SPECIAL ISSUE
FINANCIAL REPORT
Winter 1999
VIRGINIA SNAP(SM) SEMI-ANNUAL REPORT
SNAP(sm) In Review
WELCOME TO 1999! WE ARE HAPPY TO PROVIDE THE FINANCIAL STATEMENTS FOR THE
SNAP(SM) FUND--A SERIES OF MENTOR INSTITUTIONAL TRUST.
PERFORMANCE
For the six-month period ended December 31, 1998, performance of the SNAP(sm)
Fund continued to exceed that of its benchmark, the Donoghue First Tier Taxable
Institutional Average, ("the average").* Annualized total return for the
SNAP(sm) Fund for the six-month period was 5.39%, net of expenses, compared to
5.11% for the average, which is also net of expenses. The annualized monthly
return for the period ended December 31, 1998 on the SNAP(sm) Fund and the
average were 5.22% and 4.87%, respectively.**
GIVEN THE NATURE AND EXTENT OF THE NEGATIVE INFLUENCES COMING TO BEAR, THE
PERFORMANCE OF THE U.S. ECONOMY AND FINANCIAL MARKETS OVER THE PAST YEAR CAN
ONLY BE CONSIDERED REMARKABLE.
As of December 31, 1998, the Fund's average maturity was 43 days, short of our
recent targeted range of 50-55 days due to heavy investments over the year-end.
Our targeted range has been lowered from the 55-60 days or more we observed
during most of the year. The reason for this shortening is that we feel the
current outlook for rates is more uncertain than usual, and that rates could
well go in either direction during 1999.+
Returns As Of 12/31/98 Annualized Annualized
Monthly Return 6 MTD Return
SNAP(sm) Fund-Net of Fees 5.22% 5.39%
High-Quality Taxable
Institutional Average 4.87% 5.11%
Annualized Annualized
Monthly Return 6 MTD Return
SNAP(sm) Fund-Gross of Fees 5.33% 5.51%
High-Quality Taxable
Institutional Average 5.25% 5.48%
ECONOMIC OUTLOOK
Given the nature and extent of the negative influences coming to bear, the
performance of the U.S. economy and financial markets over the past year can
only be considered remarkable. We have witnessed the collapse or near-collapse
of several major world economies, including Japan and Russia. Indeed, Russia
defaulted on its debt and only a rescue by the International Monetary Fund
prevented several other defaults. The world's financial system clearly was
placed under severe strain. We have also witnessed a major and ongoing military
confrontation between the U.S. and Iraq, and have suffered through a major
government scandal in this country culminating in the impeachment of the
President.
CONTINUED ON PAGE 2
*DONOGHUE FIRST TIER TAXABLE INSTITUTIONAL AVERAGE RETURN FOR THE 12-MONTH
PERIOD IS PROVIDED BY IBC FINANCIAL DATA, INC.
**PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. MUTUAL FUNDS ARE NOT
OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED. AN
INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE US GOVERNMENT
AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.
+WHILE THE PORTFOLIO MANAGERS WILL ENDEAVOR TO MANAGE THE PORTFOLIO IN
ACCORDANCE WITH THE INVESTMENT PROCESS, THERE ARE NO GUARANTEES THAT THEY WILL
BE SUCCESSFUL.
<PAGE>
CONTINUED FROM FRONT PAGE
Despite these hostile factors, and an expansion which was already setting
longevity records, our economy remained on a remarkably even keel throughout the
quarter and year just ended. Activity continued to forge ahead at a pace
adequate to keep employment and capacity utilization at very high levels, yet
not so rapid as to give rise to inflation. Early in the year, the Federal
Reserve stood poised to raise rates as a preventive measure against an outbreak
of inflation, but as the year progressed and the threat from weak overseas
economies grew, the Fed's position shifted to one of easing rates. During the
fourth quarter the Fed lowered rates three times by 0.25%, for a total of 0.75%.
The medicine seems to be having the desired effect, as current indicators show
continued strength with little or no evidence of the "Asian flu."
Like the other U.S. financial markets, the money markets turned in a strong
performance for the quarter and the year. Led by U.S. Treasuries, yields
generally declined throughout the year. Early on, this strength was primarily a
function of a "flight to quality" as investors sought the safety of shorter
maturities, especially short-term U.S. Government securities. During this time,
spreads between Treasuries and other instruments widened significantly. Adding
to the strength was a growing feeling that the Fed would eventually have to ease
rates in response to the international crisis. Later in the year, when the Fed
did indeed assume a policy of easing, rates on all money market instruments
dropped accordingly. Perhaps reflecting a slowdown in the flight to quality,
yields on Treasuries did not drop as much, so that their spread over other
instruments narrowed somewhat. We ended the year with money market rates about
0.75% lower than where we began. Approximately half of that reduction occurred
in the fourth quarter.
LIKE THE OTHER U.S. FINANCIAL MARKETS, THE MONEY MARKETS TURNED IN A STRONG
PERFORMANCE FOR THE QUARTER AND THE YEAR.
Early in 1998, we recognized that it was unlikely that the Fed would raise rates
given what was then occurring around the world. Indeed, we could see a scenario
developing in which the Fed would have to reduce rates to preserve an acceptable
rate of growth in this country. Accordingly, we adopted a strategy of managing
the funds to an average maturity of 55-60 days, the outer end of our normal
range. Commensurate with this we decided to tighten our already high quality
standards even further, particularly regarding overseas exposure and
specifically exposure to troubled areas of the world.
We enter 1999 at a crossroads. After cutting rates three times during the fourth
quarter, the Fed is likely to adopt a "wait and see" attitude for at least a
while before taking additional action. Based on recent indications, the economy
appears to be shaking off some minor effects of the world slowdown, and as of
now seems to be moving ahead at a reasonable pace. Also, world economies and
markets in general seem to be entering the new year on a more stable note. If
these factors continue, then the Fed may well move to a position of neutrality
which could continue until inflationary pressures appear. In other words, from
an outlook for "stable to down" rates, we seem to have moved a step closer to an
outlook for "stable to up" rates. Accordingly, we have shortened our target
average maturity range from 55 to 60 days to 50 to 55 days, and may shorten
further if these trends continue.
Thank You To Our July--December 1998 SNAP(sm) Participants
Botetourt County
Carroll County
City of Chesapeake
City of Covington
City of Hopewell
City of Norfolk
City of Portsmouth
Commonwealth of Virginia
County of Fluvanna
County of Loudoun
County of Westmoreland
County of Wythe
Medical College of Virginia
Prince Edward County
Roanoke Valley Juvenile Detention Center
Tazewell County
University of Virginia
Virginia College Building Authority
Virginia Public School Authority
2
<PAGE>
The 1999 SNAP(sm) Users' Conference
CELEBRATING "THE TENTH ANNIVERSARY OF SNAP(SM)"
We are pleased to host our annual conference on April 16, 1999, from 9 a.m.
to 4 p.m., at the Jefferson Hotel in Richmond, Virginia. The theme of this
years' conference will be "The Tenth Anniversary of SNAP,sm" and will offer a
multitude of opportunities for interaction with other users. We have planned a
full day of discussion including many current topics relating to the investment
of bond proceeds. Attendees are invited to join us for a continental breakfast
and a seated luncheon. Invitations providing additional information and a
complete agenda are to follow. We look forward to seeing you at the Jefferson!
[PHOTO]
[PHOTO]
Mentor Has Moved
On February 22, 1999, Mentor Investment Group moved into its new headquarters.
We are now located in the East Tower of Riverfront Plaza. Please note, all
correspondence should be sent to:
951 East Byrd Street
P. O. Box 1357
Richmond, VA 23218-1357
Treasurer's Day Reception
At the commencement of the 1999 Session of the Virginia General Assembly, Mentor
Investment Group hosted a Treasurer's Day Reception January 17 at the Richmond
Marriott. Treasurers from across the state attended, along with representatives
from SNAP(sm), Mentor Investment Group.
Let Us Know How We Are Doing
Please watch for the 1999 SNAP(sm) Participant Survey included with your
February statement. As always, your responses assist us in finding ways to
enhance the SNAP(sm) Program and better service the needs of all participants.
Response is easy! Just complete and return the survey by March 26, 1999.
Accompanying the survey will be an envelope for return to the Department of the
Treasury. In addition to helping Mentor enhance the SNAP(sm) program,
representatives from the Treasury Department will also benefit from your
feedback. This is a great way to have your voice heard and we encourage your
participation. We appreciate your time and effort in completing the survey.
3
<PAGE>
SNAP(sm) Fund
Portfolio of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Percent of Principal Value
Net Assets Amount (Note 2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bankers Acceptances 0.95%
NationsBank, 5.41%, 8/02/99 (c) (d) $ 10,000,000 $ 9,679,908
- ------------------------------------------------------------------------------------------------------------------------
Bank Notes 25.36%
Banc One
5.55%, 1/29/99 (d) 20,000,000 19,999,264
5.55%, 2/26/99 (d) 20,000,000 19,996,029
Bank of America, 5.65%, 1/07/99 20,000,000 20,000,228
Bank of New York
5.53%, 2/25/99 (d) 20,000,000 19,997,975
5.66%, 6/17/99 (d) 20,000,000 19,993,595
FCC National Bank, 5.74%, 5/07/99 (d) 20,000,000 19,996,033
First Tennessee Bank, N.A.
5.70%, 4/15/99 (d) 25,000,000 24,996,581
5.65%, 7/09/99 (d) 15,000,000 14,996,278
Greenwood Trust Company, 5.27%, 1/15/99 20,000,000 20,000,000
Harris Trust, 5.50%, 1/22/99 40,000,000 40,000,000
Key Bank, N.A., 4.87%, 1/14/99 (b) (d) 25,000,000 24,999,631
Morgan Guaranty Trust
5.71%, 1/08/99 2,000,000 2,000,057
5.71%, 1/08/99 (d) 12,100,000 12,099,911
- ------------------------------------------------------------------------------------------------------------------------
Total Bank Notes 259,075,582
- ------------------------------------------------------------------------------------------------------------------------
Certificates of Deposit 13.21%
Bank of Montreal, 5.21%, 1/29/99 30,000,000 30,000,000
Bankers Trust Company, 5.69%, 7/27/99 (d) 15,000,000 14,995,110
Canadian Imperial Bank, 5.38%, 1/08/99 40,000,000 40,000,000
Mellon Bank, 5.25%, 2/03/99 30,000,000 30,000,000
Rabobank Nederland NV, 5.70%, 4/20/99 20,000,000 20,007,467
- ------------------------------------------------------------------------------------------------------------------------
Total Certificates of Deposit 135,002,577
- ------------------------------------------------------------------------------------------------------------------------
Commercial Paper (d) 31.58%
Centric Capital Corporation, 5.45%, 2/01/99 (a) 24,000,000 23,887,367
Corporate Receivables Corporation, 5.27%, 2/05/99 (a) 30,000,000 29,846,291
Ford Motor Credit, 5.16%, 1/22/99 30,000,000 29,909,700
Greenwich Funding Corporation, 5.55%, 1/11/99 (a) 28,000,000 27,956,833
Merrill Lynch, 5.26%, 1/29/99 20,000,000 19,918,178
Mont Blanc Capital Corporation, 5.24%, 1/19/99 (a) 31,000,000 30,918,780
Monte Rosa Capital Corporation, 5.30%, 2/19/99 (a) 30,000,000 29,783,583
Repeat Offering Securitization Entity, 5.44%, 2/26/99 (a) 30,000,000 29,746,133
Rincon Securities, Inc.
5.20%, 1/27/99 11,000,000 10,958,689
5.20%, 1/28/99 20,000,000 19,922,000
</TABLE>
4
<PAGE>
SNAP(sm) Fund
Portfolio of Investments
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Percent of Principal Value
Net Assets Amount (Note 2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Paper (d) (Continued)
Special Purpose Accounts Receivable
5.27%, 1/28/99 (a) $20,000,000 $19,920,950
5.45%, 1/29/99 (a) 20,000,000 19,915,222
Trident Capital Finance, 5.65%, 1/07/99 (a) 30,000,000 29,971,750
- ------------------------------------------------------------------------------------------------------------------------
Total Commercial Paper 322,655,476
- ------------------------------------------------------------------------------------------------------------------------
Corporate Notes 2.94%
Bankers Trust Company, 4.95%, 8/06/99, (c) (d) 10,000,000 9,991,654
Goldman Sachs Group, 5.35%, 5/11/99 20,000,000 20,000,000
- ------------------------------------------------------------------------------------------------------------------------
Total Corporate Notes 29,991,654
- ------------------------------------------------------------------------------------------------------------------------
U.S. Government Agencies 9.68%
Federal Home Loan Mortgage Corporation
5.04%, 2/10/99 (d) 50,000,000 49,720,000
4.90%, 3/05/99 (d) 20,000,000 19,828,500
Federal National Mortgage Association
5.41%, 2/23/99 (d) 10,000,000 9,998,634
5.45%, 4/15/99 (d) 14,400,000 14,390,165
Student Loan Marketing Association
4.848%, 1/13/99 (b) 5,000,000 5,000,000
- ------------------------------------------------------------------------------------------------------------------------
Total U.S. Government Agencies 98,937,299
- ------------------------------------------------------------------------------------------------------------------------
Variable Rate Demand Notes 7.13%
Catholic Health Initiative, 5.70%, 12/01/27 (b) 32,800,000 32,800,000
Virginia State Housing Development Authority,
Series A, 6.00%, 1/01/47 (b) 40,000,000 40,000,000
- ------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Demand Notes 72,800,000
- ------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement 8.06%
Goldman, Sachs & Company
Dated 12/31/98, 5.09%, Due 1/04/99; collateralized by $99,349,265
(original face value) Federal National Mortgage Association,
6.00% - 6.50%, 5/01/02 - 1/01/29; market value $88,284,439 82,352,483 82,352,483
- ------------------------------------------------------------------------------------------------------------------------
1,012,652,483
Total Investments (cost $1,010,494,979) 98.91% 1,010,494,979
- ------------------------------------------------------------------------------------------------------------------------
Other Assets less Liabilities 1.09% 11,132,114
- ------------------------------------------------------------------------------------------------------------------------
Net Assets 100.00% $1,021,627,093
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
SNAP(sm) Fund
Portfolio of Investments
December 31, 1998 (Unaudited)
(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
December 31, 1998.
(c) These securities are illiquid because they can not be resold within seven
business days from December 31, 1998.
(d) These securities are traded at a discount. The rates shown represent the
discount received at the time of purchase by the Fund.
See notes to financial statements.
6
<PAGE>
SNAP(sm) Fund
Statement of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments, at amortized cost (Note 2)
Investment securities $ 928,142,496
Repurchase agreements 82,352,483
- -------------------------------------------------------------------------------------------------------------------------
Total investments 1,010,494,979
- -------------------------------------------------------------------------------------------------------------------------
Dividends and interest receivable 11,052,475
Organizational expenses (Note 2) 129,963
- -------------------------------------------------------------------------------------------------------------------------
Total assets 1,021,677,417
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
Accrued expenses and other liabilities 50,324
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 50,324
- -------------------------------------------------------------------------------------------------------------------------
Net Assets $1,021,627,093
- -------------------------------------------------------------------------------------------------------------------------
Shares Outstanding 1,021,627,093
Net Asset Value per Share $ 1.00
- -------------------------------------------------------------------------------------------------------------------------
Statement of Operations
Six Months Ended December 31, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------
Investment income
Interest $ 29,703,607
- -------------------------------------------------------------------------------------------------------------------------
Expenses
Advisory fees (Note 3) 437,417
Amortization of organizational expenses (Note 2) 50,968
Custodian and accounting fees (Note 3) 36,254
Registration expenses 10,444
Legal fees 9,725
Audit fees 8,066
Miscellaneous 17,268
- -------------------------------------------------------------------------------------------------------------------------
Total expenses 570,142
- -------------------------------------------------------------------------------------------------------------------------
Net investment income 29,133,465
- -------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 29,133,465
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
7
<PAGE>
SNAP(sm) Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Six Months Ended
December 31, 1998 Year Ended
(Unaudited) June 30, 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Increase in Net Assets
Operations
Net investment income $ 29,133,465 $ 56,812,442
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets resulting
from operations 29,133,465 56,812,442
- ------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
From net investment income (29,133,465) (56,812,442)
- ------------------------------------------------------------------------------------------------------------------------
Capital share transactions (at $1.00 per share)
Net proceeds from sale of shares 490,391,533 1,468,606,191
Reinvested distributions 29,133,465 56,812,442
Cost of shares redeemed (581,262,194) (1,487,637,145)
- ------------------------------------------------------------------------------------------------------------------------
Net change in net assets resulting from
capital share transactions (61,737,196) 37,781,488
- ------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (61,737,196) 37,781,488
Net Assets
Beginning of period 1,083,364,289 1,045,582,801
- ------------------------------------------------------------------------------------------------------------------------
End of period $1,021,627,093 $1,083,364,289
========================================================================================================================
</TABLE>
See notes to financial statements.
8
<PAGE>
SNAP(sm) Fund
Financial Highlights
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period
December 31, 1998 Year Ended Year Ended Ended (b)
(Unaudited) June 30, 1998 June 30, 1997 June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<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 0.03 0.06 0.05 ** 0.05 **
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income (0.03) (0.06) (0.05)** (0.05)**
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 2.75% 5.71% 5.51% 5.29%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios / Supplemental Data
Net assets, end of period (in thousands) $1,021,627 $1,083,364 $1,045,583 $ 954,777
Ratio of expenses to average net assets 0.11% (a) 0.11% 0.11% 0.12% (a)
Ratio of net investment income to average
net assets 5.40% (a) 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 $0.005 per share.
See notes to financial statements.
9
<PAGE>
SNAP(sm) Fund
Notes to Financial Statements
December 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
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%
10
<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. EVEREN Capital Corporation owns 20% of the outstanding
interest in Mentor Investment Group, LLC.
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 December 31, 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 $1,021,627,093 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.
11
<PAGE>
SNAP(sm) Advisory Board
Alfred C. Anderson
Josephine Blankenship
Ellen V. Booker
Barbara O. Carraway
Richard A. Cordle
John J. Cusimano
Susan F. Dewey
Terry W. Forehand
Daniel J. Ludeman
Christoper E. Martino
W. Forrest Matthews, Jr.
Marie G. Neal
Gyles R. Norwood
Francis X. O'Leary
Fred W. Parker
John H. Tuohy
Ronald H. Williams
H. Roger Zurn, Jr.
Commonwealth of Virginia
Treasury Board
Susan F. Dewey, Chairman
Diana F. Cantor
John H. Clements
Spencer H. Elmore
William E. Landsidle
Danny M. Payne
Dr. Charles D. Whyte
[MENTOR INVESTMENT GROUP LOGO]
OUR COMMITMENT
To form a partnership that benefits the state,
program participants, and taxpayers of Virginia.
951 East Byrd Street, P.O. Box 1357, Richmond, VA 23218-1357
(804) 782-3770 (800) 570-SNAP(sm) FAX (804) 782-6604
This publication must be preceded or accompanied by a Mentor Institutional Trust
prospectus which contains complete information regarding fees, sales charges,
and expenses. Please read it carefully before investing or sending money. The
SNAP(sm) fund is neither insured nor guaranteed by the U. S. Government, and
there can be no assurance that the Fund will be able to maintain a stable net
asset value of $1.00 per share.
1999 Mentor Distributors, LLC 3/99 MK 985
