment return.
The Portfolio's ability to engage in options and futures strategies will
depend on the availability of liquid markets in such instruments. It is
impossible to predict the amount of trading interest that may exist in various
types of options or futures contracts. Therefore, there is no assurance that the
Portfolio will be able to utilize these instruments effectively for the purposes
stated above. Transactions in options and futures involve certain risks which
are described below and in the Statement of Additional Information.
Index futures and options. The Portfolio may buy and sell index futures
contracts ("index futures") and options on index futures and on indices for
hedging purposes (or may purchase warrants whose value is based on the value
from time to time of one or more foreign securities indices). An "index future"
is a contract to buy or sell units of a particular bond or stock index at an
agreed price on a specified future date. Depending on the change in value of the
index between the time when the Portfolio enters into and terminates an index
futures or option transaction, the Portfolio realizes a gain or loss. The
Portfolio may also, to the extent consistent with applicable law, buy and sell
index futures and options to increase its investment return.
Risks related to options and futures strategies. Options and futures
transactions involve costs and may result in losses. Certain risks arise because
of the possibility of imperfect correlations between movements in the prices of
futures and options and movements in the prices of the underlying security or
index or the securities held by the Portfolio that are the subject of a hedge.
The successful use by the Portfolio of the strategies described above further
depends on the ability of Mentor Perpetual to forecast market movements
correctly. Other risks arise from the Portfolio's potential inability to close
out futures and options positions. Although the Portfolio will enter into
options and futures transactions only if Mentor Perpetual believes that a liquid
secondary market exists for such options or futures contract, there can be no
assurance that the Portfolio will be able to effect closing transactions at any
particular time or at an acceptable price. Certain provisions of the Internal
Revenue Code may limit the Portfolio's ability to engage in options and futures
transactions.
The Portfolio generally expects that its options transactions will be
conducted on recognized exchanges. The Portfolio may in certain instances
purchase and sell options in the over-the-counter markets. The Portfolio's
ability to terminate options in the over-the-counter markets may be more limited
than for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to the Portfolio. The Portfolio will, however, engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of Mentor Perpetual, the pricing
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<PAGE>
mechanism and liquidity of the over-the-counter markets are satisfactory and the
participants are responsible parties likely to meet their obligations.
The Portfolio will not purchase futures or options on futures or sell
futures if as a result the sum of the initial margin deposits on the Portfolio's
existing futures positions and premiums paid for outstanding options on futures
contracts would exceed 5% of the Portfolio's assets. (For options that are
"in-the-money" at the time of purchase, the amount by which the option is
"in-the-money" is excluded from this calculation.)
Repurchase agreements; securities loans. The Portfolio may enter into
repurchase agreements and securities loans. 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. Under a securities loan,
the Portfolio lends portfolio securities. The Portfolio will enter into
repurchase agreements and securities loans only with commercial banks and with
registered broker-dealers who are members of a national securities exchange or
market makers in government securities, and in the case of repurchase
agreements, only if the debt instrument subject to the repurchase agreement is a
U.S. Government security. These transactions must be fully collateralized at all
times, but involve some risk to the Portfolio if the other party should default
on its obligations and the Portfolio is delayed or prevented from recovering 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.
_______________
Except for investment policies designated in this Prospectus or the
Statement of Additional Information as fundamental, the investment objective and
policies described herein are not fundamental and may be changed by the Trustees
without shareholder approval. 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
The Trustees of Mentor Institutional Trust (the "Trust") are responsible
for generally overseeing the conduct of the Portfolio's business. Mentor
Perpetual Advisors, LLC ("Mentor Perpetual"), located at 901 East Byrd Street,
Richmond, Virginia 23219, acts as investment adviser to the Portfolio. Mentor
Investment Group, LLC ("Mentor Investment Group") serves as administrator to the
Portfolio. Mentor Investment Group receives no compensation from the Portfolio
for the performance of such services. Mentor Investment Group 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.
Mentor Perpetual is an investment advisory firm owned equally by
Perpetual plc and Mentor Investment Group. The Perpetual organization currently
serves as investment adviser for assets of more than $6 billion. Its clients
include 28 unit investment trusts and other public investment pools for over 150
clients, including private individuals, charities, pension plans, and life
assurance companies. Mentor Perpetual currently serves as investment adviser to
the Mentor Perpetual Global Portfolio, an open-end mutual fund which is a series
of The Mentor Funds. Investment decisions for the Portfolio are made by a team
of investment professionals at Mentor Perpetual.
Mentor Investment Group is a subsidiary of Wheat First Butcher Singer,
Inc. ("Wheat First Butcher Singer"), a diversified financial services holding
company. Wheat First Butcher Singer, through other subsidiaries, also engages in
securities brokerage, investment banking, and related businesses. EVEREN Capital
Corporation has a 20% ownership in Mentor Investment Group and may acquire
additional ownership based principally on the amount of Mentor Investment
Group's revenues derived from assets attributable to clients of EVEREN
Securities, Inc. and its affiliates.
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<PAGE>
Subject to the general oversight of the Trustees, Mentor Perpetual
manages the Portfolio in accordance with the stated policies of the Portfolio.
Mentor Perpetual makes investment decisions for the Portfolio and places the
purchase and sale orders for the Portfolio's portfolio transactions. In
selecting broker-dealers, Mentor Perpetual may consider research and brokerage
services furnished to it and its affiliates. Subject to seeking the best overall
terms available, Mentor Perpetual may consider sales of shares of the 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 the
Portfolio. Mentor Perpetual may at times cause the Portfolio to pay commissions
to broker-dealers affiliated with Mentor Perpetual.
Expenses incurred in the operation of the Portfolio or otherwise
allocated to the 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 its
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, certain 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.
Portfolio turnover. The length of time the Portfolio has held a
particular security is not generally a consideration in investment decisions.
The investment policies of the Portfolio may lead to frequent changes in the
Portfolio's investments, particularly in periods of volatile market movements. A
change in the securities held by the Portfolio is known as "portfolio turnover."
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 sales may result in
realization of taxable capital gains. The Portfolio's annual portfolio turnover
rate is expected to be less than 200% for the current fiscal year.
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. The net asset value for Class A shares will generally differ from that
of Class B shares due to the variance in daily net income realized by and
dividends paid on each class of shares, and any differences in the expenses of
the different classes.
Securities quoted in foreign currencies are translated into U.S. dollars
at the current exchange rates or at such other rates as the Trustees may
determine in computing net asset value. As a result, fluctuations in the values
of such currencies in relation to the U.S. dollar will affect the net asset
value of Portfolio shares even though there has not been any change in the
values of such securities as quoted in such foreign currencies.
Sales arrangements
This Prospectus offers investors two classes of shares which bear sales
charges in different forms and amounts and which bear different levels of
expenses:
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any charges when they are redeemed, except that sales at net asset value in
excess of $1 million are subject to a contingent deferred sales charge (a
"CDSC"). Certain purchases of Class A shares qualify for reduced sales charges.
Class A shares currently bear no 12b-1 fees. See "How to buy shares --- Class A
shares."
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Class B shares. Class B shares are sold without an initial sales charge,
but are subject to a CDSC of up to 4% if redeemed within five years. Class B
shares also bear 12b-1 fees. Class B shares provide an investor the benefit of
putting all of the investor's money to work from the time the investment is
made, but have a higher expense ratio and pay lower dividends than Class A
shares due to the 12b-1 fees. If you purchase shares through an asset-allocation
program, you may also be eligible to purchase Class B shares through the "BL
Purchase Program." See "How to buy shares --- Class B shares."
Which arrangement is for you? The decision as to which class of shares
provides a suitable investment for an investor depends on a number of factors,
including the amount and intended length of the investment. Investors making
investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. Investors purchasing shares through an asset-allocation program
may wish to purchase shares through the BL Purchase Program. For more
information about these sales arrangements, consult your investment dealer or
Mentor Distributors. Sales personnel may receive different compensation
depending on which class of shares they sell. Shares may only be exchanged for
shares of the same class of certain other funds in the Mentor family and for
shares of Cash Resource U.S. Government Money Market Fund. See "How to exchange
shares."
How to buy shares
You can open a Portfolio account with as little as $1,000 and make
additional investments at any time with as little as $100. Investments under
IRAs and qualified retirement plans are subject to a minimum initial investment
of $250. The minimum initial investment may be waived for current and retired
Trustees, and current and retired employees of the Trust, Mentor Investment
Group, LLC ("Mentor Investment Group") or its affiliates. You can buy Portfolio
shares by completing the enclosed New Account Form and sending it to Mentor
Distributors along with a check or money order made payable to Mentor
Institutional Trust, through your financial institution, which may be an
investment dealer, a bank, or another institution, or through automatic
investing. If you do not have a dealer, Mentor Distributors, LLC ("Mentor
Distributors") can refer you to one.
Automatic investment plan. Once you have made the initial minimum
investment in the Portfolio, you can make regular investments of $50 or more on
a monthly or quarterly basis through automatic deductions from your bank
checking account. Application forms are available from your investment dealer or
through Mentor Distributors.
Shares are sold at a price based on the Portfolio's net asset value next
determined after Mentor Distributors receives your purchase order. In most
cases, in order to receive that day's public offering price, Mentor Distributors
must receive your order before the close of regular trading on the New York
Stock Exchange. If you buy shares through your investment dealer, the dealer
must ensure that Mentor Distributors receives your order before the close of
regular trading on the New York Stock Exchange for you to receive that day's
public offering price.
Class A Shares. The public offering price of Class A shares is the net
asset value plus a sales charge. The Portfolio receives the net asset value. The
sales charge varies depending on the size of your purchase and is allocated
between your investment dealer and Mentor Distributors. The current sales
charges for Class A shares of the Portfolio are as follows:
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as
a Percentage of a Percentage of
Public Offering Net Amount Dealer
Price Invested Commission*
<S> <C>
Less than $50,000.............................. 5.75% 5.82% 5.00%
$50,000 but less than $100,000................. 4.75% 4.99% 4.00%
$100,000 but less than $250,000................ 3.75% 3.90% 3.00%
$250,000 but less than $500,000................ 3.00% 3.09% 2.50%
$500,000 but less than $1 million 2.00% 2.04% 1.75%
$1 million or more............................. 0% 0% (see below)
</TABLE>
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* At the discretion of Mentor Distributors, the entire sales charge may at times
be reallowed to dealers. The Staff of the Securities and Exchange Commission has
indicated that dealers who receive more than 90% of the sales charge may be
considered underwriters.
There is no initial sales charge on purchases of Class A shares of
$1 million or more. However, a CDSC of 1.00% is imposed on redemptions of such
shares within the first year after purchase, based on the lower of the shares'
cost and current net asset value. A CDSC is also imposed on any shares purchased
without a sales charge as part of a purchase of shares of $1 million or more
under a purchase accumulation plan. Contact Mentor Distributors for more
information.
You may be eligible to buy Class A shares at reduced sales
charges. Consult your investment dealer or Mentor Distributors for details about
Quantity Discounts and Accumulated Purchases, Letters of Intent, the
Reinvestment Privilege, Concurrent Purchases, and the Automatic Investment Plan.
Descriptions are also included in the New Account Form and in the Statement of
Additional Information. Shares may be sold at net asset value to certain
categories of investors, including to shareholders of other mutual funds who
invest in the Portfolio in response to certain promotional activities, and the
CDSC may be waived under certain circumstances. The sales charges shown above
will not apply to shares purchased by you if you purchase shares through EVEREN
Securities, Inc. with the redemption proceeds received by you within the
preceding 90 days from the sale of shares of any non-Mentor open-end mutual
fund. No CDSC will apply to these purchases. EVEREN Securities, Inc. may
compensate your investment dealer in connection with any such purchase. See "How
to buy shares --- General" below.
Class B Shares. Class B shares are sold without an initial sales
charge, although a CDSC will be imposed if you redeem shares within five years
of purchase. The following types of shares may be redeemed without charge: (i)
shares acquired by reinvestment of distributions and (ii) shares otherwise
exempt from the CDSC, as described in the Example below. The amount of CDSC is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed. The amount of the CDSC will depend on the number
of years since you invested in the shares being redeemed and the dollar amount
being redeemed, according to the following table:
Years Since Purchase Payment Made CDSC
--------------------------------- -----------
1 4.0%
2 4.0%
3 3.0%
4 2.0%
5 1.0%
6+ None
The BL Purchase Program. If you purchase Class B shares through an
asset-allocation program sponsored by your broker-dealer or other financial
institution, you may elect to participate in the BL Purchase Program. Shares
purchased through this program are not subject to the CDSC shown above. Rather,
a CDSC of 1.00% will be imposed on redemptions of such shares within the first
year after purchase, based on the lower of the shares' cost and current net
asset value. Your broker-dealer or other financial institution is responsible
for making the election on your behalf to invest through the Program.
Accordingly, if you wish to purchase shares through this Program, you should
instruct your broker-dealer or financial institution to do so.
General. Mentor Distributors, LLC, located at 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.
A Portfolio may sell its Class A shares without a sales charge and
may waive the CDSC on shares redeemed by the Trust's current and retired
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Trustees (and their families), current and retired employees (and their
families) of Mentor Distributors, Mentor Perpetual, and their affiliates,
registered representatives and other employees (and their families) of
broker-dealers having sales agreements with Mentor Distributors, employees (and
their families) of financial institutions having sales agreements with Mentor
Distributors (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Portfolio shares), financial
institution trust departments investing an aggregate of $1 million or more in
one or more funds in the Mentor family, clients of certain administrators of
tax-qualified plans, employer-sponsored retirement plans, tax-qualified plans
when proceeds from repayments of loans to participants are invested (or
reinvested) in funds in the Mentor family, shares redeemed under the Portfolio's
Systematic Withdrawal Plan (limited to 10% of a shareholder's account in any
calendar year), and "wrap accounts" for the benefit of clients of financial
planners adhering to certain standards established by Mentor Distributors or its
affiliates. The Portfolio may sell shares without a sales charge or a CDSC in
connection with the acquisition by the Portfolio of assets of an investment
company or personal holding company. In addition, the CDSC may be waived in the
case of (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, including the shares of a shareholder who owns the shares with his or
her spouse as joint tenants with right of survivorship, provided that the
redemption is requested within one year of the death or initial determination of
disability; (ii) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified retirement
plan following retirement; (b) distributions from an IRA, Keogh Plan, or
Custodial Account under Section 403(b)(7) of the Internal Revenue Code following
attainment of age 59 1/2; and (c) a tax-free return on an excess contribution to
an IRA; (iii) redemptions by pension or profit sharing plans sponsored by Mentor
Investment Group or an affiliate; and (iv) redemptions by pension or profit
sharing plans of which Mentor Investment Group or any affiliate serves as a plan
fiduciary. In addition, certain retirement plans with over 200 employees may
purchase Class A shares at net asset value without a sales charge. The Portfolio
may sell its Class A shares without a sales charge to shareholders of other
mutual funds who invest in other funds in the Mentor family in response to
certain promotional activities (in which case a CDSC of 1% may apply for a
period of years after purchase). Contact Mentor Distributors. If you invest
through a broker-dealer or other financial institution, your broker-dealer or
other financial institution will be responsible for electing on your behalf to
take advantage of any of these reduced sales charges or waivers described above.
Please instruct your broker-dealer or other financial institution accordingly.
Shareholders of other funds in the Mentor family may be entitled
to exchange their shares for, or reinvest distributions from their funds in,
shares of the Portfolio at net asset value.
In determining whether a CDSC is payable in respect of the shares
redeemed, the Portfolio will first redeem the shares held longest (together with
any shares received upon reinvestment of distributions with respect to those
shares). Any of the shares being redeemed which were acquired by reinvestment of
distributions will be redeemed without a CDSC, and amounts representing capital
appreciation will not be subject to a CDSC. See the Example below.
Example:
You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 of those shares (including shares purchased through reinvestment
of distributions on those 100 shares) at this time, your CDSC will be calculated
as follows:
o Proceeds of 50 shares redeemed at $12 per share $600
o Minus proceeds of 10 shares not subject to a CDSC
because they were acquired through dividend reinvestment
(10 x $12) -120
o Minus appreciation on remaining shares, also not subject
to CDSC (40 x $2) -80
----
o Amount subject to a CDSC $400
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Mentor Distributors receives the entire amount of any CDSC you
pay. Consult Mentor Distributors for more information.
If you are considering redeeming or exchanging shares of the
Portfolio or transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any delay in
redemption, exchange, or transfer. Otherwise the Portfolio may delay payment
until the purchase price of those shares has been collected or, if you redeem by
telephone, until 15 calendar days after the purchase date.
Because of the relatively high cost of maintaining accounts, the
Portfolio reserves the right to redeem, upon not less than 60 days' notice, any
Portfolio account below $500 as a result of redemptions. A shareholder may,
however, avoid such a redemption by the Portfolio by increasing his investment
in shares of the Portfolio to a value of $500 or more during such 60-day period.
Mentor Distributors, Mentor Perpetual, and affiliates thereof, at
their own expense and out of their own assets, may also provide other
compensation to dealers in connection with sales of the Portfolio. Such
compensation may also include, but is not limited to, financial assistance to
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public, advertising or sales campaigns, or other
dealer-sponsored special events. In some instances, this compensation may be
made available only to certain dealers whose representatives have sold or are
expected to sell significant amounts of shares. Dealers may not use sales of the
Portfolio's shares to qualify for this compensation to the extent such may be
prohibited by the laws of any state or any self-regulatory agency, such as the
National Association of Securities Dealers, Inc. Certain dealers may not sell
all classes of shares.
In all cases Mentor Perpetual or Mentor Distributors reserves the
right to reject any particular investment.
Reinvestment Privilege. If you redeem Class A or B shares of the
Portfolio, you have a one-time right, within 60 days, to reinvest the redemption
proceeds plus the amount of CDSC you paid, if any, at the next-determined net
asset value. Front-end sales charges will not apply to such reinvestment. Mentor
Distributors must be notified in writing by you or by your financial institution
of the reinvestment for you to recover the CDSC, or to eliminate the front-end
sales charge. If you redeem shares in the Portfolio, there may be tax
consequences.
Distribution Plan (Class B Shares)
Mentor Distributors, LLC, located at 901 East Byrd Street,
Richmond, Virginia 23219, is the principal distributor for the Portfolio's
shares. Mentor Distributors is not obligated to sell any specific amount of
shares of the Portfolio.
The Portfolio has adopted a Distribution Plan under Rule 12b-1
with respect to its Class B shares (the "Plan") providing for payments by the
Portfolio to Mentor Distributors from the assets attributable to the Portfolio's
Class B shares at the annual rate set out under "Summary of Portfolio Expenses -
Annual Portfolio Operating Expenses" above. The Trustees may reduce the amount
of payments or suspend the Plan for such periods as they may determine. Mentor
Distributors also receives the proceeds of any CDSC imposed on redemptions of
shares.
Payments under the Plan are intended to compensate Mentor
Distributors for services provided and expenses incurred by it as principal
underwriter of the Portfolio's Class B shares. Mentor Distributors may select
financial institutions (such as a broker/dealer or bank) 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 schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by Mentor Distributors. Mentor
Distributors may suspend or modify such payments to dealers. Such payments are
also subject to the continuation of the Plan, the terms of any agreements
between dealers and Mentor Distributors, and any applicable limits imposed by
the National Association of Securities Dealers, Inc.
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How to sell shares
You can sell your shares to the Portfolio any day the New York
Stock Exchange is open, either directly to the Portfolio or through your
investment dealer. The Portfolio will only redeem shares for which it has
received payment.
Selling shares directly to the Portfolio. Send a signed letter of
instruction and stock power form, along with any certificates that represent
shares you want to sell, to Mentor Institutional Trust, c/o Boston Financial
Data Services, Inc. ("BFDS"), 2 Heritage Drive, North Quincy, Massachusetts
02171. The price you will receive is the net asset value next calculated after
your request is received in proper form less any applicable CDSC. In order to
receive that day's net asset value, your request must be received before the
close of regular trading on the New York Stock Exchange. If you sell shares
having a net asset value of $50,000 or more or if you want your redemption
proceeds payable to you at a different address or to someone else, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer, or certain other financial institutions.
See the Statement of Additional Information for more information about where to
obtain a signature guarantee. Stock power forms are available from your
investment dealer, Mentor Distributors, and many commercial banks. Mentor
Distributors usually requires additional documentation for the sale of shares by
a corporation, partnership, agent, fiduciary, or surviving joint owner. Contact
Mentor Distributors for details.
Selling shares by telephone. You may use Mentor Distributors'
Telephone Redemption Privilege to redeem shares from your account unless you
have notified Mentor Distributors of an address change within the preceding 15
days. Unless an investor indicates otherwise on the New Account Form, Mentor
Distributors will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as his
or her representative, who can provide Mentor Distributors with his or her
account registration and address as it appears on Mentor Distributors' records.
Mentor Distributors will employ these and other reasonable procedures to confirm
that instructions communicated by telephone are genuine; if it fails to employ
reasonable procedures, Mentor Distributors may be liable for any losses due to
unauthorized or fraudulent instructions. For more information, consult Mentor
Distributors. During periods of unusual market changes and shareholder activity,
you may experience delays in contacting Mentor Distributors by telephone in
which case you may wish to submit a written redemption request, as described
above, or contact your investment dealer, as described below. The Telephone
Redemption Privilege may be modified or terminated without notice.
Selling shares through your investment dealer. Your dealer and
Mentor Distributors must receive your request before the close of regular
trading on the New York Stock Exchange to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary documentation to
Mentor Distributors, and may charge you for its services.
Systematic Withdrawal Program. You may redeem Class A or B shares
of the Portfolio through periodic withdrawals for a predetermined amount. Only
shareholders with accounts valued at $10,000 or more are eligible to
participate. Class B shares redeemed under the Systematic Withdrawal Program are
not subject to a CDSC, but the aggregate withdrawals of Class B shares in any
year are limited to 10% of the value of the account at the time of enrollment.
Contact Mentor Distributors for more information.
General. The Portfolio generally sends you payment for your shares
the business day after your request is received. Under unusual circumstances,
the Portfolio may suspend redemptions, or postpone payment for more than seven
days, as permitted by federal securities law.
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 in 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.
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How to exchange shares
Except as otherwise described below, you can exchange your shares
in the Portfolio worth at least $1,000 for shares of the same class of certain
Portfolios of The Mentor Funds, a series investment company offering shares of
nine portfolios with different investment objectives and policies, at net asset
value beginning 15 days after purchase. You may also exchange shares of the
Portfolio for shares of Cash Resource U.S. Government Money Market Fund (the
"Cash Fund"). If you exchange shares subject to a CDSC, the transaction will not
be subject to a CDSC. However, when you redeem the shares acquired through the
exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares, using the schedule of the Portfolio from which
your first exchange was effected. For purposes of computing the CDSC, the length
of time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange. (If you exchange your shares
for shares of the Cash Fund, the period when you hold shares of the Cash Fund
will not be included in calculating the length of time you have owned the shares
subject to the CDSC, and any CDSC payable on redemption of your shares will be
reduced by the amount of any payment collected by the Cash Fund under its
distribution plan in respect of those shares. Contact Mentor Distributors for
information.)
To exchange your shares, simply complete an Exchange Authorization
Form and send it to Mentor Institutional Trust, c/o BFDS, 2 Heritage Drive,
North Quincy, Massachusetts 02171. Exchange Authorization Forms are available by
calling or writing Mentor Distributors. For federal income tax purposes, an
exchange is treated as a sale of shares and generally results in a capital gain
or loss. A Telephone Exchange Privilege is currently available. Mentor
Distributors' procedures for telephonic transactions are described above under
"How to sell shares." The Telephone Exchange Privilege is not available if you
were issued certificates for shares which remain outstanding. Ask you investment
dealer or Mentor Distributors for a prospectus relating to The Mentor Funds or
the Cash Fund. Shares of certain of the Portfolios may not be available to
residents of all states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Mentor Distributors or the Trustees
believe doing so would be in the best interests of the Portfolio, the Portfolio
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges, or reject any exchange. Shareholders would be
notified of any such action to the extent required by law. Consult Mentor
Distributors before requesting an exchange by calling 1-800-382-0016. See the
Statement of Additional Information to find out more about the exchange
privilege.
How distributions are made
The Portfolio distributes net investment income 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.
All Portfolio distributions 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,
Mentor Perpetual will not normally take into account the effect any purchase or
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sale of securities will have on the tax positions of the Portfolio's
shareholders.
Shareholders of the Portfolio who are U.S. citizens or residents
may be able to claim a foreign tax credit or deduction on their U.S. income tax
returns with respect to foreign taxes paid by the Portfolio. If, at the end of
the fiscal year of the Portfolio, more than 50% of the Portfolio's total assets
are represented by securities of foreign corporations, the Portfolio intends to
make an election permitted by the Internal Revenue Code to treat any foreign
taxes it paid as paid by its shareholders. In that case, shareholders who are
U.S. citizens, U.S. corporations, and, in some cases, U.S. residents will be
required to include in U.S. taxable income their pro rata share of such taxes,
but may then be entitled to claim a foreign tax credit or deduction (but not
both) for their share of such taxes.
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).
Other services
Shareholder Servicing Plan. The Trust has adopted a Shareholder
Servicing Plan (the "Service Plan") with respect to the Class A and Class B
shares of the Portfolio. Under the Service Plan, financial institutions will
enter into shareholder service agreements with the Trust to provide
administrative support services to their customers who are Portfolio
shareholders. In return for providing these support services, a financial
institution may receive payments at a rate not exceeding 0.25% of the average
daily net assets of the Class A or Class B shares of the Portfolio. These
administrative services may include, but are not limited to, the following
functions: providing office space, equipment, telephone facilities, and various
personnel, including clerical, supervisory, and computer personnel, as necessary
or beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding the
Portfolio; assisting clients in changing dividend options, account designations,
and addresses; and providing such other services as the Portfolio reasonably
requests.
In addition to receiving payments under the Service Plan,
financial institutions may be compensated by Mentor Perpetual and/or Mentor
Investment Group, or affiliates thereof, for providing administrative support
services to holders of Class A or Class B shares of the Portfolio. These
payments will be made directly by Mentor Perpetual and/or Mentor Investment
Group and will not be made from the assets of the Portfolio.
General Information
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 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 five
series, one representing the Portfolio, the others representing other Portfolios
with varying investment objectives and policies. The Portfolio's shares are
currently divided into four classes. Only the Portfolio's Class A and Class B
shares are offered by this Prospectus. The Portfolio also offers other classes
of shares with different sales charges and expenses. Because of these different
sales charges and expenses, the investment performance of the classes will vary.
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<PAGE>
For more information, including your eligibility to purchase any other class of
shares, contact Mentor Distributors.
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 neither the Portfolio nor the Trust are required to
hold annual meetings of 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.
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105, serves as the Portfolio's custodian. State Street Bank and
Trust Company, c/o Boston Financial Data Services, Inc., 2 Heritage Drive, North
Quincy, Massachusetts 02171, 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 Class A and Class B shares of the Portfolio. The
Portfolio's "yield" for each class of shares is calculated by dividing the
Portfolio's annualized net investment income per share during a recent 30-day
period by the maximum public offering price per share on the last day of that
period. "Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the
Portfolio at the maximum public offering price (in the case of Class A shares)
and reflecting (in the case of Class B shares) the deduction of any applicable
CDSC. Total return may also be presented for other periods or based on
investment at reduced sales charge levels or at net asset value. Investment
performance of different classes of shares of the Portfolio will differ. Any
quotation of investment performance not reflecting the maximum initial sales
charge or CDSC would be reduced if such sales charges were reflected. Quotations
of yield and total return for a period when an expense limitation was in effect
will be greater than if the limitation had not been in effect. 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 its investment personnel.
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, the Portfolio's operating expenses and the class of
shares purchased. 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.
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No person has been authorized to give any 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 may not
lawfully be made. This Pro spectus omits certain information contained in the
Registration Statement, to which reference is made, filed with the Securities
and Exchange Commission. Items which are thus omitted, including contracts and
other documents referred to or summarized herein, may be obtained from the
Commission upon payment of the prescribed fees.
Additional information concerning the securities offered hereby and the
Portfolio is to be found in the Registration Statement, including various
exhibits thereto and financial statements included or incorporated therein,
which may be inspected at the office of the Commission.
Table of Contents
Expense summary..................................................2
Investment objective and policies................................3
Other investment practices and risks.............................5
Management.......................................................6
How the Portfolio values its shares..............................7
Sales arrangements...............................................8
How to buy shares................................................8
Distribution Plan (Class B Shares)..............................12
How to sell shares..............................................12
How to exchange shares..........................................13
How distributions are made......................................14
Taxes...........................................................14
Other services..................................................14
General information.............................................15
Performance information.........................................15
MENTOR
PERPETUAL
INTERNATIONAL
PORTFOLIO
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PROSPECTUS
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Mentor Distributors, LLC
