MENTOR INSTITUTIONAL TRUST
MENTOR U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
MENTOR FIXED-INCOME PORTFOLIO
MESSAGE FROM THE CHAIRMAN AND PRESIDENT
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
On behalf of all the associates at Mentor Investment Group, we would like to
take this opportunity to thank you for your investment in the Mentor U.S.
Government Cash Management Portfolio and the Mentor Fixed-Income Portfolio.
This Annual Report reaffirms our commitment to our shareholders and details the
financial performance of these investments for the period ended October 31,
1998.
Founded in 1970, Mentor Investment Group is an investment advisory firm with
more than $16 billion under management. We pride ourselves on a strong heritage
of providing quality service and a variety of investment choices that help meet
our shareholders' financial objectives by offering mutual funds and separately-
invested portfolios.
In the commentaries that follow, Mentor's investment teams present insightful
perspectives on the markets and strategies that shaped their investment
decisions for the past fiscal year. Our investment teams operate with these
priorities:
FOCUS -- In most money management companies, each investment manager has
multiple responsibilities. At Mentor, our investment managers are singularly
focused on enhancing the value of the portfolios. This means that you can be
assured of a consistent, proven approach to developing a winning financial
strategy.
OPPORTUNITIES -- By offering six different management styles, portfolio
diversification is simplified. By offering multiple styles, Mentor gives
investors the tools for long-term investment success through diversification
and accommodation of changing investment needs.
SERVICE -- To help serve our shareholders, Mentor has a fully dedicated
Investor Relations Center. Our Relationship Coordinators are professionally
trained and licensed to serve clients' needs.
TECHNOLOGY -- Abreast of the most advanced technology and using the latest
1
<PAGE>
MENTOR INSTITUTIONAL TRUST
MENTOR U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
MENTOR FIXED-INCOME PORTFOLIO
MESSAGE FROM THE CHAIRMAN AND PRESIDENT
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
analytical tools, our investment managers have the ability to survey the
financial markets and make informed decisions about where the best place is to
invest.
We at Mentor are honored to be a partner in the management of your financial
assets. Mentor Investment Group provides diversified investment styles and
services to over one million shareholders. We serve individuals, corporations,
endowments, foundations, public funds, and municipalities. To learn more about
Mentor, please contact your consultant or us at (800) 382-0016.
We look forward to making the Mentor formula work for you, and to a mutually
beneficial relationship.
Sincerely,
/s/ Daniel J. Ludeman /s/ Paul F. Costello
Daniel J. Ludeman Paul F. Costello
CHAIRMAN PRESIDENT
[MENTOR INVESTMENT GROUP LOGO]
THE MENTOR MISSION
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 PLEASE CALL US, (800)382-0016, OR
CONTACT YOUR CONSULTANT. THE PROSPECTUSES CONTAIN COMPLETE INFORMATION
REGARDING FEES, SALES CHARGES, AND EXPENSES. PLEASE READ THEM CAREFULLY
BEFORE INVESTING OR SENDING MONEY.
2
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MENTOR U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
MANAGERS' COMMENTARY: THE CASH MANAGEMENT TEAM
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
For the first eleven months of the year ended October 31, 1998, the U.S.
witnessed remarkable economic and financial stability. The economy remained in
a growth pattern that was just strong enough to keep us moving ahead but not so
strong as to raise the risk of inflation. Consequently, despite record levels
of employment and capacity utilization, the Federal Reserve maintained rates
for most of the year at levels which had been in place since February, 1997.
But around the world, seeds of future turmoil were being sown and as the year
drew to a close, those seeds began to bear a bitter fruit. It began in Hong
Kong in December, when currency problems gave rise to an economic crisis which
quickly spread throughout the region. Amid tumbling stock markets and
near-defaults on debt, Asian economies appeared to be slowing, raising concerns
that demand for U.S. products would weaken and harm U.S. production and growth.
The initial impact was slight, most notably a decline in interest rates as it
became increasingly unlikely that the Fed would have to raise rates. Indeed,
the Fed itself stated that policy would remain "on hold" until the situation
clarified. But gradually the impact became more noticeable, and by spring the
trade deficit widened and companies involved in the Asian trade reported
softening demand. In effect, the Asian crisis was doing the Fed's job for them,
taking steam out of the economy at a time when an increase in rates might
otherwise have been necessary.
By mid-summer, the Asian situation continued to worsen and concerns were
mounting for other world economies such as Russia, Europe and South America.
Concrete evidence began to surface of a slowing of the U.S. growth rate. Russia
defaulted on its international debt amid growing economic and political
instability. Most major stock markets, including the U.S., suffered severe
losses and currencies vacillated. Interest rates in the U.S. declined as our
fixed income markets were inundated by investment assets seeking safety. In
late September a major hedge fund reported financial difficulties amid rumors
that other financial institutions were about to suffer the same fate.
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MENTOR U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
MANAGERS' COMMENTARY: THE CASH MANAGEMENT TEAM
OCTOBER 31, 1998
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Finally, on September 29th, the Federal Reserve acted to ease the developing
crisis by lowering rates 0.25%. This was quickly followed by a second 0.25%
reduction on October 15th and a third at the Fed's regular meeting on November
17th. These reductions were matched by similar easing moves by other central
banks around the world. As of this writing, the impact seems to have been
positive on both world economies and financial markets, but the threat of
renewed turmoil lingers.
It should be noted that Mentor eliminated its exposure to Japanese issuers over
two years ago, and has restricted its use of other foreign obligations to a few
select issuers of the highest quality in such countries as Canada, Great
Britain, Germany and Switzerland. Also, as early as February of this year, we
recognized that the events developing around the world were likely to prevent
the Federal Reserve from raising rates and could require them to eventually
lower rates. Accordingly, we extended our portfolios to an average maturity of
55-60 days, the outer end of our normal range of 30-60 days, and maintained
that position through the balance of the year. Through this time of turmoil, we
pledge continued emphasis on safety and liquidity through high credit standards
and conservative investment policies.
December 1998
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MENTOR FIXED-INCOME PORTFOLIO
MANAGERS' COMMENTARY: THE ACTIVE FIXED-INCOME MANAGEMENT TEAM
OCTOBER 31, 1998
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MARKET CONDITIONS
The 12-month period ended October 31, 1998 saw a substantial decline in the
level of interest rates across the yield curve. The long bond (30-year
treasury) ended the period yielding 5.15%, 1.00% below its level at the
beginning of the period. One month earlier long-term interest rates were under
5%, a level not seen since the 1960's. Two-year treasury yields saw an even
more dramatic decline, falling 1.50% to 4.11% over the course of the period.
On September 29th the Federal Reserve initiated its first monetary intervention
in over two years, a 0.25% reduction in the Federal Funds rate. This easing was
followed by an additional 0.25% cut on October 17th. By the end of October the
short-to-intermediate portion of the yield curve was actually inverted
(three-month treasury bills were yielding more than five-year treasury bonds),
implying market expectations of future monetary easing by the Federal Reserve,
continued benign domestic inflation, and a slowing economy.
In the past few months the market has grown increasingly concerned that a
global deflationary spiral could unfold. The IMF policy prescription of
currency devaluation coupled with tight monetary and fiscal polices appears to
be making economic conditions even worse for Korea, Indonesia, Russia, etc. The
large debt burdens and faltering growth rates of the economies under IMF
supervision have raised the specter of wide scale defaults despite IMF
intervention. Russia's August announcement that it would simultaneously devalue
the ruble and unilaterally reschedule the repayment terms of its debt brought
this fear home to many global investors. As the implicit guarantee of the IMF
loses its credibility, the emerging markets that had been relatively healthy
are being put under increasing pressure. Concerns about the credit quality of
these nations have elevated interest rates in these economies to the point
where a slowdown in economic growth is becoming inevitable. Such a global
slowdown cannot help but put significant downward pressure on U.S. growth and
inflation rates.
The U.S. has not been immune to global credit quality anxiety. The yield spread
between treasury rates and high quality
5
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MENTOR FIXED-INCOME PORTFOLIO
MANAGERS' COMMENTARY: THE ACTIVE FIXED-INCOME MANAGEMENT TEAM
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
corporate bonds, a traditional measure of credit concerns within the economy,
ballooned out toward quarter's end to levels not seen since the last recession.
The high yield market has come under even more stress as investors abandon
markets with any hint of credit risk. The underperformance of spread sectors
has caused leveraged investors such as hedge funds and real estate investment
trusts to come under severe funding pressure. As lenders call their loans or
demand more collateral, these leveraged investors are left with few
alternatives but to sell assets into an already depressed market. These forced
asset liquidations have further depressed prices in corporate bonds and
mortgage-backed securities, and in many instances trading activity has all but
ceased in many market sectors.
PERFORMANCE
For the 12-month period ended October 31, 1998, the Mentor Fixed-Income
Portfolio returned 7.21% compared to 7.94% for its Lipper Intermediate
Investment Grade Debt peer group and 9.34% for the Lehman Brothers Aggregate
Bond Index. The underperformance of the fund reflects continued fall out from
the investment late last year in KDB bonds. The bonds were impacted by the
global economic turmoil, and were sold in December of last year.
MARKET OUTLOOK
Economic growth is almost certain to slow in the upcoming year, as the impact
of slower growth overseas and distressed credit markets here at home takes
effect. We do not, however, anticipate a recession for 1999. The United States
has ample policy alternatives to fight any slowing in the domestic economy. As
inflation has fallen, the real rate of interest (the nominal interest rate
minus inflation) implied by the Fed Funds rates has risen appreciably. Assuming
that the turmoil overseas will place continued downward pressure on inflation
rates, the Fed could lower Fed Funds by over 125 basis points (1.25%) and still
maintain a real interest rate higher than the historical average. Unlike Japan,
the U.S. has a healthy, well-capitalized banking system and therefore any
easing in monetary conditions will help stimulate demand. For the first time in
many decades, the current budget
6
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MENTOR FIXED-INCOME PORTFOLIO
MANAGERS' COMMENTARY: THE ACTIVE FIXED-INCOME MANAGEMENT TEAM
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
surplus means that an expansionary fiscal policy could be implemented without
necessarily driving up real interest rates and therefore crowding out private
investment.
Given sufficient aggressive action on the part of the Fed, a recession can be
avoided. With an easing Fed and declining inflation, the backdrop for bonds
remains positive. The market could see rates last observed in the 1950's.
Furthermore, as the Fed provides liquidity to the currently distressed credit
markets, corporate bonds and mortgage backed securities have the potential for
significant outperformance in the upcoming year.
THE PORTFOLIOS
Our short-term strategy in this tumultuous environment has been to tilt
portfolio duration somewhat long relative to our benchmark; sector allocations
have been weighted more heavily toward treasury securities. Given our long-term
confidence in the U.S. economy we are selectively moving into domestic spread
sectors with an eye towards an even more aggressive weighting as opportunities
present themselves. Further moves will require that we be convinced that these
markets have stabilized, which will require that the Fed continue to maintain
accommodative credit conditions.
The primary risk we see to our outlook is timing. The U.S. economy has a
tremendous forward momentum and the current yield curve anticipates continued
accommodative monetary policy. Should events unfold more slowly than the market
hopes, the bond market could encounter some short-term turbulence. We would
view these sell-offs as short term in nature and would utilize the higher yield
levels to further extend the Portfolio's duration.
December 1998
7
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MENTOR FIXED-INCOME PORTFOLIO
OCTOBER 31, 1998
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PERFORMANCE COMPARISONS
Comparison of change in value of a hypothetical $10,000 investment in Mentor
Fixed-Income Portfolio and the Lehman Brothers Aggregate Bond Index.*
Fixed-Income Lehman Brothers
12/6/94 10,000 10,069
4/30/95 10,625 10,725
10/31/95 11,593 11,591
4/30/96 11,575 11,651
10/31/96 12,158 12,267
4/30/97 12,350 12,475
10/31/97 13,178 13,357
4/30/98 13,497 13,836
10/31/98 14,129 14,604
In comparing the performance of a Portfolio to an index, please recognize that
market indexes do not take into account brokerage commissions that would be
incurred if the individual securities of the index were purchased. They also do
not include taxes payable on dividends and interest payments, or operating
expenses necessary to maintain a portfolio investing in the index.
The performance data quoted in this report are historical and do not predict
future investment results. Investment return and principal value will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Performance is cited as of October 31, 1998 and includes changes in share price
and reinvestment of dividends and capital gains. Because shares of the
Portfolios of the Trust can only be purchased in individually-managed accounts,
the performance return information does not reflect the investment advisory
fees charged at each account level.
* The Lehman Brothers Aggregate Bond Index is commonly used to compare
performance of income-oriented portfolios and is made up of the
Government/Corporate Index, the Mortgage-Backed Securities Index, and the
Asset-Backed Securities Index. Please note that effective January 1,
1998, the Lehman Brothers Aggregate Bond Index became the benchmark for
the Fixed-Income Portfolio. Given its mortgage pass-through and
asset-backed components, which are not contained in the Lehamn Brothers
Government/Coporate Index, it is more reflective of the Investment
mandate of the Fixed-Income Portfolio and therefore the appropriate
benchmark.
** Reflects operations of Fixed-Income Portfolio from the date of commencement
of operations on 12/6/94 through 10/31/98.
8
<PAGE>
MENTOR U.S. GOVERNMENT CASH MANAGEMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCIES 80.72%
Federal Home Loan Bank,
5.40% - 5.63%, 1/15/99 - 4/09/99 $ 7,840,000 $ 7,839,225
Federal Home Loan Mortgage Corporation,
5.02%, 1/26/99 (a) 7,000,000 6,998,857
Federal National Mortgage Association,
4.56% - 5.18%, 1/21/99 - 5/28/99 (a) 29,500,000 29,494,622
5.33% - 5.60%, 2/12/99 - 4/22/99 8,000,000 7,997,131
- -------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCIES 52,329,835
- -------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 19.26%
Goldman, Sachs & Company Dated 10/30/98,
5.45%, due 11/02/98, collateralized by
$2,704,949 (total original face value) Federal
Home Loan Mortgage Corporation,
7.00% - 7.50%, 3/01/12 - 10/01/28, market
value $2,531,260 2,481,627 2,481,627
JP Morgan Securities, Inc.
Dated 10/30/98, 5.50%, due 11/02/98,
collateralized by various U.S. Government
Agency Securities with total original face value
of $31,156,547, 9.00%, 6/15/16-8/15/27,
market value $10,200,000 10,000,000 10,000,000
- -------------------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 12,481,627
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $64,811,462) 99.98% 64,811,462
OTHER ASSETS LESS LIABILITIES 0.02% 15,954
- -------------------------------------------------------------------------------------------------------------
NET ASSETS 100.00% $ 64,827,416
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Floating Rate Securities - The rates shown are the effective rates at
October 31, 1998. Securities shown without a date are payable within five
business days and are backed by credit support agreements from banks or
insurance institutions.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
MENTOR FIXED-INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS 90.74%
- -------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 9.83%
Advanta Home Equity Loan, 6.15%, 10/25/09 $ 763,293 $ 776,500
Advanta Mortgage Loan Trust Series 1993-3,
Class A3, 4.75%, 2/25/10 581,497 576,506
Advanta Mortgage Loan Trust Series 1996-2,
Class A2, 7.03%, 3/25/11 1,408,537 1,406,452
AFC Home Equity Loan Trust, 6.60%, 2/25/27 999,970 1,011,797
AFG Receivables Trust, 6.35% - 7.05%,
9/15/00 - 2/15/03 2,677,940 2,692,779
CS First Boston Series 1996-2, Class A6, 7.18%,
2/25/18 980,000 1,016,355
Equifax Credit Corporation, Series 1998-2,
Class A6F, 6.16%, 4/15/08 711,000 713,621
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES (COST $8,040,448) 8,194,010
- -------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS 6.19%
NASCOR Series 1997-18, 6.75%, 12/25/27 686,819 686,609
Prudential Home Mortgage Securities Series
1995-7, Class M, 7.00%, 11/25/25 867,402 880,989
Prudential Home Mortgage Securities Series
1996-3, Class M, 6.75%, 3/25/11 1,104,509 1,111,049
Prudential Home Mortgage Securities Series
1996-4, Class M, 6.50%, 4/25/26 256,947 253,927
Prudential Home Mortgage Securities Series
1996-8, Class B1, 6.75%, 6/25/26 735,546 740,874
Union Acceptance Corporation Auto Trust, Series
1997-A, 6.48%, 5/10/04 1,462,000 1,491,975
- -------------------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $5,141,119) 5,165,423
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CORPORATE BONDS 11.75%
Associates Corporation NA, 5.75%, 11/01/03 1,480,000 1,490,683
Capital One Bank, 7.20%, 7/19/99 1,000,000 1,011,885
</TABLE>
10
<PAGE>
MENTOR FIXED-INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
Capital One Bank, 7.15%, 9/15/06, puttable
9/15/99 $2,100,000 $2,181,293
Century Communications, 9.50%, 8/15/00 500,000 517,500
Lehman Brothers Holdings, Inc., 8.50%, 5/01/07 1,000,000 1,033,441
Lockheed Martin Corporation, 7.20%, 5/01/36,
puttable 5/01/08 1,000,000 1,082,729
Norwest Corporation, 6.80%, 5/15/02 270,000 283,716
Public Service Electric & Gas, 6.50%, 6/01/00 900,000 919,622
United Dominion Realty Trust, Inc., 7.07%,
11/15/06 1,300,000 1,272,062
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OTAL CORPORATE BONDS (COST $9,678,762) 9,792,931
- -------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES AND AGENCIES 60.97%
Federal Home Loan Mortgage Corporation
6.00%, 7/01/28 888,473 878,756
Federal National Mortgage Association, 6.00%,
4/01/28 - 8/01/28 2,393,803 2,365,376
Government National Mortgage Association,
6.00% - 7.00%, 5/15/09 - 8/15/28 7,602,383 7,702,030
Government National Mortgage Association, II,
6.88%, 4/20/22, ARM 2,815,659 2,839,576
U.S. Treasury Bonds, 7.13% - 7.50%,
2/15/23 - 11/15/24 8,000,000 9,948,292
U.S. Treasury Notes, 5.25% - 7.00%,
4/30/00 - 5/15/08 24,985,000 27,097,288
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TOTAL U.S. GOVERNMENT SECURITIES AND AGENCIES
(COST $49,131,095) 50,831,318
- -------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
MENTOR FIXED-INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG-TERM INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------
RESIDUAL INTERESTS (A) 2.00%
National Mortgage Funding I, Inc., 1997-4, 1998,
5/20/23 $ 59,023 $ 614,270
National Mortgage Funding I, Inc., 1997-5,
2/20/23 61,227 560,838
National Mortgage Funding I, Inc., 1998-10,
1/20/23 16,851 490,519
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TOTAL RESIDUAL INTERESTS (COST $2,218,987) 1,665,627
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TOTAL LONG-TERM INVESTMENTS (COST $74,210,411) 75,649,309
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SHORT-TERM INVESTMENTS 8.50%
- -------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 4.90%
Goldman Sachs & Company
Dated 10/30/98, 5.44%, due 11/02/98,
collateralized by $4,103,657 Federal Home
Loan Mortgage Corporation, 6.50%, 3/01/11,
market value $4,172,906 4,086,722 4,086,722
- -------------------------------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTE 3.60%
Carolina Medi-Plan, Inc., 5.22%, 6/01/22 3,000,000 3,000,000
- -------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $7,086,722) 7,086,722
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $81,297,133) 99.24% 82,736,031
OTHER ASSETS LESS LIABILITIES 0.76% 636,301
- -------------------------------------------------------------------------------------------------------------
NET ASSETS 100.00% $ 83,372,332
- -------------------------------------------------------------------------------------------------------------
</TABLE>
ARM - Adjustable Rate Mortgage
(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
Securites Act of 1933, as amended. These securities have been determined
to be liquid under guidelines established by the Board of Trustees.
12
<PAGE>
MENTOR FIXED-INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other than short-term
securities, aggregated $116,671,566 and $86,683,542, respectively.
INCOME TAX INFORMATION
At October 31, 1998, the aggregated cost of investment securities for federal
income tax purposes was $81,312,154. Net unrealized appreciation aggregated
$1,423,877, of which $2,196,666, related to appreciated investment securities
and $772,789, related to depreciated investment securities.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
<TABLE>
<CAPTION>
U.S. Government
Cash Management Fixed-Income
Portfolio Portfolio
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market value (a) (Note 2)
Investment securities $ 52,329,835 $ 78,649,309
Repurchase agreements 12,481,627 4,086,722
- --------------------------------------------------------------------------------------------
Total investments 64,811,462 82,736,031
- --------------------------------------------------------------------------------------------
Cash - 66,389
Collateral for securities loaned (Note 2) - 18,256,200
Receivables
Dividends and interest 290,106 1,083,851
Fund shares sold - 18,000
Deferred expenses (Note 2) 7,988 6,957
Other assets - 8,927
- --------------------------------------------------------------------------------------------
Total assets 65,109,556 102,176,355
- --------------------------------------------------------------------------------------------
LIABILITIES
Payables
Securities loaned (Note 2) - 18,256,200
Investments purchased - 527,910
Dividends 269,875 -
Accrued expenses and other liabilities 12,265 19,913
- --------------------------------------------------------------------------------------------
Total liabilities 282,140 18,804,023
- --------------------------------------------------------------------------------------------
NET ASSETS $ 64,827,416 $ 83,372,332
- --------------------------------------------------------------------------------------------
Net Assets represented by:
Additional paid-in capital 64,827,416 80,969,875
Accumulated undistributed net investment income - 210,480
Accumulated net realized gain on investment
transactions - 753,079
Net unrealized appreciation on investments - 1,438,898
- --------------------------------------------------------------------------------------------
NET ASSETS $ 64,827,416 $ 83,372,332
- --------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE $ 1.00 $ 13.15
- --------------------------------------------------------------------------------------------
SHARES OUTSTANDING 64,827,416 6,342,369
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Investments at cost are $64,811,462 and $81,297,133, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
U.S. Government
Cash Management Fixed-Income
Portfolio Portfolio
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest (b) (Note 2) $ 10,834,163 $ 4,391,701
- --------------------------------------------------------------------------------------------
EXPENSES
Registration expenses 104,056 12,254
Custodian and accounting fees 52,618 24,297
Shareholder reports and postage expenses 15,993 3,917
Transfer agent fee 15,900 19,078
Legal fees 12,453 2,658
Organizational expenses 6,534 6,534
Audit fees 6,272 1,352
Directors' fees and expenses 5,920 1,235
Miscellaneous 15,760 1,189
- --------------------------------------------------------------------------------------------
Total expenses 235,506 72,514
- --------------------------------------------------------------------------------------------
Deduct
Reimbursement of expenses by management company
(Note 4) (118,698) (1,996)
- --------------------------------------------------------------------------------------------
Net expenses 116,808 70,518
- --------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 10,717,355 4,321,183
- --------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
INTEREST-RATE SWAPS
Net realized gain on investments and
interest-rate swaps 625 774,135
Change in unrealized appreciation of investments - (60,111)
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 625 714,024
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 10,717,980 $ 5,035,207
- --------------------------------------------------------------------------------------------
</TABLE>
(b) Net of interest expense on interest-rate swaps of $261,568 for the
Fixed-Income Portfolio.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
MENTOR INSTITUTIONAL TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. Government
Cash Management Fixed-Income
Portfolio Portfolio
------------------------------------ -----------------------------------
Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
NET INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 10,717,355 $ 13,983,224 $ 4,321,183 $ 3,442,891
Net realized gain on investments
and interest-rate swaps 625 418 774,135 299,467
- --------------------------------------------------------------------------------------------------------------------
Change in unrealized appreciation - - (60,111) 715,440
Increase in net assets resulting from
operations 10,717,980 13,983,642 5,035,207 4,457,798
- --------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (10,717,355) (13,983,224) (4,374,722) (3,342,801)
From net realized gain on
investments (625) (418) (285,172) -
- --------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (10,717,980) (13,983,642) (4,659,894) (3,342,801)
- --------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 5)
Proceeds from sale of shares 331,400,035 435,146,664 23,755,754 16,476,287
Reinvested distributions 11,463,709 12,969,017 4,307,983 3,312,978
Shares redeemed (537,986,552) (276,138,685) (6,804,702) (9,128,026)
- --------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
capital share transactions (195,122,808) 171,976,996 21,259,035 10,661,239
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (195,122,808) 171,976,996 21,634,348 11,776,236
NET ASSETS
Beginning of year 259,950,224 87,973,228 61,737,984 49,961,748
- --------------------------------------------------------------------------------------------------------------------
End of year (including
undistributed net investment
income of $210,480 and
$323,713, respectively for
Fixed-Income Portfolio) $ 64,827,416 $ 259,950,224 $ 83,372,332 $ 61,737,984
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
MENTOR INSTITUTIONAL TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. Government
Cash Management Portfolio
----------------------------------------------------------------
Year Ended Year Ended Year Ended Period Ended
10/31/98 10/31/97 10/31/96 10/31/95 (b)
------------ ------------- ------------ ------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05
Net realized and unrealized gain (loss) on
investments -* -* -* -
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.05 0.05 0.05 0.05
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
From net investment income (0.05) (0.05) (0.05) (0.05)
From capital gains -* -* -* -
- --------------------------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.05) (0.05) (0.05)
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------------------------------
Total Return (d) 5.63% 5.56% 5.60% 5.06%
- --------------------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $64,827 $ 259,950 $ 87,973 $ 69,997
Ratio of expenses to average net assets 0.06% 0.06% 0.04% 0.04%(a)
Ratio of expenses to average net assets
excluding waiver 0.12% 0.09% 0.12% 0.18%(a)
Ratio of net investment income to average
net assets 5.48% 5.45% 5.54% 5.56%(a)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) For the period from December 5, 1994 (commencement of operations) to
October 31, 1995.
(d) Total return does not reflect sales commission and is not annualized.
* Reflects net realized gain (loss) which was less than $0.005 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
MENTOR INSTITUTIONAL TRUST
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Fixed-Income Portfolio
----------------------------------------------------------------
Year Ended Year Ended Year Ended Period Ended
10/31/98 10/31/97 10/31/96 10/31/95 (c)
------------ ------------ ------------ -------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.11 $ 12.89 $ 13.71 $ 12.50
- -----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.79 0.83 0.77 0.81
Net realized and unrealized gain (loss) on
investments 0.13 0.21 (0.16) 1.14
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 0.92 1.04 0.61 1.95
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
From net investment income (0.82) (0.82) (0.77) (0.74)
From capital gains (0.06) - (0.66) -
- -----------------------------------------------------------------------------------------------------------------
Total distributions (0.88) (0.82) (1.43) (0.74)
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 13.15 $ 13.11 $ 12.89 $ 13.71
- -----------------------------------------------------------------------------------------------------------------
Total Return (d) 7.21% 8.39% 4.87% 15.90%
- -----------------------------------------------------------------------------------------------------------------
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $83,372 $ 61,738 $ 49,962 $ 34,053
Ratio of expenses to average net assets 0.10% 0.10% 0.05% 0.05%(a)
Ratio of expenses to average net assets
excluding waiver 0.10% 0.15% 0.17% 0.22%(a)
Ratio of net investment income to average
net assets 6.08% 6.52% 6.22% 6.75%(a)
Portfolio turnover rate 137% 194% 226% 302%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(c) For the period from December 6, 1994 (commencement of operations) to
October 31, 1995.
(d) Total return does not reflect sales commission and is not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
NOTE 1: ORGANIZATION
Mentor Institutional Trust ("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 four separate diversified
portfolios (hereinafter each individually referred to as a "Portfolio" or
collectively as the "Portfolios") at October 31, 1998, as follows:
Mentor U.S. Government Cash Management Portfolio ("Cash Management
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 do not include the International Portfolio and the
SNAP Fund.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
The policies are in conformity with generally accepted accounting principles
which 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
Portfolios.
(a) Valuation of Securities
Securities held by the Cash Management Portfolio are stated at amortized cost,
which approximates market value as permitted by Rule 2a-7 of the Investment
Company Act of 1940. In the event that a deviation of 1/2 of 1% or more exists
between the Portfolio's $1.00 per share net asset value, calculated at
amortized cost, and the net asset value calculated by reference to market-based
values, or if there is any other deviation that the Board of Trustees believes
would result in a material dilution to shareholders or purchasers, the Board of
Trustees will
19
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
promptly consider what action should be initiated. Net asset value per share is
determined each business day for the Cash Management Portfolio and Fixed-Income
Portfolio by dividing net asset value by the number of shares outstanding at
the end of each business day.
U.S. Government obligations held by the Fixed-Income Portfolio are valued at
the mean between the over-the-counter bid and asked prices as furnished by an
independent pricing service. Listed corporate bonds, other fixed income
securities, mortgage backed securities, mortgage related, asset-backed and
other related securities are valued at the prices provided by an independent
pricing service. Security valuations not available from an independent pricing
service are provided by dealers approved by the Portfolio's Board of Trustees.
In determining value, the pricing services use information with respect to
transactions in such securities, market transactions in comparable securities,
various relationships between securities, and yield to maturity. Any securities
for which current market quotations are not readily available are valued at
their fair value as determined in good faith under procedures established by
the Board of Trustees.
(b) Repurchase Agreements
It is the policy of the Trust to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book entry system 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 advisor 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.
20
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(c) Portfolio Securities Loaned
The Fixed-Income Portfolio is authorized by the Board of Trustees to
participate in securities lending transactions.
The Portfolio may receive fees for participating in securities lending
transactions. During the period that a security is out on loan, the Portfolio
continues to receive interest or dividends on the securities loaned. The
Portfolio receives collateral in an amount at least equal to, at all times, the
fair value of the securities loaned plus interest. When cash is received as
collateral, the Portfolio records an asset and obligation for the market value
of that collateral. Cash received as collateral may be reinvested, in which
case that security is recorded as an asset of the Portfolio. Variations in the
market value of the securities loaned occurring during the term of the loan are
reflected in the value of the Portfolio.
At October 31, 1998, the Fixed-Income Portfolio had loaned securities to
brokers which were collateralized by cash and securities. Cash collateral at
October 31, 1998 was reinvested in U.S. Treasury and high quality money market
instruments. Income from securities lending activities amounted to $12,889 for
the year ended October 31, 1998. The risks to the Portfolio from securities
lending are that the borrower may not provide additional collateral when
required or return the securities when due. At October 31, 1998, the value of
the securities on loan and the value of the related collateral were as follows:
<TABLE>
<CAPTION>
Securities Cash Tri-Party
Portfolio On Loan Collateral Collateral
- -------------- --------------- --------------- --------------
<S> <C> <C> <C>
Fixed-Income $ 19,496,139 $ 18,256,200 $ 1,648,424
</TABLE>
(d) Security Transactions and Interest Income
Security transactions for the Portfolios are accounted for on a trade date
basis. Interest income is recorded on the accrual basis and includes
amortization of premium and discount on investments. Dividends are recorded on
ex-dividend date. Realized and unrealized gains and losses on investment
security transactions are calculated on an identified cost basis.
(f) Expenses
Expenses arising in connection with a Portfolio are allocated to that
Portfolio.
21
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Other Trust expenses are allocated among the Portfolios in proportion to their
relative net assets.
(g) 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 the allowable time limit substantially all taxable income
and realized capital gains.
(h) When-Issued and Delayed Delivery Transactions
Fixed-Income Portfolio may engage in when-issued or delayed delivery
transactions. To the extent the Portfolio engages in such transactions, they
will do so for the purpose of acquiring portfolio securities consistent with
its investment objectives and policies and not for the purpose of investment
leverage. The Portfolio will record a when-issued security and the related
liability on the trade date. Until the securities are received and paid for,
the Portfolio will maintain security positions such that sufficient liquid
assets will be available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.
(i) 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.
(j) 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 the deferral of
wash sales.
(k) Residual Interests
A derivative security is any investment that derives its value from an
underlying
22
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
security, asset, or market index. Fixed-Income Portfolio invests in mortgage
security residual interests ("residuals") which are considered derivative
securities. The Portfolio's investment in residuals have been primarily in
securities issued by proprietary mortgage trusts. While these entities have
been highly leveraged, often having indebtedness of up to 95% of their total
value, the Portfolio has not incurred any indebtedness in the course of making
these residual investments; nor has the Portfolio's assets been pledged to
secure the indebtedness of the issuing structure or the Portfolio's investment
in the residuals. In consideration of the risk associated with investment in
residual securities, it is the Portfolio's policy to limit its exposure at the
time of purchase to no more than 20% of its total assets.
(l) Interest-Rate Swaps
An interest-rate swap is a contract between two parties on a specified
principal amount (referred to as the notional principal) for a specified
period. In the most common instance, a swap involves the exchange of streams of
variable and fixed-rate interest payments. During the term of the swap, changes
in the value of the swap are recognized as unrealized gains or losses by
marking-to-market to reflect the market value of the swap. When the swap is
terminated, the Portfolio will record a realized gain or loss. As of October
31, 1998, there were no outstanding interest rate swap agreements.
NOTE 3: DIVIDENDS
Dividends will be declared daily and paid monthly by the Cash Management
Portfolio. Dividends are declared and paid quarterly by the Fixed-Income
Portfolio. Capital gains realized by each Portfolio, if any, will be
distributed annually.
23
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4: INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS
Mentor Investment Advisors, LLC ("Mentor Advisors"), the Portfolios' investment
advisor, receives no compensation for its services. Mentor Advisors is a
wholly-owned subsidiary of Mentor Investment Group, LLC ("Mentor"), which is a
partially owned subsidiary of Wheat First Union. EVEREN Capital Corporation
owns 20% of the outstanding interest in Mentor.
In order to limit the annual operating expenses of the Portfolios, Mentor
Advisors may bear certain expenses incurred in connection with the operation of
the Portfolios. For the year ended October 31, 1998, Mentor Advisors bore
expenses of $118,698, and $1,996, respectively, for the Cash Management
Portfolio and Fixed-Income Portfolio.
Mentor provides administrative personnel and services to each Portfolio,
pursuant to an Administration Agreement. Mentor receives no compensation for
such services.
24
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 5: 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 capital
shares were as follows:
<TABLE>
<CAPTION>
Cash Management Portfolio
Year Ended Year Ended
10/31/98 10/31/97
----------------- -----------------
<S> <C> <C>
Shares sold 331,400,035 435,146,664
Shares issued upon reinvestment of distributions 11,463,709 12,969,017
Shares redeemed (537,986,552) (276,138,685)
------------ ------------
Change in shares outstanding (195,122,808) 171,976,996
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Fixed-Income Portfolio
Year Ended Year Ended
10/31/98 10/31/97
----------------- -----------------
<S> <C> <C>
Shares sold 1,822,466 1,278,210
Shares issued upon reinvestment of distributions 332,359 259,140
Shares redeemed (520,775) (703,906)
------------ ------------
Change in shares outstanding 1,634,050 833,444
------------ ------------
</TABLE>
ADDITIONAL INFORMATION
YEAR 2000 (UNAUDITED)
The Portfolios receive services from a number of providers which rely on the
effective functioning of their respective systems and the systems of others to
perform those services. It is generally recognized that certain systems in use
today may not be able to perform their intended functions adequately after 1999
because of the inability of computer software to distinguish the year 2000 from
the year 1900. Mentor Advisors is taking steps that it believes are reasonably
designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Portfolios' other major service providers. There can be no assurance, however,
that these steps will be sufficient to avoid any adverse impact on the
Portfolios from this problem.
25
<PAGE>
MENTOR INSTITUTIONAL TRUST
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
FEDERAL TAX STATUS OF DIVIDENDS DECLARED (UNAUDITED)
The Fixed-Income Portfolio paid long-term capital gain dividends of $95,057
during the year. The Cash Management Portfolio paid no long-term capital gain
dividends. For federal income tax purposes, dividends from short-term capital
gains, as well as dividends paid from net investment income, are treated as
ordinary income.
26
<PAGE>
MENTOR INSTITUTIONAL TRUST
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
THE TRUSTEES AND SHAREHOLDERS
MENTOR INSTITUTIONAL TRUST
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the U.S. Government Cash Management
Portfolio and Fixed-Income Portfolio, portfolios of Mentor Institutional Trust
as of October 31, 1998, and the related statements of operations for the year
then ended, statements of changes in net assets for each of the years in the
two-year period then ended and financial highlights for U.S. Government Cash
Management Portfolio and Fixed-Income Portfolio for each of the years or
periods in the four-year period ended October 31, 1998. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1998 by correspondence with custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
U.S. Government Cash Management Portfolio and Fixed-Income Portfolio,
portfolios of Mentor Institutional Trust, as of October 31, 1998 and the
results of their operations, the changes in their net assets and their
financial highlights for the periods specified in the first paragraph above, in
conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Boston, Massachusetts
December 18, 1998
27
<PAGE>
TRUSTEES
Daniel J. Ludeman, TRUSTEE & CHAIRMAN
Chairman and Chief Executive Officer
Mentor Investment Group, LLC
Arch T. Allen III, TRUSTEE
Attorney at Law
Allen & Moore, LLP
Jerry R. Barrentine, TRUSTEE
J.R. Barrentine & Associates
Arnold H. Dreyfuss, TRUSTEE
Former Chairman and Chief Executive Officer
Hamilton Beach/Proctor-Silex, Inc.
Weston E. Edwards, TRUSTEE
President
Weston Edwards & Associates
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
J. Garnett Nelson, TRUSTEE
Consultantr
Mid-Atlantic Holdings, LLC
Troy A. Peery, Jr., TRUSTEE
President
Heilig-Meyers Company
Peter J. Quinn,Jr.,TRUSTEE
Managing Director
Mentor Investment Group, LLC
OFFICERS
Paul F. Costello, PRESIDENT
Managing Director
Mentor Investment Group, LLC
Terry L. Perkins, TREASURER
Senior Vice President, Treasurer
Mentor Investment Group, LLC
Geoffrey B. Sale, SECRETARY
Associate Vice President
Mentor Investment Group, LLC
Michael A. Wade, ASSISTANT TREASURER
Vice President, Controller
Mentor Investment Group, LLC
MK#1310
Mentor Institutional Trust
o U.S. Government Cash
Management Portfolio
o Fixed-Income Portfolio
---------------------------
ANNUAL REPORT
---------------------------
October 31, 1998
[MENTOR INVESTMENT GROUP LOGO]
