MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
MESSAGE FROM THE CHAIRMAN AND PRESIDENT
APRIL 30, 1999
- --------------------------------------------------------------------------------
TO OUR SHAREHOLDERS:
On behalf of all the associates at Mentor Investment Group, we would like to
take this opportunity to thank you for your investment in the Mentor Family of
Funds. This Semi-Annual Report reaffirms our commitment to our shareholders and
details the financial performance of these investments for the period ended
April 30, 1999.
Founded in 1970, Mentor Investment Group is an investment advisory firm with
more than $16 billion under management. We pride ourselves on a strong heritage
of providing quality service and a variety of investment choices that help meet
our shareholders' financial objectives by offering mutual funds and separately-
invested portfolios.
In the commentary that follows, Mentor's investment team presents an insightful
perspective on the markets and strategies that shaped their investment
decisions for the past semi-annual period. Our investment teams operate with
these priorities:
FOCUS -- In most money management companies, each investment manager has
multiple responsibilities. At Mentor, our investment managers are singularly
focused on enhancing the value of the portfolios. This means that you can be
assured of a consistent, proven approach to developing a winning financial
strategy.
OPPORTUNITIES -- By offering multiple management styles, portfolio
diversification is simplified. Mentor gives investors the tools for long-term
investment success through diversification and accommodation of changing
investment needs.
SERVICE -- To help serve our shareholders, Mentor has a fully dedicated
Investor Relations Center. Our Relationship Coordinators are professionally
trained and licensed to serve clients' needs.
TECHNOLOGY -- Abreast of the most advanced technology and using the latest
analytical tools, our investment managers have the ability to survey the
financial markets and make informed decisions about where the best place is to
invest.
We at Mentor appreciate the opportunity to be a partner in the management of
your financial assets. Mentor Investment Group provides diversified investment
styles and services to over one million shareholders. We serve individuals,
corporations, endowments, foundations, public funds, and municipalities. To
learn more about Mentor, please contact your consultant or us at (800)
382-0016.
1
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MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
MESSAGE FROM THE CHAIRMAN AND PRESIDENT
APRIL 30, 1999 (CONTINUED)
- --------------------------------------------------------------------------------
We look forward to making the Mentor formula work for you, and to a mutually
beneficial relationship.
Sincerely,
/S/ Daniel J. Ludeman /s/ Paul F. Costello
- ---------------------- ----------------------
Daniel J. Ludeman Paul F. Costello
CHAIRMAN PRESIDENT
[MENTOR INVESTMENT 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 THE FUNDS, PLEASE CALL US,
(800)382-0016, OR CONTACT YOUR CONSULTANT. THE PROSPECTUS CONTAINS COMPLETE
INFORMATION ABOUT FEES, SALES CHARGES, AND EXPENSES. PLEASE READ IT CAREFULLY
BEFORE INVESTING OR SENDING MONEY.
2
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
MANAGERS' COMMENTARY: THE GLOBAL/INTERNATIONAL MANAGEMENT TEAM
APRIL 30, 1999
- --------------------------------------------------------------------------------
MARKET REVIEW
UK
During the six-month period ended April 30, we initiated a process of
judiciously building exposure to the mid- and small-cap sectors of the U.K.
market. This strategy was aimed at taking advantage of the substantial
valuation disparities existing between large companies and much of the rest of
the market. During the fourth quarter of 1998 we also began a process of
selective investment in cyclical stocks. Considerations such as wage growth,
employment outlook, and greatly reduced home ownership costs suggested to us
that the gloom surrounding many consumer cyclical stocks had been overdone. We
also continued to build an exposure to selected commodity-related and
economically sensitive stocks with international activities. At period-end, we
maintained our relatively positive view of the domestic consumer market,
causing us to add selectively to property, house construction, and building
materials companies.
During the six-month period we reduced our exposure to telecom stocks, feeling
that stock valuations did not fully reflect the likely negative impact on
future earnings of increasingly aggressive price competition. We also
profitably disposed of the Portfolio's major pharmaceutical holdings, taking
advantage of what we perceived as overly generous valuations.
EUROPE
Investments in Europe continue to focus on the peripheral states, such as
Ireland, Portugal and Spain, where low interest rates are supporting already
buoyant economies. During the first quarter of 1999, we began a shift towards
commodity-related and more cyclical stocks, in line with our view that the
global economic outlook is improving more rapidly than anticipated. Recently
this move on our part has begun to be echoed by European equity markets. We
continue to maintain an underweight position in telecommunication stocks, which
hurt our performance early in the year but has helped us more recently.
JAPAN
In Japan, early indicators of economic recovery were beginning to appear in the
3
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
MANAGERS' COMMENTARY: THE GLOBAL/INTERNATIONAL MANAGEMENT TEAM
APRIL 30, 1999 (CONTINUED)
- --------------------------------------------------------------------------------
final quarter of 1998. There were also very encouraging signs of genuine
corporate restructuring that offered the prospect of significantly improved
earnings in the years to come. We began to increase the exposure of the
Portfolio to Japan during the last quarter of 1998, building to its present
significantly overweight position. The Portfolio benefited from both the
Japanese equity market's strong rally and our holdings' outperformance within
that market.
ASIA
In Asia, the perception increasingly took hold that the worst of the regions'
difficulties were behind it, with interest rates declining, debt service costs
falling, the regional consumer beginning to spend again, and exports to the
rest of the world starting to pick up. Worries over possible devaluation of the
Chinese renminbi were increasingly replaced by optimism over possible
membership in the World Trade Organization. We began the period under review
slightly overweight in this region, and maintained this weighting as the
regions' markets picked up.
LATIN AMERICA
In Brazil the economic outlook has improved. The IMF released a further $9
billion in aid, part of which can be used for foreign exchange intervention,
and Congress passed a key element of the fiscal reform package. Better than
expected figures for inflation have enabled the Central Bank to cut rates more
quickly than expected. Each of these developments was positively received by
the market. The privatization program is set to continue with further issues in
the next few months. In short, the market has come a long way since the real's
devaluation in January. We have consequently adopted a slightly overweight
position in Brazil.
MANAGEMENT STRATEGY
The principal asset allocation shift during the six months ended April 30, 1999
was to modestly reduce the Portfolio's exposure to Europe and the UK, and
increase its weighting in Japan. This increased weighting to Japan positioned
the Portfolio to benefit from the combination of a strong rally in the Japanese
equity market and a firm yen during the first quarter of 1999.
4
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MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
MANAGERS' COMMENTARY: THE GLOBAL/INTERNATIONAL MANAGEMENT TEAM
APRIL 30, 1999 (CONTINUED)
- --------------------------------------------------------------------------------
Additionally, our Japanese stock selection, with its focus on companies likely
to be able to both implement and benefit from the new found zeal for
restructuring and cost cutting, further enhanced returns.
PERFORMANCE REVIEW
The performance impact of our allocation to sectors sensitive to economic
cyclicality proved increasingly positive as the period progressed. For the
six-month period ended April 30, 1999 the Mentor Perpetual International
Portfolio A shares returned 16.58%. This compares to 15.11% for the Lipper
International Funds peer group and 15.44% for our Morgan Stanley EAFE Index
benchmark.
MARKET OUTLOOK
Although commodity prices, particularly those for oil, have firmed, and
inflation in the U.S. and parts of Continental Europe have risen modestly,
worldwide excess capacity and global competition should continue to restrain
the prices of manufactured goods. The outlook for global interest rates,
therefore, remains relatively positive.
In the UK, despite the continued challenge of sterling strength for
manufacturers, there are increasing signs of renewed buoyancy in the domestic
economy. Japan appears to be bottoming out, even if with glacial slowness. Asia
is experiencing lower interest rates, falling debt service costs, a return of
consumer expenditure, and a modest upturn in exports. In Europe, domestic
demand remains buoyant, particularly in the periphery, and the gloom
surrounding the steep decline in exports and depressed German business
confidence may have been overdone. The general improvement in the outlook for
the global economy has encouraged a recent shift of investment emphasis in all
major equity markets towards economically cyclical and commodity-related
stocks.
In the light of this assessment, and barring any unforeseen shocks to global
financial markets, we remain optimistic that 1999 will continue to provide
positive investment opportunities.
5
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
APRIL 30, 1999
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
Comparison of change in value of a hypothetical $10,000 purchase in Mentor
Perpetual International Portfolio Class A and Class B Shares and the Morgan
Stanley Capital International EAFE Index.*
[GRAPH]
Class A Shares+ Class B Shares++ Morgan Stanley*
12/27/96 9,500 10,000 10,000
4/30/97 9,952 10,584 9,905
10/31/97 10,403 11,048 10,217
4/30/98 12,139 12,838 11,810
10/31/98 11,175 11,354 11,234
4/30/99 13,029 13,680 12,968
Average Annual Returns as of 4/30/99
1-Year Since Inception**
Class A Shares 1.17% 11.99%
Class B Shares 2.56% 13.14%
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 ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Morgan Stanley Capital International EAFE Index is an unmanaged index
composed of approximately 1,119 securities issued by foreign companies
listed on Europe, Australia & Far East (EAFE) stock exchanges. This is a
total return index with gross dividends reinvested. The performance of
countries and unmanaged indexes does not reflect expenses and many do not
correspond to the performance of the Portfolio, which is actively managed
and incurs expenses.
+ Represents a hypothetical investment of $10,000 in Mentor Perpetual
International Portfolio Class A Shares, after deducting the maximum sales
charge of 5.75% ($10,000 investment minus $575 sales charges = $9,425).
The Class A Shares' performance assumes the reinvestment of all dividends
and distributions.
++ Represents a hypothetical investment of $10,000 in Mentor Perpetual
International Portfolio Class B Shares. A contingent deferred sales
charge will be imposed, if applicable, on Class B Shares at rates ranging
from a maximum of 4.00% of amounts redeemed during the first year
following the date of purchase to 1.00% of amounts redeemed during the
six-year period following the date of purchase. Class B Shares are
charged a redemption fee of 4.00% on any redemption less than one year
from the purchase date. The value of the Class B Shares reflects a
redemption fee in effect at the end of each of the stated periods. The
Class B Shares' performance assumes the reinvestment of all dividends and
distributions.
** Reflects operations on Mentor Perpetual International Portfolio Class A and
Class B Shares from the date of initial offering on 12/27/96 through
4/30/99.
6
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
APRIL 30, 1999
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
Comparison of change in value of a hypothetical $10,000 purchase in Mentor
Perpetual International Portfolio Class E Shares and the Morgan Stanley Capital
International EAFE Index.*
[GRAPH]
Class E Shares+ Morgan Stanley*
1/16/98 10,000 10,000
3/31/98 11,806 10,974
6/30/98 11,573 11,098
10/31/98 10,833 10,524
4/30/99 12,629 12,148
Annual Return as of 4/30/99
1-Year Since Inception**
Class E Shares 7.36% 19.92%
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 ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
+ Represents a hypothetical investment of $10,000 in Mentor Perpetual
International Portfolio Class E Shares. The Class E Shares' performance
assumes the reinvestment of all dividends and distributions.
* The Morgan Stanley Capital International (MSCI) EAFE (Europe, Australia, and
Far East) World Index is an unmanaged index of approximately 1,119
securities issued by companies listed on European, Australian, and Far
Eastern stock exchanges. It contains no US equities and is therefore a
broadly diversified proxy for international performance. This is a total
return index with gross dividends reinvested. The Index is not adjusted to
reflect sales loads, expenses, or other fees that the SEC requires to be
reflected in the Portfolio's performance. Investors cannot invest in the
index. The performance of countries and unmanaged indexes does not reflect
expenses and may not correspond to the performance of Mentor Perpetual
International Portfolio, which is actively managed and incurs expenses.
** Reflects operations of Mentor Perpetual International Portfolio Class E
Shares from the date of initial offering on 1/16/98 through 4/30/99.
7
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
APRIL 30, 1999
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
Comparison of change in value of a hypothetical $10,000 purchase in Mentor
Perpetual International Portfolio Class Y Shares and the Morgan Stanley Capital
International EAFE Index.*
[GRAPH]
Class Y Shares+ Morgan Stanley*
5/29/96 10,000 10,000
10/31/96 9,696 9,953
4/30/97 10,627 10,124
10/31/97 11,157 10,443
4/30/98 13,036 12,071
10/31/98 12,015 11,482
4/30/99 14,012 13,255
Average Annual Return as of 4/30/99
1-Year Since Inception**
Class Y Shares 7.48% 12.24%
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 ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
+ Represents a hypothetical investment of $10,000 in Mentor Perpetual
International Portfolio Class Y Shares. The Class Y Shares' performance
assumes the reinvestment of all dividends and distributions.
* The Morgan Stanley Capital International (MSCI) EAFE (Europe, Australia, and
Far East) World Index is an unmanaged index of approximately 1,119
securities issued by companies listed on European, Australian, and Far
Eastern stock exchanges. It contains no US equities and is therefore a
broadly diversified proxy for international performance. This is a total
return index with gross dividends reinvested. The Index is not adjusted to
reflect sales loads, expenses, or other fees that the SEC requires to be
reflected in the Portfolio's performance. Investors cannot invest in the
index. The performance of countries and unmanaged indexes does not reflect
expenses and may not correspond to the performance of Mentor Perpetual
International Portfolio, which is actively managed and incurs expenses.
** Reflects operations of Mentor Perpetual International Portfolio Class Y
Shares from the date of commencement of operations on 5/29/96 through
4/30/99.
8
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- -------- -------------
<S> <C> <C> <C>
PREFERRED STOCKS 1.04%
- -----------------------------------------------------------------------------------------------
BRAZIL 0.09%
Centrais Eletrobras~ 5,440 $ 57,384
Telecomonicacoes Brasileiras SA~* 740 67,537
- -----------------------------------------------------------------------------------------------
124,921
- -----------------------------------------------------------------------------------------------
GERMANY 0.95%
Porsche AG 560 1,391,867
- -----------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $1,400,483) 1,516,788
- -----------------------------------------------------------------------------------------------
COMMON STOCKS 99.10%
- -----------------------------------------------------------------------------------------------
ARGENTINA 0.15%
Banco Galicia~ 1,000 23,062
Central Costanera S.A.-Class B 8,100 20,015
Perez Company SA~ 3,540 44,054
Telecom Argentina SA~ 800 27,600
Telefonica de Argentina SA~ 760 28,405
YPF SA~ 1,700 71,400
- ------------------------------------------------------------------------------------------------
214,536
- ------------------------------------------------------------------------------------------------
BELGIUM 0.12%
Cofinimmo 1,455 174,817
- ------------------------------------------------------------------------------------------------
BRAZIL 0.26%
CIA Paranaense Energy~ 5,100 41,756
Companhia Energetica de Minais Gerais~ 1,102 26,438
Companhia Energetica de Sao Paulo~ 1,230 29,509
Embratel Participa~ 1,300 21,125
Petroleo Brasileiro SA~ 2,800 45,233
Tele Centro Sul Participacoes SA~ 900 47,812
Telesp Participacoes SA~ 2,600 65,000
</TABLE>
9
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ------------ -------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------------
BRAZIL (CONTINUED)
Uniao de Bancos Brasileiros SA~ 1,600 $ 39,700
Vale do Rio Doche~ 3,320 63,840
- --------------------------------------------------------------------------------------------------------
380,413
- --------------------------------------------------------------------------------------------------------
CHILE 0.10%
Chilectra SA~ 2,150 47,547
CIA de Telecomunicaciones de Chile SA~ 1,630 43,093
Embotelladora Andina SA~ 2,000 36,125
Enersis SA~ 1,270 24,368
- --------------------------------------------------------------------------------------------------------
151,133
- --------------------------------------------------------------------------------------------------------
CHINA 0.31%
First Tractor 560,000 111,988
Pohang Iron & Steel~ 5,000 128,750
Yizheng Chemical Fibre Company, Limited * 1,395,000 201,579
- --------------------------------------------------------------------------------------------------------
442,317
- --------------------------------------------------------------------------------------------------------
CROATIA 0.11%
Zagrebacka Banka 18,000 154,350
- --------------------------------------------------------------------------------------------------------
CZECH REPUBLIC 0.08%
Ceske Radiokomunikace * 3,200 117,600
- --------------------------------------------------------------------------------------------------------
ESTONIA 0.21%
Eesti Telekom # 14,400 304,200
- --------------------------------------------------------------------------------------------------------
FINLAND 3.43%
Hansabank * 12,000 69,551
Huhtamaki 17,400 625,706
Metra Oy-Class B 41,480 1,033,169
Nokia Oy-Class A 23,832 1,838,771
Upm-Kymmene Oy 46,910 1,421,451
- --------------------------------------------------------------------------------------------------------
4,988,648
- --------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- -------- -------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------------------------
FRANCE 13.37%
Accor SA 3,250 $ 857,622
Alstom SA 22,240 729,186
Atos SA 13,920 1,192,522
Axa 7,540 974,506
BQE Paribas 8,890 945,892
Casino Guichard Perrachon 8,915 878,778
Coflexip 8,325 748,420
Compagne de Saint-Gobain 10,670 1,833,833
Elf Aquitane SA 4,600 715,183
Entrelec 18,950 761,614
Eramet SLN 19,887 759,477
Imetal 8,080 1,051,989
ISIS 3,600 282,900
Pechiney International 9,512 403,570
Sanofi SA 6,714 1,053,088
Schneider 17,130 1,118,758
Serp Recyclage * 3,809 561,988
Societe Generale D'Enterprises 16,110 681,550
Total SA-Class B 18,080 2,478,252
Usinor SA 49,160 761,193
Vivendi 2,727 637,699
- ------------------------------------------------------------------------------------------------
19,428,020
- ------------------------------------------------------------------------------------------------
GERMANY 3.75%
AVA Allgemeine Handelsgesellschaft der
Verbraucher AG 2,470 888,214
Deutsche Lufthansa 43,500 1,022,293
Global Telesystems Group, Inc. * 14,540 961,458
Metro AG 4,325 315,172
Siemens AG 9,077 669,140
Veba AG 29,040 1,589,458
- ------------------------------------------------------------------------------------------------
5,445,735
- ------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ---------- -------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -----------------------------------------------------------------------------------------------
GREAT BRITAIN 22.24%
Abbey National Bank PLC 36,000 $ 814,032
Allied Zurich PLC * 23,650 324,059
Arcadia Group PLC 53,750 241,609
Arriva PLC 35,150 223,859
ASDA Group PLC 132,000 441,030
BAA PLC 38,000 395,710
Barclays Bank PLC 34,754 1,098,859
Bass PLC 38,785 613,468
BBA Group PLC 25,645 204,156
BG PLC 42,000 234,724
Blue Circle Industries 46,666 316,714
Britannic Assurance PLC 21,000 337,395
British Aerospace PLC 94,200 704,840
British Airways PLC 62,800 494,133
British American Tobacco PLC 76,700 642,668
British Biotech PLC * 190,000 48,891
Burmah Castrol PLC 25,000 427,996
Canary Wharf Group 13,200 81,094
Celltech PLC * 24,000 192,025
Centrica PLC * 93,700 190,250
Chelsfield PLC 27,000 122,235
Coats Viyella 90,000 67,305
Countrywide Assured Group PLC 100,000 252,495
Debenhams PLC 46,500 355,596
Dixons Group 15,000 320,846
Emap PLC 40,040 843,566
Enterprise Oil PLC 53,500 386,111
Express Dairies PLC 48,000 84,916
Fairview Holdings 87,500 197,011
Frogmore Estates PLC 37,000 276,699
Gallaher Group PLC 50,000 286,470
Garban PLC 22,600 99,044
</TABLE>
12
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ---------- -------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------------------------
GREAT BRITAIN (CONTINUED)
Granada Group PLC 31,900 $ 677,202
Great Universal Stores PLC 18,300 208,518
Greenalls Group PLC 67,500 428,257
HSBC Holdings PLC 50,413 1,888,039
Iceland Group PLC 57,250 223,275
III Group PLC 49,500 540,541
Imperial Chemical Industries PLC 43,000 460,916
Inchcape PLC 70,000 171,681
Ladbroke Group 140,941 678,872
Land Securities 16,000 210,488
Lloyds TSB Group PLC 91,000 1,464,239
Medeva PLC 123,300 229,033
Meggitt PLC 90,000 288,761
National Westminster Bank 41,600 1,001,541
Next PLC 36,526 451,146
Northern Foods PLC 90,000 172,967
Nycomed Amersham PLC 57,800 471,524
Powderject Pharmaceuticals 32,148 433,521
PowerGen PLC 28,000 305,310
Prudential Corporation PLC 49,140 701,386
Railtrack Group PLC 8,400 175,216
Rank Group PLC 65,000 270,226
Reckitt & Colman PLC 20,100 240,181
Reuters Group PLC 34,700 469,331
Rio Tinto 25,000 437,846
Rolls-Royce PLC 129,000 598,016
Safeway PLC 26,882 112,406
Sainsbury (J.) PLC * 75,700 479,978
Scotia Holdings * 30,000 62,239
Scottish Power PLC 28,500 233,530
Securicor PLC 43,750 412,667
Shell 90,000 673,776
</TABLE>
13
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ---------- -------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------------------------------
GREAT BRITAIN (CONTINUED)
Signet Group 532,750 $ 518,361
Smith (H.W.) Group PLC 54,150 622,670
Smiths Industries PLC 23,000 361,020
Spirax-Sarco Engineering PLC 38,000 337,652
Standard Chartered Bank 63,500 1,145,830
Sun Life & Provin Holdings 36,440 327,600
Tate & Lyle PLC 34,682 238,309
Telewest Communications * 48,500 223,470
Tesco PLC 154,400 457,518
Trinity PLC 33,600 310,714
United Assurance Group PLC 44,150 332,655
United News & Media PLC 46,400 568,626
United Utilities 20,000 226,442
United Assurance Group PLC 15,000 1,689
Vickers Group PLC 18,333 48,649
Wolseley 12,622 112,864
- -------------------------------------------------------------------------------------------------------
32,326,504
- -------------------------------------------------------------------------------------------------------
GREECE 0.32%
Alpha Credit Bank 900 64,314
Chipita 7,000 150,066
Hellenic Petroleum SA * 12,000 96,861
Panafon Hellenic Telecom SA * 5,700 152,005
- -------------------------------------------------------------------------------------------------------
463,246
- -------------------------------------------------------------------------------------------------------
HONG KONG 3.18%
Aeon Credit Services 690,000 189,174
Asia Satellite Telecommunications Holdings,
Limited 101,000 182,433
Axa China Region, Limited 280,000 214,946
Cafe de Coral Holdings, Limited 975,000 320,773
Cheung Kong Holdings 60,000 545,750
CLP Holdings, Limited 60,000 322,031
</TABLE>
14
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ------------ -------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- --------------------------------------------------------------------------------------------------------
HONG KONG (CONTINUED)
Dah Sing Financial Group 32,000 $ 100,944
Henderson Land Development 100,000 605,099
HKR International, Limited 432,800 321,077
Hong Kong Telecomm 100,000 269,004
Hutchison Whampoa, Limited 30,000 269,004
Legend Holdings, Limited 500,000 258,038
New World Development 142,764 353,650
Road King Infrastructure, Limited 464,544 314,659
Shui On Construction & Materials, Limited 70,000 81,734
Yanzhou Coal Mining Company - Class H 1,150,000 270,037
- -------------------------------------------------------------------------------------------------------
4,618,353
- -------------------------------------------------------------------------------------------------------
INDIA 0.13%
BSES, Limited #* 8,000 73,200
Hindalco Industries, Limited # 4,000 56,400
Mahanagar Telephone Nigam, Limited #* 6,000 62,550
- -------------------------------------------------------------------------------------------------------
192,150
- -------------------------------------------------------------------------------------------------------
INDONESIA 0.60%
Bat Indonesia 20,000 37,372
PT Hajaya Mandala Sampoerna 460,000 641,794
PT Indofoods Sukses Mak 244,000 194,531
- -------------------------------------------------------------------------------------------------------
873,697
- -------------------------------------------------------------------------------------------------------
IRELAND 2.45%
Bank of Ireland 40,160 803,143
CRH PLC 71,970 1,411,519
Elan Corporation PLC ~* 15,690 808,035
Irish Permanent 37,360 531,745
- -------------------------------------------------------------------------------------------------------
3,554,442
- -------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ------------ -------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------------------------------
ITALY 3.32%
Assicurazioni Generali 15,450 $ 602,155
Finmeccanica SPA 972,030 958,159
Grupo Editoriale L'Espresso 112,800 1,652,345
Ina SPA 313,000 827,611
Rinascente SPA 92,650 788,830
- ------------------------------------------------------------------------------------------------------
4,829,100
- ------------------------------------------------------------------------------------------------------
JAPAN 22.94%
Asahi Bank 450,000 2,379,635
Asahi Glass Company, Limited 320,000 2,451,121
Chugai Pharmaceuticals 200,000 2,380,054
DDI Corporation 420 2,087,241
Fuji Heavy Industries, Limited 290,000 1,944,270
Funai Electric Company, Limited 14,000 1,883,092
Kokusai Securities Company, Limited 120,000 1,498,429
Nichiei Company 18,000 1,561,282
Nippon Steel Corporation 1,235,000 3,674,838
Nippon Mining & Metals Company, Limited 350,000 1,721,768
Oji Paper Company, Limited 400,000 2,396,815
Ricoh Company, Limited 235,000 2,264,823
Shin-Etsu Chemical 85,000 2,706,893
Teijin, Limited 450,000 1,893,149
Yasuda F&M Insurance Company, Limited 450,000 2,496,543
- -----------------------------------------------------------------------------------------------------
33,339,953
- -----------------------------------------------------------------------------------------------------
KOREA 0.82%
Atlantic Korean Company 5,000 71,650
Korea House & Commerce 30,000 734,250
Samsung Electronic Goods #(a) 6,000 136,500
Schroder Korea Fund 7,000 57,575
Shinhan Bank 8,000 191,200
- -----------------------------------------------------------------------------------------------------
1,191,175
- -----------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ---------- -------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ------------------------------------------------------------------------------------------------------
LUXEMBOURG 0.18%
Benpres Holdings (a)* 40,600 $ 134,850
Tata Elec Cies 800 124,000
- ------------------------------------------------------------------------------------------------------
258,850
- ------------------------------------------------------------------------------------------------------
MALAYSIA 0.43%
Boustead Holdings Berhad (b) 10,000 8,631
IOI Corporation Berhad (b) 300,000 190,261
Nanyang Press Berhad (b) 8,000 8,042
Telekom Malaysia Berhad (b) 143,000 421,468
- ------------------------------------------------------------------------------------------------------
628,402
- ------------------------------------------------------------------------------------------------------
MEXICO 0.33%
Carso Global Telecom 4,700 23,069
Cemex SA~* 3,850 35,834
Cifra SA~ 26,900 51,130
Coca Cola Femsa~ 1,800 37,238
DESC SA~ 1,432 35,442
Fomento Economico~ 900 32,738
Grupo Carso SA~ 5,290 51,184
Grupo Fin Bancomer 100,000 34,628
Grupo Televisa #* 1,500 61,500
Kimberly-Clark de Mexico SA~ 5,300 20,554
Telefonos de Mexico SA - Class L~ 1,240 93,930
- ------------------------------------------------------------------------------------------------------
477,247
- ------------------------------------------------------------------------------------------------------
NETHERLANDS 5.19%
Akzo Nobel NV 32,020 1,447,769
DSM NV 7,776 752,111
ING Groep NV 26,750 1,649,432
Philips Electronics NV 10,836 934,047
Royal Dutch Petroleum Company 33,106 1,929,302
</TABLE>
17
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ------------ -------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ----------------------------------------------------------------------------------------------------
NETHERLANDS (CONTINUED)
Vendex International NV 30,000 $ 747,230
Vendex International NV - Coupon 2,120 85,877
- ----------------------------------------------------------------------------------------------------
7,545,768
- ----------------------------------------------------------------------------------------------------
NORWAY 0.34%
Petroleum Geo 29,470 496,522
- ----------------------------------------------------------------------------------------------------
PERU 0.02%
Telefonica del Peru SA- 2,300 34,644
- ----------------------------------------------------------------------------------------------------
PHILIPPINES 0.22%
Ayala Corporation 45,000 16,272
Bank of The Phillippinnes Island 69,500 219,329
Filinvest Development Corporation * 1,000,000 84,155
- ----------------------------------------------------------------------------------------------------
319,756
- ----------------------------------------------------------------------------------------------------
PORTUGAL 1.11%
BPI SGPS SA 30,900 833,375
Cimpor Cimentos de Portugal 13,920 382,785
Jeronimo Martins 12,066 396,567
- ----------------------------------------------------------------------------------------------------
1,612,727
- ----------------------------------------------------------------------------------------------------
SINGAPORE 1.73%
Bukit Sembawang Estates, Limited 20,000 177,043
DBS Land 200,000 370,611
GP Batteries International, Limited 100,000 167,011
Hong Leong Finance 80,000 197,344
Overseas Chinese Bank * 40,286 378,016
Overseas Chinese Bank - Warrants * 200,000 126,291
Overseas Union Bank, Limited 60,000 308,055
Singapore Computer Systems & Services,
Limited * 200,000 194,748
</TABLE>
18
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ---------- -------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- ----------------------------------------------------------------------------------------------
SINGAPORE (CONTINUED)
United Overseas Bank 76,000 $ 587,548
- ----------------------------------------------------------------------------------------------
2,506,667
- ----------------------------------------------------------------------------------------------
SPAIN 5.89%
Baron de Ley * 31,230 1,076,791
Centros Comerciales Continente SA 41,221 976,582
Dragados & Construcciones SA 19,900 665,093
Empresa Nac de Celulosa 36,200 676,530
Endesa SA 50,000 1,112,648
Prosegur CIA de Seguridad SA 98,294 1,138,369
Tabacalera SA 72,300 1,409,307
Telefonica SA 27,704 1,325,290
Viscofan Envolturas Celulosicas
SA - Warrants 14,932 183,986
- ----------------------------------------------------------------------------------------------
8,564,596
- ----------------------------------------------------------------------------------------------
SWEDEN 2.93%
BPA AB 278,000 934,190
Celsius AB - Class B 53,380 823,003
Ericsson LM - Class B 38,920 1,022,413
ForeningsSparbanken AB - Class A 47,220 1,036,042
Kinnevik AB 20,350 446,494
- ----------------------------------------------------------------------------------------------
4,262,142
- ----------------------------------------------------------------------------------------------
SWITZERLAND 2.07%
Jelmoli Holdings AG 715 675,435
UBS AG * 6,841 2,324,688
- ----------------------------------------------------------------------------------------------
3,000,123
- ----------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Percent of Net Assets Shares Market Value
----------------------- ------------ --------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
- -------------------------------------------------------------------------------------------------------
TAIWAN 0.07%
Taipei Fund * 4 $ 33,000
Taiwan Semiconductor~* 2,950 70,800
- -------------------------------------------------------------------------------------------------------
103,800
- -------------------------------------------------------------------------------------------------------
THAILAND 0.34%
Electricity Generating Public Company * 40,000 88,949
Siam Pulp & Paper Public Company,
Limited * 27,000 61,224
TelecomAsia Corporation Public Company,
Limited * 400,000 345,013
- -------------------------------------------------------------------------------------------------------
495,186
- -------------------------------------------------------------------------------------------------------
TURKEY 0.36%
Akbank 5,100,000 162,574
Haci Omer Sabanci~ 28,000 196,700
Turkiye IS Bankasi 1,800,000 88,364
Yapi ve Kredi Bankasi AS 3,000,000 71,915
- -------------------------------------------------------------------------------------------------------
519,553
- -------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $127,897,167) 144,016,372
- -------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
PORTFOLIO OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Principal
Percent of Net Assets Amount Market Value
----------------------- ---------- ---------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
CORPORATE BONDS 0.15%
- ------------------------------------------------------------------------------------------------
GREAT BRITAIN 0.02%
Scotia Holdings, 8.50%, 3/26/02 $19,000 $ 23,681
- ------------------------------------------------------------------------------------------------
THAILAND 0.13%
PTTEP International, Limited, 7.63%,
10/01/06 200,000 195,000
- ------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $171,577) 218,681
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $129,469,227) 100.29% 145,751,841
- ------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES (0.29%) (424,034)
- ------------------------------------------------------------------------------------------------
NET ASSETS 100.00% $145,327,807
- ------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing.
~ American Depository Receipts.
# Global Depository Receipts.
(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.
(b) These securities are considered illiquid due to a one year moratorium on
the repatriation of assets from Malaysia.
INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other than short-term
securities, aggregated $97,311,460 and $84,297,341, respectively.
INCOME TAX INFORMATION
At April 30, 1999, the aggregated cost of investment securities for federal
income tax purposes was $129,469,227. Net unrealized appreciation aggregated
$16,282,614, of which $22,860,910 related to appreciated investment securities
and $6,578,296 related to depreciated investment securities.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------
ASSETS
Investments, at market value (cost $129,469,227) (Note 2) $ 145,751,841
Collateral for securities loaned (Note 2) 24,613,294
Receivables
Investments sold 3,296,036
Fund shares sold 152,930
Dividends and interest 722,866
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 4,751
Deferred expenses (Note 2) 12,035
- -----------------------------------------------------------------------------------------------------------
Total assets 174,553,753
- -----------------------------------------------------------------------------------------------------------
LIABILITIES
Payables
Investments purchased 4,235,675
Securities loaned (Note 2) 24,613,294
Fund shares redeemed 244,074
Unrealized depreciation on forward foreign currency exchange contracts (Note 6) 484
Accrued expenses and other liabilities 132,419
- -----------------------------------------------------------------------------------------------------------
Total liabilities 29,225,946
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $ 145,327,807
===========================================================================================================
Net Assets represented by: (Note 2)
Additional paid-in capital $ 122,681,723
Accumulated undistributed net investment gain 262,873
Accumulated net realized gain on investment transactions 6,103,187
Net unrealized appreciation of investments and foreign currency related transactions 16,280,024
- -----------------------------------------------------------------------------------------------------------
NET ASSETS $ 145,327,807
===========================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares $ 17.08
Class B Shares $ 16.86
Class E Shares $ 17.16
Class Y Shares $ 17.19
OFFERING PRICE PER SHARE
Class A Shares $ 18.12(a)
Class B Shares $ 16.86
Class E Shares $ 17.16
Class Y Shares $ 17.19
SHARES OUTSTANDING
Class A Shares 4,928,558
Class B Shares 3,109,452
Class E Shares 149,924
Class Y Shares 357,064
</TABLE>
(a) Computation of offering price: 100/94.25 of net asset value.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends (b) $ 1,289,335
Interest 145,162
- --------------------------------------------------------------------------------------------------
Total investment income (Note 2) 1,434,497
- --------------------------------------------------------------------------------------------------
EXPENSES
Management fee (Note 4) 650,383
Distribution fee (Note 5) 173,005
Shareholder service fee (Note 5) 153,209
Custodian and accounting fees 78,166
Transfer agent fee 68,361
Administration fee (Note 4) 65,011
Registration expenses 18,651
Shareholder reports and postage expenses 13,675
Legal fees 2,658
Organizational expenses 1,991
Audit fees 1,280
Directors' fees and expenses 955
Miscellaneous 1,752
- --------------------------------------------------------------------------------------------------
Total expenses 1,229,097
- --------------------------------------------------------------------------------------------------
Deduct
Waiver of management fee (Note 4) (68,420)
- --------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 273,820
- --------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED
TRANSACTIONS
Net realized gain on investments and foreign currency related transactions
(Note 2) 6,878,729
Change in unrealized appreciation (depreciation) on investments and foreign
currency related transactions 13,681,605
- --------------------------------------------------------------------------------------------------
Net gain on investments and foreign currency related transactions 20,560,334
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 20,834,154
==================================================================================================
</TABLE>
(b) Net of foreign withholding taxes of $156,044.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended 4/30/99 Year Ended
(Unaudited) 10/31/98
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $ 273,820 $ 760,153
Net realized gain (loss) on investments and foreign currency
related transactions 6,878,729 (1,408,584)
Change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions 13,681,605 4,181,964
- --------------------------------------------------------------------------------------------------------
Increase in net assets resulting from operations 20,834,154 3,533,533
- --------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A (94) (71,555)
Class B (10,799) (52,551)
Class E - (2,861)
Class Y - (26,033)
Net realized gain on investments
Class A - (91,708)
Class B - (54,364)
Class Y - (51,028)
Tax return of capital
Class A - (594,361)
Class B - (404,533)
Class E - (19,395)
Class Y - (103,344)
- --------------------------------------------------------------------------------------------------------
Total distributions to shareholders (10,893) (1,471,733)
- --------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 7)
Proceeds from sale of shares 80,822,548 70,000,076
Reinvested distributions - 1,395,920
Shares redeemed (74,640,175) (23,829,534)
- --------------------------------------------------------------------------------------------------------
Change in net assets resulting from capital share transactions 6,182,373 47,566,462
- --------------------------------------------------------------------------------------------------------
Increase in net assets 27,005,634 49,628,262
NET ASSETS
Beginning of period 118,322,173 68,693,911
- --------------------------------------------------------------------------------------------------------
End of period (including accumulated undistributed net
investment income (loss) of ($262,873) and $53,
respectively) $ 145,327,807 $ 118,322,173
========================================================================================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS A SHARES
<TABLE>
<CAPTION>
Six Months
Ended Year Period
4/30/99 Ended Ended
(Unaudited) 10/31/98 10/31/97 (b)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.65 $ 13.83 $ 12.53
====================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.11 0.01
Net realized and unrealized gain on investments 2.38 0.91 1.29
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.43 1.02 1.30
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income - ( 0.03) -
Capital gains - ( 0.03) -
Tax return of capital - ( 0.14) -
- --------------------------------------------------------------------------------------------------------------------
Total distirbutions - ( 0.20) -
- --------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.08 $ 14.65 $ 13.83
====================================================================================================================
Total Return* 16.59% 7.43% 10.38%
====================================================================================================================
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 84,175 $ 62,782 $ 33,213
Ratio of expenses to average net assets 1.53% (a) 1.35% 1.35%(a)
Ratio of expenses to average net assets excluding waiver 1.63% (a) 1.68% 1.92%(a)
Ratio of net investment income income to
average net assets 0.67% (a) 0.96% 0.71%(a)
Portfolio turnover rate 66% 120% 107%
====================================================================================================================
</TABLE>
(a) Annualized.
(b) For the period from December 27, 1996 (initial offering of Class A shares)
to October 31, 1997.
* Total return does not reflect sales commission and is not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS B SHARES
<TABLE>
<CAPTION>
Six Months
Ended Year Period
4/30/99 Ended Ended
(Unaudited) 10/31/98 10/31/97 (c)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.52 $ 13.81 $12.53
========================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net investment income - 0.03 -
Net realized and unrealized gain on investments 2.34 0.88 1.28
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.34 0.91 1.28
- -----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income - (0.03) -
Capital gains - (0.03) -
Tax return of capital - (0.14) -
- -----------------------------------------------------------------------------------------------------------------------
Total distributions - (0.20) -
- -----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 16.86 $ 14.52 $13.81
=======================================================================================================================
Total Return* 16.12% 6.64% 10.22%
=======================================================================================================================
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 52,440 $ 42,354 $19,371
Ratio of expenses to average net assets 2.28% (a) 2.10% 2.10%(a)
Ratio of expenses to average net assets excluding waiver 2.38% (a) 2.43% 2.65%(a)
Ratio of net investment income (loss) to average net assets (0.08%)(a) 0.21% 0.04%(a)
Portfolio turnover rate 66% 120% 107%
=======================================================================================================================
</TABLE>
(a) Annualized.
(c) For the period from December 27, 1996 (initial offering of Class B shares)
to October 31, 1997.
* Total return does not reflect sales commission and is not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS E SHARES
<TABLE>
<CAPTION>
Six Months
Ended Period
4/30/99 Ended
(Unaudited) 10/31/98 (e)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.72 $ 13.53
===================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.19
Net realized and unrealized gain on investments 2.39 1.15
- ---------------------------------------------------------------------------------------------------
Total from investment operations 2.44 1.34
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income - (0.02)
Tax return of capital - (0.13)
- ---------------------------------------------------------------------------------------------------
Total distributions - (0.15)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.16 $ 14.72
===================================================================================================
Total Return* 16.58% 8.33%
===================================================================================================
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 2,573 $ 2,207
Ratio of expenses to average net assets 1.53%(a) 1.35%(a)
Ratio of expenses to average net assets excluding waiver 1.63%(a) 1.76%(a)
Ratio of net investment income to average net assets 0.67%(a) 1.57%(a)
Portfolio turnover rate 66% 120%
===================================================================================================
</TABLE>
(a) Annualized.
(e) For the period from January 16, 1998 (initial offering of Class E shares)
to October 31, 1998.
* Total return does not reflect sales commission and is not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS Y SHARES
<TABLE>
<CAPTION>
Six Months
Ended Year Year Period
4/30/99 Ended Ended Ended
(Unaudited) 10/31/98 10/31/97 10/31/96 (f)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.74 $ 13.89 $ 12.12 $ 12.50
=================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.33 0.27 0.15 0.04
Net realized and unrealized gain (loss)
on investments 2.12 0.79 1.67 (0.42)
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations 2.45 1.06 1.82 (0.38)
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM
Net investment income - (0.02) (0.05) -
Capital gains - (0.05) - -
Tax return of capital - (0.14) - -
- -----------------------------------------------------------------------------------------------------------------
Total distributions - (0.21) (0.05) -
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 17.19 $ 14.74 $ 13.89 $ 12.12
=================================================================================================================
Total Return* 16.62% 7.69% 15.07% (3.04%)
=================================================================================================================
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 6,140 $ 10,979 $ 16,110 $ 8,741
Ratio of expenses to average net assets 1.28%(a) 1.10% 1.10% 1.10%(a)
Ratio of expenses to average net assets
excluding waiver 1.39%(a) 1.43% 1.74% 1.75%(a)
Ratio of net investment income to
average net assets 0.92%(a) 1.21% 1.20% 0.89%(a)
Portfolio turnover rate 66% 120% 107% 59%
=================================================================================================================
</TABLE>
(a) Annualized.
(f) For the period from May 29, 1996 (commencement of operations) to October
31, 1996.
* Total return does not reflect sales commission and is not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (UNAUDITED)
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 April 30, 1999, as follows:
Mentor U.S. Government
Cash Management Portfolio
("Cash Management Portfolio")
Mentor Fixed-Income Portfolio ("Fixed-Income Portfolio")
Mentor Perpetual International Portfolio ("The 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 include only the International Portfolio.
The Portfolio currently issues four classes of shares. Class A shares are sold
subject to a maximum sales charge of 5.75% payable at the time of purchase.
Class B shares are sold subject to a contingent deferred sales charge payable
upon redemption which decreases depending on when shares were purchased and how
long they have been held. Class E and Class Y shares are not subject to any
sales charges.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolio 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
Portfolio.
(a) Valuation of Securities -- Listed securities held by the Portfolio traded
on national securities exchanges and over-the-counter securities quoted on the
NASDAQ National Market System are valued at the
29
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
last reported sales price or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market under
procedures approved by the Board of Trustees. Securities traded in the
over-the-counter market, other than those quoted on the NASDAQ National Market
System, are valued at the last available bid price.
Foreign currency amounts are translated into United States dollars as follows:
market value of investments, assets and liabilities at the daily rate of
exchange, purchases and sales of investments, income and expenses at the rate
of exchange prevailing on the respective dates of such transactions. Net
unrealized foreign exchange gains/losses are a component of unrealized
appreciation/depreciation of investments.
Net realized foreign currency gains and losses include foreign currency gains
and losses between trade date and settlement date on investment securities
transactions, foreign currency transactions and the difference between the
amounts of interest and dividends recorded on the books of the Portfolio and
the amount actually received. The portion of investment gains and losses
related to foreign currency fluctuations in exchange rates between the initial
purchase trade date and subsequent sale trade date is included in realized
gains and losses on security transactions.
(b) Repurchase Agreements -- It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book entry system all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's underlying securities to ensure the existence of a
proper level of collateral.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Trust's adviser to be creditworthy pursuant to guidelines established by
the Trustees. Risks may arise from the potential inability of counterparties to
30
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
honor the terms of the repurchase agreement. Accordingly, the Trust could
receive less than the repurchase price on the sale of collateral securities.
(c) Portfolio Securities Loaned -- The 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 April 30, 1999, the Portfolio had loaned securities to brokers which were
collateralized by cash and securities. Cash collateral at April 30, 1999 was
reinvested in U.S. Treasury and high quality money market instruments. Income
from securities lending activities amounted to $52,698 for the six months ended
April 30, 1999. 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 April 30, 1999, the market value of the securities on
loan and the related collateral were as follows:
<TABLE>
<CAPTION>
Securities Cash Securities
On Loan Collateral Collateral
- -------------- -------------- -----------
<S> <C> <C>
$24,354,522 $24,613,294 $740,308
</TABLE>
(d) Security Transactions and Interest Income -- Security transactions for the
Portfolio 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.
31
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(e) Expenses -- Expenses arising in connection with a Portfolio are allocated
to that Portfolio. 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 the Portfolio's intent to comply with the provisions applicable to
regulated investment companies under the Internal Revenue Code and to
distribute to its shareholders within the allowable time limit substantially
all taxable income and realized capital gains.
(g) 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.
(h) Distributions -- Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due
to the deferral of wash sales.
NOTE 3: DIVIDENDS
Dividends are declared and paid annually by the Portfolio. Capital gains
realized by the Portfolio, if any, will be distributed annually.
NOTE 4: INVESTMENT MANAGEMENT AND ADMINISTRATION AGREEMENTS
The Portfolio has entered into an Investment Advisory Agreement with Mentor
Perpetual Advisors, LLC ("Mentor Perpetual"). Mentor Perpetual is owned equally
by Mentor Investment Advisors, LLC and Perpetual plc., a diversified financial
services holding company. Under this agreement, Mentor Perpetual's management
fee is accrued daily and paid monthly at an annual rate of 1.00% applied to the
average daily net assets of the Portfolio. For the six months ended April 30,
1999, Mentor Perpetual earned advisory fees of $650,383 and waived $68,420 of
those fees.
Mentor Investment Advisors, LLC ("Mentor Advisors") is a wholly owned
subsidiary of Mentor Investment Group, LLC ("Mentor") and its affiliates.
Mentor is a subsidiary of Wheat First Butcher Singer, Inc., which in turn is a
wholly owned subsidiary of First Union
32
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Corporation ("First Union"). First Union is a leading financial services
company; First Union has announced plans to acquire EVEREN Capital Corporation,
which currently has a minority ownership interest in Mentor.
Mentor provides administrative personnel and services to the Portfolio,
pursuant to an Administration Agreement. For the six months ended April 30,
1999, Mentor earned administration fees of $65,011. Mentor is a partially owned
subsidiary of Wheat First Butcher Singer, Inc., ("Wheat") and EVEREN Capital
Corporation.
NOTE 5: DISTRIBUTION AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
The Portfolio has adopted a Distribution Plan ("the Plan") with respect to its
Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Under a Distribution Agreement between the Portfolio and Mentor Distributors,
LLC ("Mentor Distributors") a wholly-owned subsidiary of BISYS Fund Services,
Inc., Mentor Distributors was appointed distributor of the Portfolio. To
compensate Mentor Distributors for the services it provides and for the
expenses it incurs under the Distribution Agreement, the Portfolio pay a
distribution fee, which is accrued daily and paid monthly at the annual rate of
0.75% of the Portfolio's average daily net assets.
Mentor Distributors may select financial institutions, such as investment
dealers and banks to provide sales support services as agents for their clients
or customers who beneficially own Class B shares of the Portfolio. Financial
institutions will receive fees from Mentor Distributors based upon Class B
shares owned by their clients or customers.
The Trust has adopted a Shareholder Servicing Plan (the "Service Plan") with
respect to Class A, Class B and Class E shares of the Portfolio. Under the
Service Plan, financial institutions will enter into shareholder service
agreements with the Portfolio to provide administrative support services to
their customers who from time to time may be owners of record or beneficial
owners of Class A, Class B or Class E shares of the Portfolio. In return for
providing these support services, a financial institution may receive
33
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
payments from the Portfolio at a rate not exceeding 0.25% of the average daily
net assets of the Class A, Class B or Class E shares.
Presently, the Portfolio's class specific expenses are limited to expenses
incurred by a class of shares pursuant to its respective Distribution Plan. For
the six months ended April 30, 1999, distribution fees and shareholder
servicing fees were as follows:
Distribution Shareholder Service Fee
Fee Class A Class B Class E
- ------------- --------- --------- --------
$173,005 $92,712 $57,607 $2,890
NOTE 6: FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
In connection with portfolio purchases and sales of securities denominated in a
foreign currency, the Portfolio may enter into forward foreign currency
exchange contracts ("contracts"). Additionally, from time to time the Portfolio
may enter into contracts to hedge certain foreign currency assets. Contracts
are recorded at market value. Realized gains and losses arising from such
transactions are included in net gain (loss) on investments and forward foreign
currency exchange contracts. The Portfolio is subject to the credit risk that
the other party will not complete the obligations of the contract. At April 30,
1999, the Portfolio had outstanding forward contracts as set forth below.
<TABLE>
<CAPTION>
Unrealized
Contracts to In Exchange Appreciation/
Settlement Date Deliver/Receive Value For (Depreciation)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PURCHASES
4/29/99 British Pound 19,603 $ 31,526 $ 31,501 $ 25
4/29/99 British Pound 22,178 35,668 35,640 28
4/28/99 Indonesian Rupiah 584,453,400 72,806 69,166 3,640
SALES
4/29/99 British Pound 63,474 102,082 102,003 (79)
4/29/99 British Pound 69,306 111,462 111,375 (87)
4/29/99 British Pound 105,788 170,134 170,001 (133)
4/29/99 British Pound 72,232 116,168 116,078 (90)
4/29/99 British Pound 33,533 53,929 53,887 (42)
4/29/99 British Pound 32,309 51,960 51,920 (40)
4/28/99 Euro 216,730 229,225 229,734 509
4/28/99 Euro 233,409 246,865 247,414 549
4/29/99 Euro 36,275 38,366 38,353 (13)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
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>
Mentor Perpetual International Portfolio
Six Months Ended Period Ended
4/30/99 10/31/98
Shares Dollars Shares Dollars
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A:
Shares sold 4,723,704 $ 71,450,864 2,714,324 $40,017,047
Shares issued upon reinvestment of distributions -- -- 51,307 729,947
Shares redeemed (4,079,597) (63,082,285) (882,718) (12,590,371)
--------------------------------------------------------------
Change in net assets from capital share
transactions 644,107 $ 8,368,579 1,882,913 $28,156,623
==============================================================
CLASS B:
Shares sold 549,440 $ 8,403,945 1,859,926 $27,973,060
Shares issued upon reinvestment of distributions -- -- 33,872 478,262
Shares redeemed (356,059) (5,322,985) (380,236) (5,482,882)
--------------------------------------------------------------
Change in net assets from capital share
transactions 193,381 $ 3,080,960 1,513,562 $22,968,440
==============================================================
CLASS E: (a)
Shares sold -- $ -- 148,374 $ 2,008,618
Shares issued upon reinvestment of distributions -- -- 1,550 22,256
Shares redeemed -- -- -- --
-------------------------------------------------------------
Change in net assets from capital share
transactions -- $ -- 149,924 $ 2,030,874
=============================================================
CLASS Y:
Shares sold 19 $ 300 95 $ 1,350
Shares issued upon reinvestment of distributions -- -- 11,659 165,455
Shares redeemed (387,911) (6,078,783) (426,754) (5,756,280)
--------------------------------------------------------------
Change in net assets from capital share
transactions (387,892) $ (6,078,483) (415,000) $(5,589,475)
==============================================================
</TABLE>
(a) For the period from January 16, 1998 (initial offering of Class E shares)
to October 31, 1998.
35
<PAGE>
MENTOR PERPETUAL INTERNATIONAL PORTFOLIO
ADDITIONAL INFORMATION
YEAR 2000 (UNAUDITED)
The Portfolio 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 adequately after 1999
because of the inability of computer software to distinguish the year 2000 from
the year 1900. Mentor Advisors is taking steps that it believes are reasonably
designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Portfolio's other major service providers. There can be no assurance, however,
that these steps will be sufficient to avoid any adverse impact on the
Portfolio from this problem.
36
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEES
Daniel J. Ludeman, TRUSTEE & CHAIRMAN
Chairman and Chief Executive Officer
Mentor Investment Group, LLC
Arch T. Allen III, TRUSTEE
Attorney at Law
Allen & Moore, LLP
Jerry R. Barrentine, TRUSTEE
President
J.R. Barrentine & Associates
Arnold H. Dreyfuss, TRUSTEE
Former Chairman & Chief Executive Officer
Hamilton Beach/Proctor-Silex, Inc.
Weston E. Edwards, TRUSTEE
President
Weston Edwards & Associates
Thomas F. Keller, TRUSTEE
Former Dean, Fuqua School of Business
Duke University
Louis W. Moelchert, Jr., TRUSTEE
Vice President for Business & Finance
University of Richmond
J. Garnett Nelson, TRUSTEE
Consultant
Mid-Atlantic Holdings, LLC
Troy A. Peery, Jr., TRUSTEE
Former President
Heilig-Meyers Company
Peter J. Quinn, Jr., TRUSTEE
Managing Director
Mentor Investment Group, LLC
OFFICERS
Paul F. Costello, PRESIDENT
Managing Director
Mentor Investment Group, LLC
Terry L. Perkins, TREASURER AND SECRETARY
Senior Vice President and Treasurer
Mentor Investment Group, LLC
Michael A. Wade, ASSISTANT TREASURER
Vice President and Controller
Mentor Investment Group, LLC
MK#1312
Mentor Institutional Trust
Mentor Perpetual
International Portfolio
-------------------------------------
SEMI-ANNUAL REPORT
-------------------------------------
April 30, 1999
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