Mentor Institutional Trust
U.S. Government Cash Management Portfolio
Fixed-Income Portfolio
Message from the Chairman and President
- --------------------------------------------------------------------------------
It is our privilege to send you the Mentor Institutional Trust Annual Report
for the U.S. Government Cash Management and Fixed-Income Portfolios, for the
year ended October 31, 1997.
Mentor Institutional Trust is part of Mentor Investment Group, a firm that
provides diversified investment services to a broad range of investors
including corporations, foundations, endowments, municipalities, public funds,
and individual investors. Seven different investment styles are available to
investors through Mentor, in both mutual funds and separately-invested
portfolios.
In the Annual Report that follows the management teams present their
perspectives on the markets and their
Mentor Investment Group
[GRAPH]
Seven Investment Style
[Listed in order from Lower Risk and Reward down to Higher Risk and Reward]
Cash Management
Active Fixed Income
Balanced Management
Tactical Asset Allocation
Large-Capitalization Quality Growth
Global/International Equity Growth
Small/Mid-Capitalization Growth
1
<PAGE>
Mentor Institutional Trust
U.S. Government Cash Management Portfolio
Fixed-Income Portfolio
Message from the Chairman and President (continued)
- --------------------------------------------------------------------------------
strategies for investing your assets. Complete performance information for the
Fixed-Income Portfolio, relative to the appropriate index, is also included in
the reports.
Please review the information carefully. Should you have any questions, please
call your consultant, or call us directly, (800) 382-0016. We welcome your
comments.
On behalf of all of us at Mentor Investment Group, we thank you for your
investment in Mentor Institutional Trust.
Sincerely,
/s/ Daniel J. Ludeman /s/ Paul F. Costello
- --------------------- ---------------------
Daniel J. Ludeman Paul F. Costello
Chairman and CEO 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 a prospectus for Mentor Funds and Mentor
Institutional Trust, 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
<PAGE>
U.S. Government Cash Management Portfolio
Managers' Commentary
- --------------------------------------------------------------------------------
The year ended October 31, 1997 marked the completion of the U.S. Government
Cash Management Portfolio's third full year of operation and first full year as
an all-government fund. It was an eventful 12 months for the fund. In addition
to its conversion to an all government and agency portfolio, the fund received
its designation from Standard & Poor's Corporation as a AAAm-rated fund.
In the money markets the year witnessed the only shift in monetary policy by
the Federal Reserve during an otherwise stable period, which is now approaching
two years. That shift occurred on March 25, when short rates were raised 0.25%
in the Fed's much-publicized "pre-emptive strike" against inflation. For most
of the year, however, the economy maintained a remarkable pattern of
fair-to-moderate growth with low inflation. Market volatility was considerable,
but this tended to be sparked more by the ebb and flow of speculation over the
Fed's next move than by the emergence of concrete events.
The Economy and the Market
There is an old saying that "a watched pot never boils." For the better part of
two years now, one of the most closely watched "pots" in the world has been the
U.S. economy, its activity scrupulously watched by the Fed, Wall Street, and
economists - both public and private -for signs overheating, i.e., for signs of
inflation.
But for almost two years, the heat has been just about right - hot enough to
keep things progressing, yet cool enough to avoid the turbulence of inflation.
Economic data have tended to ebb and flow, with each wave sending speculation
through the markets over what the Fed was likely to do next. But every time the
data seemed to be signaling an increase in the heat, it was soon followed by
other data signaling cooling. The overall trendline consistently delineated a
path of moderate growth with inflation almost non-existent. Consequently, the
"chef"(the Fed) has found it necessary to make only one adjustment over the
past 20 months, as noted above.
The Investment Outlook
The year ended with growing uneasiness that the economy's temperature was once
again rising. Consumers seemed to be
3
<PAGE>
U.S. Government Cash Management Portfolio
Managers' Commentary (continued)
- --------------------------------------------------------------------------------
loosening their purse strings and gaining confidence just at a time when labor
markets were extremely tight and factories were already running at near-record
capacity. But just as this uneasiness began to fuel speculation of a Fed
increase, a currency crisis in Hong Kong sparked dramatic volatility in world
equity markets. This in turn, prompted a "flight to quality" and unsettled
conditions in our money markets.
Hence, the current year is off to an uncertain start, already presenting
challenges to the skills of portfolio managers. Throughout the past year our
conservative investment philosophy enabled the fund to provide satisfactory
current income without compromising our high quality and liquidity standards.
We intend to continue this philosophy through the uncertain times ahead, always
placing primary emphasis on safety and liquidity.* The objective of the U.S.
Government Cash Management Portfolio is to continue to seek current income and
preservation of capital.
* While the managers seek to invest the Portfolio in accordance with these high
standards, there is no guarantee of investment success. An investment in the
Portfolio is neither guaranteed nor insured by the U.S. government and there
can be no assurance that it will maintain a stable net asset value of $1.00
per share.
4
<PAGE>
Fixed-Income Portfolio
Managers' Commentary
- --------------------------------------------------------------------------------
Market Conditions
During the 12-month period ended October 31, 1997 the yield curve flattened.
While yields of three-month and six-month treasury bills were largely
unchanged, yields of treasury notes and bonds with maturities of five years and
greater were lower by 0.35% to 0.50%. Generally speaking, the greater the
maturity of the security, the larger the decrease in its yield. Two- and
10-year treasuries closed the period at 5.61% and 5.83%, respectively, down
0.12% and 0.51% from the beginning of the period. Rates trended lower during
the period with the exception of the first quarter of 1997. In the first
quarter much stronger than anticipated economic growth prompted the Federal
Reserve to increase the federal funds rate (the rate member banks charge each
other on inter-bank loans) by 0.25% in late March.
As noted, only once during the 12-month period did the Federal Reserve deem it
necessary to alter the level of the short-term fed funds rate, and then only
modestly. Otherwise the monetary authorities remained on the sidelines, content
to let the economy move unencumbered on a low-inflation and moderate-growth
progression. Gross Domestic Product (GDP), the most comprehensive measure of
overall domestic economic growth, grew at annualized rates of 4.3%, 4.9%, 3.3%,
and 3.3% for the fourth quarter of 1996, the first quarter of 1997, the second
quarter of 1997, and the third quarter of 1997, respectively.
Despite continued steady economic growth, inflation at both the wholesale and
retail levels has remained consistently benign. In seven of the 12 monthly
periods during the fiscal year ended October 31, the Producer Price Index (PPI)
actually declined. The CPI-core (Consumer Price Index minus the volatile food
and energy components), viewed by many as the most reliable and significant of
the inflation measures, only once during the period experienced a monthly
increase as much as 0.3%. Given the lack of current measurable inflationary
pressure and the Federal Reserve's growing credibility as an inflation-fighting
institution, fixed-income buyers have scaled back the inflation premium they
have demanded from their fixed-income investments. As a result, despite
continued economic growth and the lowest unemployment rate in the past 30
years, rates on fixed-income securities have eased from levels of a year ago.
5
<PAGE>
Fixed-Income Portfolio
Managers' Commentary (continued)
- --------------------------------------------------------------------------------
Performance
The Mentor Fixed-Income Portfolio returned 8.39% for the 12 months ended
October 31, 1997, 0.43% below the return of its Lehman Brothers
Government/Corporate Bond Index benchmark.* Virtually all of this
underperformance occurred during the month of October. During that month,
turmoil in emerging Asian and Latin American markets prompted a flight to
quality into U.S. Treasury obligations. Because investors fleeing overseas
turbulence were only interested in buying treasury bonds, virtually every other
fixed-income security class (corporate bonds, mortgaged-backed securities,
etc.) failed to participate fully in the bond market rally. The Lehman Brothers
Government/Corporate Bond Index, with an 80% weighting in government-issued
securities, performed well during this period. We expect price returns of other
fixed-income markets to catch up to treasury issues early in 1998 as investors
return to higher-yielding alternatives.
Since the Federal Reserve intervened to raise the federal funds rate in late
March, we have maintained a duration within 10% of our benchmark. Our sense has
been that despite the continued good inflationary news, an increasingly tight
job market will eventually lead to pricing pressures. At no point during the
12-month period ended October 31, 1997 did the unemployment level exceed 5.4%.
In fact, during the last half of the period the unemployment rate never
surpassed 5.0%. These are levels that as recently as a few years ago were
considered below "full employment."
At the period's end the Fixed-Income Portfolio maintained a duration
approximately 5% shorter than its Lehman Brothers Government/Corporate Bond
Index benchmark. Its primary underweighting relative to its benchmark was in
the five-year sector of the curve while it maintained an overweighting in the
30-year sector. During the period we selectively added to the Fixed-Income
Portfolio a 7.5% duration position in international fixed-income markets. The
majority of this position represents exposure to five-year German interest
rates, while the balance is invested in the two-year area of the United
Kingdom's fixed-income market. All international exposure has been done on a
currency-hedged basis through the use of swap contracts; the Portfolio is not
accepting the volatility inherent in unhedged foreign currency exposure. Over
time participation in high-quality international bond markets should allow us
to enhance
6
<PAGE>
Fixed-Income Portfolio
Managers' Commentary (continued)
- --------------------------------------------------------------------------------
the risk/return profile of the Fixed-Income Portfolio relative to pure domestic
fixed-income alternatives.** The Fixed-Income Portfolio seeks a high level of
long-term total return by investing in a diversified portfolio of
investment-grade, fixed-income securities. Preservation of capital also remains
an important objective.
Market Outlook
The moderate growth, low unemployment, low inflation environment of recent
years continues intact. We believe, however, that this combination of economic
growth and job creation, if sustained, may eventually lead to inflationary
pressures. We are of the opinion that the Fed would likely have tightened in
November absent the recent extreme international market volatility.
The outlook going forward is clouded by uncertainty over how much growth in the
Pacific Rim will decline, and to what degree this slow-down in Asia will affect
the U.S. economy. Given the stock market's recovery from October's declines, we
feel that the risks remain weighted toward continued above-trend economic
growth and an eventual Fed tightening. This suggests that short rates are
currently at risk of rising. The prospects for continued low inflation,
however, make us comfortable that long rates, which are more sensitive to
inflation than economic growth, will not rise and may even decline if the Fed
acts to preserve the current low-inflation environment. The objective of the
Fixed-Income Portfolio is to continue to seek high level of long-term total
return through investing in a diversified portfolio of investment-grade,
fixed-income securities.
* The Lehman Brothers Government/Corporate Bond Index is commonly used to
compare performance of fixed-income portfolios. It includes treasuries,
agencies, and publicly-issued, fixed-rate, non-convertible,
investment-grade, dollar-denominated debt. 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.
** While the managers seek to invest the portfolio in accordance with a
proprietary fixed-income investment process, there is no guarantee of
investment success. Past performance does not guarantee future
comparable results. Investment return and principal value will fluctuate
so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Performance figures represent change in
investment value after reinvesting all dividends.
7
<PAGE>
Fixed-Income Portfolio
Managers' Commentary (continued)
- --------------------------------------------------------------------------------
Performance Comparisons
[GRAPH]
Fixed-Income Portfolio Lehman Brothers Gov't/Corporate Bond Index
---------------------- ------------------------------------------
12/94 $10,000 $10,000
1/95 10,196 10,192
2/95 10,421 10,428
3/95 10,511 10,498
4/95 10,625 10,644
5/95 11,092 11,090
6/95 11,215 11,179
7/95 11,131 11,135
8/95 11,290 11,278
9/95 11,407 11,393
10/95 11,593 11,560
11/95 11,785 11,751
12/95 11,974 11,924
1/96 12,046 11,998
2/96 11,802 11,743
3/96 11,676 11,645
4/96 11,575 11,564
5/96 11,539 11,545
6/96 11,688 11,700
7/96 11,716 11,726
8/96 11,688 11,698
9/96 11,885 11,907
10/96 12,158 12,184
11/96 12,384 12,408
12/96 12,262 12,270
1/97 12,271 12,285
2/97 12,309 12,311
3/97 12,165 12,165
4/97 12,350 12,342
5/97 12,447 12,458
6/97 12,592 12,607
7/97 12,947 12,993
8/97 12,819 12,847
9/97 12,997 13,049
10/97 13,178 13,258
Average Annual Returns as of 10/31/97
1-Year Since Inception*
8.39% 9.97%
* Reflects operations of Fixed-Income Portfolio from the date of commencement
of operations on 12/6/94 through 10/31/97.
The graph compares the investment performance of each Portfolio, from
inception, to an appropriate broad-based securities index. The graph reflects
the performance of a $10,000 investment from the date of inception through
October 31, 1997. Returns do not reflect taxes payable on distributions.
In comparing the performance of a Portfolio to an index, please recognize that
market indexes do not take into account brokerage commissions that would be
incurred if the individual securities of the index were purchased. They also do
not include taxes payable on dividends and interest payments, or operating
expenses necessary to maintain a portfolio investing in the index.
The performance data quoted in this report are historical and do not predict
future investment results. Investment return and principal value will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
Performance is cited as of October 31, 1997 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.
8
<PAGE>
U.S. Government Cash Management Portfolio
Portfolio of Investments
October 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities and Agencies 49.35%
Federal Farm Credit Bank,
5.30%, 11/17/97-11/24/97 $ 16,450,000 $ 16,405,789
Federal Home Loan Bank,
5.43%-5.70%, 11/14/97-10/20/98 35,000,000 34,962,706
5.29, 12/10/97 (a) 20,000,000 19,999,218
Federal Home Loan Mortgage Corporation,
5.47%, 12/24/97 12,000,000 11,907,010
Federal National Mortgage Association,
5.45%, 1/15/98 (a) 15,000,000 14,998,533
5.47%-5.63%, 1/21/98-8/14/98 15,182,000 15,031,117
Student Loan Marketing Association,
5.31%, 2/05/98 15,000,000 14,998,299
- -------------------------------------------------------------------------------------------------------------
Total U.S. Government Securities and Agencies 128,302,672
- -------------------------------------------------------------------------------------------------------------
Repurchase Agreements 50.86%
Dean Witter
Dated 10/31/97, 5.75%, due 11/03/97,
collateralized by various U.S. Government
Agency Securities with total original face value
of $10,739,000, 5.83%- 7.25%, 11/07/97-
01/15/14, market value $10,090,514 10,000,000 10,000,000
First Boston
Dated 10/31/97, 5.75%, due 11/03/97,
collateralized by $30,438,035 Federal Home
Loan Mortgage Corporation, 7.00%,
08/01/27, market value $30,599,728 30,000,000 30,000,000
First Boston (b)
Dated 9/22/97, 5.53%, due 12/22/97,
collateralized by $25,523,481 Federal Home
Loan Mortgage Corporation, 7.00%, 8/01/27,
market value $25,499,548 25,000,000 25,000,000
</TABLE>
9
<PAGE>
U.S. Government Cash Management Portfolio
Portfolio of Investments
October 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Repurchase Agreements (continued)
Goldman, Sachs & Company
Dated 10/31/97, 5.74%, due 11/03/97,
collateralized by $66,139,366 (original face
value) Federal Home Loan Mortgage
Corporation, 6.00%-9.50% 1/0/98- 8/01/27,
market value $47,843,323 $47,205,287 $ 47,205,287
JP Morgan Securities, Inc.
Dated 10/31/97, 5.75%, due 11/03/97,
collateralized by $10,312,892 Federal
National Mortgage Association, 6.50%,
10/01/12, market value $10,300,001 10,000,000 10,000,000
Lehman Brothers, Inc.
Dated 10/31/97, 5.75%, due 11/03/97,
collateralized by $10,261,519 Federal
National Mortgage Association, 6.50%,
6/01/00, market value $10,287,173 10,000,000 10,000,000
- -------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements 132,205,287
- -------------------------------------------------------------------------------------------------------------
Total Investments (cost $260,507,959) 100.21% 260,507,959
- -------------------------------------------------------------------------------------------------------------
Other Assets less Liabilities (0.21%) (557,735)
- -------------------------------------------------------------------------------------------------------------
Net Assets 100.00% $259,950,224
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Floating Rate Securities-The rates shown are the effective rates at October
31, 1997. Securities shown without a date are payable within five business
days and are backed by credit support agreements from banks or insurance
institutions.
(b) This repurchase agreement is deemed illiquid because it cannot be resold
within seven business days from October 31, 1997.
See notes to financial statements.
10
<PAGE>
Fixed-Income Portfolio
Portfolio of Investments
October 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asset-Backed Securities 13.05%
Advanta Home Equity Loan, 6.15%, 10/25/09 $1,091,735 $ 1,080,698
Advanta Mortgage Loan Trust, Series 1993-3,
4.75%, 2/25/10, CMO 1,043,367 1,014,278
AFC Home Equity Loan Trust, 6.60%,
2/25/27, CMO 999,970 1,000,854
AFG Receivables Trust, 6.40%-7.05%,
9/15/00 -2/15/03 2,477,583 2,476,817
CS First Boston, Series 1996-2 A6, 7.18%,
2/25/18 980,000 1,010,144
Union Acceptance Corporation Auto Trust,
Series 1997-A, 6.48%, 5/10/04, CMO 1,462,000 1,472,237
- -------------------------------------------------------------------------------------------------------------
Total Asset-Backed Securities (cost $7,935,996) 8,055,028
- -------------------------------------------------------------------------------------------------------------
Corporate Bonds 31.11%
Capital One Bank, 7.15%-7.20%, 7/19/99-
9/15/06, puttable 9/15/99 3,100,000 3,147,705
Korea Development Bank, 7.13%, 9/17/01 4,500,000 4,368,033
Lehman Brothers Holdings, Inc., 8.5%, 5/01/07 1,000,000 1,116,262
Lehman Brothers, Inc., 7.50%, 8/01/26, puttable
8/01/03 1,500,000 1,593,771
Lockheed Martin Corporation, 7.20%, 5/01/36,
puttable 5/01/08 1,000,000 1,067,465
Merrill Lynch & Company, Inc., 6.64%,
9/19/02 155,000 157,105
Norwest Corporation, 6.80%, 5/15/02 270,000 276,842
Philips Electronics NV, 7.20%, 6/01/26,
puttable 6/01/06 2,200,000 2,304,135
Reliastar Financial Corporation, 6.63%, 9/15/03 2,250,000 2,255,157
Salomon, Inc., 7.65%, 6/27/05 1,300,000 1,381,272
Travelers Group, Inc., 8.63%, 2/01/07 180,000 205,355
United Dominion Realty Trust, Inc., 7.07%,
11/15/06 1,300,000 1,331,455
- -------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (cost $18,789,418) 19,204,557
- -------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Fixed-Income Portfolio
Portfolio of Investments
October 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Government Securities and Agencies 29.92%
Federal Home Loan Mortgage Corporation,
6.50%, Series 1422, 2/15/07-REMIC, CMO $1,599,392 $ 1,597,410
6.50%, Series 1647 B, 11/15/08-REMIC,
CMO 1,369,906 1,365,512
Government National Mortgage Association,
5.50%-7.13%, 4/20/22-5/20/27, ARM 6,008,052 6,148,262
6.50%, 5/15/09 39,950 40,240
U.S. Treasury Bonds, 7.13%-7.50%,
2/15/23-11/15/24 7,390,000 8,448,644
U.S. Treasury Note, 6.00%, 2/15/26 900,000 874,278
- -------------------------------------------------------------------------------------------------------------
Total U.S. Government Securities and Agencies
(cost $17,391,992) 18,474,346
- -------------------------------------------------------------------------------------------------------------
Residual Interests (a) 7.00%
Capital Mortgage Funding I, Inc., 1997-13,
11/20/22 38,219 691,545
Capital Mortgage Funding I, Inc., 1997-20,
1/20/23 23,944 777,674
General Mortgage Securities II, Inc., 1997-5,
7/20/23 33,388 1,007,175
National Mortgage Funding I, Inc., 1997-4,
5/20/23 81,645 955,928
National Mortgage Funding I, Inc., 1997-5,
8/01/25 85,000 891,009
- -------------------------------------------------------------------------------------------------------------
Total Residual Interests (cost $4,371,031) 4,323,331
- -------------------------------------------------------------------------------------------------------------
Total Long-Term Investments (cost $48,488,437) 50,057,262
- -------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Fixed-Income Portfolio
Portfolio of Investments
October 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Investments 24.04%
Repurchase Agreement 9.46%
Goldman Sachs & Company
Dated 10/31/97, 5.72%, due 11/03/97,
collateralized by $5,939,204 Federal
Mortgage Home Loan Corporation, 7.00%,
7/01/27, market value $5,967,045 $5,841,939 $ 5,841,939
- -------------------------------------------------------------------------------------------------------------
Variable Rate Demand Notes 14.58%
Carolina Medi-Plan, Inc., 5.61%, 6/01/22 7,000,000 7,000,000
Hilander Finance, LLC, 5.70%, 12/01/25 2,000,000 2,000,000
- -------------------------------------------------------------------------------------------------------------
9,000,000
- -------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $14,841,939) 14,841,939
- -------------------------------------------------------------------------------------------------------------
Total Investments (cost $63,330,376) 105.12% 64,899,201
- -------------------------------------------------------------------------------------------------------------
Other Assets less Liabilities (5.12%) (3,161,217)
- -------------------------------------------------------------------------------------------------------------
Net Assets 100.00% $61,737,984
- -------------------------------------------------------------------------------------------------------------
</TABLE>
ARM-Adjustable Rate Mortgage
CMO-Collateralized Mortgage Obligation
REMIC-Real Estate Mortgage Investment Conduit
(a) These are securities that may be resold to "qualified institutional buyers"
under Rule 144A or securities offered pursuant to Section 4(2) of the
Securities Act of 1933, as amended. These securities have been determined to
be liquid under guidelines established by the Board of Trustees.
See notes to financial statements.
13
<PAGE>
Mentor Institutional Trust
Statements of Assets and Liabilities
October 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government
Cash Management Fixed-Income
Portfolio Portfolio
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investments, at market value* (Note 2)
Investment securities $ 128,302,672 $ 59,057,262
Repurchase agreements 132,205,287 5,841,939
- -------------------------------------------------------------------------------------------------
Total investments 260,507,959 64,899,201
- -------------------------------------------------------------------------------------------------
Cash 8,137 1,864
Collateral for securities loaned (Note 2) - 3,471,500
Receivables
Interest 742,061 1,018,618
Fund shares sold - 695,500
Deferred expenses (Note 2) 13,653 13,491
- -------------------------------------------------------------------------------------------------
Total assets 261,271,810 70,100,174
- -------------------------------------------------------------------------------------------------
Liabilities
Payables
Investments purchased - 4,449,529
Securities loaned (Note 2) - 3,471,500
Fund shares redeemed - 267,051
Dividends 1,303,764 -
Unrealized depreciation on interest rate swaps (Note 2) - 69,816
Accrued expenses and other liabilities 17,822 104,294
- -------------------------------------------------------------------------------------------------
Total liabilities 1,321,586 8,362,190
- -------------------------------------------------------------------------------------------------
Net Assets $ 259,950,224 $ 61,737,984
- -------------------------------------------------------------------------------------------------
Net Assets represented by:
Additional paid-in capital $ 259,950,224 $ 59,710,572
Accumulated net investment income - 323,713
Accumulated net realized gain on investment transactions - 204,690
Net unrealized appreciation on investments - 1,499,009
- -------------------------------------------------------------------------------------------------
Net Assets $ 259,950,224 $ 61,737,984
- -------------------------------------------------------------------------------------------------
Shares Outstanding 259,950,224 4,708,319
- -------------------------------------------------------------------------------------------------
Net Asset Value per Share $ 1.00 $ 13.11
- -------------------------------------------------------------------------------------------------
</TABLE>
* Investments at cost are $260,507,959 and $63,330,376, respectively.
See notes to financial statements.
14
<PAGE>
Mentor Institutional Trust
Statements of Operations
Year Ended October 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government
Cash Management Fixed-Income
Portfolio Portfolio
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income
Interest** (Note 2) $14,137,465 $ 3,496,074
- -------------------------------------------------------------------------------------------------
Expenses
Custodian fees 66,283 23,886
Transfer agent fees 49,636 10,574
Registration expenses 38,027 23,412
Shareholder reports and postage expenses 17,749 3,980
Legal fees 13,985 3,155
Organizational expenses (Note 2) 6,857 6,779
Audit fees 6,444 1,454
Directors' fees and expenses 777 175
Miscellaneous 20,686 4,062
- -------------------------------------------------------------------------------------------------
Total expenses 220,444 77,477
- -------------------------------------------------------------------------------------------------
Deduct
Reimbursement of expenses by management
company (Note 4) 66,203 24,294
- -------------------------------------------------------------------------------------------------
Net expenses 154,241 53,183
- -------------------------------------------------------------------------------------------------
Net investment income 13,983,224 3,442,891
- -------------------------------------------------------------------------------------------------
Realized and unrealized gain on investments
Net realized gain on investments 418 299,467
Change in unrealized appreciation of investments and
interest-rate swaps - 715,440
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 418 1,014,907
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $13,983,642 $ 4,457,798
- -------------------------------------------------------------------------------------------------
</TABLE>
** Net of interest expense on interest-rate swap of $91,755 for the
Fixed-Income Porfolio.
See notes to financial statements.
15
<PAGE>
Mentor Institutional Trust
Statements of Changes in Net Assets
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government
Cash Management Portfolio Fixed-Income Portfolio
- -----------------------------------------------------------------------------------------------------------
Year Year Year Year
Ended Ended Ended Ended
10/31/97 10/31/96 10/31/97 10/31/96
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Increase in Net Assets
Operations
Net investment income $ 13,983,224 $ 5,047,095 $ 3,442,891 $ 2,270,255
Net realized gain (loss) on
investments 418 3,914 299,467 (37,346)
Change in unrealized
appreciation (depreciation)
of investments and
interest-rate swaps - - 715,440 (263,824)
- -----------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from operations 13,983,642 5,051,009 4,457,798 1,969,085
- -----------------------------------------------------------------------------------------------------------
Distributions to Shareholders
Net investment income (13,983,224) (5,047,095) (3,342,801) (2,177,204)
Net realized gain on
investments (418) (3,914) - (1,453,358)
- -----------------------------------------------------------------------------------------------------------
Net decrease from
distributions (13,983,642) (5,051,009) (3,342,801) (3,630,562)
- -----------------------------------------------------------------------------------------------------------
Capital Share Transactions
(Note 8)
Net proceeds from sale of
shares 435,146,664 169,019,163 16,476,287 22,115,938
Reinvested distributions 12,969,017 4,642,653 3,312,978 3,624,390
Cost of shares redeemed (276,138,685) (155,685,567) (9,128,026) (8,170,562)
- -----------------------------------------------------------------------------------------------------------
Change in net assets resulting
from capital share
transactions 171,976,996 17,976,249 10,661,239 17,569,766
- -----------------------------------------------------------------------------------------------------------
Increase in net assets 171,976,996 17,976,249 11,776,236 15,908,289
Net Assets
Beginning of year 87,973,228 69,996,979 49,961,748 34,053,459
- -----------------------------------------------------------------------------------------------------------
End of year (including
undistributed net investment
income of $323,713 and
$172,944, respectively for
Fixed-Income Portfolio) $ 259,950,224 $ 87,973,228 $ 61,737,984 $49,961,748
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
16
<PAGE>
Mentor Institutional Trust
Financial Highlights
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government
Cash Management Portfolio
------------------------------------------------
Year Year Period
Ended Ended Ended
10/31/97 10/31/96 10/31/95(b)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.05 0.05 0.05
Net realized and unrealized gain (loss) on investments -* -* -
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 0.05 0.05 0.05
Less distributions
Dividends from income (0.05) (0.05) (0.05)
Distributions from capital gains -* -* -
- -----------------------------------------------------------------------------------------------------------
Total distributions (0.05) (0.05) (0.05)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------------
Total Return 5.56% 5.60% 5.06%
- -----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 259,950 $ 87,973 $ 69,997
Ratio of expenses to average net assets 0.06% 0.04% 0.04%(a)
Ratio of expenses to average net assets excluding waiver 0.09% 0.12% 0.18%(a)
Ratio of net investment income to average net assets 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.
* Reflects net realized gain (loss) which was under $0.005 per share.
See notes to financial statements.
17
<PAGE>
Mentor Institutional Trust
Financial Highlights
- ------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fixed-Income Portfolio
----------------------------------------------------
Year Year Period
Ended Ended Ended
10/31/97 10/31/96 10/31/95(c)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 12.89 $ 13.71 $ 12.50
Income from investment operations
Net investment income 0.83 0.77 0.81
Net realized and unrealized gain (loss) on investments 0.21 (0.16) 1.14
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.04 0.61 1.95
Less distributions
Dividends from income (0.82) (0.77) (0.74)
Distributions from capital gains - (0.66) -
- -----------------------------------------------------------------------------------------------------------
Total distributions (0.82) (1.43) (0.74)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.11 $ 12.89 $ 13.71
- -----------------------------------------------------------------------------------------------------------
Total Return 8.39% 4.87% 15.90%
- -----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 61,738 $ 49,962 $ 34,053
Ratio of expenses to average net assets 0.10% 0.05% 0.05%(a)
Ratio of expenses to average net assets excluding waiver 0.15% 0.17% 0.22%(a)
Ratio of net investment income to average net assets 6.52% 6.22% 6.75%(a)
Portfolio turnover rate 194% 226% 302%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(c) For the period from December 6, 1994 (commencement of operations) to
October 31, 1995.
See notes to financial statements.
18
<PAGE>
Mentor Institutional Trust
Notes to Financial Statements
October 31, 1997
- ------------------------------------------------------------------------
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, 1997:
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
Portfolio.
(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|M/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 is
calculated 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 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 Board of Trustees. In determining value,
the dealers use information with respect to transactions in such securities,
market transactions in comparable securities, various relationships between
securities, and yield to maturity. Any securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith under procedures established by the Board of Trustees.
(b) Repurchase Agreements
It is the policy of the Trust to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book entry system, or to have
segregated within the custodian bank's possession all securities held as
collateral in support of repurchase agreement investments. Additionally,
procedures have been established by the Trust to monitor, on a daily basis, the
market value of each repurchase agreement's underlying securities to ensure the
existence of a proper level of collateral.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Trust's adviser to be creditworthy pursuant to guidelines established by
the Trustees. Risks may arise from the potential inability of counterparties to
honor the terms of the repurchase agreement. Accordingly, the Trust could
20
<PAGE>
Mentor Institutional Trust
Notes to Financial Statements
(continued)
- ------------------------------------------------------------------------
receive less than the repurchase price on the sale of collateral securities.
(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 lending securities
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, 1997, the Fixed-Income Portfolio had loaned securities to
brokers which were collateralized by cash. Income from securities lending
activities amounted to $444 for the year ended October 31, 1997. 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, 1997, the market value of the securities on loan and the related
cash collateral for the Fixed-Income Portfolio were $3,335,509, and $3,471,500,
respectively.
(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.
(e) 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.
(f) 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 an allowable time limit substantially all taxable income
and realized capital gains.
(g) 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.
(h) 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.
(i) Distributions
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to deferral of wash
sales and investment in residual interests.
22
<PAGE>
Mentor Institutional Trust
Notes to Financial Statements
(continued)
- ------------------------------------------------------------------------
(j) Interest-Rate Swap
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, 1997, Fixed-Income Portfolio had entered into the following interest rate
swap agreements. In each agreement, the Portfolio has exchanged fixed rates for
floating rates. The terms vary among the contracts but provide for the interest
rate differential to be settled on a semi annual basis. During the year ended
October 31, 1997, no cash payments were received in connection with the
interest-rate swap agreements, however, the net interest receivable accrued at
the end of the year for the Fixed-Income Portfolio was $17,387.
<TABLE>
<CAPTION>
Rate
Rate Paid Received
Swap by the by the Floating Net
Counter Notional Portfolio Portfolio Rate Termination Unrealized
Portfolio Party Principal at 10/31/97 at 10/31/97 Index Date Loss
- -------------- ----------------- ------------ ------------- ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed-Income Lehman Brothers $4,055,620 3.21% 4.77% 6-Month 7/16/02 $(66,086)
German LIBOR
Lehman Brothers 5,000,000 7.43% 7.25% 3-Month 10/3/99 (3,730)
---------
British LIBOR $(69,816)
=========
</TABLE>
(k) Reclassification of Capital Accounts
Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. Accordingly, periodic
reclassifications are made within the Portfolio's capital accounts to reflect
income and gains available for distribution under income tax regulations.
Note 3: Dividends
Dividends are declared daily and paid monthly by the Cash Management
23
<PAGE>
Mentor Institutional Trust
Notes to Financial Statements
(continued)
- ------------------------------------------------------------------------
Portfolio. Dividends are declared and paid quarterly by the Fixed-Income
Portfolio. Capital gains realized by each Portfolio, if any, will be
distributed annually.
Note 4: Investment Management and Administration Agreements
The Cash Management Portfolio and Fixed-Income Portfolio have entered into an
Investment Management Agreement with Mentor Investment Advisors, LLC ("Mentor
Advisors") to provide investment advisory services to each of the Portfolios.
Mentor Advisors 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 Butcher Singer, Inc., ("Wheat") and
EVEREN Capital Corporation.
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, 1997, Mentor Advisors bore
expenses of $66,203, and $24,294 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.
Acquisition of Advisor
On August 20, 1997, Wheat entered into an Agreement and Plan of Merger
("Merger") with First Union Corporation ("First Union"), pursuant to which
Wheat would be merged into First Union. First Union is a bank holding company
that as of September 30, 1997, had assets of $144 billion. Upon consummation of
the Merger (expected to occur as early as December of this year), First Union
will become the owner of a majority of the beneficial interest in Mentor
Advisors.
At a meeting held on October 14, 1997, the Trustees of Mentor Institutional
Trust approved new Investment Advisory, and Administration Agreements which
will replace the existing agreements. Each of the existing agreements will by
its terms terminate upon the consummation of the Merger, since the Merger will
constitute a change in control of Mentor Advisors for purposes of the
Investment Company Act
24
<PAGE>
Mentor Institutional Trust
Notes to Financial Statements
(continued)
- ------------------------------------------------------------------------
of 1940, as amended ("1940 Act"). The shareholders of each Portfolio at a
meeting to be held on December 22, 1997, will vote to approve the new
Investment Advisory Agreements with Mentor Advisors. Each new agreement is
substantially identical to the existing agreements it replaces, other than its
effective and termination date.
Note 5: Investment Transactions
Purchases and sales of investments (excluding short-term investments), for the
year ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
Portfolio Purchases Sales
- ----------------- ------------- ------------
<S> <C> <C>
Cash Management - -
Fixed-Income $93,838,959 $89,499,556
- --------------- ------------ ------------
</TABLE>
Note 6: Unrealized Appreciation and Depreciation of Investments
The cost of investments for federal income tax purposes amounted to
$260,507,959 for the Cash Management Portfolio and $63,389,862 for the
Fixed-Income Portfolio at October 31, 1997. Gross unrealized appreciation and
depreciation of investments at October 31, 1997 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Net Unrealized
Portfolio Appreciation Depreciation Appreciation
- ----------------- -------------- -------------- ---------------
<S> <C> <C> <C>
Cash Management - - -
Fixed-Income $1,598,312 $88,973 $1,509,339
- --------------- ----------- -------- -----------
</TABLE>
25
<PAGE>
Mentor Institutional Trust
Notes to Financial Statements
(continued)
- ------------------------------------------------------------------------
Note 7: Capital Share Transactions
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest. Transactions in capital
shares were as follows:
<TABLE>
<CAPTION>
U.S. Government
Cash Management Portfolio
Year Ended Year Ended
10/31/97 10/31/96
----------------- -----------------
<S> <C> <C>
Shares sold 435,146,664 169,019,163
Shares issued upon reinvestment of distributions 12,969,017 4,642,653
Shares redeemed (276,138,685) (155,685,567)
------------- -------------
Change in net assets from capital share transactions 171,976,996 17,976,249
============= =============
</TABLE>
<TABLE>
<CAPTION>
Fixed-Income Portfolio
Year Ended Year Ended
10/31/97 10/31/96
------------- ------------
<S> <C> <C>
Shares sold 1,278,210 1,725,003
Shares issued upon reinvestment of distributions 259,140 282,124
Shares redeemed (703,906) (616,390)
----------- -----------
Change in net assets from capital share transactions 833,444 1,390,737
=========== ===========
</TABLE>
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, 1997, 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 for each of the years in the two-year period ended October
31, 1997 and for the period from December 5, 1994 (commencement of operations)
to October 31, 1995 and for Fixed-Income Portfolio for each of the years in the
two-year period ended October 31, 1997 and for the period from December 6, 1994
(commencement of operations) to October 31, 1995. 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, 1997 by correspondence with the 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, 1997 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 12, 1997
27
<PAGE>
Trustees
Daniel J. Ludeman, Trustee & Chairman
Chairman and Chief Executive Officer
Mentor Investment Group, LLC
Arnold H. Dreyfuss, Trustee
Former Chairman and Chief Executive Officer
Hamilton Beach/Proctor-Silex, Inc.
Thomas F. Keller, Trustee
Former Dean, Fuqua School of Business
Duke University
Louis W. Moelchert, Jr., Trustee
Vice President for Business & Finance
University of Richmond
Stanley F. Pauley, Jr., Trustee
Chairman and Chief Executive Officer
Carpenter Company
Troy A. Peery, Jr., Trustee
President
Heilig-Meyers Company
Officers
Paul F. Costello, President
Managing Director
Mentor Investment Group, LLC
Terry L. Perkins, Treasurer
Senior Vice President
Mentor Investment Group, LLC
John M. Ivan, Secretary
Managing Director/Assistant General Counsel
Wheat First Butcher Singer, Inc.
Michael A. Wade, Assistant Treasurer
Vice President
Mentor Investment Group, LLC
Mentor Institutional Trust
U.S. Government Cash
Management Portfolio
Fixed-Income Portfolio
---------------------------
ANNUAL REPORT
---------------------------
October 31, 1997
[MENTOR INVESTMENT GROUP LOGO]
