SNAP(sm) Fund
Portfolio of Investments
June 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Percent of Principal Value
Net Assets Amount (Note 2)
- --------------------------------------------------------------------------------------------
<S> <C>
Bankers Acceptances (d) 2.75%
Bank of Montreal, 5.51%, 7/17/98 $ 9,700,000 $ 9,676,246
Corestates Bank, 5.36%, 7/22/98 5,117,850 5,101,848
Morgan Guaranty Trust, 5.52%, 7/8/98 15,000,000 14,983,900
- --------------------------------------------------------------------------------------------
Total Bankers Acceptances 29,761,994
- --------------------------------------------------------------------------------------------
Bank Notes 26.68%
Abbey National, N.A., 5.88%, 12/22/98 20,000,000 20,028,144
Banc One, 5.55%, 1/29/99 - 2/26/99 (d) 40,000,000 39,977,405
Bank of America, 5.65%, 1/7/99 20,000,000 20,007,216
Bank of New York (d)
5.53%, 2/25/99 20,000,000 19,991,205
5.66%, 6/17/99 20,000,000 19,986,537
FCC National Bank, 5.74%, 5/7/99 (d) 20,000,000 19,990,241
First Tennessee Bank, 5.70%, 4/15/99 (d) 25,000,000 24,990,532
Greenwood Trust Company
5.57%, 7/24/98 20,000,000 20,000,000
5.59%, 9/16/98 20,000,000 20,000,000
Harris Trust, 5.53%, 7/13/98 25,000,000 25,000,000
Key Bank, N.A., 5.76%, 1/14/99 (b) (d) 25,000,000 24,994,405
Morgan Guaranty Trust, 5.71%, 1/8/99 14,100,000 14,099,121
NationsBank, 5.55%, 7/16/98 (d) 20,000,000 19,999,392
- --------------------------------------------------------------------------------------------
Total Bank Notes 289,064,198
- --------------------------------------------------------------------------------------------
Commercial Paper (d) 32.63%
Alpine Securitization, 5.53% - 5.54%,
7/21/98 (a) (c) 42,664,000 42,532,815
CXC Inc., 5.54%, 8/10/98 (a) 20,000,000 19,876,889
Delaware Funding Corporation, 5.55%,
7/30/98 (a) 30,000,000 29,865,875
General Electric Capital Corporation,
5.35%, 7/20/98 20,000,000 19,943,528
GMAC, 5.54%, 7/24/98 30,000,000 29,893,817
Greenwich Funding Corporation
5.55%, 9/21/98 (a) (c) 30,000,000 29,620,750
J.P. Morgan, 5.37%, 7/17/98 10,000,000 9,976,133
Mont Blanc Corporation, 5.58%, 8/28/98 (a) 25,000,000 24,775,250
Monte Rosa Capital Corporation
5.55%, 8/14/98 (a) 30,000,000 29,796,500
Repeat Offering Securitization Entity, 5.53%,
7/28/98 (a) 26,876,000 26,764,532
Rincon Securities, Inc.
5.54%, 7/24/98 20,000,000 19,929,211
5.52%, 9/15/98 10,800,000 10,674,144
Salomon Smith Barney, 5.52%, 8/7/98 20,000,000 19,886,533
<PAGE>
</TABLE>
SNAP(sm) Fund
Portfolio of Investments
June 30, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Percent of Principal Value
Net Assets Amount (Note 2)
- --------------------------------------------------------------------------------------------
<S> <C>
Commercial Paper (d) (continued)
Special Purpose Accounts Receivable, 5.55%,
8/14/98 (a) $ 20,000,000 $ 19,864,456
Windmill Funding Corporation, 5.60%,
7/23/98 (a) 20,217,000 20,147,813
- --------------------------------------------------------------------------------------------
Total Commercial Paper 353,548,246
- --------------------------------------------------------------------------------------------
Corporate Note 1.85%
Goldman Sachs Group, 5.60%, 5/11/99 20,000,000 20,000,000
- --------------------------------------------------------------------------------------------
U.S. Government Agencies 7.32%
Federal National Mortgage Association
5.62%, 11/9/98 (b) 50,000,000 49,994,789
5.41%, 2/23/99 10,000,000 9,993,890
5.45%, 4/15/99 14,400,000 14,372,764
Student Loan Marketing Association
5.33%, 1/13/99 (b) 5,000,000 5,000,000
- --------------------------------------------------------------------------------------------
Total U.S. Government Agencies 79,361,443
- --------------------------------------------------------------------------------------------
Variable Rate Demand Note 3.03%
- --------------------------------------------------------------------------------------------
Catholic Health Initiative, 5.60%, 12/1/27 (b) 32,800,000 32,800,000
Total Investment Securities 804,535,881
- --------------------------------------------------------------------------------------------
Repurchase Agreements 25.23%
Goldman, Sachs & Company
Dated 6/30/98, 6.05%, Due 7/1/98; collateralized by
$140,315,000 (original face value) Federal National
Mortgage Association, 6.00% - 9.50%, 6/1/03 - 11/1/25
and $173,262,581 (original face value) Federal Home
Loan Mortgage Corporation, 6.00% - 8.00%,
9/1/98 - 6/1/28; market value $253,171,214 233,332,223 233,332,223
Merrill Lynch
Dated 6/30/98, 6.20%, Due 7/1/98; collateralized by
$39,870,871 Government National Mortgage
Association, 6.50% - 7.00%, 7/15/24 - 2/20/27;
market value $40,801,243 40,000,000 40,000,000
- --------------------------------------------------------------------------------------------
Total Repurchase Agreements 273,332,223
- --------------------------------------------------------------------------------------------
<PAGE>
SNAP(sm) FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
- ---------------------------------------------------------------------------------------------------
PERCENT OF VALUE
NET ASSETS (NOTE 2)
- ---------------------------------------------------------------------------------------------------
Total Investments (cost $1,077,868,104) 99.49% $ 1,077,868,104
- ---------------------------------------------------------------------------------------------------
Other Assets less Liabilities 0.51% 5,496,185
- ---------------------------------------------------------------------------------------------------
Net Assets 100.00% $ 1,083,364,289
- ---------------------------------------------------------------------------------------------------
</TABLE>
(a) These are securities that may be resold to qualified institutional buyers
under Rule 144A or securities offered pursuant to section 4(2) of the
Securities Act of 1933, as amended.
(b) Floating Rate Securities- The rates shown are the effective rates at June
30, 1998.
(c) These securities are illiquid because they can not be resold within seven
business days from June 30, 1998.
(d) These securities are traded at a discount. The rates shown represent the
effective yield of the securities, which consider the discount received at
the time of purchase by the Fund.
See notes to financial statements.
<PAGE>
SNAP(sm) Fund
Statement of Assets and Liabilities
June 30, 1998
- -----------------------------------------------------------------
Assets
Investments, at amortized cost (Note 2)
Investment securities $ 804,535,881
Repurchase agreements 273,332,223
- -----------------------------------------------------------------
Total investments 1,077,868,104
- -----------------------------------------------------------------
Dividends and interest receivable 5,382,100
Organizational expenses (Note 2) 180,931
- -----------------------------------------------------------------
Total assets 1,083,431,135
- -----------------------------------------------------------------
Liabilities
Accrued expenses and other liabilities 66,846
- -----------------------------------------------------------------
Total liabilities 66,846
- -----------------------------------------------------------------
Net Assets $1,083,364,289
- -----------------------------------------------------------------
Shares Outstanding 1,083,364,289
Net Asset Value per Share $ 1.00
- -----------------------------------------------------------------
Statement of Operations
Year Ended June 30, 1998
- -------------------------------------------------------------------------
Investment income
Interest $ 57,965,692
- -------------------------------------------------------------------------
Expenses
Advisory fees (Note 3) 837,768
Custodian and accounting fees (Note 3) 145,232
Amortization of organizational expenses (Note 2) 101,105
Registration expenses 21,667
Legal fees 19,503
Audit fees 8,024
Miscellaneous 19,951
- -------------------------------------------------------------------------
Total expenses 1,153,250
- -------------------------------------------------------------------------
Net investment income 56,812,442
- -------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 56,812,442
- -------------------------------------------------------------------------
See notes to financial statements.
<PAGE>
SNAP(sm) Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 1998 June 30, 1997
- --------------------------------------------------------------------------------------------
<S> <C>
Net Increase in Net Assets $ 56,812,442 $ 50,788,919
Operations
Net investment income
- --------------------------------------------------------------------------------------------
Increase in net assets resulting
from operations 56,812,442 50,788,919
- --------------------------------------------------------------------------------------------
Distributions to shareholders
from net investment income (56,812,442) (50,788,919)
- --------------------------------------------------------------------------------------------
Capital Share Transactions
(at $1.00 per share)
Net proceeds from sale of shares 1,468,606,191 1,457,944,273
Reinvested distributions 56,812,442 50,788,304
Cost of shares redeemed (1,487,637,145) (1,417,927,189)
- --------------------------------------------------------------------------------------------
Net change in net assets resulting from
capital share transactions 37,781,488 90,805,388
- --------------------------------------------------------------------------------------------
Total increase in net assets 37,781,488 90,805,388
Net Assets
Beginning of year 1,045,582,801 954,777,413
- --------------------------------------------------------------------------------------------
End of year $1,083,364,289 $1,045,582,801
- --------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
<PAGE>
SNAP(sm) Fund
Financial Highlights
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Year Ended Year Ended Period Ended (b)
June 30, 1998 June 30, 1997 June 30, 1996
- --------------------------------------------------------------------------------------------
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.06 0.05 ** 0.05 **
- --------------------------------------------------------------------------------------------
Distributions from net investment income (0.06) (0.05)** (0.05)**
- --------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------------------
Total Return 5.71% 5.51% 5.29%
- --------------------------------------------------------------------------------------------
Ratios / Supplemental Data
Net assets, end of period
(in thousands) $1,083,364 $1,045,583 $ 954,777
Ratio of expenses to average
net assets 0.11% 0.11% 0.12% (a)
Ratio of net investment income to
average net assets 5.56% 5.38% 5.53% (a)
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) For the period from July 24, 1995 (commencement of operations as a
registrant under the Investment Company Act of 1940) to June 30, 1996.
** Includes net realized capital gains which were less than $0.01 per share.
See notes to financial statements.
<PAGE>
SNAP(sm) Fund
Notes to Financial Statements
June 30, 1998
- -------------------------------------------------------------------------------
Note 1: Organization
SNAP(sm) Fund (the "Fund") is an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund is a
series of shares of beneficial interest of Mentor Institutional Trust, a
Massachusetts business trust. Prior to July 24, 1995, the Fund was known as the
Mentor Limited Duration Portfolio and had no shares outstanding. On July 24,
1995, net assets of the Virginia State Non-Arbitrage Program (SNAP) in the
amount of $628,335,685 were exchanged for shares of the Fund.
Note 2: Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Fund.
(a) Valuation of Securities
Investments 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 Fund's $1.00 per share net
asset value, calculated at amortized cost, and the net asset value calculated by
reference to market-based values, or if there is any other deviation that the
Board of Trustees believes would result in a material dilution to shareholders
or purchasers, the Board of Trustees will promptly consider what action, if any,
should be initiated. Net asset value per share is determined each business day
for the Fund and is calculated by dividing net asset value by the number of
shares outstanding at the end of each business day.
(b) Repurchase Agreements
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book entry system, or to have
segregated within the custodian bank's possession all securities held as
collateral in support of repurchase agreement investments. Additionally,
procedures have been established by the Trust to monitor, on a daily basis, the
market value of each repurchase agreement's underlying securities to ensure the
existence of a proper level of collateral.
The Fund will enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers which are deemed by the Fund's
investment advisor to be credit-worthy, only pursuant to guidelines established
by the Board of Trustees. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly, the
Fund could receive less than the repurchase price on the sale of collateral.
(c) Investment Transactions
Investment transactions are accounted for on trade date and the cost of
investments sold is determined by use of the specific identification method.
(d) Interest Income and Expenses
Interest income is recorded on the accrual basis as earned and includes
amortization of premiums and discounts on investments. Expenses arising in
connection with the operation of the Fund are recorded on the accrual basis as
incurred and paid from the assets of the Fund.
(e) Organizational Expenses
Organizational expenses are related to costs incurred in connection with the
registration of the Fund as a management investment company. Such expenses are
being amortized on a straight-line basis over 60 months.
(f) Distributions to Shareholders
Dividends, equal to the net investment income plus or minus any net realized
gains or losses, are declared daily and paid monthly.
(g) Federal Income Taxes
No provision for federal income taxes has been made as it is the Fund's policy
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.
Note 3: Investment Management Fees
The Fund has entered into an Investment Management and Advisory Agreement with
Mentor Investment Advisors, LLC (Mentor Advisors) to provide investment advisory
services to the Fund. The Fund pays advisory fees to Mentor Advisors monthly at
the following annual rates expressed as a percentage of the average daily net
assets of the Fund:
Average Daily Net Assets Rate
First $500 million 0.09%
Next $250 million 0.08%
Next $250 million 0.07%
Next $250 million 0.06%
Over $1.25 billion 0.05%
<PAGE>
SNAP(sm) Fund
Notes to Financial Statements (continued)
- -------------------------------------------------------------------------------
Mentor Advisors is a wholly owned subsidiary of Mentor Investment Group, LLC,
which is in turn a partially owned subsidiary of Wheat First Union and EVEREN
Capital Corporation.
Note 4: Governmental Accounting and Financial Reporting for Investments and
Investment Pools
Governmental accounting standards state that credit risk is the risk that an
Investor may not be able to obtain possession of its investment instrument or
collateral at maturity. A portfolio of a subject entity is required to be
characterized into certain categories. Risk category 1 includes investments that
are insured or registered or for which the securities are held by the Investor
or its agent in the Investor's name. Risk category 2 includes uninsured or
unregistered investments for which the securities are held by the broker's or
dealer's trust department or agent in the Investor's name. Risk category 3
includes uninsured or unregistered investments for which the securities are held
by the broker or dealer, or by its trust department or agent but not in the
Investor's name. All investments held at June 30, 1998 are in risk category 1.
Governmental accounting standards also require, among other things, disclosure
of the extent of involuntary participation (those investors that are required by
legal provisions) in the Fund. Participants who borrow through the Virginia
Public School Authority's pooled bond program are required to invest their bond
proceeds in the Fund.
Note 5: Capital Share Information Net assets consist entirely of paid-in-capital
applicable to $1,083,364,289 no par value shares of beneficial interest
outstanding. An unlimited number of shares have been authorized for issuance.
Note 6: Year 2000 (unaudited)
The Fund receives 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 effectively 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 the Fund's other major
service providers. There can be no assurance, however, that these steps will be
sufficient to avoid any adverse impact on the Fund from this problem.
Independent Auditors' Report
The Board Of Trustees
Mentor Institutional Trust
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of the SNAP(sm) Fund, a portfolio of Mentor
Institutional Trust, as of June 30, 1998, and the related statement 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 each
of the years in the two-year period then ended and for the period from July 24,
1995 (commencement of operations as a registrant under the Investment Company
Act of 1940) to June 30, 1996. These financial statements and financial
highlights are the responsibility of the Fund'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 and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1998 by correspondence with the custodian. 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
SNAP(sm) Fund, a portfolio of Mentor Institutional Trust, as of June 30, 1998,
and the results of its operations for the year then ended, changes in its net
assets for each of the years in the two-year period then ended and financial
highlights for each of the years in the two-year period then ended and for the
period from July 24, 1995 (commencement of operations as a registrant under the
Investment Company Act of 1940) to June 30, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Boston, Massachusetts
July 31, 1998
