CAMBRIDGE SERIES TRUST, 485BPOS, 1995-01-27

CAMBRIDGE SERIES TRUST
485BPOS, 1995-01-27

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1933 Act File No. 33-45315
1940 Act File No. 811-6550

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. ___________. . . . . . . . . .

Post-Effective Amendment No. 8. . . . . . . . . . . . X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940. . . . . . . . . . . . . . . . . . . . . . . X

Amendment No. 9 . . . . . . . . . . . . . . . . . . . . . X

CAMBRIDGE SERIES TRUST

(Exact Name of Registrant as Specified in Charter)

901 East Byrd Street, Richmond, Virginia 23219

(Address of Principal Executive Offices)

(804) 782-3648

(Registrant's Telephone Number)

Paul F. Costello
901 East Byrd Street,
Richmond, Virginia 23219
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

x immediately upon filing pursuant to paragraph (b)
on ______________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a), or such earlier date as
the Commission may declare the filing effective
on ______________ pursuant to paragraph (a) of Rule 485.

Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:

x filed the Notice required by that Rule on November 28, 1994; or intends to
file the Notice required by that Rule on or about ______________ __, 1995;
or

during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.

Copies to:

David M. Carter, Esquire
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
<PAGE>

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of Cambridge Series Trust,
which consists of six portfolios: (1) Cambridge Growth Portfolio, (2) Cambridge
Capital Growth Portfolio, (3) Cambridge Government Income Portfolio, (4)
Cambridge Municipal Income Portfolio, (5) Cambridge Income and Growth Portfolio,
and (6) Cambridge Global Portfolio; all six portfolios offering two separate
classes of shares, (a) Class A and (b) Class B, relates to all six portfolios.
A combined prospectus and a combined Statement of Additional Information is
being filed herewith for all six portfolios.

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

<TABLE>
Prospectus Heading
(Rule 404(c) Cross Reference)
<S> <C>
Item 1. Cover Page. . . . . . . . . . . (1-6) Cover Page.

Item 2. Synopsis. . . . . . . . . . . . (1-6) Summary of Portfolio Expenses.

Item 3. Condensed Financial Information (1-6) Financial Highlights: (1-6)
Performance Information.

Item 4. General Description of
Registrant. . . . . . . . . . (1-6) Cambridge Family of Funds; (1-6)
Investment Information; (1-6)
Investment Objectives and Policies;
(1-6) Investment Practices; (1,2,5,6)
Currency Risks; (4) Risks of
Lower-Grade Municipal Securities.

Item 5. Management of the Fund. . . . . (1-6) Cambridge Series Trust
Information; (1-6) Investment
Management of the Trust; (1-6)
General Information; (1-6) Board of
Trustees; (1-6) Investment Adviser;
(1-6) Investment Advisory Fees; (1-6)
Investment Adviser's Profile; (1-6)
The Sub-Advisers: (1-6) Sub-Advisory
Fees; (1-6) Sub-Advisers' Profiles;
(1-6) Administration of the Trust;
(1-6) Brokerage Transactions; (1-6)
Shareholder Servicing Plan; (1-6)
Expenses of the Portfolios and
Class A and Class B Shares.
Item 6. Capital Stock and Other
Securities. . . . . . . . . . . (1-6) Dividends; (1-6) Capital Gains;
(1-6) Shareholder Information; (1-6)
Voting Rights; (1-6) Massachusetts
Partnership Law; (1-6) Tax
Information.
Item 7. Purchase of Securities Being
Offered. . . . . . . . . . . . . (1-6) Net Asset Value; (1-6) How to
Buy Shares; (1-6) Alternative Purchase
Arrangements; (1-6) Through a Financial
Institution; (1-6) Distribution of Fund
Shares; (1b-6b) Distribution Plan;
(1-6) Minimum Investment Required;
(1-6) What Shares Cost; (1-6) When
Net Asset Value is Determined; (1-6)
Purchases at Net Asset Value; (1a-6a)
Reducing the Sales Charge for Class A
Shares; (1-6) Systematic Investment
Program; (1-6) Certificates and
Confirmations; (1-6) Retirement Plans.

Item 8. Redemption or Repurchase . . . . (1-6) Exchange Privilege; (1-6)
Requirements for Exchange; (1-6) Tax
Consequences; (1-6) Making an Exchange;
(1-6) Telephone Instructions; (1-6)

Redeeming Shares; (1-6) Contingent
Deferred Sales Charge; (1-6) Through a
Financial Institution; (1-6) Directly
from the Portfolios; (1-6) Redemption
Before Purchase Instruments Clear;
(1-6) Systematic Withdrawal Program;
(1-6) Accounts with Low Balances.

Item 9. Pending Legal Proceedings. . . . None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 10. Cover Page. . . . . . . . . . . (1-6) Cover Page.

Item 11. Table of Contents . . . . . . . (1-6) Table of Contents.

Item 12. General Information
and History . . . . . . . . . . (1-6) General Information About the
Trust.

Item 13. Investment Objectives and
Policies. . . . . . . . . . . . (1-6) Investment Objectives and
Policies of the Portfolios; (1-6)
Investment Limitations.

Item 14. Management of the Fund. . . . . (1-6) Management of the Trust.

Item 15. Control Persons and Principal
Holders of Securities. . . . . . Not applicable.

Item 16. Investment Advisory and Other
Services . . . . . . . . . . . . (1-6) Investment Advisory Services;
(1-6) Administrative Services; (1-6)
Shareholder Servicing Plan.

Item 17. Brokerage Allocation . . . . . . (1-6) Brokerage Transactions.

Item 18. Capital Stock and Other
Securities . . . . . . . . . . . Not applicable.

Item 19. Purchase, Redemption and Pricing
of Securities Being Offered. . . (1-6) How to Buy Shares; (1-6)
Determining Net Asset Value; (1-6)
Exchange Privilege; (1-6) Redeeming
Shares.

Item 20. Tax Status . . . . . . . . . . . (1-6) Tax Status.

Item 21. Underwriters . . . . . . . . . . (1b-6b) Distribution Plan (Class B
Shares).

Item 22. Calculation of Performance
Data . . . . . . . . . . . . . . (1-6) Total Return; (1-6) Yield: (4)
Tax-Equivalent Yield; (1-6)
Performance Comparisons.

Item 23. Financial Statements . . . . . . (1-6) Incorporated into Part B by
reference to Registrant's Annual
Report dated September 30, 1994.
</TABLE>

<PAGE>
PROSPECTUS
CAMBRIDGE SERIES TRUST
Cambridge Series Trust (the "Trust"), an open-end management investment
company (a mutual fund), offers investors interests in the six separate
diversified investment portfolios described below (collectively, the
"Portfolios," and each individually, the "Portfolio").
Cambridge Growth Portfolio -- a Portfolio advised by Kemper Financial
Services, Inc., seeking growth of capital through professional management and
diversification of investment securities having potential of capital
appreciation.
Cambridge Capital Growth Portfolio -- a Portfolio seeking long-term
appreciation of capital by investing primarily in common stock of companies
believed by Phoenix Investment Counsel, Inc., the Portfolio's Sub-Adviser, to
have appreciation potential.
Cambridge Government Income Portfolio -- a Portfolio advised by Pacific
Investment Management Company seeking current income by investing primarily in

securities which are either issued or guaranteed as to payment of principal and
interest by the U.S. government or its agencies or instrumentalities.

Cambridge Municipal Income Portfolio -- a Portfolio seeking to provide
investors with a high level of current income exempt from federal regular income
tax, consistent with preservation of capital, by investing, under normal market
conditions, at least 80% of its total assets in tax-exempt municipal securities
rated investment grade, or deemed by Van Kampen/American Capital Management
Inc., the Portfolio's Sub-Adviser, to be of comparable quality.

Cambridge Income and Growth Portfolio -- a Portfolio advised by Wellington
Management Company seeking to provide a conservative combination of income and
growth of capital, consistent with capital protection.
Cambridge Global Portfolio -- a Portfolio advised by Scudder, Stevens &
Clark, Inc. seeking to provide growth of capital through a diversified portfolio
of marketable securities, primarily equity securities, including common stocks,
preferred stocks and debt securities convertible into common stocks.
There can be no assurance that any Portfolio will achieve its investment
objective. Each Portfolio may also invest in certain other types of securities
as further described in the prospectus.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This combined prospectus contains the information you should read and know
before you invest in any of the Portfolios of the Trust. Keep this prospectus
for future reference.
The Trust has also filed a combined Statement of Additional Information for
each Portfolio, dated January 27, 1995, with the Securities and Exchange
Commission. The information contained in the combined Statement of Additional
Information is incorporated by reference in this prospectus. You may request a
copy of the combined Statement of Additional Information free of charge, obtain
other information, or make inquiries about any of the Portfolios by writing the
particular Portfolio or Portfolios or by calling 1-800-382-0016.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED JANUARY 27, 1995

<PAGE>

TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF PORTFOLIO EXPENSES................................................................................ 1
CAMBRIDGE SERIES TRUST
FINANCIAL HIGHLIGHTS
CLASS A SHARES............................................................................................... 4
CAMBRIDGE SERIES TRUST
FINANCIAL HIGHLIGHTS
CLASS B SHARES............................................................................................... 5
CAMBRIDGE FAMILY OF FUNDS.................................................................................... 6
INVESTMENT INFORMATION....................................................................................... 6
Investment Objectives and Policies......................................................................... 6
Cambridge Growth Portfolio................................................................................. 6
Cambridge Capital Growth Portfolio......................................................................... 7
Cambridge Government Income Portfolio...................................................................... 8
Cambridge Municipal Income Portfolio....................................................................... 8
Cambridge Income and Growth Portfolio...................................................................... 11
Cambridge Global Portfolio................................................................................. 13
Investment Practices....................................................................................... 15
NET ASSET VALUE.............................................................................................. 21
HOW TO BUY SHARES............................................................................................ 21
Minimum Investment Required................................................................................ 22
What Shares Cost........................................................................................... 23
When Net Asset Value is Determined......................................................................... 24
Purchases at Net Asset Value............................................................................... 24
Reducing the Sales Charge for Class A Shares............................................................... 24
Systematic Investment Program.............................................................................. 25
Certificates and Confirmations............................................................................. 25
Dividends.................................................................................................. 26
Capital Gains.............................................................................................. 26
Retirement Plans........................................................................................... 26
EXCHANGE PRIVILEGE........................................................................................... 26
REDEEMING SHARES............................................................................................. 27
Contingent Deferred Sales Charge........................................................................... 27
Through a Financial Institution............................................................................ 28
Directly from the Portfolios............................................................................... 29
Redemptions Before Purchase Instruments Clear.............................................................. 30

Systematic Withdrawal Program.............................................................................. 30
Accounts with Low Balances................................................................................. 30
CAMBRIDGE SERIES TRUST INFORMATION........................................................................... 30
INVESTMENT MANAGEMENT OF THE TRUST........................................................................... 31
Investment Adviser......................................................................................... 31
The Sub-Advisers........................................................................................... 32
Sub-Advisers' Profiles..................................................................................... 32
Distribution of Portfolio Shares........................................................................... 35
Administration of the Trust................................................................................ 35
Brokerage Transactions..................................................................................... 36
Shareholder Servicing Plan................................................................................. 36
Expenses of the Portfolios and the Class A and Class B Shares.............................................. 37
</TABLE>
i

<PAGE>
<TABLE>
<S> <C>
SHAREHOLDER INFORMATION...................................................................................... 37
Voting Rights.............................................................................................. 37
Massachusetts Partnership Law.............................................................................. 38
TAX INFORMATION.............................................................................................. 38
PERFORMANCE INFORMATION...................................................................................... 39
</TABLE>

ii
<PAGE>
SUMMARY OF PORTFOLIO EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
CLASS A CLASS B
SHARES SHARES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)
Cambridge Growth Portfolio.......................................................... 5.50% None
Cambridge Capital Growth Portfolio.................................................. 5.50% None
Cambridge Government Income Portfolio............................................... 4.75% None
Cambridge Municipal Income Portfolio................................................ 4.75% None
Cambridge Income and Growth Portfolio............................................... 5.50% None

Cambridge Global Portfolio.......................................................... 5.50% None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None None
Maximum Deferred Sales Load (as a percentage of original purchase price or redemption
proceeds, as applicable)............................................................ 1.00%(1) 1.00%(1)
Exchange Fee.......................................................................... None None
</TABLE>

ANNUAL PORTFOLIO OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>

CAMBRIDGE CAMBRIDGE CAMBRIDGE CAMBRIDGE
CAMBRIDGE CAPITAL GOVERNMENT MUNICIPAL INCOME AND CAMBRIDGE
GROWTH GROWTH INCOME INCOME GROWTH GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Investment Advisory Fee (after waiver)(2)...... 0.80% 0.80% 0.60% 0.60% 0.75% 0.00%
12b-1 Fees..................................... None None None None None None
Total Other Expenses (after waiver)(3)......... 0.76% 0.65% 0.53% 0.48% 0.78% 1.99%
Shareholder Service Plan Fees................ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Portfolio Operating Expenses(4)........ 1.81% 1.70% 1.38% 1.33% 1.78% 2.24%

<CAPTION>
CAMBRIDGE CAMBRIDGE CAMBRIDGE CAMBRIDGE
CAMBRIDGE CAPITAL GOVERNMENT MUNICIPAL INCOME AND CAMBRIDGE
GROWTH GROWTH INCOME INCOME GROWTH GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Investment Advisory Fee (after waiver)(2)...... 0.80% 0.80% 0.60% 0.60% 0.75% 0.00%
12b-1 Fees..................................... 0.75% 0.75% 0.50% 0.50% 0.75% 0.75%
Total Other Expenses (after waiver)(3)......... 0.76% 0.65% 0.53% 0.48% 0.78% 1.99%
Shareholder Service Plan Fees.................. 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Portfolio Operating Expenses(4).......... 2.56% 2.45% 1.88% 1.83% 2.53% 2.99%

(1) On Class A shares a contingent deferred sales charge ("CDSC") is applicable
only if shares over $1 million are purchased at NAV and redeemed within one

year. On Class B shares a CDSC is applicable only if shares purchased are
redeemed within one year of original purchase.
(2) The investment advisory fee on the Cambridge Global Portfolio has been
reduced to reflect the anticipated voluntary waiver of a portion of the

<PAGE>
investment advisory fee by the investment advisor through March 31, 1995.
The investment adviser can terminate this voluntary waiver of fees prior to
that time in its sole discretion as long as absent the waiver the total portfolio
operating expenses would not exceed those shown in the table. The maximum investment
advisory fee on the Cambridge Global Portfolio is 1.10%.
(3) With respect to the Global Portfolio, the estimated total other expenses have
been reduced to reflect the anticipated voluntary waiver of certain Portfolio
expenses by the administrator. The administrator can terminate this voluntary
waiver prior to March 31, 1995 in its sole discretion as long as absent the waiver
the total portfolio operating expenses would not exceed those shown in the table.
Total other expenses for the Global Portfolio are estimated based on average
expenses expected to be incurred during the period ending September 30, 1995.
During the course of this period, expenses may be more or less than the average
amount shown.
(4) During the Fund's last fiscal year, Cambridge Advisers, Inc. waived a portion
of its investment advisory fees in respect to the Class A and Class B shares of
Cambridge Municipal Income Portfolio and Cambridge Global Portfolio. Also during
the Fund's last fiscal year, Investment Management Group, Inc., the Fund's
administrator, waived a portion of its administrative fees in respect to the
Class A and Class B shares of Cambridge Growth Portfolio, Cambridge Government
Income Portfolio, Cambridge Income and Growth Portfolio and Cambridge Global
Portfolio. Neither Cambridge Advisers, Inc. nor Investment Management Group,
Inc. is expected to waive their fees in respect to Class A or Class B shares of
the Cambridge Growth Portfolio, Cambridge Government Income Portfolio, Cambridge
Municipal Income Portfolio or Cambridge Income and Growth Portfolio for the current
fiscal year. The amounts shown in the table have been restated to show the expenses
of the Portfolios in the absence of the waivers. During the most recent fiscal year,
Cambridge Municipal Income Portfolio paid investment advisory fees, reflecting the
waiver, of 0.50% for Class A shares, and 0.50% for Class B shares. During the most
recent fiscal year, Other Expenses and Total Fund Operating Expenses, reflecting the
applicable waivers, were as follows: Cambridge Growth Portfolio -- 0.76% and 1.81%,
respectively, for Class A shares, and 0.76% and 2.56%, respectively, for Class B shares;
Cambridge Government Income Portfolio -- 0.53% and 1.38%, respectively, for Class A shares
and 0.53% and 1.88%, respectively, for Class B shares; Cambridge Municipal Income
Portfolio -- 0.50% and 1.24%, respectively, for Class A shares, and 0.50% and
1.74%, respectively, for Class B shares; Cambridge Income and Growth Portfolio --
0.75% and 1.75%, respectively, for Class A shares, and 0.75% and 2.50%, respectively,
for Class B shares. Fee waivers, with respect to the Cambridge Global Portfolio,
are anticipated for the current fiscal period. During the most recent fiscal year,
Other Expenses and Total Fund Operating Expenses, reflecting the applicable waivers,
were 1.82% and 2.07%, respectively, for Class A shares, and 1.82% and 2.82%, respectively,
for Class B shares.
</TABLE>

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF A PORTFOLIO WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "HOW TO BUY SHARES," "INVESTMENT MANAGEMENT OF THE TRUST," AND
"CAMBRIDGE SERIES TRUST INFORMATION."
Long-term Class B shareholders may pay more than the economic equivalent of
the maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
2

<PAGE>
EXAMPLE
<TABLE>
CAMBRIDGE CAMBRIDGE CAMBRIDGE CAMBRIDGE
CAMBRIDGE CAPITAL GOVERNMENT MUNICIPAL INCOME AND CAMBRIDGE
GROWTH GROWTH INCOME INCOME GROWTH GLOBAL
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return and (2) no redemption at the end of
each time period:
CLASS A SHARES
1 year....................................... $ 73 $ 72 $ 61 $ 61 $ 73 $ 77
3 years...................................... 109 106 90 88 109 122
5 years...................................... 148 143 120 117 147 169
10 years..................................... 257 246 206 201 254 299
CLASS B SHARES

1 year....................................... $ 26 $ 25 $ 19 $ 19 $ 26 $ 30
3 years...................................... 80 76 59 58 79 92
5 years...................................... 136 131 102 99 135 157
10 years..................................... 290 279 220 215 287 331
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each
time period:
CLASS A SHARES
1 year....................................... $ 73 $ 72 $ 61 $ 61 $ 73 $ 77
3 years...................................... 109 106 90 88 109 122
5 years...................................... 148 143 120 117 147 169
10 years..................................... 257 246 206 201 254 299
CLASS B SHARES
1 year....................................... $ 26 $ 25 $ 19 $ 19 $ 26 $ 30
3 years...................................... 80 76 59 58 79 92
5 years...................................... 136 131 102 99 135 157
10 years..................................... 290 279 220 215 287 331
</TABLE>

The above examples should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those shown.
3

<PAGE>
CAMBRIDGE SERIES TRUST
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by KPMG Peat Marwick LLP, the Trust's
independent auditors. Their report dated November 11, 1994 on the Portfolios'
financial statements for the period ended September 30, 1994 is included in the
Combined Annual Report dated September 30, 1994, which is incorporated by
reference. This table should be read in conjunction with each of the Portfolio's
financial statements and notes thereto, which may be obtained free of charge
from the Trust.
<TABLE>

CAMBRIDGE GROWTH CAMBRIDGE CAPITAL
PORTFOLIO GROWTH PORTFOLIO
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992* 1994 1993 1992* 1994
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE, $ 16.69 $ 14.14 $ 14.18 $ 15.26 $ 14.21 $ 14.18 $ 14.04
BEGINNING OF PERIOD
Income from investment
operations
Net investment income (0.11) (0.07) 0.03 0.09 0.14 0.08 0.84
(loss)
Net realized and
unrealized gain (loss) (1.90) 2.65 (0.07) (0.30) 1.02 0.03 (1.30)
on investments
Total from investment (2.01) 2.58 (0.04) (0.21) 1.16 0.11 (0.46)
operations
Less distributions -- -- -- (0.04) (0.11) (0.08) (0.83)
Dividends from income
Distributions from -- -- -- (0.13) -- -- --
capital gains
Distributions in excess
of net investment -- (0.03) -- -- -- -- --
income
NET ASSET VALUE PER SHARE, $ 14.68 $ 16.69 $ 14.14 $ 14.88 $ 15.26 $ 14.21 $ 12.75
END OF PERIOD (12.04%) 18.23% (0.28%) (1.37%) 8.21 0.78% (3.39%)
Total return
Ratios to Average Net Assets 1.81% 1.66% 1.33%(a) 1.70% 1.49% 1.14%(a) 1.38%
Expenses
Net investment income (0.65%) (0.49%) 0.59%(a) 0.53% 0.96% 1.54%(a) 6.33%
(loss) 0.01% 0.12% 0.39%(a) -- 0.10% 0.29%(a) 0.01%
Expense adjustment(b)
Supplemental Data
Net assets, end of period $14,579 $19,708 $11,464 $21,181 $31,360 $20,864 $30,142
(000 omitted) 132% 137% 26% 149% 192% 61% 455%
Portfolio turnover rate

CAMBRIDGE
GOVERNMENT INCOME CAMBRIDGE MUNICIPAL
PORTFOLIO INCOME PORTFOLIO
SEPTEMBER 30, SEPTEMBER 30,
1993 1992* 1994 1993 1992*
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE, $ 14.39 $ 14.30 $ 16.05 $ 14.76 $ 14.29
BEGINNING OF PERIOD
Income from investment
operations
Net investment income 1.06 0.44 0.82 0.92 0.32
(loss)
Net realized and
unrealized gain (loss) (0.31) 0.09 (1.54) 1.32 0.47
on investments
Total from investment 0.75 0.53 (0.72) 2.24 0.79
operations
Less distributions (1.06) (0.44) (0.81) (0.92) (0.32)
Dividends from income
Distributions from -- -- (0.10) -- --
capital gains
Distributions in excess
of net investment (0.04) -- -- (0.03) --
income
NET ASSET VALUE PER SHARE, $ 14.04 $ 14.39 $ 14.42 $ 16.05 $ 14.76
END OF PERIOD 5.41% 3.37% (4.83%) 16.00% 5.34%
Total return
Ratios to Average Net Assets 1.04% 0.36%(a) 1.24% 0.71% 0.00%(a)
Expenses
Net investment income 7.31% 8.00%(a) 5.43% 5.92% 6.21%(a)
(loss) 0.18% 0.85%(a) 0.09% 0.68% 1.26%(a)
Expense adjustment(b)
Supplemental Data
Net assets, end of period $47,780 $36,740 $25,056 $29,245 $18,801
(000 omitted) 102% 9% 87% 88% 0%
Portfolio turnover rate

CAMBRIDGE
INCOME AND CAMBRIDGE
GROWTH GLOBAL
PORTFOLIO PORTFOLIO

SEPTEMBER 30, SEPTEMBER 30,
1994 1993** 1994***
<S> <C> <C>
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD $14.88 $ 14.14 $14.18
Income from investment
operations
Net investment income
(loss) 0.31 0.09 (0.01)
Net realized and
unrealized gain (loss)
on investments 0.64 0.73 0.06
Total from investment
operations 0.95 0.82 0.05
Less distributions
Dividends from income (0.30) (0.08) --
Distributions from
capital gains (0.26) -- --
Distributions in excess
of net investment
income -- -- --
NET ASSET VALUE PER SHARE,
END OF PERIOD $15.27 $ 14.88 $14.23
Total return 6.54% 5.54% 0.35%
Ratios to Average Net Assets
Expenses 1.75% 1.56%(a) 2.09%(a)
Net investment income
(loss) 2.20% 2.35%(a) (0.10%)(a)
Expense adjustment(b) -- 0.38%(a) 1.09(a)
Supplemental Data
Net assets, end of period
(000 omitted) $17,773 $ 9,849 $8,882
Portfolio turnover rate 78% 13% 2%
</TABLE>

* Reflects operations for the period from April 29, 1992 (date of initial
public investment) to September 30, 1992.
** Reflects operations for the period from May 24, 1993 (date of initial

public investment) to September 30, 1993.
*** Reflects operations for the period from March 29, 1994 (date of initial
public investment) to September 30, 1994.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses.

Further information about each Portfolio's performance is contained
in the Combined Annual Report dated September 30, 1993, which can be obtained
free of charge.
4

<PAGE>
CAMBRIDGE SERIES TRUST
FINANCIAL HIGHLIGHTS
CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by KPMG Peat Marwick LLP, the Trust's
independent auditors. Their report dated November 11, 1994 on the Portfolios'
financial statements for the period ended September 30, 1994 is included in the
Combined Annual Report dated September 30, 1994, which is incorporated by
reference. This table should be read in conjunction with each of the Portfolio's
financial statements and notes thereto, which may be obtained free of charge
from the Trust.

<TABLE>

unrealized gain (loss)
on investments (1.81) 2.59 (0.03) (0.26) 1.02 0.04 (1.37)
Total from investment
operations (2.06) 2.45 (0.04) (0.30) 1.07 0.50 (0.55)
Less distributions
Dividends from income -- -- -- -- (0.05) (0.46) (0.75)
Distributions from
capital gains -- -- -- (0.13) -- -- --
Distributions in excess
of net investment
income -- -- -- -- (0.01) -- --
NET ASSET VALUE PER SHARE,
END OF PERIOD $ 14.53 $ 16.59 $ 14.14 $ 14.80 $ 15.23 $ 14.22 $ 12.76
Total return (12.48%) 17.33% (0.28%) (2.00%) 7.52% 0.61% (3.97%)
Ratios to Average Net
Assets
Expenses 2.56% 2.41% 2.07%(a) 2.46% 2.24% 1.86%(a) 1.88%
Net investment income
(loss) (1.40%) (1.24%) (0.17%)(a) (0.22%) 0.21% 0.83%(a) 6.21%
Expense adjustment(b) 0.02% 0.12% 0.40%(a) -- 0.10% 0.30%(a) 0.02%
Supplemental Data
Net assets, end of period
(000 omitted) $28,678 $35,069 $13,828 $41,106 $57,030 $25,468 $77,888
Portfolio turnover rate 132% 137% 26% 149% 192% 61% 455%

CAMBRIDGE
GOVERNMENT INCOME CAMBRIDGE MUNICIPAL
PORTFOLIO INCOME PORTFOLIO
SEPTEMBER 30, SEPTEMBER 30,
1993 1992* 1994 1993 1992*
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD $ 14.40 $ 14.30 $ 16.06 $ 14.78 $ 14.29
Income from investment
operations
Net investment income
(loss) 0.99 0.41 0.74 0.82 0.29
Net realized and
unrealized gain (loss)
on investments (0.31) 0.10 (1.54) 1.32 0.49
Total from investment
operations 0.68 0.51 (0.80) 2.14 0.78
Less distributions
Dividends from income (0.99) (0.41) (0.73) (0.82) (0.29)
Distributions from
capital gains -- -- (0.10) -- --
Distributions in excess
of net investment
income (0.03) -- -- (0.04) --
NET ASSET VALUE PER SHARE,
END OF PERIOD $ 14.06 $ 14.40 $ 14.43 $ 16.06 $ 14.78
Total return 4.86% 3.24% (5.34%) 15.27% 5.28%
Ratios to Average Net
Assets
Expenses 1.54% 0.83%(a) 1.74% 1.21% 0.50%(a)
Net investment income
(loss) 6.81% 7.53%(a) 4.93% 5.42% 5.80%(a)
Expense adjustment(b) 0.18% 0.84%(a) 0.12% 0.68% 1.26%(a)
Supplemental Data
Net assets, end of period
(000 omitted) $127,346 $65,661 $46,157 $50,976 $24,265
Portfolio turnover rate 102% 9% 87% 88% 0%

CAMBRIDGE
INCOME AND CAMBRIDGE
GROWTH GLOBAL
PORTFOLIO PORTFOLIO
SEPTEMBER 30, SEPTEMBER 30,
1994 1993** 1994***
<S> <C> <C> <C>
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD $14.91 $ 14.14 $14.18
Income from investment
operations
Net investment income
(loss) 0.21 0.05 (0.04)
Net realized and

unrealized gain (loss)
on investments 0.61 0.77 0.01
Total from investment
operations 0.82 0.82 (0.03)
Less distributions
Dividends from income (0.19) (0.05) --
Distributions from
capital gains (0.26) -- --
Distributions in excess
of net investment
income -- -- --
NET ASSET VALUE PER SHARE,
END OF PERIOD $15.28 $ 14.91 $14.15
Total return 5.66% 5.54% (0.21%)
Ratios to Average Net Assets
Assets
Expenses 2.44% 2.31%(a) 2.79%(a)
Net investment income
(loss) 1.51% 1.60%(a) (0.82%)(a)
Expense adjustment(b) 0.38%(a) 1.14%(a)
Supplemental Data
Net assets, end of period
(000 omitted) $43,219 $18,127 $7,987
Portfolio turnover rate 78% 13% 2%
</TABLE>

* Reflects operations for the period from April 29, 1992 (date of initial
public investment) to September 30, 1992.
** Reflects operations for the period from May 24, 1993 (date of initial
public investment) to September 30, 1993.
*** Reflects operations for the period from March 29, 1994 (date of initial
public investment) to September 30, 1994.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses.

Further information about each Portfolio's performance is contained in the
Combined Annual Report dated September 30, 1994, which can be obtained free of
charge.

<PAGE>
CAMBRIDGE FAMILY OF FUNDS

The Cambridge Family of Funds consists of the Portfolios of the Trust,
together with the Government Securities Portfolio of the Cash Equivalent Fund
which is advised by Kemper Financial Services, Inc. (or beginning March 16, 1995
the Cash Resource U.S. Government Money Market Fund which is advised by
Cambridge Investment Advisers) (the Cash Equivalent Fund and the Cash Resource
U.S. Government Money Market Fund, as the case may be, is referred to
hereinafter as the "Cash Fund").

The Trust is managed by Cambridge Investment Advisors, Inc. which in turn
has entered into sub-advisory agreements for each of the Portfolios. Kemper
Financial Services, Inc. serves as the sub-adviser for Cambridge Growth
Portfolio; Phoenix Investment Counsel, Inc. serves as the sub-adviser for
Cambridge Capital Growth Portfolio; Pacific Investment Management Company serves
as the sub-adviser for Cambridge Government Income Portfolio; Van
Kampen/American Capital Management Inc. serves as the sub-adviser for Cambridge
Municipal Portfolio; Wellington Management Company serves as the sub-adviser for
Cambridge Income and Growth Portfolio; and Scudder, Stevens & Clark, Inc. serves
as the sub-adviser to the new Global Portfolio. Such sub-advisers have over 255
years of investment experience and currently manage or supervise in excess of
$300 billion on behalf of over 11 million shareholder or client accounts. The
Cambridge Family of Funds provides flexibility and diversification for an
investor's investment planning needs. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give an investor access to as many as seven investment
vehicles.

The Cambridge Family of Funds may be utilized in connection with advisory
accounts of investment advisers registered under the Investment Advisers Act of
1940.

Information on the Cambridge Family of Funds may be obtained by calling
1-800-382-0016.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a description of the investment objectives and policies
of each Portfolio. The investment objectives of each Portfolio, along with those
investment policies which are identified as being fundamental, may not be
changed without the affirmative vote of a majority of the applicable Portfolio's
outstanding voting securities. All other investment policies of a Portfolio may

be changed by the Board of Trustees of the Trust without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective. There can be no assurance that any Portfolio will achieve its
investment objective. For additional information concerning investment
techniques utilized by the Portfolios, see "Investment Practices."
CAMBRIDGE GROWTH PORTFOLIO
The investment objective of the Cambridge Growth Portfolio is growth of
capital through professional management and diversification of investments in
securities it believes to have potential of capital appreciation. The Portfolio
will be invested primarily in securities which Kemper Financial Services, Inc.
("KFS"), the Portfolio's Sub-Adviser, believes offer the potential for capital
appreciation. The Portfolio invests primarily in common stocks but can invest in
any securities with potential for capital growth.
6

<PAGE>
In seeking to obtain capital appreciation, the Portfolio may trade to some
degree in securities for the short term. To this extent, the Portfolio will be
engaged in trading operations based on short-term market considerations as
distinct from long-term investment based upon fundamental valuation of
securities. However, the Portfolio will emphasize fundamental research in
attempting to identify under-valued situations which are anticipated will
appreciate over the longer term.
In seeking to achieve its objective, it will be the Portfolio's policy to
invest primarily in securities which it believes will offer the potential for
increasing the Portfolio's total asset value. While it is anticipated that most
investments will be in common stocks of companies with above-average growth
prospects, investments may also be made to a limited degree in other common
stocks and in convertible securities, such as bonds and preferred stocks. There
may be times when a significant portion of the Portfolio's assets may be held
temporarily in cash or defensive-type securities, depending upon the
Sub-Adviser's analysis of business and economic conditions and the outlook for
security prices. For these purposes, defensive-type securities include
high-grade debt securities (rated "A" or above); securities issued by the U.S.
government, its agencies or instrumentalities; and high-quality money market
instruments, including repurchase agreements. Some of the factors the
Sub-Adviser will consider in making investments for the Portfolio are patterns
of increasing growth in sales and earnings, the development of new or improved
products or services, favorable outlooks for growth in the industry, the

probability of increased operating efficiencies, emphasis on research and
development, cyclical conditions, or other signs that a company is expected to
show greater than average capital appreciation and earnings growth.
CAMBRIDGE CAPITAL GROWTH PORTFOLIO
The investment objective of the Cambridge Capital Growth Portfolio is to
provide long-term appreciation of capital. Since income is not an objective, any
income generated by the investment of the Portfolio's assets will be incidental
to its objective. Phoenix Investment Counsel, Inc. ("PIC"), the Portfolio's
Sub-Adviser, intends to invest primarily in the common stock of companies
believed by management to have appreciation potential. However, since no one
class or type of security at all times necessarily affords the greatest promise
for capital appreciation, the Portfolio may invest any amount or proportion of
its assets in any class or type of security believed by the Sub-Adviser to offer
potential for capital appreciation over both the intermediate and long term.
Normally, the Portfolio's investments will consist largely of common stocks
selected for the promise that they offer appreciation of capital. However, the
Portfolio may also invest in preferred stocks, investment-grade bonds,
convertible preferred stocks, and convertible debentures if, in the judgment of
the Sub-Adviser, the investment would further its investment objective. It is
anticipated that investment in bonds during periods of historically high
interest rates or during periods of high interest rates during the interest rate
cycle will lead to capital gains in such bonds when interest rates fall, causing
the value of the bonds to increase. Each security held will be monitored to
determine whether it is contributing to the basic objective of long-term
appreciation of capital.
The Sub-Adviser believes that a portfolio of such securities provides the
most effective way to obtain capital appreciation, but when, for temporary
defensive purposes (as when market conditions for equity securities are
adverse), other types of investments appear advantageous on the basis of
combined considerations of risk and the protection of capital values,
investments may be made in fixed income securities with or without warrants or
conversion features. In an effort to protect its assets against major market
declines, or for other temporary defensive purposes, the Portfolio may actively
pursue a policy of retaining cash or investing part or all of its assets in
high-quality money market instruments and repurchase agreements.
Diversification is an important consideration in selecting investments for
the Portfolio. However, greater emphasis will be placed upon careful selection
of securities believed to have good potential for appreciation than upon wide
diversification.

<PAGE>
CAMBRIDGE GOVERNMENT INCOME PORTFOLIO
The investment objective of the Cambridge Government Income Portfolio is to
provide current income. The Portfolio, which is advised by Pacific Investment
Management Company ( "PIMCO"), pursues this objective by investing primarily in
securities which are either issued or guaranteed as to payment of principal and
interest by the U.S. government or its agencies or instrumentalities. The
Portfolio may also invest in certain mortgage-related securities. The Portfolio
may also invest (i) up to 20% of its net assets in bonds issued by governments
of industrialized foreign companies which bonds PIMCO determines are of
comparable quality to bonds rated AAA by Standard and Poor's Corporation ("S&P")
or Aaa by Moody's Investors Service, Inc. ("Moody's"); (ii) in private issue
collateralized mortgage obligations rated A or higher by S&P or Moody's; and
(iii) in corporate debt securities rated BBB or higher by S&P or Baa or higher
by Moody's. Any subsequent change in a rating assigned by any rating service to
a security (or, if unrated, deemed to be of comparable quality) will not require
the Portfolio to dispose of the investment until the subadviser determines that
it is practicable to sell or close out the investment without undue market or
tax consequences to the Portfolio.
Under normal circumstances, the Portfolio will invest at least 65% of the
value of its total assets in U.S. government securities.
The U.S. government securities in which the Portfolio invests include:
(Bullet) direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds; and
(Bullet) obligations of U.S. government agencies or instrumentalities, such
as Federal Home Loan Banks, Federal Farm Credit Banks, Federal
National Mortgage Association, Government National Mortgage
Association, and Federal Home Loan Mortgage Corporation.
The obligations of the U.S. government agencies or instrumentalities which
the Portfolio may buy are backed by:
(Bullet) the full faith and credit of the U.S. Treasury;
(Bullet) the issuer's right to borrow from the U.S. Treasury;
(Bullet) the discretionary authority of the U.S. government to purchase
certain obligations of the agency or instrumentality; or
(Bullet) the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities whose obligations are

permissible investments but may not always receive financial support from the
U.S. government are: Federal Land Banks; Central Bank for Cooperatives; Federal
Intermediate Credit Banks; Federal Home Loan Banks; and Federal National
Mortgage Association. See "Investment Practices" for additional information
regarding mortgage-related securities, stripped mortgage securities, and dollar
roll transactions.
CAMBRIDGE MUNICIPAL INCOME PORTFOLIO

The investment objective of the Cambridge Municipal Income Portfolio is to
provide investors with a high level of current income exempt from federal
regular income tax, consistent with preservation of capital. Van Kampen/American
Capital Management Inc. ("VK/AC Management"), serves as the Sub-Adviser to the
Portfolio. Under normal market conditions, the Portfolio will invest at least
80% of its total assets in tax-exempt municipal securities rated investment
grade, or deemed by the Sub-Adviser to be of comparable quality, at the time of
investment.

<PAGE>
Investment-grade securities are securities rated BBB or higher by S&P or
Baa or higher by Moody's, in the case of long-term obligations, or which have
equivalent ratings in the case of short-term obligations. Securities rated BBB
by S&P are regarded by S&P as having an adequate capacity to pay interest and
repay principal. Whereas such securities normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest or repay principal for
debt in this category than in higher rated categories. Securities rated Baa by
Moody's are considered by Moody's as medium-grade obligations. Such securities
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
They lack outstanding investment characteristics and, in fact, have speculative
characteristics as well.
Up to 20% of the Portfolio's total assets may be invested in tax-exempt
municipal securities rated between BB and B-(inclusive) by S&P or between Ba and
B3 (inclusive) by Moody's (or equivalently rated short-term obligations) and
unrated tax-exempt securities that the Sub-Adviser considers to be of comparable
quality. These securities are below investment grade and are regarded by S&P, on
balance, as predominantly speculative with respect to the capacity to pay
interest and repay principal in accordance with the terms of the obligation.
While such securities will likely have some quality and protective

characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. These securities are regarded by Moody's as
generally lacking characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
securities' contract over any long period of time may be small. Debt securities
rated below investment grade are commonly referred to as "junk bonds." The
Portfolio will not invest in securities rated below B-by S&P or below B3 by
Moody's at the time of purchase. For a description of S&P's and Moody's ratings,
see the Appendix to the combined Statement of Additional Information.
From time to time, the Portfolio temporarily may also invest up to 10% of
its assets in tax-exempt money market funds, subject to the restrictions of
Section 12(d)(1)(A) of the Investment Company Act of 1940. Such instruments will
be treated as investments in municipal securities.
The Portfolio may invest a substantial portion of its assets in municipal
securities that pay interest that is subject to the federal alternative minimum
tax. The Portfolio may not be a suitable investment for investors who are
already subject to the federal alternative minimum tax or who would become
subject to the federal alternative minimum tax as a result of an investment in
the Portfolio.
MUNICIPAL SECURITIES. Tax-exempt municipal securities are debt obligations
issued by or on behalf of the governments of states, territories, or possessions
of the United States; the District of Columbia; their political subdivisions,
agencies, and instrumentalities; and certain interstate agencies, the interest
on which, in the opinion of bond counsel or other counsel to the issuer of such
securities, is exempt from federal regular income tax. Under normal market
conditions, up to 100%, but not less than 80%, of the Portfolio's assets will be
invested in such municipal securities. The foregoing is a fundamental policy of
the Portfolio and cannot be changed without approval of the shareholders of the
Portfolio.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit, and taxing power for the payment of
principal and interest. Revenue bonds are usually payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific revenue source.
Industrial development bonds are usually revenue bonds, the credit quality of
which is normally directly related to the credit standing of the industrial user
involved.
9

<PAGE>
There are, in addition, a variety of hybrid and special types of municipal
securities, including variable rate securities, municipal notes, and municipal
leases. Variable rate securities bear rates of interest that are adjusted
periodically according to formulae intended to minimize fluctuation in values of
the instruments. Municipal notes include tax, revenue, and bond anticipation
notes of short maturity, generally less than three years, which are issued to
obtain temporary funds for various public purposes. Municipal leases are
obligations issued by state and local governments or authorities to finance the
acquisition of equipment and facilities and may be considered not to be liquid.
They may take the form of a lease, an installment purchase contract, a
conditional sales contract, or a participation certificate on any of the above.
No more than 5% of the net assets of the Portfolio will be invested in municipal
leases. A more detailed description of the types of municipal securities in
which the Portfolio may invest is included in the Statement of Additional
Information.
From time to time, proposals have been introduced before Congress that
would have the effect of reducing or eliminating the federal tax exemption on
municipal securities. If such a proposal were enacted, the ability of the
Portfolio to pay tax-exempt interest dividends might be adversely affected.
RISKS OF LOWER-GRADE MUNICIPAL SECURITIES. The Portfolio may invest up to
20% of its total assets in lower-grade tax-exempt municipal securities or in
unrated municipal securities considered by the Sub-Adviser to be of comparable
quality. Lower-grade municipal securities are rated between BB and B-by S&P or
between Ba and B3 by Moody's, in each case inclusive of such rating categories.
Higher yields are generally available from municipal securities of such grade.
With respect to such 20% of the Portfolio's total assets, the Portfolio has not
established any limit on the percentage of its portfolio which may be invested
in securities in any one rating category.
Investment in lower-grade municipal securities involves special risks as
compared with investment in higher-grade municipal securities. The market for
lower-grade municipal securities is considered to be less liquid than the market
for investment-grade municipal securities, which may adversely affect the
ability of the Portfolio to dispose of such securities in a timely manner at a
price which reflects the value of such securities. The market price for less
liquid securities tends to be more volatile than the market price for more
liquid securities. Illiquid securities and the absence of readily available
market quotations with respect thereto may make the valuation of such securities

more difficult, and the judgment of the Trust's officers and Trustees may play a
greater role in the valuation of the Portfolio's securities. Lower-grade
municipal securities generally involve greater credit risk than higher-grade
municipal securities and are more sensitive to adverse economic changes,
significant increases in interest rates, and individual issuer developments.
Because issuers of lower-grade municipal securities frequently choose not to
seek a rating of their municipal securities, the Portfolio will rely more
heavily on the Sub-Adviser's ability to determine the relative investment
quality of such securities than if the Portfolio invested exclusively in
higher-grade municipal securities. The Portfolio may, if deemed appropriate by
the Sub-Adviser, retain a security whose rating has been downgraded below B-by
S&P or below B3 by Moody's, or whose rating has been withdrawn. More detailed
information concerning the risks associated with instruments in lower-grade
municipal securities is included in the Statement of Additional Information.
The Sub-Adviser seeks to minimize the risks involved in investing in
lower-grade municipal securities through diversification and careful investment
analysis. To the extent that there is no established retail market for some of
the lower-grade municipal securities in which the Portfolio may invest, trading
in such securities may be relatively inactive. During periods of reduced market
liquidity and in the absence of readily available market quotations for
lower-grade municipal securities held in the Portfolio, the ability to value the
Portfolio's securities becomes more difficult and the use of judgment may play a
greater role in the valuation of the Portfolio's securities due to the reduced
availability of reliable objective data. The effects of adverse publicity and
investor perceptions may be more pronounced for securities for which no
established market exists as compared with the effects
10

<PAGE>
on securities for which such a market does exist. Further, the Portfolio may
have more difficulty selling such securities in a timely manner and at their
stated value than would be the case for securities for which an established
market does exist.
Investors should carefully consider the risks of owning shares of an
investment company which invests in lower-grade municipal securities before
making an investment in the Portfolio. The higher yield on certain securities
held by the Portfolio reflects a greater possibility that the financial
condition of the issuer, or adverse changes in general economic conditions, or
both, may impair the ability of the issuer to make payments of income and

principal.
CONCENTRATION. The Portfolio generally will not invest more than 25% of its
total assets in any industry, nor will the Portfolio generally invest more than
5% of its assets in the securities of any single issuer. Governmental issuers of
municipal securities are not considered part of any "industry." However,
municipal securities backed only by the assets and revenues of nongovernmental
users may for this purpose be deemed to be issued by such nongovernmental users,
and the 25% limitation would apply to such obligations. It is nonetheless
possible that the Portfolio may invest more than 25% of its assets in a broader
segment of the municipal securities market, such as revenue obligations of
hospitals and other health care facilities, housing agency revenue obligations,
or airport revenue obligations if the Sub-Adviser determines that the yields
available from obligations in a particular segment of the market justify the
additional risks associated with a large investment in such segment. Although
such obligations could be supported by the credit of governmental users, or by
the credit of nongovernmental users engaged in a number of industries, economic,
business, political, and other developments generally affecting the revenues of
such users (for example, proposed legislation or pending court decisions
affecting the financing of such projects and market factors affecting the demand
for their services or products) may have a general adverse effect on all
municipal securities in such a market segment. The Portfolio reserves the right
of investing more than 25% of its assets in industrial development bonds or in
issuers located in any individual state, although the Sub-Adviser has no present
intention to invest more than 25% of the Portfolio's assets in issuers located
in the same state. If the Portfolio were to invest more than 25% of its assets
in issuers located in one individual state, it would be more susceptible to
adverse economic, business, or regulatory conditions in that state.
CAMBRIDGE INCOME AND GROWTH PORTFOLIO
The investment objective of the Cambridge Income and Growth Portfolio is to
provide a conservative combination of income and growth of capital, consistent
with capital protection. To achieve the Portfolio's objective, Wellington
Management Company ("WMC"), the Portfolio's Sub-Adviser, will invest the
Portfolio's assets in a diversified portfolio of equity securities of companies
that it believes exhibit sound fundamental characteristics and investment-grade
fixed-income securities, as well as U.S. government securities, as described
below. The Portfolio's holdings in common stocks provide long-term appreciation
potential and dividend growth, while diversification into bonds provides current
income and reduces the overall volatility of returns. The Portfolio will
typically exhibit less investment risk than a portfolio consisting entirely of

common stocks.
The Sub-Adviser will manage the allocation of assets among asset classes
based upon its judgment of the projected investment environment for financial
assets, relative fundamental values and attractiveness of each asset class, and
expected future returns of each asset class. The Sub-Adviser will base its asset
allocation decisions on fundamental analysis and will not attempt to make
short-term market timing decisions among asset classes. As a result, changes in
allocation to stocks and bonds are expected to be gradual, and the Portfolio
will normally have some portion of its assets invested in each asset class at
all times. The Portfolio does not have percentage limitations on the amount
allocated to each asset class.
11

<PAGE>
Within the equity asset class, the Portfolio seeks to achieve long-term
appreciation of capital and a moderate income level by selecting investments
in out-of-favor companies with sound fundamentals. Accordingly, the Portfolio's
equity investments will generally be focused on stocks of companies which the
Sub-Adviser believes have the potential to provide above-average potential total
returns and which sell at below-average price/earnings multiples. These equity
investment decisions are based primarily on the Sub-Adviser's fundamental
research and security valuations.

Within the fixed income asset class, the Portfolio seeks to provide as high
a level of current income as is consistent with prudent investment risk.
Investment management of the fixed income asset class will focus on relative
value and yield spreads among security types and among quality, issues, and
industry sectors, call protection, and credit research. Credit research on
corporate bonds is based on both quantitative and qualitative criteria
established by the Sub-Adviser, such as an issuer's industry, operating and
financial profiles, business strategy, management quality, and projected
financial and business conditions.
The Portfolio will contain a broadly diversified mix of investments
including the following acceptable investments:
EQUITY SECURITIES. The Portfolio may invest in common stocks and other
equity securities, such as preferred stocks and debt securities with conversion
privileges or warrants. The Portfolio may also invest in equity securities,
including convertible debt securities, of real estate related companies and real
estate investment trusts. The Portfolio will limit its investment in real estate
investment trusts to 10% of its total assets. All real estate securities will be

publicly traded, primarily on an exchange.
REAL ESTATE SECURITIES. Although the Portfolio's investments in real estate
will be limited to publicly traded securities secured by real estate or
interests therein or issued by companies which invest in real estate or
interests therein, the Portfolio may be subject to risks associated with direct
ownership of real estate. These include declines in the value of real estate,
risks related to general and local economic conditions and increases in interest
rates.
Other risks associated with real estate investments include the fact that
equity and mortgage real estate investment trusts are dependent upon management
skill, are not diversified, and are, therefore, subject to the risk of financing
single projects or a limited number of projects. They are also subject to heavy
cash flow dependency, defaults by borrowers, and self-liquidation.
Additionally, equity real estate investment trusts may be affected by any
changes in the value of the underlying property owned by the trust, and mortgage
real estate investment trusts may be affected by the quality of any credit
extended.
FIXED INCOME SECURITIES. The debt securities in which the Portfolio
invests, including zero-coupon securities, will be rated at the time of purchase
within the four highest bond ratings by Moody's or S&P or, if unrated, deemed to
be of equivalent quality by the Sub-Adviser. While bonds carrying the fourth
highest quality rating ("Baa" by Moody's or "BBB" by S&P) are considered as
investment grade and are viewed to have adequate capacity for payment of
principal and interest, investments in such securities involve a higher degree
of risk than that associated with investments in debt securities in the higher
rating categories, and such bonds lack outstanding investment characteristics
and have speculative characteristics as well. For example, changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds. If a security's rating is reduced below the required minimum after the
Portfolio has purchased it, the Portfolio is not required to sell the security,
but may consider doing so. A
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description of the rating categories is contained in the Appendix to the
combined Statement of Additional Information.
U.S. GOVERNMENT SECURITIES. The Portfolio may invest in securities issued
or guaranteed as to principal or interest by the U.S. government or its agencies

or instrumentalities, including mortgage-related securities. These U.S.
government securities include:
(Bullet) direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds; and
(Bullet) obligations of U.S. government agencies or instrumentalities, such
as Federal Home Loan Banks, Federal Farm Credit Banks, Federal
National Mortgage Association, Government National Mortgage
Association, and Federal Home Loan Mortgage Corporation.
The obligations of the U.S. government agencies or instrumentalities which
the Portfolio may buy are backed by:
(Bullet) the full faith and credit of the U.S. Treasury;
(Bullet) the issuer's right to borrow from the U.S. Treasury;
(Bullet) the discretionary authority of the U.S. government to purchase
certain obligations of the agency or instrumentality; or
(Bullet) the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities whose obligations are
permissible investments but may not always receive financial support from the
U.S. government are: Federal Land Banks; Central Bank for Cooperatives; Federal
Intermediate Credit Banks; Federal Home Loan Banks; and Federal National
Mortgage Association. See "Investment Practices" for additional information
regarding mortgage-related securities, stripped mortgage securities, and dollar
roll transactions.
CAMBRIDGE GLOBAL PORTFOLIO
The investment objective of the Cambridge Global Portfolio is to seek
long-term growth of capital through a diversified portfolio of marketable
securities, primarily equity securities, including common stocks, preferred
stocks and debt securities convertible into common stocks, and warrants. To
achieve the Portfolio's objective, Scudder, Stevens & Clark, Inc. ("Scudder"),
the Portfolio's Sub-Adviser, will invest the Portfolio's assets on a worldwide
basis in equity securities of companies which are incorporated in the United
States or in foreign countries. It also may invest in the debt securities of
U.S. and foreign issuers. Income is an incidental consideration.
The Portfolio will invest in companies the Sub-Adviser believes will
benefit from global economic trends, promising technologies or products and
specific country opportunities resulting from changing geopolitical, currency,
or economic relationships. It is expected that investments will be spread
broadly around the world. Under normal circumstances, the Portfolio will invest
at least 65% of the value of its total assets in securities of at least three

countries, one of which may be the United States. The Portfolio may be invested
100% in non-U.S. issues, and for temporary defensive purposes may be invested
100% in U.S. issues, although under normal circumstances it is expected that
both foreign and U.S. investments will be represented in the Portfolio. It is
expected that investments will include companies of varying size as measured by
assets, sales, or capitalization.
The Portfolio is designed for investors seeking worldwide equity
opportunities in developed, newly industrialized and developing countries (some
of these developing countries are located in Latin America and Africa). The
management of the Portfolio believes that there is substantial opportunity for
long-term capital growth from a professionally managed portfolio of securities
selected from the U.S. and foreign equity markets. The Portfolio
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affords the investor access to opportunities wherever they arise, without being
constrained by the location of a company's headquarters or the trading market
for its shares. Because the Portfolio invests globally, it provides the
potential to augment returns available from the U.S. stock market. In addition,
since U.S. and foreign markets do not always move in step with each other, a
global portfolio will be more diversified than one invested solely in U.S.
securities.
Investing directly in foreign securities is impractical for many investors
due to the difficulty of arranging for purchases and sales, obtaining current
information, holding securities in safekeeping and converting the value of their
investments from foreign currencies into dollars. The Portfolio manages these
problems for the investor. With an investment in the Portfolio, however, the
investor has a diversified worldwide investment portfolio which is managed
actively by experienced professionals.
The Portfolio generally will invest in equity securities of established
companies listed on U.S. or foreign securities exchanges, but also may invest in
securities traded over-the-counter. It also may invest in debt securities
convertible into common stock, and convertible and non-convertible preferred
stock, and fixed income securities of governments, government agencies,
supranational agencies and companies when the Sub-Adviser believes the potential
for appreciation will equal or exceed that available from investments in equity
securities. These debt and fixed income securities will be predominantly
investment-grade securities or those of equivalent quality as determined by
Scudder. The Portfolio may not invest more

than 5% of its total assets in debt securities rated Baa or below by Moody's, or
BBB or below by S&P or deemed by the Sub-Adviser to be of comparable quality.
The Portfolio may invest in zero coupon securities which pay no cash income
and are sold at substantial discounts from their value at maturity. When held to
maturity, their entire income, which consists of accretion of discount, comes
from the difference between the issue price and their value at maturity.
Zero-coupon securities may include U.S. Treasury bills issued directly by the
U.S. Treasury or other short-term debt obligations, and longer-term bonds or
notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment brokerage firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal of U.S. Treasury securities and resold them in custodial
receipt programs with a number of different names, including Treasury Income
Growth Receipts ("TIGRS") and Certificates of Accrual on Treasuries ( "CATS").
The U.S. Treasury has facilitated transfers of zero coupon securities through
the "Separate Trading of Registered Interest and Principal of Securities"
("STRIPS") program by accounting separately for the beneficial ownership of
interest coupons and principal payments. Zero coupon securities are subject to
greater market value fluctuations from changing interest rates than debt
obligations of comparable maturities which make current cash distributions of
interest. Fixed income securities also may be held for temporary defensive
purposes when the Sub-Adviser believes market conditions so warrant and for
temporary investment. Similarly, the Portfolio may invest in cash equivalents
(including foreign money market instruments, such as bankers' acceptances,
certificates of deposit, commercial paper rated P-1 or above by Moody's or A-1
or above by S&P or those of equivalent quality as determined by the Sub-Adviser,
short-term government obligations, and short-term corporate obligations rated A
or above by Moody's or S&P or those of equivalent quality as determined by the
Sub-Adviser) for temporary defensive purposes. The Portfolio may invest in
closed-end investment companies holding foreign securities.
RISK FACTORS. The Portfolio is designed for long-term investors who can
accept international investment risk. Since the Portfolio normally will be
invested in both U.S. and foreign securities markets, changes in the Portfolio's
share price may have a low correlation with movements in the U.S. markets. The
Portfolio's share price will reflect the movements of both the different stock
and bond markets in which it is invested and the currencies in which the
investments are denominated; the strength or weakness of the U.S. dollar against
foreign
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currencies may account for part of the Portfolio's investment performance.
Because of the Portfolio's global investment policies and the investment
considerations discussed above, investment in shares of the Portfolio should not
be considered a complete investment program. See "Investment Practices --
Foreign Securities" below.
The Portfolio will invest no more than 5% of its total assets in debt
securities rated BBB or Baa or below or in unrated securities. Securities rated
BB or Ba and below are commonly referred to as "junk bonds." The lower the
quality of such debt securities, the greater their risks render them like equity
securities. The Portfolio may invest in securities which are rated as low as C
by Moody's or D by S&P at the time of purchase. Securities rated D may be in
default with respect to payment of principal or interest.
CURRENCY RISKS. The Portfolio may engage in currency transactions with
counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. The
Portfolio dealings in forward currency contracts and other currency transactions
such as futures, options, options on futures and swaps will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is entering into a currency transaction with respect to
specific assets or liabilities of the Portfolio, which will generally arise in
connection with the purchase or sale of its portfolio securities or the receipt
of income therefrom. Position hedging is entering into a currency transaction
with respect to portfolio security positions denominated or generally quoted in
that currency. The use of currency transactions can result in the Portfolio
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency.
SWAPS, CAPS, FLOORS AND COLLARS. The Portfolio may enter into interest
rate, currency and index swaps and purchase or sell related caps, floors and
collars. The Portfolio expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a duration management
technique or to protect against any increase in the price of securities the
Portfolio anticipates purchasing at a later date. The Portfolio intends to use
these transactions as hedges and not as speculative investments and will not

sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Portfolio may be obligated to pay.
The Portfolio will limit the aggregate value of the assets underlying interest
rate and index swaps, caps, floors and collars to not more than 20% of the
Portfolio's net assets. There is no limitation on the Portfolio's ability to
engage in currency swaps and related caps, floors and collars, except that the
Portfolio will not maintain an exposure to a currency through such transactions
in excess of the value of the Portfolio investments in securities denominated in
that currency.
INVESTMENT PRACTICES
Except as noted otherwise below, each of the Portfolios may engage in one
or more of the following investment practices or may purchase one or more of the
following investments.
MORTGAGE-RELATED SECURITIES. The mortgage-related securities in which the
Cambridge Government Income Portfolio and Cambridge Income and Growth Portfolio
invest are generally issued by Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), and Federal Home Loan
Mortgage Corporation ("FHLMC"), or are privately issued (such as collateralized
mortgage obligations described below), and are actively traded. The underlying
mortgages which collateralize mortgage-related securities issued by GNMA are
fully guaranteed by the Federal Housing Administration ("FHA") or Veterans
Administration
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("VA"), while those collateralizing mortgage-related securities issued by FHLMC
or FNMA are typically conventional residential mortgages conforming to strict
underwriting size and maturity constraints. Mortgage-related securities provide
for a periodic payment consisting of both interest and principal. The interest
portion of these payments will be distributed by the Portfolios as income, and
the capital portion will be reinvested.
Unlike conventional bonds, mortgage-related securities pay back principal
over the life of the mortgage-related securities rather than at maturity. At the
time that a holder of a mortgage-related security reinvests the payments and any
unscheduled prepayment of principal that it receives, the holder may receive a
rate of interest which is actually lower than the rate of interest paid on the
existing mortgage-related securities. As a consequence, mortgage-related
securities may be a less effective means of "locking-in" long-term interest
rates than other types of U.S. government securities.

The Portfolios may also invest in certain collateralized mortgage
obligations ("CMOs") which are rated AAA by a nationally recognized statistical
rating organization and which are issued by private entities such as investment
banking firms and companies related to the construction industry. The CMOs in
which the Portfolios may invest may be: (i) privately issued securities which
are collateralized by pools of mortgages in which each mortgage is guaranteed as
to payment of principal and interest by an agency or instrumentality of the U.S.
government; (ii) privately issued securities which are collateralized by pools
of mortgages in which payment of principal and interest are guaranteed by the
issuer and such guarantee is collateralized by U.S. government securities; or
(iii) other privately issued securities in which the proceeds of the issuance
are invested in mortgage-backed securities, and payment of the principal and
interest are supported by the credit of any agency or instrumentality of the
U.S. government.
While mortgage-related securities generally entail less risk of a decline
during periods of rapidly rising interest rates, mortgage-related securities may
also have less potential for capital appreciation than other similar investments
(e.g., investments with comparable maturities) because, as interest rates
decline, the likelihood increases that mortgages will be prepaid. Furthermore,
if mortgage-related securities are purchased at a premium, mortgage foreclosures
and unscheduled principal payments may result in some loss of a holder's
principal investment to the extent of the premium paid. Conversely, if
mortgage-related securities are purchased at a discount, both a scheduled
payment of principal and an unscheduled prepayment of principal would increase
current and total returns and would accelerate the recognition of income, which
would be taxed as ordinary income when distributed to shareholders.
STRIPPED MORTGAGE SECURITIES. The Cambridge Government Income Portfolio may
invest up to 10% of its assets in stripped mortgage securities. Stripped
mortgage securities are derivative multiclass securities which may be issued by
agencies or instrumentalities of the U.S. government, or by private originators
of, or investors in, mortgage loans, such as savings and loan associations,
mortgage banks, commercial banks, investment banks, and special purpose
subsidiaries of the foregoing organizations. The market volatility of stripped
mortgage securities tends to be greater than the market volatility of the other
types of mortgage-related securities in which the Portfolios invest.
Principal-only stripped mortgage securities are used primarily to hedge against
interest rate risk to the capital assets of the Portfolios in a changing
interest rate environment. If the mortgage assets which underlie the stripped
mortgage securities were to experience greater than anticipated prepayments of

principal, a Portfolio could fail to fully recoup its initial investment in
these securities, even if they are rated in the highest rating categories (e.g.,
AAA or Aaa by S&P or Moody's, respectively).
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and manage
prepayment risks, the Cambridge Government Income Portfolio, Cambridge Income
and Growth Portfolio and Cambridge Global Portfolio may engage in dollar roll
transactions with respect to mortgage-related securities issued by GNMA, FNMA,
and
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FHLMC. In a dollar roll transaction, a Portfolio sells a mortgage-related
security to a financial institution, such as a bank or broker/dealer, and
simultaneously agrees to repurchase a substantially similar (i.e., same type,
coupon, and maturity) security from the institution at a later date at an agreed
upon price. The mortgage-related securities that are repurchased will bear the
same interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment histories. During the
period between the sale and repurchase, the Portfolios will not be entitled to
receive interest and principal payments on the securities sold. Proceeds of the
sale will be invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the sale, will
generate income for the Portfolios exceeding the yield. When a Portfolio enters
into a dollar roll transaction, liquid assets of the Portfolio, in a dollar
amount sufficient to make payment for the obligations to be repurchased, are
segregated at the trade date. These securities are marked to market daily and
are maintained until the transaction is settled.
MONEY MARKET INSTRUMENTS. In order to invest cash which is awaiting
long-term investment, to maintain liquidity, or for temporary defensive
purposes, each of the Portfolios may purchase money market instruments. To the
extent that investments in money market instruments are not for defensive
purposes, each of the Portfolios, except the Cambridge Municipal Income
Portfolio, agrees to limit its investment in these securities to 35% of its
total assets. To the extent the Cambridge Municipal Income Portfolio invests in
money market instruments for other than defensive purposes, it will limit its
investment in these securities to 20% of its total assets. For these purposes,
money market instruments will be limited to short-term obligations of the U.S.
government or its agencies or instrumentalities; certificates of deposit, time
deposits, and bankers' acceptances issued by banks or savings and loan

associations having assets of at least $500 million as of the end of their most
recent fiscal year; short-term corporate debt securities; and high-quality
commercial paper. Each of the Portfolios may also invest up to 10% of its assets
in shares of money market funds whose investments are limited to money market
instruments which each Portfolio could purchase directly.
REPURCHASE AGREEMENTS. Each Portfolio, other than the Cambridge Municipal
Income Portfolio, may engage in repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the
Portfolio and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not repurchase
the securities from the Portfolio, the Portfolio could receive less than the
repurchase price on any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Portfolio may purchase
securities on a when-issued or delayed delivery basis. In when-issued and
delayed delivery transactions, the Portfolio relies on the seller to complete
the transaction. The seller's failure to complete the transaction may cause the
Portfolio to miss a price or yield considered to be advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
each Portfolio, other than the Cambridge Municipal Income Portfolio, may lend
portfolio securities up to one-third of the value of its total assets to
broker/dealers, banks, or other institutional borrowers of securities on a
short-term basis. A Portfolio will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the particular Sub-Adviser
has determined are creditworthy under guidelines established by the Trust's
Board of Trustees and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned.
BORROWING. Each of the Portfolios may, under certain circumstances, borrow
money directly or through reverse repurchase agreements (arrangements in which
the Portfolio sells a money market instrument for a percentage of its cash value
with an agreement to buy it back on a set date) or pledge securities. The
Cambridge
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Municipal Income Portfolio may borrow directly or through reverse repurchase
agreements up to 5% of its total assets and may pledge up to 10% of the value of
those assets to secure such borrowings. Under certain circumstances, each

remaining Portfolio may borrow directly or through reverse repurchase agreements
up to one-third of the value of its net assets and pledge up to 10% of the value
of those assets to secure such borrowings.
PUT AND CALL OPTIONS. Each of the Portfolios, except the Cambridge
Municipal Income Portfolio and Cambridge Income and Growth Portfolio, may
purchase put and call options on its portfolio securities. However, the
Cambridge Growth Portfolio will only invest in options that are traded on
securities exchanges and for which it pays a premium (cost of option). Put and
call options will be used as a hedge to attempt to protect securities which the
particular Portfolio holds, or will be purchasing, against decreases or
increases in value. Each of the Portfolios, except the Cambridge Growth
Portfolio and Cambridge Income and Growth Portfolio, may also write (sell) put
and call options on all or any portion of its portfolio to generate income or
enhance potential gain. The Portfolios will write call options on securities
either held in their portfolios or for which they have the right to obtain
without payment of further consideration or for which they have segregated cash
in the amount of any additional consideration. In the case of put options
written by the Portfolios, the Trust's custodian will segregate cash, U.S.
Treasury obligations, or high quality debt securities with a value equal to or
greater than the exercise price of the underlying securities.
The Cambridge Global Portfolio also may purchase and write call and put
options on securities indices and other financial indices and on currencies.
Each of the Portfolios, except the Cambridge Growth Portfolio and Cambridge
Income and Growth Portfolio, may generally purchase and write over-the-counter
options on portfolio securities in negotiated transactions with the buyers or
writers of the options since options on the portfolio securities held by the
Portfolios are not traded on an exchange. The Portfolios purchase and write
options only with investment dealers and other financial institutions (such as
commercial banks or savings and loan associations) deemed creditworthy by the
particular Portfolio's Sub-Adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third-party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
The Portfolios that may use put and call options (1) will limit the
aggregate value of the assets underlying covered call options or put options
written by a Portfolio to not more than 25% of such Portfolios net assets and
(2) will limit the premiums paid for options purchased by a Portfolio to 5% of

its net assets.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. Each Portfolio may purchase and
sell financial futures contracts to hedge all or a portion of its portfolio
against changes in interest rates or securities prices. Futures contracts on
securities call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government at a certain time in the future. The seller of the contract
agrees to make delivery of the type of instrument called for in the contract,
and the buyer agrees to take delivery of the instrument at the specified future
time. A futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index.
The Portfolios (except the Cambridge Income and Growth Portfolio) may write
call options and purchase put options on financial futures contracts as a hedge
to attempt to protect securities in each portfolio against decreases in value
resulting from anticipated increases in market interest rates or broad declines
in securities
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prices. When a Portfolio writes a call option on a futures contract, it is
undertaking the obligation of selling the futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, a Portfolio is entitled (but
not obligated) to sell a futures contract at the fixed price during the life of
the option.
The Portfolios (except the Cambridge Income and Growth Portfolio) may also
write put options and purchase call options on financial futures contracts as a
hedge against rising purchase prices of portfolio securities resulting from
anticipated decreases in market interest rates or broad ascents in securities
prices. The Portfolios will use these transactions to attempt to protect their
ability to purchase portfolio securities in the future at price levels existing
at the time it enters into the transactions. When a Portfolio writes a put
option on a futures contract, it is undertaking to buy a particular futures
contract at a fixed price at any time during a specified period if the option is
exercised. As a purchaser of a call option on a futures contract, the Portfolio
is entitled (but not obligated) to purchase a futures contract at a fixed price
at any time during the life of the option.
A Portfolio may not purchase or sell futures contracts or related options

if immediately thereafter the sum of the amount of margin deposits on the
Portfolio's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Portfolio's total assets. When a
Portfolio purchases futures contracts, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contracts (less any
related margin deposits), will be deposited in a segregated account with the
Trust's custodian to collateralize the position and thereby insure that the use
of such futures contracts is unleveraged.
When a Portfolio uses financial futures and options on financial futures as
hedging devices, there is a risk that the prices of the securities subject to
the futures contracts may not correlate perfectly with the prices of the
securities in that Portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities to market
changes. In addition, the particular Sub-Adviser could be incorrect in its
expectations about the direction or extent of market factors, such as interest
rate or securities price movements. In these events, the Portfolio may lose
money on the futures contract or option. It is not certain that a secondary
market for positions in futures contracts or for options will exist at all
times. Although the Sub-Adviser will consider liquidity before entering into
options transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option at any
particular time. A Portfolio's ability to establish and close out futures and
options positions depends on this secondary market.
FOREIGN SECURITIES. The Cambridge Growth Portfolio, Cambridge Capital
Growth Portfolio, Cambridge Income and Growth Portfolio and Cambridge Global
Portfolio may invest in foreign securities. The Cambridge Growth Portfolio,
Cambridge Capital Growth Portfolio, and Cambridge Income and Growth Portfolio
will limit investments in foreign securities not publicly traded in the United
States to less than 10%, 15%, and 10% of their total assets, respectively.
Investments in foreign securities involve special risks that differ from
those associated with investments in domestic securities. The risks associated
with investments in foreign securities relate to political and economic
developments abroad, as well as those that result from the differences between
the regulation of domestic securities and issuers and foreign securities and
issuers. These risks may include, but are not limited to, expropriation,
confiscatory taxation, currency fluctuations, withholding taxes on interest,
limitations on the use or transfer of Portfolio assets, political or social
instability, ability to obtain or enforce court judgments abroad, and adverse
diplomatic developments. Moreover, individual foreign economies may differ

favorably or unfavorably from the domestic economy in such respects as growth of
gross national product, the rate of inflation, capital reinvestment, resource
self-sufficiency, and balance of payments position.
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Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly available
information about foreign issuers; credit risks associated with certain foreign
governments; the lack of uniform financial accounting standards applicable to
foreign issuers; less readily available market quotations on foreign issues; the
likelihood that securities of foreign issuers may be less liquid or more
volatile; generally higher foreign brokerage commissions; and unreliable mail
service between countries.
CURRENCY RISKS. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of the Portfolios' assets and income may be
affected by changes in exchange rates and regulations. Although the Portfolios
value their assets daily in U.S. dollars, they will not convert their holdings
of foreign currencies to U.S. dollars daily. When a Portfolio converts its
holdings to another currency, it may incur conversion costs. Foreign exchange
dealers realize a profit on the difference between the prices at which they buy
and sell currencies.
The Cambridge Growth Portfolio, Cambridge Capital Growth Portfolio,
Cambridge Income and Growth Portfolio and Cambridge Global Portfolio will engage
in foreign currency exchange transactions in connection with their investments
in foreign securities. These Portfolios will conduct their foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through forward contracts
to purchase or sell foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded directly between currency traders (usually large
commercial banks) and their customers. When a Portfolio enters into a contract
for the purchase or sale of a security denominated in a foreign currency, it may
want to establish the U.S. dollar cost or proceeds, as the case may be. By
entering into a forward contract in U.S. dollars for the purchase or sale of the
amount of foreign currency involved in an underlying security transaction, a

Portfolio is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship between
the U.S. dollar and such foreign currency. However, this tends to limit
potential gains which might result from a positive change in such currency
relationships.
There is no limitation on the Portfolio's ability to invest in forward
foreign currency exchange contracts in the aggregate; however, a Portfolio will
not enter into forward foreign currency exchange contracts or maintain a net
exposure in such contracts where the Portfolio would be obligated to deliver an
amount of foreign currency in excess of the value of the Portfolio's securities
or other assets denominated in that currency or denominated in a currency or
currencies that the Portfolio's Sub-Adviser believes will reflect a high degree
of correlation with the currency with regard to price movements. The Portfolio's
exposure to a particular currency through such contracts will vary from time to
time depending on the Portfolio's investment in securities denominated in that
currency. The Portfolios generally do not enter into forward foreign currency
exchange contracts with a term longer than one year.
INDEXED SECURITIES. The Global Portfolio may invest in indexed securities,
the value of which is linked to currencies, interest rates, commodities, indices
or other financial indicators. Investment in indexed securities involves certain
risks. In addition to the credit risk of the securities issuer and normal risks
of price changes in response to changes in interest rates, the principal amount
of indexed securities may decrease as a result of changes in the value of the
reference instruments. Also, in the case of certain indexed securities in which
the interest rate is linked to a reference instrument, the interest rate may be
reduced to zero and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Further, indexed securities may
be more volatile than the reference instruments underlying indexed securities.
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INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Portfolios will
limit their respective investments in other investment companies to no more than
3% of the total outstanding voting stock of any investment company, invest no
more than 5% of total assets in any one investment company, and invest more than
10% of total assets in investment companies in general. The Portfolios will
purchase securities of closed-end investment companies only in open market
transactions involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a merger,

consolidation, reorganization, or acquisition of assets. It should be noted that
investment companies incur certain expenses such as management fees, and
therefore any investment by a Portfolio in shares of another investment company
would be subject to duplicative expenses.
RESTRICTED AND ILLIQUID SECURITIES. The Portfolios (other than the
Government Income Portfolio) may invest up to 10% of their net assets in
restricted securities; the Government Income Portfolio may invest up to 15% of
its net assets in restricted securities. Restricted securities are any
securities in which the Portfolios may otherwise invest pursuant to its
investment objective and policies but which are subject to restrictions on
resale under federal securities laws. The Portfolios will limit investments in
illiquid securities, including over-the-counter options and certain municipal
leases and certain restricted securities not determined by the Board of Trustees
to be liquid under guidelines adopted by the Board of Trustees pursuant to
Securities Act Rule 144A, to 15% of their net assets.
PORTFOLIO TURNOVER. The annual turnover rate of the Portfolios may vary
from year to year and may also be affected by cash requirements for redemptions
and repurchase of Portfolio shares and by the necessity of maintaining the
Portfolios as regulated investment companies under the Internal Revenue Code, as
amended, in order to receive certain favorable tax treatment. With respect to
the Cambridge Government Income Portfolio, the Portfolio may trade or dispose of
portfolio securities as considered necessary to meet its investment objective.
Higher portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs.
For additional information concerning the Portfolios' investment policies
and limitations, see the combined Statement of Additional Information.
NET ASSET VALUE
Each Portfolio's net asset value per share fluctuates. The net asset value
per share for Class A shares of each Portfolio is determined by dividing the net
assets attributable to the Class A shares by the total number of Class A shares
outstanding. Likewise, the net asset value per share for Class B shares of each
Portfolio is determined by dividing the net assets attributable to the Class B
shares by the total number of Class B shares outstanding. The net asset value
for Class A shares will, from time to time, differ from that of Class B shares
due to the variance in daily net income realized by and dividends paid on each
class of shares.
HOW TO BUY SHARES
Class A and Class B shares of the Portfolios are sold on days on which the
New York Stock Exchange is open for business. Class A and Class B shares of each

Portfolio may be purchased through a financial institution which has a sales
agreement with the Distributor. Each Portfolio reserves the right to reject any
purchase request.
ALTERNATIVE PURCHASE ARRANGEMENTS. Each Portfolio offers two classes of
shares, Class A and Class B shares. The Class A shares of each Portfolio are
sold at net asset value plus an applicable sales charge, except
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<PAGE>
under the circumstances described in the section entitled "What Shares Cost,"
and generally are redeemed at net asset value. However, a CDSC may be imposed on
the redemption of the Class A shares of each Portfolio under the circumstances
described in the section entitled "Contingent Deferred Sales Charge." The Class
B shares of each Portfolio are sold at net asset value and are redeemed at net
asset value. However, a CDSC may be imposed on the redemption of Class B shares
of each Portfolio under the circumstances described in the section entitled
"Contingent Deferred Sales Charge." Class A and Class B shares represent
identical interests in the Portfolios and have the same rights and are identical
in all respects, except that Class B shares of each Portfolio will pay a
distribution fee, which will cause the net income attributable to Class B shares
and the dividends payable on the Class B shares to be reduced by the amount of
the distribution fee and incremental expenses associated with the distribution
fee. As a result, the net asset value of Class B shares of each Portfolio will
be reduced by such amount to the extent that the particular Portfolio has
undistributed net income. Sales personnel may receive different compensation for
selling Class A and Class B shares of the Portfolios.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial
institution (such as a broker/dealer or bank) to place an order to purchase
shares of a particular Portfolio. Orders through a financial institution are
considered received when the Distributor is notified of the purchase order.
Purchase orders through a registered broker/dealer must be received by the
broker/dealer before 4:00 p.m. (Eastern time) and must be transmitted by the
broker/dealer to the Distributor before 5:00 p.m. (Eastern time) in order for
shares to be purchased at that day's price. Purchase orders through other types
of financial institutions must be received by the financial institution and
transmitted to the particular Portfolio before 4:00 p.m. (Eastern time) in order
for shares to be purchased at that day's price. It is the financial
institution's responsibility to transmit orders promptly.
Investors who have previously opened an account with the Trust through a

financial institution may purchase additional shares by mail or by Federal
Reserve wire. To make such purchases, an investor should contact his financial
institution for instructions.
State securities laws governing the ability of depository institutions to
act as underwriters or distributors of securities may differ from
interpretations given to the Glass-Steagall Act and, therefore, banks and other
financial institutions may be required to register as dealers pursuant to state
law.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Class A and Class B shares of each
Portfolio is $1,000, unless the investment is in a retirement plan, in which
case the minimum initial investment is $250. The minimum initial investment may
be waived for shareholders purchasing shares pursuant to the Systematic
Investment Program. Subsequent investments must be in amounts of at least $100,
except for retirement plans, which must be in amounts of $50. The minimum
initial investment may be waived for Trustees, emeritus trustees, employees and
retired employees of the Trust, or directors, emeritus directors, employees and
retired employees of the Distributor or affiliates thereof.
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WHAT SHARES COST
CLASS A SHARES. Class A shares of the Cambridge Growth Portfolio, Cambridge
Capital Growth Portfolio, Cambridge Income and Growth Portfolio and Cambridge
Global Portfolio are sold at their net asset value next determined after an
order is received plus a sales charge as follows:
<TABLE>

SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
PUBLIC OFFERING NET AMOUNT
PRICE INVESTED DEALER COMMISSION
<S> <C> <C>
Less than $50,000............................................. 5.50% 5.82% 4.75%
$50,000 but less than $100,000................................ 4.75% 4.99% 4.00%
$100,000 but less than $250,000............................... 3.75% 3.90% 3.00%
$250,000 but less than $500,000............................... 3.00% 3.09% 2.50%
$500,000 but less than $1 million............................. 2.00% 2.04% 1.75%

$1 million or more............................................ 0% 0% (see below)
</TABLE>

Commissions will be paid to dealers who initiate and are responsible for
purchases as set forth in the Statement of Additional Information. Class A
shares of the Cambridge Government Income Portfolio and Cambridge Municipal
Income Portfolio are sold at their net asset value next determined after an
order is received plus a sales charge as follows:
<TABLE>

SALES CHARGE AS SALES CHARGE AS
AS A PERCENTAGE A PERCENTAGE OF
OF PUBLIC NET AMOUNT
OFFERING PRICE INVESTED DEALER COMMISSION
<S> <C> <C> <C>
Less than $100,000............................................ 4.75% 4.99% 4.00%
$100,000 but less than $250,000............................... 4.00% 4.17% 3.25%
$250,000 but less than $500,000............................... 3.00% 3.09% 2.50%
$500,000 but less than $1 million............................. 2.00% 2.04% 1.75%
$1 million or more............................................ 0% 0% (see below)
</TABLE>

Commissions will be paid to dealers who initiate and are responsible for
purchases as set forth in the Statement of Additional Information.
Under certain circumstances described under the section entitled "Redeeming
Shares," shareholders may be charged a CDSC by the Distributor at the time Class
A shares are redeemed.
The Distributor, the Investment Adviser, or certain Sub-Advisers, or
affiliates thereof, at their own expense and out of their own assets, may also
provide other compensation to dealers in connection with sales of shares of the
Portfolios. Compensation may also include, but is not limited to, financial
assistance to dealers in connection with conferences, sales, or training
programs for their employees, seminars for the public, advertising or sales
campaigns, or other dealer-sponsored special events. In some instances, this
compensation may be made available only to certain dealers whose representatives
have sold or are expected to sell significant amounts of shares. Dealers may not
use sales of the Trust's shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. None of the

aforementioned other compensation shall be paid for by the Trust or its
shareholders.
CLASS B SHARES. Class B shares of each Portfolio may be purchased at their
net asset value next determined after an order is received, without the
imposition of a sales charge. Class B shares will be subject to ongoing
distribution fees as described in the section entitled "Distribution Plan."
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Under certain circumstances described under the section entitled "Redeeming
Shares," shareholders may be charged a CDSC by the Distributor at the time Class
B shares are redeemed.
WHEN NET ASSET VALUE IS DETERMINED
The net asset value of Class A and Class B shares of each Portfolio is
determined as of 4:00 p.m. (Eastern time), Monday through Friday, except on: (i)
days on which there are not sufficient changes in the value of a Portfolio's
securities that its net asset value might be materially affected; (ii) days
during which no shares are tendered for redemption and no orders to purchase
shares are received; and (iii) days on which the New York Stock Exchange is
closed.
PURCHASES AT NET ASSET VALUE
Class A shares of the Portfolios may be purchased at their net asset value
with no sales charge by advisory accounts through investment advisers registered
under the Investment Advisers Act of 1940 or by bank trust departments
purchasing on behalf of their clients. Trustees, emeritus trustees, employees,
and retired employees of the Trust, or directors, emeritus directors, employees,
or retired employees of the Distributor or affiliates thereof, or any financial
institution who has a sales agreement with the Distributor with regard to the
Trust, and their spouses and children under age 21 may also buy Class A shares
at net asset value with no sales charge. Class A shares of the Portfolios also
may be purchased at their net asset value with no sales charge by defined
contribution retirement plans qualified under Internal Revenue Code section
401(a), that have 200 or more eligible employees.
REDUCING THE SALES CHARGE FOR CLASS A SHARES
The sales charge imposed on purchases of Class A shares of the Portfolios
can be reduced through:
-- quantity discounts and accumulated purchases;
-- signing a 13-month letter of intent;
-- using the reinvestment privilege; or

-- concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the sales charge
tables, larger purchases reduce the sales charge paid. The Distributor will
combine purchases of Class A shares made on the same day by the investor, his
spouse, and his children under age 21 when the sales charge is calculated.
If an additional purchase of Class A shares of a Portfolio is made, the
Distributor will consider the previous purchases still invested in the
Portfolios. For example, if a shareholder already owns Class A shares of one or
more of the Portfolios having a current value of $40,000 and he purchases
$10,000 or more of Class A shares of the Cambridge Growth Portfolio at the
current offering price, the sales charge on the additional purchase of Class A
shares according to the schedule now in effect would be 4.75%, not 5.50%.
To receive the sales charge reduction, Cambridge Distributors, Inc. must be
notified by the shareholder in writing, or by his financial institution at the
time that the purchase is made, that Class A shares of one or more of the
Portfolios are already owned or that purchases are being combined. The
particular Portfolio will reduce the sales charge after it confirms the
purchases.
LETTER OF INTENT. If an investor intends to purchase at least $50,000 of
Class A shares of one or more Portfolios within a 13-month period, the sales
charge may be reduced by signing a letter of intent to that effect. The size
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<PAGE>
of the reduction will depend upon the sales schedule applicable to the
particular Portfolios. This letter of intent includes a provision for a sales
charge adjustment, depending upon the amount actually purchased within the 13-
month period, and a provision for the custodian to hold 5.50% or 4.75%, as the
case may be, of the total amount intended to be purchased in escrow (in Class A
shares) until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at
the end of the 13-month period unless the amount specified in the letter of
intent is not purchased. In this event, an appropriate number of escrowed Class
A shares may be redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase Class A
shares, but if he does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. The letter of
intent may be dated as of a prior date to include any purchases made within the
past 90 days.

REINVESTMENT PRIVILEGE. If Class A shares of any of the Portfolios have
been redeemed, the shareholder has a one-time right, within 60 days, to reinvest
the redemption proceeds at the next-determined net asset value without any sales
charge. Cambridge Distributors, Inc. must be notified by the shareholder in
writing or by his financial institution of the reinvestment in order to
eliminate a sales charge. If the shareholder redeems his shares in any of the
Portfolios, there may be tax consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge
reduction, a shareholder has the privilege of combining concurrent purchases of
Class A shares of two or more Portfolios, the purchase price of which includes a
sales charge. For example, if a shareholder concurrently invested $70,000 in
Class A shares of Cambridge Government Income Portfolio and $40,000 in Class A
shares of the Cambridge Growth Portfolio, the sales charge imposed upon the
purchase of Class A shares of both Portfolios would be reduced in accordance
with those schedules now in effect; that is, the shareholder would pay a sales
charge of 4.00% on the purchase of Cambridge Government Income Portfolio shares
and 3.75% on the purchase of Cambridge Growth Portfolio shares.
To receive this reduction on the sales charge, the Distributor must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The particular Portfolio or Portfolios
will reduce the sales charge after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once an account with a Portfolio has been opened, shareholders may add to
their investment in that Portfolio on a regular basis in a minimum amount of
$100. Under the program, funds may be automatically withdrawn periodically from
the shareholder's checking account and invested in additional shares of the
particular Portfolio at the net asset value next determined after an order is
received by the Distributor, plus the applicable sales charge imposed upon
purchases of Class A shares. A shareholder may apply for participation in this
program through his financial institution. However, a shareholder may purchase
only the same class of shares under this program as that held in the existing
account. Thus, for example, a shareholder who has an account in Class A shares
of a Portfolio may only purchase Class A shares of that Portfolio under this
program.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Portfolios, The Shareholder Services Group, Inc.
("TSSG"), maintains a share account for each shareholder. Share certificates are
not issued unless requested in writing to TSSG.
Detailed confirmations of each purchase, redemption, and distribution are

sent to each shareholder.
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<PAGE>
DIVIDENDS
Dividends, if any, are declared daily and paid monthly to all shareholders
invested in the Cambridge Government Income Portfolio and the Cambridge
Municipal Income Portfolio on the record date. Any dividends for the Cambridge
Income and Growth Portfolio are declared and paid quarterly to all shareholders
invested in the Cambridge Income and Growth Portfolio on the record date.
Dividends, if any, are declared and paid semi-annually to all shareholders
invested in the Cambridge Capital Growth Portfolio on the record date, and
dividends, if any, are declared and paid annually to all shareholders invested
in the Cambridge Growth Portfolio and the Cambridge Global Portfolio on the
record date. Dividends will be reinvested in additional shares of the same class
and Portfolio on payment dates at the ex-dividend date net asset value without a
sales charge unless cash payments are requested by shareholders in writing to
the Trust.
CAPITAL GAINS
Capital gains realized by each Portfolio, if any, will be distributed at
least once every 12 months.
RETIREMENT PLANS
Class A and Class B shares of the Portfolios can be purchased as an
investment for retirement plans or for IRA accounts. For further details,
including prototype retirement plans, contact the Portfolios and consult a tax
adviser.
EXCHANGE PRIVILEGE
Class A shares in each Portfolio may be exchanged for Class A shares in the
other Portfolios at net asset value without a sales charge or a CDSC. Class B
shares in each Portfolio may be exchanged for Class B shares in the other
Portfolios at net asset value without a sales charge or a CDSC. Shares of the
the Cash Fund may be exchanged for Class A shares in each Portfolio at net asset
value without a sales charge or CDSC, so long as the transferred shares have
previously paid a sales charge with respect to Class A shares of the Portfolios
(unless not applicable under the circumstances), and shares of the Cash Fund may
be exchanged for Class B shares in each Portfolio at net asset value without a
CDSC. In addition, Class A and Class B shares of the Portfolios may be exchanged
into shares of the Cash Fund at net asset value without a sales charge or CDSC.
If a shareholder making such an exchange qualifies for an elimination of

the sales charge with respect to Class A shares of the Portfolios, Cambridge
Distributors, Inc. must be notified in writing by the shareholder or his
financial institution.
REQUIREMENTS FOR EXCHANGE. Shareholders using this privilege must exchange
shares having a net asset value of at least $1,000. Before the exchange, the
shareholder must receive a prospectus of the Portfolio for which the exchange is
being made.
This privilege is available to shareholders resident in any state in which
Class A or Class B shares of the Portfolio being acquired may be sold. Upon
receipt of proper instructions and required supporting documents, shares
submitted for exchange are redeemed and the proceeds invested in shares of the
other Portfolio. The exchange privilege may be modified or terminated at any
time. Shareholders will be notified of the modification or termination of the
exchange privilege.
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Further information on the exchange privilege is available and the
prospectus for the Cash Fund may be obtained by calling 1-800-382-0016.
TAX CONSEQUENCES. An exercise of the exchange privilege is treated as a
sale for federal income tax purposes. Depending on the circumstances, a
short-term or long-term capital gain or loss may be realized.
MAKING AN EXCHANGE. Instructions for exchanges may be given in writing or
by telephone. Written instructions require a signature guarantee. Shareholders
may have difficulty in making exchanges by telephone through brokers and other
financial institutions during times of drastic economic or market changes. If a
shareholder cannot contact his broker or other financial institution by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail to Cambridge Family of Funds, c/o TSSG, One American
Express Plaza, Providence, Rhode Island 02903.
TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form is completed by the investor
and is on file with TSSG. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with TSSG. Shares may
be exchanged between two Portfolios by telephone only if both Portfolios have
identical shareholder registrations.
Any shares held in certificate form cannot be exchanged by telephone but
must be forwarded to TSSG and deposited to the shareholder's account before
being exchanged. Telephone exchange instructions may be recorded. Such

instructions will be processed as of 4:00 p.m. (Eastern time) and must be
received by the Distributor before that time for shares to be exchanged the same
day. Shareholders exchanging into a Portfolio will not receive any dividend that
is payable to shareholders of record on that date. This privilege may be
modified or terminated at any time.
If reasonable procedures are not followed by the Portfolios, they may be
liable for losses due to unauthorized or fraudulent telephone instructions.
REDEEMING SHARES
Each Portfolio redeems Class A and Class B shares at their net asset value
next determined, less the applicable CDSC as described below, after TSSG
receives the redemption request. Redemptions will be made on days on which each
Portfolio computes its net asset value. Redemptions can be made through a
financial institution or directly from each Portfolio. Redemption requests must
be received in proper form.
CONTINGENT DEFERRED SALES CHARGE
CLASS A SHARES. As of the date of this prospectus, shareholders who
purchase or who have purchased $1 million or more of the Class A shares of any
Portfolio at net asset value, without a sales charge, will be subject to a CDSC
by the Distributor of 1.00% for redemptions of such Class A shares made within
one year from the date of purchase. (For those shareholders who purchased $1
million or more of the Class A shares of any Portfolio at net asset value,
without a sales charge, prior to the date of this prospectus, the previous
four-year redemption period will be waived and such shareholders will now only
be subject to the one-year redemption period.) The CDSC will be calculated based
upon the lesser of the original purchase price of the Class A shares being
redeemed or the net asset value of those shares when redeemed.
The CDSC will not be imposed on Class A shares acquired through
reinvestment of dividends or distributions of long-term capital gains.
Redemptions are deemed to have occurred in the following order: (1) Class A
shares acquired through the reinvestment of dividends and long-term capital
gains; (2) purchases of Class A
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<PAGE>
shares occurring more than four years before the date of redemption; (3)
purchases of $1 million or more of Class A shares occurring more than one year
before the date of redemption; (4) purchases of Class A shares within the
previous four years without the use of redemption proceeds as described above;
(5) purchases of Class A shares within the previous one year through the use of

redemption proceeds as described above; and (6) purchases of $1 million or more
of Class A shares within the previous year without a sales charge.
No CDSC will be imposed when a redemption results from a total or partial
distribution from a qualified retirement plan, IRA, Keogh Plan, or a custodial
account following retirement, attainment of age 59 1/2, separation from service
(except for an IRA), or results from the death or permanent and total disability
of the beneficial owner. Also, no CDSC will be imposed in connection with
involuntary redemptions by the Portfolios of accounts with low balances (see
"Accounts with Low Balances" below) or with respect to Class A shares purchased
under the circumstances described in the section entitled "Purchases at Net
Asset Value."
CLASS B SHARES. Shareholders who purchased Class B shares will be charged a
CDSC by the Distributor of 1.00% for redemptions of Class B shares made within
one year from the date of purchase. The CDSC will be calculated based upon the
lesser of the original purchase price of the Class B shares or the net asset
value of the Class B shares when redeemed.
The CDSC will not be imposed on Class B shares acquired through
reinvestment of dividends or distributions of long-term capital gains.
Redemptions are deemed to have occurred in the following order: (1) Class B
shares acquired through the reinvestment of dividends and long-term capital
gains; (2) purchases of Class B shares occurring more than one year before the
date of redemption; and (3) purchases of Class B shares within the previous
year.
No CDSC will be imposed when a redemption results from the total or partial
distribution from a qualified retirement plan, IRA, Keogh Plan, or a custodial
account following retirement, attainment of age 59 1/2, separation from service
(except for an IRA), or the death or permanent and total disability of the
beneficial owner. Additionally, no CDSC will be charged in connection with
redemptions by the Portfolios of accounts with low balances (see "Accounts with
Low Balances" below).
Any period during which Class A shares and Class B shares are invested in
the Cash Fund is not taken into account when determining whether a CDSC is
imposed upon redemption.

REINVESTMENT PRIVILEGE. If the Class B shares of any of the Portfolios have
been redeemed, the shareholder has a one-time right, within 60 days, to reinvest
the redemption proceeds plus the amount of contingent deferred sales charge paid
by the shareholder at the next-determined net asset value. Cambridge
Distributors, Inc. must be notified by the shareholder in writing or by his
financial institution of the reinvestment in order to recover the CDSC. If the
shareholder redeems his shares in any of the Portfolios, there may be tax
consequences.

THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem Class A or Class B shares of the Portfolios by
calling his financial institution (such as a broker/dealer or a bank) to request
the redemption. Class A and Class B shares of the Portfolios will be redeemed at
the net asset value next determined, less the applicable CDSC, after the
particular Portfolio receives the redemption request from the financial
institution. The financial institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions to the
particular Portfolio. The financial institution may charge customary fees and
commissions for this service. Redemption requests through a registered
broker/dealer must be received by the broker/dealer before 4:00 p.m. (Eastern
time) and must be transmitted by the broker/dealer to the particular Portfolio
before 5:00 p.m. (Eastern time) in order for Class A and Class B shares to be
redeemed at that day's net asset value. Redemption requests through other
financial institutions must be received by the financial institution and
transmitted to the particular Portfolio before 4:00 p.m. (Eastern time) in order
for Class A and Class B shares to be redeemed at that day's net asset value.
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DIRECTLY FROM THE PORTFOLIOS
BY TELEPHONE. Shareholders may redeem their Class A and Class B shares of
the Portfolios by calling 1-800-382-0016. The proceeds will be mailed to the
shareholder's address of record or wire transferred to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System,
normally within one business day, but in no event longer than seven days after
receipt of the request. The minimum amount for a wire transfer is $1,000. Each
wire transfer may be subject to a fee of $10; additional fees may be charged by
the recipient's financial institution or bank. If at any time the Trust shall
determine it is necessary to terminate or modify this method of redemption,
shareholders will be promptly notified.
An authorization form permitting TSSG to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Cambridge Distributors, Inc. Telephone redemption instructions
may be recorded.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as redeeming by mail, should be considered.

If reasonable procedures are not followed by the Portfolios, they may be
liable for losses due to unauthorized or fraudulent telephone instructions.

BY MAIL. Any shareholder may redeem Class A or Class B shares of the
Portfolios by sending a written request to Cambridge Family of Funds, c/o TSSG,
One American Express Plaza, Providence, Rhode Island 02903. The written request
should include the shareholder's name, the name of the particular Portfolio from
which Class A or Class B shares are being redeemed, the account number, and the
share or dollar amount requested.

If Class A or Class B share certificates have been issued, they must be
properly endorsed and should be sent by registered or certified mail with the
written request. Shareholders should call 1-800-382-0016 for assistance in
redeeming by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any amount to be sent to an address other than that on record with the
particular Portfolio, or a redemption payable other than to the shareholder of
record must have signatures on written redemption requests guaranteed by:
-- a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the Federal
Deposit Insurance Corporation ("FDIC");
-- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
-- a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC; or
-- any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Portfolios do not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Trust may elect in the
future to limit eligible signature guarantors to institutions that are members
of a signature guarantee program. The Trust and its transfer agent reserve the
right to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but
in no event more than seven days, after receipt of a proper written redemption
request, except as described in the paragraph below.
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REDEMPTIONS BEFORE PURCHASE INSTRUMENTS CLEAR

When Class A or Class B shares are purchased by check or through the
Pre-Authorized Check ("PAC"), the proceeds from the redemption of those shares
are not available, and those shares may not be exchanged, until TSSG is
reasonably certain that the purchase check has cleared, which could take up to
ten calendar days.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount not
less than $100 may take advantage of the Systematic Withdrawal Program. Under
this program, Class A and Class B shares of the Portfolios are redeemed to
provide for periodic withdrawal payments in an amount directed by the
shareholder. However, the aggregate withdrawals of Class B shares in any year
are not subject to a CDSC and are generally limited to 10% of the value of the
shareholder's account at the time of the establishment of the Systematic
Withdrawal Program. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Class A
or Class B shares of the Portfolios, and the fluctuation of the net asset value
of Class A or Class B shares redeemed under this program, redemptions may
reduce, and eventually deplete, the shareholder's investment in the particular
Portfolio. For this reason, payments under the program should not be considered
as yield or income on the shareholder's investment in the particular Portfolio.
To be eligible to participate in this program, a shareholder must have an
initial account value in the particular Portfolio of at least $10,000.
A shareholder may apply for participation in this program through Cambridge
Distributors, Inc. Due to the fact that Class A shares are normally sold with a
sales charge, it may not be advisable for shareholders to be purchasing Class A
shares while participating in the program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the
Portfolios may redeem Class A and Class B shares in any account, except for
retirement plans, and pay the proceeds to the shareholder if the account balance
falls below the required minimum value of $1,000. This requirement does not
apply, however, if the balance falls below $1,000 because of changes in any
particular Portfolio's net asset value. Before Class A or Class B shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional Class A or Class B shares, as the case may be, to
meet the required minimum value of $1,000.
CAMBRIDGE SERIES TRUST INFORMATION
GENERAL INFORMATION. The Trust, an open-end, management investment company,
was established as a Massachusetts business trust on January 20, 1992. The

Trust's Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest representing interests in separate Portfolios. The
shares in any one Portfolio may be offered in separate classes. As of the date
of the prospectus, the Board of Trustees of the Trust has established six
Portfolios, each with two classes of shares, Class A and Class B shares.
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are responsible for managing the Trust's business affairs and for
exercising all the Trust's powers, except those reserved for the shareholders.
The Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
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INVESTMENT MANAGEMENT OF THE TRUST
INVESTMENT ADVISER
The Trust is managed by Cambridge Investment Advisors, Inc. (the
"Investment Adviser"), pursuant to an investment advisory agreement (the
"Investment Advisory Agreement") with the Trust. The Investment Adviser, in
turn, has entered into a sub-advisory agreement (the "Sub-Advisory Agreement")
with each sub-adviser selected for the Portfolios (the "Sub-Adviser"or
"Sub-Advisers"). It is the Investment Adviser's responsibility to select,
subject to review and approval by the Trust's Board of Trustees, the
Sub-Advisers for each of its Portfolios who have distinguished themselves in
their respective areas of expertise in asset management and to review their
continued performance.
Subject to the supervision and direction of the Board of Trustees, the
Investment Adviser provides investment management evaluation services
principally by performing initial due diligence on the prospective Sub-Adviser
for each Portfolio and thereafter monitoring each Sub-Adviser's performance
through quantitative and qualitative analysis, as well as periodic in-person,
telephonic and written consultations with each Sub-Adviser. In evaluating
prospective Sub-Advisers, the Investment Adviser considers, among other factors,
each Sub-Adviser's level of expertise; relative performance and consistency of
performance over a minimum period of five years; level of adherence to
investment discipline or philosophy; personnel, facilities and financial
strength; and quality of service and client communications. The Investment
Adviser has responsibility for communicating performance expectations and
evaluations to the Sub-Advisers and ultimately recommending to the Board of
Trustees of the Trust whether each Sub-Adviser's contract should be renewed,

modified, or terminated. The Investment Adviser provides written reports to the
Board of Trustees regarding the results of its evaluation and monitoring
functions. The Investment Adviser is also responsible for conducting all
operations of the Trust, except those operations contracted to the Sub-Advisers,
custodian, transfer agent, and administrator. Although each Sub-Adviser's
activities are subject to oversight by the Board of Trustees and the officers of
the Trust, neither the Board of Trustees, the officers, nor the Investment
Adviser evaluates the investment merits of each Sub-Adviser's individual
security selections.
INVESTMENT ADVISORY FEES. The Investment Adviser receives an annual
investment advisory fee from each Portfolio. For performing its
responsibilities, the Investment Adviser receives an annual investment advisory
fee not to exceed the following percentages of the average daily net assets of
the particular Portfolio: Cambridge Growth Portfolio, 0.80%; Cambridge Capital
Growth Portfolio, 0.80%; Cambridge Government Income Portfolio, 0.60%; Cambridge
Municipal Income Portfolio, 0.60%; and Cambridge Income and Growth Portfolio,
0.75%. The annual investment advisory fee for the Global Portfolio is equal to
1.10% of the average daily net assets of the Portfolio up to and including $75
million and 1.00% of the average daily net assets of the Portfolio in excess of
$75 million. The advisory fee for the Cambridge Growth Portfolio, Cambridge
Capital Growth Portfolio, Cambridge Income and Growth Portfolio and Cambridge
Global Portfolio, while higher than the advisory fee paid by other mutual funds
in general, is comparable to the advisory fees paid by many mutual funds with
similar objectives and policies. Under the Investment Advisory Agreement, the
Investment Adviser may, from time to time, voluntarily waive some or all of its
investment advisory fee and may terminate any such voluntary waiver of some or
all of its investment advisory fee at any time in its sole discretion. The
Investment Adviser has undertaken to reimburse the respective Portfolios for a
portion of the Portfolios' operating expenses in excess of limitations
established by certain states.
INVESTMENT ADVISER'S PROFILE. Cambridge Investment Advisors, Inc., located
at 901 East Byrd Street, Richmond, Virginia 23219, serves as the Trust's
Investment Adviser. It is a wholly-owned subsidiary of Investment
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Management Group, Inc., which, in turn, is a wholly-owned subsidiary of WFS
Financial Corporation, Inc., a diversified financial services holding company.
The Investment Adviser was incorporated under the laws of Virginia in 1991.

Although prior to 1992 the Investment Adviser had not managed mutual funds, it
has employed a group of Sub-Advisers which together have over 255 years of
investment experience and currently manage or supervise in excess of $300
billion on behalf of over 11 million shareholders or client accounts.
THE SUB-ADVISERS
As discussed below under the section entitled "Sub-Advisers' Profiles,"
each Portfolio has a separate Sub-Adviser. Each Sub-Adviser has complete
discretion to purchase, manage, and sell portfolio securities for the Portfolio
to which it serves as Sub-Adviser within the particular Portfolio's investment
objectives, restrictions, and policies.
SUB-ADVISORY FEES. The Investment Adviser pays each Sub-Adviser an annual
fee not to exceed the following percentage of Portfolio assets: Cambridge Growth
Portfolio, 0.40%; Cambridge Capital Growth Portfolio, 0.40%; Cambridge
Government Income Portfolio, 0.30% on the first $150 million in Portfolio assets
and 0.25% on assets in excess of $150 million; and Cambridge Municipal Income
Portfolio, 0.30%. The Sub-Adviser to the Cambridge Income and Growth Portfolio
receives from the Investment Adviser an annual fee expressed as a percentage of
that Portfolio's assets as follows: 0.325% on the first $50 million in Portfolio
assets, 0.275% on the next $150 million in assets, 0.225% on the next $300
million in assets, and 0.200% on assets over $500 million. The Sub-Adviser to
the Cambridge Global Portfolio receives from the Investment Adviser an annual
fee expressed as a percentage of that Portfolio's assets as follows: 0.55% on
the first $75 million in Portfolio assets, and 0.50% on assets over $75 million.
No performance or incentive fees are paid to the Sub-Adviser. Under the
Sub-Advisory Agreement, the Sub-Adviser may, from time to time, voluntarily
waive some or all of its sub-advisory fee charged to the Investment Adviser and
may terminate any such voluntary waiver at any time in its sole discretion. No
performance or incentive fees are paid to the Sub-Advisers. Under certain
Sub-Advisory Agreements, the particular Sub-Adviser may, from time to time,
voluntarily waive some or all of its sub-advisory fee charged to the Investment
Adviser and may terminate any such voluntary waiver at any time in its sole
discretion.
SUB-ADVISERS' PROFILES
CAMBRIDGE GROWTH PORTFOLIO. Under the terms of a Sub-Advisory Agreement
between Kemper Financial Services, Inc. ("KFS"), and the Investment Adviser, KFS
serves as the Sub-Adviser to the Cambridge Growth Portfolio. KFS is located at
120 South LaSalle Street, Chicago, Illinois 60603, and is a majority-owned
subsidiary of Kemper Corporation, a diversified insurance and financial services
holding company. KFS is one of the largest investment managers in the country.

KFS has been engaged in the management of investment funds for more than 40
years. In addition to serving as Sub-Adviser for the Cambridge Growth Portfolio,
KFS and its affiliates provide investment advice and manage investment
portfolios for the Kemper Insurance Companies, The Kemper Funds, and other
corporate, pension, profit sharing and individual accounts and acts as
investment adviser or principal underwriter for 25 open-end and 6 closed-end
investment companies with 58 separate investment portfolios, representing more
than 3.3 million shareholder accounts. Total assets under management by KFS and
its affiliates are approximately $70 billion.
C. Beth Cotner is the portfolio manager of the Cambridge Growth Portfolio.
Ms. Cotner joined KFS in January 1985 and is currently an Executive Vice
President of KFS. She has served as portfolio manager of the KFS Small Cap Fund
since 1987 and has also recently become portfolio manager of the KFS Growth
Fund. Ms.
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Cotner received a B.A. from Ohio State University, Columbus, Ohio, and an M.B.A.
from George Washington University, Washington, D.C.
CAMBRIDGE CAPITAL GROWTH PORTFOLIO. Under the terms of a Sub-Advisory
Agreement between Phoenix Investment Counsel, Inc. ("PIC"), and the Investment
Adviser, PIC serves as the Sub-Adviser to the Cambridge Capital Growth
Portfolio. PIC is located at One American Row, Hartford, Connecticut 06115-2520.
PIC was originally organized in 1932 as John P. Chase, Inc., and has been
engaged in the management of mutual funds since 1958. Total assets under
management by PIC and/or affiliates are currently approximately $10 billion.
All of the outstanding stock of PIC is owned by Phoenix Equity Planning
Corporation ("Equity Planning"), an indirect subsidiary of Phoenix Home Life
Mutual Insurance Company ("Phoenix Home Life") of Hartford, Connecticut. Phoenix
Home Life is in the business of writing ordinary and group life and health
insurance and annuities. Its principal offices are located at One American Row,
Hartford, Connecticut 06115. Equity Planning is registered as a broker/dealer in
50 states and has its principal offices at 100 Bright Meadow Boulevard, P.O. Box
2200, Enfield, Connecticut 06083-2200.
Catherine Dudley has been the portfolio manager of the Cambridge Capital
Growth Portfolio since its inception in 1992. Ms. Dudley joined PIC in 1985 and
has been a Vice President since 1990. Ms. Dudley is a Chartered Financial
Analyst and received B.A.s in Economics and German from the University of
Connecticut.

CAMBRIDGE GOVERNMENT INCOME PORTFOLIO. Under the terms of a Sub-Advisory
Agreement between PIMCO and the Investment Adviser, PIMCO serves as Sub-Adviser
to the Cambridge Government Income Portfolio. PIMCO, established in 1971,
provides investment advisory services to investment companies, pension plans,
foundations, endowments and other institutions located both in the U.S. and
abroad. As of November 30, 1993, PIMCO had over $52.6 billion of assets under
management, of which approximately $26.0 billion were invested in U.S.
Government securities. PIMCO is presently a wholly owned subsidiary of Pacific
Financial Management Corporation ("PFAMCo"), which is, in turn, a wholly owned
subsidiary of Pacific Mutual Life Insurance Company. PFAMCo, PIMCO and certain
of their affiliates have entered into an Agreement and Plan of Consolidation
with Thompson Advisory Group L.P. ("TAG") which provides for the consolidation
of the investment advisory and related businesses of PFAMCo, PIMCO and TAG.
The consolidation resulted in the transfer of the current investment advisory
business of PIMCO to a new entity, Pacific Investment Management Company ("New
PIMCO"). The terms and conditions of the new sub-advisory agreement between
the Cambridge Government Income Portfolio and New PIMCO are identical in all
material respects to those of the previous sub-advisory contract with PIMCO,
and were approved by the shareholders of the Cambridge Government Income
Portfolio of Cambridge Series Trust at a meeting held on October 28, 1994.
PIMCO is located at 840 Newport Center Drive, Suite 360, Newport Beach,
California 92660.
David H. Edington serves as the portfolio manager of the Cambridge
Government Income Portfolio. An Executive Vice President of PIMCO, Mr. Edington
joined the firm in 1987. He received a Bachelor's degree in Engineering from the
California Polytechnic State University and a Master's degree in Management from
the Sloan School of Management at M.I.T.

CAMBRIDGE MUNICIPAL INCOME PORTFOLIO. Under the terms of a Sub-Advisory
Agreement between Van Kampen/American Capital Management Inc. ("VK/AC
Management") and the Investment Adviser, VK/AC Management serves as the
Sub-Adviser to the Cambridge Municipal Income Portfolio. VK/AC Management,
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181, was
incorporated in 1990 and commenced operations in 1992. VK/AC Management
currently provides investment advice to a wide variety of individual,
institutional, and investment company clients. VK/AC Management is a
wholly-owned subsidiary of Van Kampen/American Capital, Inc., which, in turn, is
a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is
indirectly controlled by Clayton & Dubilier Associates IV Limited Partnership,

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the general partners of which are Joseph L. Rice, III, B. Charles Ames, Alberto
Cribiore, Donald J. Gogel, and Hubbard C. Howe, each of whom is a principal of
Clayton, Dubilier & Rice, Inc., a New York-based private investment firm.
The current Sub-Advisory Agreement between VK/AC Management and the
Investment Adviser was approved by shareholders of the Portfolio on February 5,
1993. On February 17, 1993, the Sub-Advisory Agreement between the Portfolios'
previous sub-adviser, Van Kampen/American Capital Investment Advisory Corp.
("Advisory Corp."), and the Investment Adviser terminated. The rate of the
sub-advisory fee to be paid to VK/AC Management under the current Sub-Advisory
Agreement is identical to that paid to Advisory Corp. under the former Sub-
Advisory Agreement, and the terms of the two contracts are substantially
identical. VK/AC Management is staffed by personnel formerly employed by
Advisory Corp. and continues to use the resources of Advisory Corp. in managing
client accounts. As of December 31, 1994, VK/AC Management, together with its
affiliates, managed or supervised approximately $49.6 billion of assets.

David C. Johnson has been co-manager of the Cambridge Municipal Income
Portfolio since 1992. Mr. Johnson joined Van Kampen/American Capital in 1989,
and is currently First Vice President of the firm. He has served as portfolio
manager of the VKM Municipal Income Portfolio since 1989 and is responsible for
the municipal fund desk. He was previously associated with The Chicago
Corporation, where he marketed financial futures and options. Mr. Johnson
received his M.B.A. from Loyola University.

William V. Grady has been co-manager of the Cambridge Municipal Income
Portfolio since 1992. Mr. Grady is Vice President of Van Kampen/American
Capital, which he joined in 1992. He is portfolio manager for several national
and specialty state funds. He was previously associated with Municipal Bond
Investors Assurance Corporation where he structured insured tax-exempt
financings for two years, and was employed by CIGNA Investments Inc. from
1984-1990 as a portfolio manager and research analyst. Mr. Grady is a Chartered
Financial Analyst and received his B.B.A. in Finance from the University of
Notre Dame.

CAMBRIDGE INCOME AND GROWTH PORTFOLIO. The Investment Adviser employs
Wellington Management Company ("WMC") to manage the investment and reinvestment
of the assets of the Cambridge Income and Growth Portfolio and to continuously
review, supervise, and administer the Portfolio's investment program. WMC,
located at 75 State Street, Boston, Massachusetts 02109, is a professional
investment counseling firm which provides investment services to investment
companies, employee benefit plans, endowments, foundations, and other
institutions and individuals. As of September 30, 1994, WMC had discretionary

investment management authority with respect to approximately $82.0 billion in
assets. WMC and its predecessor organizations have provided investment advisory
services to investment companies since 1933 and to investment counseling clients
since 1960.
Paul D. Kaplan, Senior Vice President of WMC, and Arnold C. Schneider III,
Senior Vice President of WMC, have served as portfolio managers to the Portfolio
since its inception in May 1993, when WMC became Sub-Adviser to the Portfolio.
Mr. Kaplan manages the fixed-income and U.S. government securities portion of
the Portfolio, and Mr. Schneider manages the equity securities portion of the
Portfolio. Mr. Kaplan has been a portfolio manager with WMC since 1982 and Mr.
Schneider has been a portfolio manager with WMC since 1987.

CAMBRIDGE GLOBAL PORTFOLIO. The Investment Adviser employs Scudder to
manage the investment and reinvestment of the assets of the Cambridge Global
Portfolio and to continuously review, supervise, and administer the Portfolio's
investment program. Scudder is located at 345 Park Avenue, New York, New York.
Scudder was founded in 1919 and, today, the Sub-Adviser manages in excess of $90
billion for many private accounts and over 70 mutual fund portfolios.

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Scudder has been a leader in international investment management for over
30 years. Assets of international investment company clients of Scudder exceeded
$4 billion as of December 31, 1993.
Lead portfolio manager, William E. Holzer, has responsibility for worldwide
strategy and investment themes. Mr. Holzer, who has twenty years of experience
in global investing, joined Scudder in 1980. Alice Ho, portfolio manager, joined
Scudder in 1986 and has been involved with global investment management since
that time.
DISTRIBUTION OF PORTFOLIO SHARES
Cambridge Distributors, Inc., having its principal office at 901 East Byrd
Street, Richmond, Virginia 23219, is the principal distributor for Class A and
Class B shares of the Portfolios. Cambridge Distributors, Inc. is a Virginia
corporation organized on December 24, 1991 and is an affiliate of the Investment
Adviser. (Cambridge Distributors, Inc. is referred to as "Distributor.")
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan
adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940
(the "Plan"), Class B shares of the Cambridge Growth Portfolio, Cambridge
Capital Growth Portfolio, Cambridge Income and Growth Portfolio and Cambridge
Global Portfolio will pay an amount computed at an annual rate of 0.75% of the

average daily net asset value of Class B shares of the particular Portfolio to
finance any activity which is principally intended to result in the sale of
those Class B shares. The Class B shares of the Cambridge Government Income
Portfolio and the Cambridge Municipal Income Portfolio will pay an amount
computed at an annual rate of 0.50% of the average daily net asset value of
Class B shares of the particular Portfolio to finance any activity which is
principally intended to result in the sale of those Class B shares.
The Distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan by notice to the
Class B shareholders of a particular Portfolio.
The Distributor may select financial institutions (such as a broker/dealer
or bank) to provide sales support services as agents for their clients or
customers who beneficially own Class B shares of the Portfolios. Financial
institutions will receive fees from the Distributor based upon Class B shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
Distributor.
The Plan is a compensation type plan. As such, the Portfolios make no
payments to the Distributor except as described above. Therefore, the Portfolios
do not pay for unreimbursed expenses of the Distributor, including amounts
expended by the Distributor in excess of amounts received by it from the
Portfolios, interest, carrying, or other financing charges in connection with
excess amounts expended, or the Distributor's overhead expenses. However, the
Distributor may be able to recover such amounts or may earn a profit from future
payments made by the Portfolios under the Plan.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Investment Management Group, Inc. (the
"Administrator"), located at 901 East Byrd Street, Richmond, Virginia 23219,
provides each Portfolio with certain administrative personnel and services
necessary to operate each Portfolio, such as legal and accounting services. The
Administrator provides these services at an annual rate of 0.125% on the first
$1.5 billion of the average aggregate daily net assets of the Trust and 0.120%
on assets in excess of $1.5 billion. The Administrator may voluntarily reimburse
a portion of its administrative fee. Investment Management Group, Inc. is the
parent of the Investment Adviser.
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CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT. Investors

Fiduciary Trust Company, 127 West 10th Street, Kansas City, Missouri 64105, is
custodian for the securities and cash of each Portfolio (except the Cambridge
Global Portfolio). State Street Bank & Trust Company, P.O. Box 8602, Boston,
Massachusetts 02266 is custodian for the securities and cash of the Cambridge
Global Portfolio. The Shareholder Services Group, Inc., P.O. Box 9653,
Providence, Rhode Island 02940-9653, is transfer agent for Class A and Class B
shares of the Portfolios and dividend disbursing agent for the Portfolios.
LEGAL COUNSEL. Legal counsel is provided by Hunton & Williams, 951 East
Byrd Street, Richmond, Virginia 23219-4074.
INDEPENDENT AUDITORS. The independent auditors for the Portfolios are KPMG
Peat Marwick LLP, One Boston Place, Boston, Massachusetts 02108.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, a Sub-Adviser looks for prompt execution of the order at
the best overall terms available. In working with dealers, a Sub-Adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. In selecting among firms believed to meet these criteria, a
Sub-Adviser may give consideration to those firms which have sold or are willing
to sell shares of the Portfolios. A Sub-Adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the Board of
Trustees.
Notwithstanding the foregoing, to the extent consistent with applicable
provisions of the Investment Company Act of 1940, Rule 17e-1, and other rules
and exemptions adopted by the Securities and Exchange Commission ("SEC") under
that Act, the Board of Trustees of the Trust has determined that transactions
for the Portfolios may be executed by affiliated brokers if, in the judgment of
a Sub-Adviser, the use of an affiliated broker is likely to result in price and
execution at least as favorable as those of other qualified brokers. Under rules
adopted by the SEC, an affiliated broker may not execute transactions for a
Portfolio on the floor of any national securities exchange, but may effect
transactions by transmitting orders for execution, providing for clearance and
settlement and arranging for the performance of the execution function by
members of the exchange not associated with the affiliated broker. The broker
will be required to pay fees charged by those persons performing the floor
brokerage elements out of the brokerage compensation that it receives from a
Portfolio.
SHAREHOLDER SERVICING PLAN
The Trust has adopted a Shareholder Servicing Plan (the "Service Plan")

with respect to Class A and Class B shares of each Portfolio. Under the Service
Plan, financial institutions will enter into shareholder service agreements with
the Portfolios to provide administrative support services to their customers who
from time to time may be owners of record or beneficial owners of Class A or
Class B shares of one or more Portfolios. In return for providing these support
services, a financial institution may receive payments from one or more
Portfolios at a rate not exceeding 0.25% of the average daily net assets of the
Class A or Class B shares of the particular Portfolio or Portfolios beneficially
owned by the financial institution's customers for whom it is holder of record
or with whom it has a servicing relationship. These administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various personnel, including
clerical, supervisory, and computer, as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Portfolios; assisting clients
in changing dividend options, account designations, and addresses; and providing
such other services as the Portfolios reasonably request.
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In addition to receiving payments under the Service Plan, financial
institutions may be compensated by the Investment Adviser, a Sub-Adviser, and/or
the Administrator, or affiliates thereof, for providing administrative support
services to holders of Class A or Class B shares of the Portfolios. These
payments will be made directly by the Investment Adviser, Sub-Adviser, and/or
Administrator and will not be made from the assets of any of the Portfolios.
EXPENSES OF THE PORTFOLIOS AND THE CLASS A AND CLASS B SHARES
The holders of each class of shares pay their allocable portion of their
respective Portfolio's expenses and the expenses of the Trust.
The expenses of the Trust for which holders of Class A shares and Class B
shares each pay their allocable portion include, but are not limited to: the
cost of organizing the Trust and continuing its existence; registering the
Trust; Trustees' fees; auditors' fees; the cost of meetings of the Trust; legal
fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise from time to time.
Each Portfolio's expenses for which holders of Class A shares and Class B
shares each pay their allocable portion include, but are not limited to:
registering the Portfolio and Class A and Class B shares of the Portfolio;

investment advisory services; taxes and commissions; custodian fees; insurance
provisions; auditors' fees; transfer agent fees; accounting and investor
servicing fees; and such non-recurring and extraordinary items as may arise from
time to time.
At present, the only expenses which are allocated specifically to Class A
shares as a class are expenses under the Trust's Shareholder Servicing Plan, and
the only expenses which are allocated specifically to Class B shares as a class
are expenses under the Trust's Shareholder Servicing Plan and Rule 12b-1 Plan.
However, the Board of Trustees reserves the right to allocate certain expenses
to holders of Class A shares and Class B shares as it deems appropriate ("Class
Expenses"). In any case, Class Expenses would be limited to: distribution fees;
transfer agent fees as identified by the transfer agent as attributable to
holders of Class A shares or Class B shares; fees under the Trust's Shareholder
Servicing Plan; printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses, and proxies to
current shareholders; registration fees paid to the SEC and to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of Class A shares or Class B shares; legal fees
relating solely to Class A shares or Class B shares; and Trustees' fees incurred
as a result of issues relating solely to Class A shares or Class B shares.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each Class A share and each Class B share of a Portfolio gives the
shareholder one vote in Trustee elections and other matters submitted to
shareholders of the Trust for vote. All shares of all classes of each Portfolio
have equal voting rights, except that in matters affecting only a particular
Portfolio or class, only shares of that Portfolio or class are entitled to vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or a Portfolio's operation and for the election of
Trustees under certain circumstances.
Trustees may be removed by a two-thirds vote of the number of Trustees
prior to such removal or by a two-thirds vote of the shareholders at a special
meeting. A special meeting of shareholders shall be called by the
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Trustees upon the written request of shareholders owning at least 10% of the
Trust's outstanding shares of all series entitled to vote.

MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
under Massachusetts law for acts or obligations of the Trust on behalf of the
Trust. To protect shareholders of the Portfolios, the Trust has filed legal
documents with the state of Massachusetts that expressly disclaim the liability
of shareholders of the Portfolios for such acts or obligations of the Trust.
These documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument the Trust or its Trustees enter into or sign on behalf
of the Portfolios.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to use
the property of the Trust to protect or compensate the shareholder. On request,
the Trust will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Trust. Therefore, financial loss resulting from
liability as a shareholder will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from its
assets.
TAX INFORMATION
GENERAL. The Portfolios do not anticipate having to pay federal income tax
because each Portfolio expects to meet the requirements of the Internal Revenue
Code, as amended, applicable to regulated investment companies and to receive
the special tax treatment afforded to such companies.
Each Portfolio will be treated as a single, separate entity for federal
income tax purposes so that income and losses (including capital gains and
losses) realized by a Portfolio will not be combined for tax purposes with
income and losses realized by any of the other Portfolios.
Unless otherwise exempt, shareholders of the Portfolios, other than
Cambridge Municipal Income Portfolio, which is discussed below, are required to
pay federal income tax on any dividends and other distributions, including
capital gains distributions, received. This applies whether dividends and
distributions are received in cash or as additional shares. Distributions
representing long-term capital gains, if any, will be taxable to shareholders as
long-term capital gains irrespective of how long the shareholders have held the
particular shares. No federal income tax is due on any dividends or any capital
gain distributions earned in an IRA or qualified retirement plan or custodial
account until distributed.
CAMBRIDGE MUNICIPAL INCOME PORTFOLIO. With respect to the Cambridge
Municipal Income Portfolio, shareholders are not required to pay the federal
regular income tax on any dividends received from the Portfolio that represent

net interest on tax-exempt municipal bonds. However, under the Tax Reform Act of
1986, dividends representing net interest earned on some municipal bonds may be
included in calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum
taxable income for individuals and 20% for corporations, applies when it exceeds
the regular tax for the taxable year. Alternative minimum taxable income is
equal to the regular taxable income of the taxpayer increased by certain "tax
preference" items not included in regular taxable income and reduced by only a
portion of the deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity"
bonds issued after August 7, 1986, as a tax preference item. Unlike traditional
governmental purpose municipal bonds, which finance roads, schools,
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libraries, prisons and other public facilities, private activity bonds provide
benefits to private parties. The Portfolio may purchase all types of municipal
bonds, including private activity bonds.
In addition, in the case of a corporate shareholder, dividends of the
Portfolio which represent interest on municipal bonds may be subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporation's "adjusted current earnings." The corporate alternative minimum tax
treats 75% of the excess of a taxpayer's pre-tax "adjusted current earnings"
over the taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Portfolio dividend, and alternative minimum taxable income does
not include the portion of the Portfolio's dividend attributable to municipal
bonds which are not private activity bonds, the difference will be included in
the calculation of the corporation's alternative minimum tax.
Dividends of the Portfolio representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
Information on the tax status of dividends and distributions is provided
annually.
PERFORMANCE INFORMATION
From time to time, each Portfolio advertises its total return, yield, and,
as applicable, tax-equivalent yield.

Total return represents the change, over a specified period of time, in the
value of an investment in a particular Portfolio after reinvesting all income
and capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Class A and Class B shares of each Portfolio is calculated by
dividing the net investment income per share (as defined by the SEC) earned by
the particular Portfolio over a thirty-day period by the maximum offering price
per Class A and Class B share of that Portfolio on the last day of the period.
This number is then annualized using semi-annual compounding. With respect to
the Cambridge Municipal Income Portfolio, the tax-equivalent yield of the
Portfolio is calculated similarly to the yield but is adjusted to reflect the
taxable yield that the Portfolio would have had to earn to equal its actual
yield, assuming a specific tax rate. The yield and tax-equivalent yield do not
necessarily reflect income actually earned by each Portfolio and, therefore, may
not correlate to the dividends or other distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load,
in the case of Class A shares of each Portfolio, and other non-recurring
charges, such as the CDSC, in the case of Class A and Class B shares of each
Portfolio, which, if excluded, would increase the total return, yield and, as
applicable, tax-equivalent yield. Each Portfolio will include the performance
information for both Class A and Class B shares in any advertisement or
information that includes the performance data of the particular Portfolio.
From time to time, the Trust may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
39

<PAGE>

CAMBRIDGE SERIES TRUST
PROSPECTUS
AN OPEN-END MANAGEMENT
INVESTMENT COMPANY
(Bullet) Cambridge Growth Portfolio
(Bullet) Cambridge Capital Growth Portfolio
(Bullet) Cambridge Government Income Portfolio
(Bullet) Cambridge Municipal Income Portfolio
(Bullet) Cambridge Income and Growth Portfolio
(Bullet) Cambridge Global Portfolio
January 27, 1995

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40

<PAGE>
January 27, 1995

Cambridge Series Trust
Cambridge Growth Portfolio
Cambridge Capital Growth Portfolio
Cambridge Government Income Portfolio
Cambridge Municipal Income Portfolio
Cambridge Income and Growth Portfolio
Cambridge Global Portfolio

Statement of Additional Information

This combined Statement of Additional Information should be read with the
combined Prospectus of Cambridge Series Trust (the "Trust") dated January
27, 1995. This Statement is not a prospectus itself. To receive a copy
of the Prospectus, write to the Trust or call 1-800-382-0016.

Statement dated January 27, 1995

Table of Contents

General Information About Brokerage Transactions 20
the Trust 1
How to Buy Shares 21
Investment Objectives and
Policies of the Distribution Plan (Class B Shares) 21
Portfolios 1
Conversion to Federal Funds 22
Repurchase Agreements 1
Purchases at Net Asset Value 22
When-Issued and Delayed
Delivery Transactions 1 Determining Net Asset
Value 22
Lending of Portfolio Securities 1
Determining Market Value
Bank Instruments 2 of Securities 22

Restricted Securities 2 Exchange Privilege 23

Lower-Grade Municipal
Securities 2 Redeeming Shares 23

Zero-Coupon Securities 4 Contingent Deferred Sales Charge 23

Reverse Repurchase Agreements 5 Redemptions in Kind 23

Futures and Options
Transactions 5 Tax Status 24

Futures Contracts 5 The Portfolios' Tax Status 24

Put Options on Futures
Contracts 5 Shareholders' Tax Status 25

Call Options on Futures
Contracts 6 Total Return 25

"Margin" in Futures
Transactions 6 Yield 26

Regulatory Restrictions 7 Tax-Equivalent Yield
(Municipal Income Portfolio) 26
Purchasing Put Options on
Portfolio Securities 7
Tax-Equivalency Table 26
Writing Covered Call
Options on Portfolio
Securities 7 Performance Comparisons 27

Over-the-Counter Options 7 Financial Statements 29

Collateralized Mortgage
Obligations (CMOs) 7 Appendix 30

Convertible Securities 8

Warrants 8

Dollar Rolls 8

Swaps, Caps, Floors and Collars 9

High Yield, High Risk Debt
Securities 10

Indexed Securities 10

Currency Transactions 11

Risk of Currency Transactions 12

Eurodollar Instruments 12

Portfolio Turnover 12

Investment Limitations 12

Management of the Trust 15

Officers and Trustees 15

Ownership of Portfolios 16

Trustee Liability 16

Investment Advisory
Services 16

Investment Adviser 16

Investment Adviser Fees 17

The Sub-Advisers 17

Distribution of Portfolio
Shares 19

Administrative Services 19

Shareholder Servicing Plan 19

General Information About the Trust

The Trust was established as a Massachusetts business trust on January 20,
1992. As of the date of this Statement, the Trust consists of two classes
of shares of beneficial interest, Class A and Class B shares, in each of

the following six separate portfolios of securities (collectively, the

"Portfolios" and each individually, the "Portfolio"): Cambridge Growth
Portfolio ("Growth Portfolio"); Cambridge Capital Growth Portfolio
("Capital Growth Portfolio"); Cambridge Government Income Portfolio
("Government Income Portfolio"); Cambridge Municipal Income Portfolio
("Municipal Income Portfolio"); and Cambridge Income and Growth Portfolio
("Income and Growth Portfolio"); and Cambridge Global Portfolio ("Global
Portfolio").

Investment Objectives and Policies of the Portfolios

The Prospectus discusses the objective of each Portfolio and the policies
it employs to achieve those objectives. The following discussion
supplements the description of the Portfolios' investment policies in the
Prospectus. The Portfolios' respective investment objectives cannot be
changed without approval of shareholders. Except as noted, the investment
policies described below may be changed by the Board of Trustees without
shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.

Repurchase Agreements

The Portfolios or their custodian will take possession of the securities
subject to repurchase agreements and these securities will be marked to
market daily. In the event that a defaulting seller filed for bankruptcy
or became insolvent, disposition of such securities by a Portfolio might be
delayed pending court action. The Portfolios believe that, under the
regular procedures normally in effect for custody of a Portfolio's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of a Portfolio and allow retention or

disposition of such securities. The Portfolios will only enter into
repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the adviser to be
creditworthy pursuant to guidelines established by the Board of Trustees.

When-Issued and Delayed Delivery Transactions

The Portfolios may engage in when-issued and delayed delivery transactions.
These transactions are arrangements in which a Portfolio purchases
securities with payment and delivery scheduled for a future time. A
Portfolio engages in when-issued and delayed delivery transactions only for
the purpose of acquiring portfolio securities consistent with its
investment objective and policies, not for investment leverage, but a
Portfolio may sell such securities prior to settlement date if such a sale
is considered to be advisable. No income accrues to the Portfolios on
securities in connection with such transactions prior to the date the
Portfolios actually take delivery of securities. In when-issued and
delayed delivery transactions, a Portfolio relies on the seller to complete
the transaction. The seller's failure to complete the transaction may
cause a Portfolio to miss a price or yield considered to be advantageous.

These transactions are made to secure what is considered to be an
advantageous price or yield for a Portfolio. Settlement dates may be a

month or more after entering into these transactions, and the market values
of the securities purchased may vary from the purchase prices. No fees or
other expenses, other than normal transaction costs, are incurred.
However, liquid assets of a Portfolio sufficient to make payment for the
securities to be purchased are segregated at the trade date. These
securities are marked to market daily and are maintained until the

transaction is settled. As a matter of policy, the Portfolios, other than
the Municipal Income Portfolio, do not intend to engage in when-issued and
delayed delivery transactions to an extent that would cause the segregation
of more than 20% of the total value of their respective assets.

Lending of Portfolio Securities

The collateral received when a Portfolio lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the particular
Portfolio. During the time portfolio securities are on loan, the borrower
pays a Portfolio any dividends or interest paid on such securities. Loans
are subject to termination at the option of a Portfolio or the borrower. A
Portfolio may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing
broker.

A Portfolio would not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.

Bank Instruments

The Portfolios may invest in the instruments of banks and savings and loans
whose deposits are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund, both of which are administered by the Federal
Deposit Insurance Corporation ("FDIC"), such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances.
However, the above-mentioned instruments are not necessarily guaranteed by
those organizations. In addition to domestic bank obligations, such as
certificates of deposit, demand and time deposits, savings shares, and
bankers' acceptances, the Portfolios may invest in:

(bullet) Eurodollar Certificates of Deposit ("ECDs") issued by foreign
branches of U.S. or foreign banks;

(bullet) Eurodollar Time Deposits ("ETDs"), which are U.S.
dollar-denominated deposits in foreign branches of U.S. or foreign
banks;

(bullet) Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the U.S.; and

(bullet) Yankee Certificates of Deposit ("Yankee CDs"), which are U.S.
dollar-denominated certificates of deposit issued by U.S. branches
of foreign banks and held in the U.S.

Restricted Securities

The Portfolios may invest in restricted securities. Restricted securities
are any securities in which each Portfolio may otherwise invest pursuant to
its investment objective and policies but which are subject to restriction
on resale under federal securities law.

The ability of the Board of Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive, safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for

resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Trust, on behalf of the Portfolios, believes that the Staff of the SEC has
left the question of determining the liquidity of all restricted securities
(eligible for resale under Rule 144A) for determination of the Trust's
Board of Trustees. The Board of Trustees considers the following criteria
in determining the liquidity of certain restricted securities.

(bullet) the frequency of trades and quotes for the security;

(bullet) the number of dealers willing to purchase or sell the security
and the number of other potential buyers;

(bullet) dealer undertakings to make a market in the security; and

(bullet) the nature of the security and the nature of the marketplace trades.

Lower-Grade Municipal Securities

In normal circumstances, at least 80% of the Municipal Income Portfolio's
total assets will be invested in investment-grade tax-exempt municipal
securities and up to 20% of the Municipal Income Portfolio's total assets
may be invested in lower-grade tax-exempt municipal securities. The amount
of available information about the financial condition of municipal

securities issuers is generally less extensive than that for corporate
issuers with publicly traded securities, and the market for tax-exempt
municipal securities is considered to be generally less liquid than the
market for corporate debt obligations. Liquidity relates to the ability of
a Portfolio to sell a security in a timely manner at a price which reflects
the value of that security. As discussed below, the market for lower-grade
tax-exempt municipal securities is considered generally to be less liquid
than the market for investment-grade tax-exempt municipal securities.
Further, municipal securities in which the Municipal Income Portfolio may
invest include special obligation bonds, lease obligations, participation
certificates and variable rate instruments. The market for such securities
may be particularly less liquid. The relative illiquidity of some of the
Municipal Income Portfolio's securities may adversely affect the ability of
the Municipal Income Portfolio to dispose of such securities in a timely
manner and at a price which reflects the value of such security in the
Trust's judgment. Although the issuer of some such municipal securities
may be obligated to redeem such securities at face value, such redemption
could result in capital losses to the Municipal Income Portfolio to the
extent that such municipal securities were purchased by the Municipal
Income Portfolio at a premium to face value. The market for less liquid
securities tends to be more volatile than the market for more liquid
securities, and market values of relatively illiquid securities may be more
susceptible to change as a result of adverse publicity and investor
perceptions than are the market values of higher grade, more liquid
securities.

The Municipal Income Portfolio's net asset value will change with changes
in the value of its portfolio securities. Because the Municipal Income
Portfolio will invest primarily in fixed income municipal securities, the
Municipal Income Portfolio's net asset value can be expected to change as
general levels of interest rates fluctuate. When interest rates decline,
the value of a portfolio invested in fixed income securities can be
expected to rise. Conversely, when interest rates rise, the value of a
portfolio invested in fixed income securities can be expected to decline.
Net asset value and market value may be volatile due to the Municipal
Income Portfolio's investment in lower-grade and less liquid municipal
securities. Volatility may be greater during periods of general economic
uncertainty.

To the extent that there is no established retail market for some of the
securities in which the Municipal Income Portfolio may invest, there may be
relatively inactive trading in such securities and the ability of the Trust
to accurately value such securities may be adversely affected. During
periods of reduced market liquidity and in the absence of readily available
market quotations for securities held in the Municipal Income Portfolio,
the responsibility of the Trust to value the Municipal Income Portfolio's
securities becomes more difficult and the Trust's judgment may play a
greater role in the valuation of the Municipal Income Portfolio's
securities due to the reduced availability of reliable objective data. To
the extent that the Municipal Income Portfolio invests in illiquid

securities and securities which are restricted as to resale, the Municipal
Income Portfolio may incur additional risks and costs. Illiquid and
restricted securities are particularly difficult to dispose of. When
determining whether municipal leases purchased by the Municipal Income
Portfolio will be classified as a liquid or illiquid security, the Board of
Trustees has directed the Sub-Adviser to consider the following factors:
the frequency of trades and quotes for the security; the volatility of
quotations and trade prices for the security; the number of dealers willing
to purchase or sell the security and the number of potential purchases;
dealer undertaking to make a market in the security; the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics
of transfer); the rating of the security and the financial condition and
prospects of the issuer of the security; whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial

characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of nonappropriation"); any credit enhancement or
legal recourse provided upon an event of nonappropriation or other
termination of the lease; and such other factors as may be relevant to the
Portfolio's ability to dispose of the security.

Lower-grade tax-exempt municipal securities generally involve greater
credit risk than higher-grade municipal securities. A general economic
downturn or a significant increase in interest rates could severely disrupt
the market for lower-grade tax-exempt municipal securities and adversely
affect the market value of such securities. In addition, in such
circumstances, the ability of issuers of lower-grade tax-exempt municipal
securities to repay principal and to pay interest, to meet projected
financial goals and to obtain additional financing may be adversely
affected. Such consequences could lead to an increased incidence of
default for such securities and adversely affect the value of the lower-
grade tax-exempt municipal securities in the Municipal Income Portfolio
and, thus, the Portfolio's net asset value. The secondary market prices of
lower-grade tax-exempt municipal securities are less sensitive to changes
in interest rates than are those for higher rated tax-exempt municipal
securities, but are more sensitive to adverse economic changes or
individual issuer developments. Adverse publicity and investors'
perceptions, whether or not based on rational analysis, may also affect the
value and liquidity of lower-grade tax-exempt municipal securities.

Yields on the Municipal Income Portfolio's securities can be expected to
fluctuate over time. In addition, periods of economic uncertainty and
changes in interest rates can be expected to result in increased volatility
of the market prices of the lower-grade tax-exempt municipal securities in
the Municipal Income Portfolio's portfolio and, thus, in the net asset
value of the Portfolio. Net asset value and market value may be volatile

due to the Municipal Income Portfolio's investment in lower-grade and less
liquid municipal securities. Volatility may be greater during periods of
general economic uncertainty. The Municipal Income Portfolio may incur
additional expenses to the extent it is required to seek recovery upon a
default in the payment of interest or a repayment of principal on its
portfolio holdings, and the Municipal Income Portfolio may be unable to
obtain full recovery thereof. In the event that an issuer of securities
held by the Municipal Income Portfolio experiences difficulties in the
timely payment of principal or interest, and such issuer seeks to
restructure the terms of its borrowings, the Municipal Income Portfolio may
incur additional expenses and may determine to invest additional capital
with respect to such issuer or the project or projects to which the
Municipal Income Portfolio's securities relate. Recent and proposed
legislation may have an adverse impact on the market for lower-grade tax-
exempt municipal securities. Recent legislation requires federally-insured
savings and loan associations to divest their investments in lower-grade
bonds. Other legislation has, from time to time, been proposed which, if
enacted, could have an adverse impact on the market for lower-grade tax-
exempt municipal securities.

The Municipal Income Portfolio will rely on the Sub-Adviser's judgment,
analysis, and experience in evaluating the creditworthiness of an issue.
In this evaluation, the Sub-Adviser will take into consideration, among
other things, the issuer's financial resources, its sensitivity to economic
conditions and trends, its operating history, the quality of the issuer's
management and regulatory matters. The Sub-Adviser also may consider,
although it does not rely primarily on, the credit ratings of Standard &
Poor's Corporation ("S&P") and Moody's Investors Service, Inc. ("Moody's"),
in evaluating tax-exempt municipal securities. Such ratings evaluate only
the safety of principal and interest payments, not market value risk.
Additionally, because the creditworthiness of an issuer may change more
rapidly than is able to be timely reflected in changes in credit ratings,
the Sub-Adviser continuously monitors the issuers of tax-exempt municipal
securities held in the Municipal Income Portfolio. The Municipal Income
Portfolio may, if deemed appropriate by the Sub-Adviser, retain a security

whose rating has been downgraded below B-by S&P or below B3 by Moody's, or
whose rating has been withdrawn.

Because issuers of lower-grade tax-exempt municipal securities frequently
choose not to seek a rating of their municipal securities, the Sub-Adviser
will be required to determine the relative investment quality of many of
the municipal securities in the Municipal Income Portfolio. Further,
because the Municipal Income Portfolio may invest up to 20% of its total
assets in these lower-grade municipal securities, achievement by the
Municipal Income Portfolio of its investment objective may be more
dependent upon the Sub-Adviser's investment analysis than would be the case
if the Municipal Income Portfolio were investing exclusively in higher-
grade municipal securities. The relative lack of financial information
available with respect to issuers of municipal securities may adversely
affect the Sub-Adviser's ability to successfully conduct the required

investment analysis.

Zero-Coupon Securities

Zero-coupon securities in which the Income and Growth and Global Portfolios
may invest are debt obligations which are generally issued at a discount
and payable in full at maturity, and do not provide for current payments of
interest prior to maturity. Zero-coupon securities usually trade at a deep
discount from their face or par value and are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current distributions of interest. As a
result, the net asset value of shares of a Portfolio investing in zero-
coupon securities may fluctuate over a greater range than shares of other

Portfolios and other mutual funds investing in securities making current
distributions of interest and having similar maturities.

Zero-coupon securities may include U.S. Treasury bills issued directly by
the U.S. Treasury or other short-term debt obligations, and longer-term
bonds or notes and their unmatured interest coupons which have been
separated by their holder, typically a custodian bank or investment
brokerage firm. A number of securities firms and banks have stripped the
interest coupons from the underlying principal (the "corpus") of U.S.
Treasury securities and resold them in custodial receipt programs with a
number of different names, including Treasury Income Growth Receipts
("TIGRS") and Certificates of Accrual on Treasuries ("CATS"). The
underlying U.S. Treasury bonds and notes themselves are held in book-entry
form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof.

In addition, the Treasury has facilitated transfers of ownership of zero-
coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities
through the Federal Reserve book-entry recordkeeping system. The Federal
Reserve program as established by the Treasury Department is known as
"STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities." Under the STRIPS program, a Portfolio will be able to have its
beneficial ownership of U.S. Treasury zero-coupon securities recorded
directly in the book-entry recordkeeping system in lieu of having to hold
certificates or other evidence of ownership of the underlying U.S. Treasury
securities.

When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The
principal or corpus is sold at a deep discount because the buyer receives
only the right to receive a future fixed payment on the security and does
not receive any rights to periodic cash interest payments. Once stripped
or separated, the corpus and coupons may be sold separately. Typically,
the coupons are sold separately or grouped with other coupons with like
maturity dates and sold in such bundled form. Purchasers of stripped

obligations acquire, in effect, discount obligations that are economically
identical to the zero-coupon securities issued directly by the obligor.

No more than 5% of the net assets of the Income and Growth Portfolio will
be invested in CATS, TIGRS or STRIPS.

Reverse Repurchase Agreements

The Portfolios may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Portfolio transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Portfolio will
repurchase the portfolio instrument by remitting the original consideration
plus interest at an agreed upon rate. The use of reverse repurchase
agreements may enable the Portfolio to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability
to enter into reverse repurchase agreements does not ensure that the
Portfolio will be able to avoid selling portfolio instruments at a
disadvantageous time.

When effecting reverse repurchase agreements, liquid assets of the
Portfolio, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These
securities are marked to market daily and are maintained until the
transaction is settled.

Futures and Options Transactions

The Portfolios may engage in futures and options hedging transactions. The
Income and Growth Portfolio will not, however, utilize options on its
futures. In an effort to reduce fluctuations in the net asset value of
shares of a Portfolio, a Portfolio may attempt to hedge all or a portion of
its portfolio by buying and selling financial futures contracts, buying put
options on portfolio securities and listed put options on futures
contracts, and writing call options on futures contracts. A Portfolio may
also write covered call options on portfolio securities to attempt to
increase its current income. A Portfolio will maintain its positions in
securities, option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired. An option
position on financial futures contracts may be closed out only on the
exchange on which the position was established.

Futures Contracts

The Portfolios may engage in transactions in futures contracts. A futures
contract is a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. However, a stock index
futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to the difference between

the value of the index at the close of the last trading day of the contract
and the price at which the index contract was originally written. No
physical delivery of the underlying securities in the index is made.

The purpose of the acquisition or sale of a futures contract by a Portfolio

is to protect the Portfolio from fluctuations in the value of its
securities caused by anticipated changes in interest rates or market
conditions without necessarily buying or selling the securities. For
example, in the fixed income securities market, price generally moves
inversely to interest rates. A rise in rates generally means a drop in
price. Conversely, a drop in rates generally means a rise in price. In
order to hedge their holdings of fixed income securities against a rise in
market interest rates, Government Income Portfolio, Municipal Income
Portfolio, Income and Growth Portfolio and Global Portfolio could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect themselves against the possibility that the prices of
their fixed income securities may decline during the anticipated holding
period. Any of these Portfolios would "go long" (i.e., agree to purchase
securities in the future at a predetermined price) to hedge against a
decline in market interest rates.

Put Options on Futures Contracts

The Portfolios, with the exception of the Income and Growth Portfolio, may
engage in transactions in put options on futures contracts. A Portfolio
may purchase listed put options on futures contracts. Unlike entering
directly into a futures contract, which requires the purchaser to buy a
financial instrument on a set date at a specified price, the purchase of a
put option on a futures contract entitles (but does not obligate) its
purchaser to decide on or before a future date whether to assume a short
position at the specified price. A Portfolio would purchase put options on
futures contracts to protect portfolio securities against decreases in
value resulting from market factors, such as an anticipated increase in
interest rates.

Generally, if the hedged portfolio securities decrease in value during the
term of an option, the related futures contracts will also decrease in
value and the option will increase in value. In such an event, a Portfolio
will normally close out its option by selling an identical option. If the
hedge is successful, the proceeds received by a Portfolio upon the sale of
the second option may be large enough to offset both the premium paid by
the Portfolio for the original option plus the decrease in value of the
hedged securities. Alternatively, a Portfolio may exercise its put option
to close out the position. To do so, it would simultaneously enter into a

futures contract of the type underlying the option (for a price less than
the strike price of the option) and exercise the option. The Portfolio
would then deliver the futures contract in return for payment of the strike
price. If the Portfolio neither closes out nor exercises an option, the
option will expire on the date provided in the option contract, and only
the premium paid for the contract will be lost.

When a Portfolio sells a put on a futures contract, it receives a cash
premium which can be used in whatever way is deemed most advantageous to
the Portfolio. In exchange for such premium, the Portfolio grants to the
purchaser of the put the right to receive from the Portfolio, at the strike
price, a short position in such futures contract, even though the strike
price upon exercise of the option is greater than the value of the futures
position received by such holder. If the value of the underlying futures
position is not such that exercise of the option would be profitable to the
option holder, the option will generally expire without being exercised.
The Portfolio has no obligation to return premiums paid to it whether or
not the option is exercised. It will generally be the policy of each
Portfolio, in order to avoid the exercise of an option sold by it, to
cancel its obligation under the option by entering into a closing purchase
transaction, if available, unless it is determined to be in such
Portfolio's interest to deliver the underlying futures position. A closing
purchase transaction consists of the purchase by the Portfolio of an option
having the same term as the option sold by the Portfolio, and has the
effect of canceling the Portfolio's position as a seller. The premium
which the Portfolio will pay in executing a closing purchase transaction
may be higher than the premium received when the option was sold, depending
in large part upon the relative price of the underlying futures position at
the time of each transaction.

Call Options on Futures Contracts

The Portfolios, with the exception of the Income and Growth Portfolio, may
engage in transactions in call options on futures contracts. In addition
to purchasing put options on futures, the Portfolios may write listed call
options on futures contracts to hedge their respective portfolios against,
for example, an increase in market interest rates. When a Portfolio writes
a call option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the fixed
strike price at any time during the life of the option if the option is
exercised. As market interest rates rise (in the case of the Government
Income Portfolio, Municipal Income Portfolio and Global Portfolio) or as
stock prices fall (in the case of the Growth Portfolio, Capital Growth
Portfolio and Global Portfolio), causing the prices of futures to go down,
a Portfolio's obligation under a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of a Portfolio's call
option position to increase. In other words, as the underlying future's
price goes down below the strike price, the buyer of the option has no
reason to exercise the call, so that a Portfolio keeps the premium received
for the option. This premium can help substantially to offset the drop in
value of a Portfolio's portfolio securities. Prior to the expiration of a
call written by a Portfolio, or exercise of it by the buyer, a Portfolio
may close out the option by buying an identical option. If the hedge is
successful, the cost of the second option will be less than the premium
received by a Portfolio for the initial option. The net premium income of
a Portfolio will then help offset the decrease in value of the hedged
securities.

When a Portfolio purchases a call on a financial futures contract, it

receives in exchange for the payment of a cash premium the right, but not
the obligation to enter into the underlying futures contract at a strike
price determined at the time the call was purchased, regardless of the
comparative market value of such futures position at the time the option is
exercised. The holder of a call option has the right to receive a long (or
buyer's) position in the underlying futures contract.

A Portfolio will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio (including cash or cash
equivalents) plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at
any time, a Portfolio will take prompt action to close out a sufficient
number of open contracts to bring its open futures and options positions
within this limitation.

"Margin" in Futures Transactions

Unlike the purchase or sale of a security, the Portfolios do not pay or
receive money upon the purchase or sale of a futures contract. Rather, the
Portfolios are required to deposit an amount of "initial margin" in cash or
U.S. Treasury bills with the custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that futures
contracts initial margin does not involve a borrowing by a Portfolio to
finance the transactions. Initial margin is in the nature of a performance
bond or good faith deposit on the contract which is returned to a Portfolio
upon termination of the futures contract, assuming all contractual
obligations have been satisfied.

A futures contract held by a Portfolio is valued daily at the official
settlement price of the exchange on which it is traded. Each day a
Portfolio pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by a Portfolio but is instead settlement between a Portfolio and the
broker of the amount one would owe the other if the futures contract

expired. In computing its daily net asset value, a Portfolio will mark to
market its open futures positions. The Portfolios are also required to
deposit and maintain margin when they write call options on futures
contracts.

Regulatory Restrictions

To the extent required to comply with Commodity Futures Trading Commission
Regulation 4.5 and thereby avoid status as a "commodity pool operator," the
Portfolios will not enter into a futures contract, or purchase an option

thereon, if immediately thereafter the initial margin deposits for futures
contracts held by a Portfolio, plus premiums paid by it for open options of
futures, would exceed 5% of the total assets of the Portfolio. The
Portfolios will not engage in transactions in futures contracts or options
thereon for speculation, but only to attempt to hedge against changes in
market conditions affecting the values of assets which the Portfolios hold
or intend to purchase. When futures contracts or options thereon are
purchased in order to protect against a price increase on securities or
other assets intended to be purchased later, it is anticipated that at
least 75% of such intended purchases will be completed. When other futures
contracts or options thereon are purchased, the underlying value of such
contracts will at all times not exceed the sum of (1) accrued profit on
such contracts held by the broker; (2) cash or high-quality money market
instruments set aside in an identifiable manner; and (3) cash proceeds from
investments due in 30 days or less.

Purchasing Put Options on Portfolio Securities

With the exception of the Income and Growth Portfolio, the Portfolios may
purchase put options on portfolio securities to protect against price
movements in particular securities in their respective portfolios. A put
option gives a Portfolio, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the
term of the option.

Writing Covered Call Options on Portfolio Securities

The Capital Growth, Government Income, and Municipal Income and Global
Portfolios may write covered call options to generate income. As a writer
of a call option, a Portfolio has the obligation upon exercise of the
option during the option period to deliver the underlying security upon
payment of the exercise price. A Portfolio may only sell call options
either on securities held in its portfolio or on securities which it has
the right to obtain without payment of further consideration (or has
segregated cash in the amount of any additional consideration).

Over-the-Counter Options

The Capital Growth, Government Income, and Municipal Income and Global
Portfolios may purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of the
options for those options on portfolio securities held by a Portfolio and
not traded on an exchange.

Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options
are third-party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded
options have a continuous liquid market while over-the-counter options may
not.

Collateralized Mortgage Obligations (CMOs)

The Government Income and Income and Growth Portfolios may invest in CMOs.
Privately issued CMOs generally represent an ownership interest in a pool
of federal agency mortgage pass-through securities such as those issued by
the Government National Mortgage Association. The terms and
characteristics of the mortgage instruments may vary among pass-through
mortgage loan pools.

The market for such CMOs has expanded considerably since its inception.
The size of the primary issuance market and the active participation in the
secondary market by securities dealers and other investors make government-
related pools highly liquid.

Convertible Securities

The Growth, Capital Growth, Income and Growth and Global Portfolios may
invest in convertible securities. Convertible securities are fixed income
securities which may be exchanged or converted into a predetermined number
of the issuer's underlying common stock at the option of the holder during
a specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for a variety of investment strategies.

A Portfolio will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock when, in the Sub-
Adviser's opinion, the investment characteristics of the underlying common
shares will assist the Portfolio in achieving its investment objectives.
Otherwise, the Portfolio may hold or trade convertible securities. In
selecting convertible securities for the Portfolio, the Portfolio's Sub-
Adviser evaluates the investment characteristics of the convertible
security as a fixed income instrument and the investment potential of the
underlying equity security for capital appreciation. In evaluating these

matters with respect to a particular convertible security, the Portfolio's
Sub-Adviser considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.

Warrants

The Growth, Capital Growth, and Income and Growth and Global Portfolios may
invest in warrants. Warrants are basically options to purchase common
stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years or
may be perpetual. However, most warrants have expiration dates after which

they are worthless. In addition, if the market price of the common stock
does not exceed the warrant's exercise price during the life of the
warrant, the warrant will expire as worthless. Warrants have no voting
rights, pay no dividends, and have no rights with respect to the assets of
the corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock. A
Portfolio will not invest more than 5% of the value of its total assets in
warrants. No more than 2% of this 5% may be warrants which are not listed
on the New York or American Stock Exchanges. Warrants acquired in units or
attached to securities may be deemed to be without value for purposes of
this policy.

Dollar Rolls

The Government Income, Income and Growth and Global Portfolios may enter
into "dollar roll" transactions, which consist of the sale by the
Government Income Portfolio, Income and Growth Portfolio or Global
Portfolio to a bank or broker/dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment
to purchase similar, but not identical, securities at a future date, at the
same price. The counterparty receives all principal and interest payments,
including prepayments, made on the security while the counterparty is the
holder. The Government Income, Income and Growth and Global Portfolios
receive a fee from the counterparty as consideration for entering into the
commitment to purchase. Dollar rolls may be renewed over a period of
several months with a different repurchase price and a cash settlement
made at each renewal without physical delivery of securities. Moreover,
the transaction may be preceded by a firm commitment agreement pursuant
to which the Government Income Portfolio, Income and Growth Portfolio or
Global Portfolio agrees to buy a security on a future date.

The Government Income, Income and Growth and Global Portfolios will not use
such transactions for leveraging purposes and, accordingly, will
segregate cash, U.S. Government securities or other high grade debt
obligations in an amount sufficient to meet its purchase obligations
under the transactions. The Government Income, Income and Growth and
Global Portfolios will also maintain asset coverage of at least 300%
for all outstanding firm commitments, dollar rolls and other borrowings.

Dollar rolls are treated for purposes of the Investment Company Act of 1940
as borrowings of the Government Income, Income and Growth and Global
Portfolios because they involve the sale of a security coupled with an
agreement to repurchase. Like all borrowings, a dollar roll involves
costs to the Government Income, Income and Growth and Global Portfolios.
For example, while the Government Income, Income and Growth and Global
Portfolios receive a fee as consideration for agreeing to repurchase the
security, the Government Income, Income and Growth and Global Portfolios
forgo the right to receive all principal and interest payments while the
counterparty holds the security. These payments to the counterparty may

exceed the fee received by the Government Income, Income and Growth
and Global Portfolios, thereby effectively charging the Government Income,
Income and Growth and Global Portfolios interest

on its respective borrowing. Further, although the Government Income,
Income and Growth and Global Portfolios can estimate the amount of expected
principal prepayment over the term of the dollar roll, a variation in
the actual amount of prepayment could increase or decrease the cost of the
Government Income, Income and Growth and Global Portfolio's borrowing.

The entry into dollar rolls involves potential risks of loss which are
different from those of the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Government Income,
Income and Growth and Global Portfolios' right to purchase from the
counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Government Income, Income
and Growth and Global Portfolios are able to purchase them. Similarly,
the Government Income, Income and Growth and Global Portfolios may be
required to purchase securities in connection with a dollar roll at a
higher price than may otherwise be available on the open market. Since, as
noted above, the counterparty is required to deliver a similar, but not
identical security to the Government Income, Income and Growth and Global
Portfolios, the security which the Government Income, Income and
Growth and Global Portfolios are required to buy under the dollar roll may
be worth less than an identical security. Finally, there can be no
assurance that the Government Income, Income and Growth and Global
Portfolios' use of the cash that it receives from a dollar roll
will provide a return that exceeds borrowing costs.

The Board of Trustees of the Trust on behalf of the Government Income,
Income and Growth and Global Portfolios have adopted guidelines to ensure
that those securities received are substantially identical to those sold.
To reduce the risk of default, the Government Income, Income and Growth
and Global Portfolios will engage in such transactions only with banks
and broker-dealers selected pursuant to such guidelines.

Swaps, Caps, Floors and Collars

The Global Portfolio may enter into interest rate, currency and index swaps
and the purchase or sale of related caps, floors and collars. The Global
Portfolio expects to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of its portfolio, to
protect against currency fluctuations, as a duration management technique
or to protect against any increase in the price of securities the Global
Portfolio anticipates purchasing at a later date. The Global Portfolio
intends to use these transactions as hedges and not as speculative
investments and will not sell interest rate caps or floors where it does
not own securities or other instruments providing the income stream the
Global Portfolio may be obligated to pay. Interest rate swaps involve the
exchange by the Global Portfolio with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a
notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash
flows on a notional amount based on changes in the values of the reference

indices. The purchase of a cap entitles the purchaser to receive payments
on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or
amount. The purchase of a floor entitles the purchaser to receive payments
on a notional principal amount from the party selling such floor to the
extent that a specified index falls below a predetermined interest rate or
amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.

The Global Portfolio will usually enter into swaps on a net basis, i.e.,
the two payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Global Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these swaps, caps, floors and collars are entered
into for good faith hedging purposes, the Global Portfolio and its Sub-
Adviser believe such obligations do not constitute senior securities under
the Investment Company Act of 1940 and, accordingly, will not treat them as
being subject to its borrowing restrictions. The Global Portfolio will not
enter into any swap, cap, floor or collar transaction unless, at the time
of entering into such transaction, the unsecured long-term debt of the
Counterparty, combined with any credit enhancements, is rated at least A by
S&P or Moody's or has an equivalent rating from a NRSRO or is determined to
be of equivalent credit quality by the Global Portfolio's Sub-Adviser. If
there is a default by the Counterparty, the Global Portfolio may have
contractual remedies pursuant to the agreements related to the transaction.
The swap market has grown substantially in recent years with a large number
of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been
fully developed and, accordingly, they are less liquid than swaps.

High Yield, High Risk Debt Securities

The Global Portfolio may invest up to 5% of its net assets in securities
rated Baa/BBB or lower and in unrated securities of equivalent quality in
the Sub-Adviser's judgment. The Global Portfolio may invest in debt

securities which are rated as low as C by Moody's or D by S&P. Such
securities may be in default with respect to payment of principal or
interest.

Below investment grade securities (rated below Baa by Moody's and below BBB
by S&P) or unrated securities of equivalent quality in the Sub-Adviser's
judgment, carry a high degree of risk (including the possibility of default
or bankruptcy of the issuers of such securities), generally involve greater
volatility of price and risk of principal and income, and may be less
liquid, than securities in the higher rating categories and are considered
speculative. The lower the ratings of such debt securities, the greater
their risks render them like equity securities. See the Appendix to this
Statement of Additional Information for a more complete description of the

ratings assigned by ratings organizations and their respective
characteristics.

An economic downturn could disrupt the high yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates would likely have a greater adverse impact on the value of
such obligations than on higher quality debt securities. During an
economic downturn or period of rising interest rates, highly leveraged
issues may experience financial stress which could adversely affect their
ability to service their principal and interest payment obligations.
Prices and yields of high yield securities will fluctuate over time and,
during periods of economic uncertainty, volatility of high yield securities
may adversely affect the Global Portfolio's net asset value. In addition,
investments in high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and may be

subject to greater fluctuations in value due to changes in interest rates.

The trading market for high yield securities may be thin to the extent that
there is no established retail secondary market. A thin trading market may
limit the ability of the Global Portfolio to accurately value high yield
securities in its portfolio and to dispose of those securities. Adverse
publicity and investor perceptions may decrease the values and liquidity of
high yield securities. These securities may also involve special
registration responsibilities, liabilities and costs, and liquidity and
valuation difficulties.

Credit quality in the high-yield securities market can change suddenly and
unexpectedly, and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high-yield security. For these
reasons, it is the policy of the Sub-Adviser not to rely exclusively on
ratings issued by established credit rating agencies, but to supplement
such ratings with its own independent and on-going review of credit
quality. The achievement of the Global Portfolio's investment objective by
investment in such securities may be more dependent on the Sub-Adviser's
credit analysis than is the case for higher quality bonds. Should the
rating of a portfolio security be downgraded, the Sub-Adviser will
determine whether it is in the best interest of the Global Portfolio to
retain or dispose of such security.

Prices for below investment-grade securities may be affected by legislative
and regulatory developments. For example, new federal rules require
savings and loan institutions to gradually reduce their holdings of this
type of security. Also, recent legislation restricts the issuer's tax
deduction for interest payments on these securities. Such legislation may
significantly depress the prices of outstanding securities of this type.

Indexed Securities

The Global Portfolio may invest in indexed securities, the value of which
is linked to currencies, interest rates, commodities, indices or other

financial indicators ("reference instruments"). Most indexed securities
have maturities of three years or less.

Indexed securities differ from other types of debt securities in which the
Global Portfolio may invest in several respects. First, the interest rate
or, unlike other debt securities, the principal amount payable at maturity
of an indexed security may vary based on changes in one or more specified
reference instruments, such as an interest rate compared with a fixed
interest rate or the currency exchange rates between two currencies
(neither of which need be the currency in which the instrument is
denominated). The reference instrument need not be related to the terms of
the indexed security. For example, the principal amount of a U.S. dollar
denominated indexed security may vary based on the exchange rate of two
foreign currencies. An indexed security may be positively or negatively
indexed; that is, its value may increase or decrease if the value of the
reference instrument increases. Further, the change in the principal
amount payable or the interest rate of an indexed security may be a
multiple of the percentage change (positive or negative) in the value of
the underlying reference instrument(s).

Investment in indexed securities involves certain risks. In addition to
the credit risk of the security's issuer and the normal risks of price
changes in response to changes in interest rates, the principal amount of
indexed securities may decrease as a result of changes in the value of
reference instruments. Further, in the case of certain indexed securities
in which the interest rate is linked to a reference instrument, the
interest rate may be reduced to zero, and any further declines in the value
of the security may then reduce the principal amount payable on maturity.
Finally, indexed securities may be more volatile than the reference
instruments underlying indexed securities.

Currency Transactions

The Global Portfolio may engage in currency transactions with
counterparties in order to hedge the value of portfolio holdings
denominated in particular currencies against fluctuations in relative
value. Currency transactions include forward currency contracts, exchange
listed currency futures, exchange listed and OTC options on currencies, and
currency swaps. A forward currency contract involves a privately
negotiated obligation to purchase or sell (with delivery generally
required) a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at
a price set at the time of the contract. A currency swap is an agreement
to exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap, which is
described below. A Global Portfolio may enter into currency transactions
with counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or
(except for OTC currency options) are determined to be of equivalent credit

quality by the Sub-Adviser.

The Global Portfolio dealings in forward currency contracts and other
currency transactions such as futures, options, options on futures and
swaps will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is entering into a currency
transaction with respect to specific assets or liabilities of the Global
Portfolio, which will generally arise in connection with the purchase or
sale of its portfolio securities or the receipt of income therefrom.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that

currency.

The Global Portfolio will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended
wholly or partially to offset other transactions, than the aggregate market
value (at the time of entering into the transaction) of the securities held
in its portfolio that are denominated or generally quoted in or currently
convertible into such currency, other than with respect to proxy hedging as
described below.

The Global Portfolio may also cross-hedge currencies by entering into
transactions to purchase or sell one or more currencies that are expected
to decline in value relative to other currencies to which the Global
Portfolio has or in which a Global Portfolio expects to have portfolio
exposure.

To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Global Portfolio may also
engage in proxy hedging. Proxy hedging is often used when the currency to
which the Portfolio is exposed is difficult to hedge or to hedge against
the dollar. Proxy hedging entails entering into a forward contract to sell
a currency whose changes in value are generally considered to be linked to
a currency or currencies in which some or all of the Global Portfolio's
securities are or are expected to be denominated, and to buy U.S. dollars.
The amount of the contract would not exceed the value of the Global
Portfolio's securities denominated in linked currencies. For example, if
the Sub-Adviser considers that the Austrian schilling is linked to the
German deutschemark (the "D-mark"), the Global Portfolio holds securities
denominated in schillings and the Sub-Adviser believes that the value of
schillings will decline against the U.S. dollar, the Sub-Adviser may enter
into a contract to sell D-marks and buy dollars. Currency hedging involves
some of the same risks and considerations as other transactions with
similar instruments. Currency transactions can result in losses to the
Global Portfolio if the currency being hedged fluctuates in value to a
degree or in a direction that is not anticipated. Further, there is the
risk that the perceived linkage between various currencies may not be
present or may not be present during the particular time that the Global
Portfolio is engaging in proxy hedging. Except when the Global Portfolio
enters into a forward contract for the purchase or sale of a security

denominated in a particular currency, which requires no segregation, a
currency contract which obligates the Global Portfolio to buy or sell
currency will generally require the Global Portfolio to hold an amount of
that currency or liquid securities denominated in that currency equal to
the Global Portfolio's obligations or to segregate liquid high grade assets
equal to the amount of the Global Portfolio's obligation.

Risk of Currency Transactions

Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy,
purchases and sales of currency and related instruments can be negatively
affected by government exchange controls, blockages, and manipulations or
exchange restrictions imposed by governments. These can result in losses
to the Global Portfolio if it is unable to deliver or receive currency or
funds in settlement of obligations and could also cause hedges it has
entered into to be rendered useless, resulting in full currency exposure as
well as incurring transaction costs. Buyers and sellers of currency
futures are subject to the same risks that apply to the use of futures
generally. Further, settlement of a currency futures contract for the
purchase of most currencies must occur at a bank based in the issuing
nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to
the maintenance of a liquid market which may not always be available.
Currency exchange rates may fluctuate based on factors extrinsic to that
country's economy.

Eurodollar Instruments

The Global Portfolio may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or
options thereon which are linked to the London Interbank Offered Rate
("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to
obtain a fixed rate for the lending of funds and sellers to obtain a fixed
rate for borrowings. The Global Portfolio might use Eurodollar futures
contracts and options thereon to hedge against changes in LIBOR, to which
many interest rate swaps and fixed income instruments are linked.

Portfolio Turnover

The annual turnover rate of the Portfolios may vary from year to year, and
may also be affected by cash requirements for redemptions and repurchases
of Portfolio shares and by the necessity of maintaining the Portfolios as
regulated investment companies under the Internal Revenue Code, as amended,
in order to receive certain favorable tax treatment.

The Portfolios will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in an

attempt to achieve each Portfolio's investment objective. During the
fiscal years ended September 30, 1994 and 1993, the respective portfolio
turnover rates for the indicated Portfolios were as follows: Growth
Portfolio, 132% and 137%; Capital Growth Portfolio, 149% and 192%;
Government Income Portfolio, 455% and 102%; and Municipal Income Portfolio,
87% and 88%. During the fiscal year ended September 30, 1994 and the period
May 24, 1993 (date of initial public investment), to September 30, 1993,
the portfolio turnover rate for the Income and Growth Portfolio was 78%

and 13%. During the period March 29, 1994 (date of initial public
investment), to September 30, 1994, the portfolio turnover rate for the
Global Portfolio was 2%.

Investment Limitations

Issuing Senior Securities and Borrowing Money

The Portfolios will not issue senior securities except that a Portfolio
(other than the Municipal Income Portfolio) may borrow money directly or
through reverse repurchase agreements in amounts up to one-third of the
value of its net assets, including the amount borrowed; and except to the
extent that a Portfolio may enter into futures contracts. The Municipal
Income Portfolio may borrow money from banks for temporary purposes in
amounts up to 5% of its total assets. The Portfolios will not borrow money
or engage in reverse repurchase agreements for investment leverage, but
rather as a temporary, extraordinary, or emergency measure or to facilitate
management of the Portfolio by enabling it to meet redemption requests when
the liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Portfolios will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding. During the
period any reverse repurchase agreements are outstanding, the Government
Income Portfolio will restrict the purchase of portfolio securities to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements. Notwithstanding this
restriction, the Portfolios may enter into when-issued and delayed delivery
transactions.

Selling Short and Buying on Margin

The Portfolios will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as are
necessary for clearance of purchases and sales of securities. The deposit
or payment by a Portfolio of initial or variation margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin.

Pledging Assets

The Portfolios will not mortgage, pledge, or hypothecate any assets, except
to secure permitted borrowings. In these cases the Portfolios may pledge
assets having a value of 10% of assets taken at cost. For purposes of this
restriction, (a) the deposit of assets in escrow in connection with the
writing of covered put or call options and the purchase of securities on a
when-issued basis; and (b) collateral arrangements with respect to (i) the
purchase and sale of stock options (and options on stock indexes) and (ii)
initial or variation margin for futures contracts, will not be deemed to be
pledges of a Portfolio's assets. Margin deposits for the purchase and sale
of futures contracts and related options are not deemed to be a pledge.

Lending Cash or Securities

The Portfolios will not lend any of their respective assets except
portfolio securities up to one-third of the value of total assets. (The
Municipal Income Portfolio will not lend portfolio securities.) This shall

not prevent a Portfolio from purchasing or holding U.S. government
obligations, money market instruments, variable amount demand master notes,
bonds, debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by a Portfolio's investment objective,
policies and limitations or Declaration of Trust. The Municipal Income
Portfolio will not make loans except to the extent the obligations the
Portfolio may invest in are considered to be loans.

Investing in Restricted Securities

The Portfolios (other than the Government Income Portfolio) will not invest
more than 10% of the value of their net assets in restricted securities;
the Government Income Portfolio will not invest more than 15% of the value
of its net assets in restricted securities.

23
Investing in Commodities

None of the Portfolios will invest in commodities, except to the extent
that the Portfolios may engage in transactions involving futures contracts
or options on futures contracts, and except to the extent the securities
the Municipal Income Portfolio invests in are considered interests in
commodities or commodities contracts or to the extent the Portfolio
exercises its rights under agreements relating to such municipal
securities.

Investing in Real Estate

None of the Portfolios will purchase or sell real estate, including limited
partnership interests, except to the extent the securities the Income and

Growth Portfolio and Municipal Income Portfolio may invest in are
considered to be interests in real estate or to the extent the Municipal
Income Portfolio exercises its rights under agreements relating to such
municipal securities (in which case the Portfolio may liquidate real estate
acquired as a result of a default on a mortgage), although the Portfolios
may invest in securities of issuers whose business involves the purchase or
sale of real estate or in securities which are secured by real estate or
interests in real estate.

Diversification of Investments

With respect to 75% of the value of its respective total assets, a
Portfolio will not purchase securities issued by any one issuer (other than
cash or securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities and repurchase agreements
collateralized by such securities), if as a result more than 5% of the
value of its total assets would be invested in the securities of that
issuer. A Portfolio will not acquire more than 10% of the outstanding
voting securities of any one issuer.

Concentration of Investments

A Portfolio will not invest 25% or more of the value of its respective
total assets in any one industry (other than securities issued by the U.S.
government, its agencies or instrumentalities). As described in the
Prospectus, the Municipal Income Portfolio may from time to time invest
more than 25% of its assets in a particular segment of the municipal bond
market; however, that Portfolio will not invest more than 25% of its assets
in industrial development bonds in a single industry except as described in
the Prospectus.

Underwriting

A Portfolio will not underwrite any issue of securities, except as a
Portfolio may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.

The above limitations cannot be changed with respect to a Portfolio without
approval of holders of a majority of that Portfolio's shares. The
following limitations may be changed by the Board of Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.

Investing in Illiquid Securities

The Portfolios will not invest more than 15% of the value of their
respective net assets in illiquid securities, including repurchase
agreements providing for settlement more than seven days after notice;
over-the-counter options; certain restricted securities not determined by
the Trustees to be liquid; and non-negotiable fixed income time deposits
with maturities over seven days.

Investing in Securities of Other Investment Companies

The Portfolios will limit their respective investments in other investment
companies to no more than 3% of the total outstanding voting stock of any
investment company, invest no more than 5% of total assets in any one
investment company, or invest more than 10% of total assets in investment
companies in general. The Portfolios will purchase securities of closed-
end investment companies only in open market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation,
reorganization, or acquisition of assets. It should be noted that

investment companies incur certain expenses such as management fees, and
therefore any investment by a Portfolio in shares of another investment
company would be subject to duplicative expenses.

Investing in New Issuers

Except for the Municipal Income Portfolio, no Portfolio will invest more
than 5% of the value of its respective total assets in securities of
issuers which have records of less than three years of continuous
operations, including the operation of any predecessor. The Municipal
Income Portfolio will not invest more than 5% of its total assets in
industrial development bonds where the payment of principal and interest is

the responsibility of companies with less than three years of operating
history.

Investing in Issuers Whose Securities are Owned by Officers and Trustees of
the Trust

A Portfolio will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust, the Investment Adviser, or Sub-Adviser
own individually more than 1/2 of 1% of the issuer's securities or together
own more than 5% of the issuer's securities.

Investing in Minerals

A Portfolio will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except it may purchase the
securities of issuers which invest in or sponsor such programs and except
pursuant to the exercise by the Municipal Income Portfolio of its rights
under agreements relating to municipal securities.

Arbitrage Transactions

A Portfolio will not enter into transactions for the purpose of engaging in
arbitrage.

Purchasing Securities to Exercise Control

A Portfolio will not purchase securities of a company for the purpose of
exercising control or management, except to the extent that exercise by the
Municipal Income Portfolio of its rights under agreements related to
municipal securities would be deemed to constitute such control or
management.

None of the Portfolios borrowed money (including through use of reverse
repurchase agreements) or loaned portfolio securities in excess of 5% of
the value of its net assets during the last fiscal year, and no Portfolio
has any present intent to do so in the coming fiscal year.

Except with respect to the Portfolios' policy of borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or
net assets will not result in a violation of such restriction.

To comply with registration requirements in certain states, the Portfolios
(1) will limit the aggregate value of the assets underlying covered call
options or put options written by a Portfolio to not more than 25% of its
net assets, (2) will limit the premiums paid for options purchased by a
Portfolio to 5% of its net assets, (3) will limit the margin deposits on
futures contracts entered into by a Portfolio to 5% of its net assets, and
(4) will limit investment in warrants to 5% of its net assets. No more
than 2% will be warrants which are not listed on the New York or American
Stock Exchanges. Also to comply with certain state restrictions, the
Growth Portfolio, Capital Growth Portfolio, and Income and Growth Portfolio
will limit their investment in restricted securities to 5% of total assets.
(If state requirements change, these restrictions may be revised without
shareholder notification.)

Management of the Trust

Officers and Trustees

Officers and Trustees are listed with their addresses, principal
occupations, and present positions, including any affiliation with
Cambridge Administrative Services, Cambridge Distributors, Inc., Cambridge
Investment Advisors, Inc., and WFS Financial, Inc.

<TABLE>

Positions with Principal Occupations
Name and Address the Trust During Past Five Years
<S> <C> <C>
Daniel J. Ludeman*** Chairman Chairman, Investment Management Group, Inc.; Managing Director, WFS
901 E. Byrd Street and Trustee Financial Corp.; formerly, Managing Director, Wheat First Butcher Singer,
Richmond, Virginia 23219 Inc.

Peter J. Quinn, Jr.*** President President, Cambridge Investment Advisors, Inc., and
901 E. Byrd Street and Trustee Cambridge Distributors, Inc.; Director, Investment
Richmond, Virginia 23219 Management Group, Inc.; Managing Director, WFS
Financial Corporation; formerly, Senior Vice
President/Director of Mutual Funds, Wheat First Butcher Singer, Inc.

Paul F. Costello Senior Vice Senior Vice President, Cambridge Investment Advisors, Inc.,
901 E. Byrd Street President, and Cambridge Distributors, Inc.; Director,
Richmond, Virginia 23219 Treasurer, Investment Management Group., Inc.; President,
and Secretary Mentor Series Trust and Cash
Resource Trust; formerly, Director, President
and Chief Executive Officer, First Variable
Life Insurance Company; President and Chief Financial Officer,
Variable Investors Series Trust; President and
Treasurer, Atlantic Capital & Research, Inc.; Vice President and
Treasurer, Variable Stock Fund, Inc., Monarch Investment Series
Trust, and GEICO Tax Advantage Series Trust; Vice President,
Monarch Life Insurance Company, GEICO Investment Services
Company, Inc., Monarch Investment Services Company, Inc.,
and Springfield Life Insurance Company.

Arnold H. Dreyfuss Trustee Formerly, Chairman and Chief Executive
5100 Cary Street Road Officer, Hamilton Beach/Proctor-Silex, Inc.;
Richmond, Virginia 23225 Director, Mentor Growth Fund.

Thomas F. Keller Trustee Dean, The Fuqua School of Business, Duke
Duke University University, Durham, NC.
Durham, North Carolina 27706

Louis W. Moelchert, Jr. Trustee Vice President for Business & Finance,
University of Richmond University of Richmond, Richmond, VA.
Richmond, Virginia 23173

Stanley F. Pauley Trustee Chairman, E. R. Carpenter Company, Inc.
P.O. Box 27205
Richmond, Virginia 23261

Troy A. Peery, Jr.** Trustee President, Heilig-Meyers Company;
2235 Staples Mill Road Member, Board of Directors, ACME Markets.
Richmond, Virginia 23230

</TABLE>

*
This Trustee is deemed to be an "interested person" of the Trust as defined
in the Investment Company Act of 1940.

**
Members of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.

Ownership of Portfolios

Officers and Trustees own less than 1% of the outstanding Class A shares
and Class B shares of each Portfolio.

Trustee Liability

The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.

Investment Advisory Services

Investment Adviser

The Trust's Investment Adviser is Cambridge Investment Advisors, Inc. It
is the Investment Adviser's responsibility to select, subject to review and
approval by the Trust's Board of Trustees and shareholders, the sub-
advisers for the Portfolios (collectively, the "Sub-Advisers" and each
individually the "Sub-Adviser") who have distinguished themselves in their
respective areas of expertise in asset management and to review their
continued performance. Cambridge Investment Advisors, Inc., is a wholly-
owned subsidiary of Investment Management Group, Inc., which in turn is a
wholly-owned subsidiary of WFS Financial, Inc.

The Investment Adviser and the Sub-Advisers shall not be liable for any
losses that may be sustained in the purchase, holding or sale of any
security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.

Investment Adviser Fees

For performing its responsibilities, the Investment Adviser receives an
annual investment advisory fee from each Portfolio as described in the
Prospectus. The Investment Adviser, in turn, made payments to the Sub-
Advisers for their services as stated in the section entitled "The Sub-
Advisers."

During the fiscal years ended September 30, 1994 and 1993,

the Investment Adviser earned and waived advisory fees as follows:

<TABLE>

1994 1993
Investment Investment Investment Investment
Advisory Advisory Advisory Advisory
Portfolio Fee Earned Fee Waived Fee Earned Fee Waived
<S> <C> <C> <C> <C>
Growth Portfolio . . . . . . . . $ 410,955 $ -- $ 316,743 $ 18,450
Capital Growth Portfolio . . . . 590,693 -- 570,705 35,435
Government Income Portfolio . . . 839,139 -- 888,963 230,311
Municipal Income Portfolio . . . 468,787 81,713 378,268 374,138
Income and Growth Portfolio . . . 374,462 -- 45,081* --*
Global Portfolio**. . . . . . . . 69,515 69,515 -- --

* For the period May 24, 1993 (date of initial public investment), to
September 30, 1993.

** For the period March 29, 1994 (date of initial public investment), to
September 30, 1994.
</TABLE>

State Expense Limitations

The Investment Adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If a Portfolio's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2 1/2% per year of the first $30 million of average net assets, 2% per year
of the next $70 million of average net assets, and 1 1/2% per year of the
remaining average net assets, the Investment Adviser will reimburse the
particular Portfolio for its expenses over the limitation.

If a Portfolio's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the amount
of the excess, subject to an annual adjustment. If the expense limitation
is exceeded, the amount to be reimbursed by the Investment Adviser will be
limited, in any single fiscal year, by the amount of the investment
advisory fee.

This arrangement is not part of the Investment Advisory Agreement and may

be amended or rescinded in the future.

The Sub-Advisers

Pursuant to a Sub-Advisory Agreement entered into between the Investment
Adviser and each Sub-Adviser, each Portfolio is advised by a Sub-Adviser
who has complete discretion to purchase and sell portfolio securities for
the Portfolio to which it serves as the Sub-Adviser within the particular
Portfolio's investment objective, restrictions, and policies.

Kemper Financial Services, Inc. ("KFS"), serves as the Sub-Adviser to the
Growth Portfolio under the terms of a Sub-Advisory Agreement between the
Investment Adviser and KFS. KFS is a wholly-owned subsidiary of Kemper
Financial Companies, Inc. ("KFC"). KFC is a business corporation
incorporated under the laws of the State of Delaware. It was founded in
1986 and is a financial services holding company and a subsidiary of Kemper
Corporation. Kemper Corporation was incorporated under the laws of the
State of Delaware in 1968 and is a diversified insurance and financial
services holding company. During the fiscal years ended September 30, 1994
and 1993, KFS earned $205,478 and $158,980, respectively, as its
sub-advisory fee for services it provided on behalf of the Growth Portfolio.

Phoenix Investment Counsel, Inc. ("PIC"), serves as the Sub-Adviser to the
Capital Growth Portfolio under the terms of a Sub-Advisory Agreement
between the Investment Adviser and PIC. PIC is a wholly-owned subsidiary
of Phoenix Equity Planning Corporation, which was incorporated under the
laws of the State of Connecticut in 1968, and is registered as a broker-
dealer in fifty states. Phoenix Equity Planning Corporation is an indirect
subsidiary of Phoenix Home Life Mutual Insurance Company. Phoenix Home
Life Mutual Insurance Company has been engaged in the business of writing
ordinary and group life and health insurance and annuities since 1861.
During the fiscal years ended September 30, 1994 and 1993, PIC earned
$295,347 and $286,476, respectively, as its sub-advisory fee for services
it provided on behalf of the Capital Growth Portfolio.

Pacific Investment Management Company ("PIMCO") serves as the Sub- Adviser
to the Government Income Portfolio under the terms of a Sub- Advisory
Agreement between the Investment Adviser and PIMCO. PIMCO and certain of
its affiliates have entered into an Agreement and Plan of Consolidation
with Thompson Advisory Group L.P. ("TAG") which provides for the
consolidation of the investment advisory and related businesses of PIMCO
and TAG. The consolidation resulted in the transfer of the current
investment advisory business of PIMCO to a new entity, Pacific Investment
Management Company ("New PIMCO"). The terms and conditions of the new
sub-advisory agreement between the Cambridge Government Income Portfolio
and New PIMCO are identical in all material respects to those of the
previous sub-advisory contract with PIMCO, and were approved
by the shareholders of the Cambridge Government Income Portfolio of
Cambridge Series Trust at a meeting held on October 28, 1994.

PIMCO, established in 1971, provides investment advisory services to
investment companies, pension plans, foundations, endowments and other
institutions located both in the U.S. and abroad. As of November 30, 1993,
PIMCO had over $52.6 billion of assets under management, of which
approximately $26.0 billion were invested in U.S. Government securities.
PIMCO, a wholly owned subsidiary of Pacific Mutual Life Insurance Company,
is located at 840 Newport Center Drive, Suite 360, Newport Beach,
California 92660. Prior to PIMCO's serving as the Sub-Adviser to the
Government Income Portfolio, the Sub-Adviser to this Portfolio was
Federated Advisers. During the fiscal year ended September 30, 1994, PIMCO
earned $419,570 as its sub-advisory fee for services it provided on behalf
of the Government Income Portfolio. During the fiscal year ended September
30, 1993, Federated Advisers, the Portfolio's former sub-adviser, earned
$442,982 as its sub-advisory fee for services it provided on behalf of the

Government Income Portfolio, of which $42,481 was voluntarily waived.

Van Kampen/American Capital Management Inc. ("VK/AC Management") serves as
the Sub-Adviser to the Municipal Income Portfolio under the terms of a
Sub-Advisory Agreement between the Investment Adviser and VK/AC
Management. VK/AC Management is a wholly-owned subsidiary of Van Kampen/
American Capital, Inc., which, in turn, is a wholly-owned subsidiary of VK/
AC Holding, Inc. VK/AC Holding, Inc., is indirectly controlled by
Clayton & Dubilier Associates IV Limited Partnership, the general
partners of which are Joseph L. Rice, III, B. Charles Ames, Alberto
Cribiore, Donald J. Gogel, and Hubbard C. Howe, each of whom is a principal
of Clayton, Dubilier & Rice, Inc., a New York-based private investment
firm. During the fiscal year ended September 30, 1994, VK/AC Management
earned $234,393 for services it provided on behalf of the Municipal
Income Portfolio. During the period from February 17, 1993, to September
30, 1993, VK/AC Management earned $132,315 as its sub-advisory fee for
services it provided on behalf of the Municipal Income Portfolio, of which
$130,250 was voluntarily waived. During the period from October 1, 1992, to
February 16, 1993, Van Kampen/American Capital Investment Advisory Corp.,
the Portfolio's former sub-adviser, earned $56,819 as its sub-advisory fee
for services it provided on behalf of the Municipal Income Portfolio, all
of which was voluntarily waived.

Wellington Management Company ("WMC") serves as the Sub-Adviser to the
Income and Growth Portfolio under the terms of a Sub-Advisory Agreement
between the Investment Adviser and WMC. WMC is a professional investment
counseling firm which provides investment services to investment companies,
employee benefit plans, endowments, foundations, and other institutions and
individuals. During the fiscal year ended September 30, 1994, and for the
period from May 24, 1993 (date of initial public investment), to September
30, 1993, WMC earned $187,231 and $22,521, respectively, as its
sub-advisory fees for services it provided on behalf of the Income and
Growth Portfolio.

Scudder, Stevens & Clark, Inc. ("Scudder") serves as the Sub-Adviser to the
Global Portfolio under the terms of a Sub-Advisory Agreement between the
Investment Adviser and Scudder. Scudder is an investment counseling firm
which was established as a partnership in 1919. In 1953, Scudder
introduced Scudder International Fund, the first mutual fund registered

with the Commission in the U.S. investing internationally in securities of

issuers in several foreign countries. The Investment Adviser pays the
Sub-Adviser an annual fee expressed as a percentage of Global Portfolio
assets: .55% on the first $75 million in Global Portfolio assets and .50%
on assets over $75 million. During the period from March 29, 1994 (date of
initial public investment), to September 30, 1994, Scudder earned $34,757
as its sub-advisory fee for services it provided on behalf of the Global
Portfolio.

Distribution of Portfolio Shares

Cambridge Distributors, Inc., is the principal distributor of Portfolio
shares, as explained in the prospectus. During the fiscal year ended
September 30, 1994, the distributors, both affiliated parties of the
Trust, received the following commissions and other compensation:

<TABLE>

Net Underwriting Compensation on
Discounts and Redemption and Brokerage *Other
Name of Principal Underwriter Commissions Repurchases Commissions Compensation
<S> <C> <C> <C> <C>
Cambridge Distributors, Inc. . . $ 77,089 $142,445 $ -- $2,650,747
Federated Securities Corp. . . . $ -- $ -- $ -- $ --

* "Other Compensation" represents $1,652,605 for services performed under
the Trust's Distribution Plan and $998,142 for services performed
under the Trust's Shareholder Servicing Plan.

</TABLE>

Administrative Services

Investment Management Group, Inc., which is the parent of the Investment
Adviser, provides administrative personnel and services to the Portfolios
for the fees set forth in the Prospectus. Prior to June 1, 1994,
Cambridge Administrative Services, a subsidiary of Federated Advisers, had
provided such services. During the fiscal years ended September 30, 1994
and 1993, the Portfolios incurred costs for administrative services
as follows:

<TABLE>

1994 1993
Administrative Administrative Administrative Administrative
Portfolio Fee Earned Fee Waived Fee Earned Fee Waived Administrative Administrative
CAS CAS IMG IMG Fee Earned Fee Waived
<S> <C> <C> <C> <C> <C> <C>
Growth Portfolio . . . . . . $ 45,092 $ 6,569 $19,103 $ -- $ 55,468 $ 20,121
Capital Growth Portfolio . . 65,005 -- 27,273 -- 104,427 36,269
Government Income Portfolio . 126,300 23,563 48,497 -- 184,593 41,518
Municipal Income Portfolio . 66,804 -- 30,849 -- 97,110 34,261
Income and Growth Portfolio . 37,484 15,033 24,831 -- 7,514* 3,005*
Global Portfolio**. . . . . . 1,326 530 6,344 -- -- --

* For the period May 24, 1993 (date of initial public investment),
to September 30, 1993.
** For the period March 29, 1994 (date of initial public investment),
to September 30, 1994.
</TABLE>

Shareholder Servicing Plan

The Trust has adopted a Shareholder Servicing Plan (the "Service Plan")
with respect to both classes of shares of each Portfolio. Pursuant to the
Service Plan, financial institutions will enter into shareholder service
agreements with the Portfolios to provide administrative support services
to their customers who from time to time may be owners of record or
beneficial owners of shares of one or more Portfolios. In return for
providing these support services, a financial institution may receive
payments from one or more Portfolios at a rate not exceeding .25% of the
average daily net assets of the Class A or Class B shares of the particular
Portfolio or Portfolios beneficially owned by the financial institution's
customers for whom it is holder of record or with whom it has a servicing
relationship. The Service Plan is designed to stimulate financial
institutions to render administrative support services to the Portfolios
and their shareholders. These administrative support services include, but
are not limited to, the following functions: providing office space,
equipment, telephone facilities, and various personnel including clerical,
supervisory, and computer as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding the Portfolios;
assisting clients in changing dividend options, account designations and
addresses; and providing such other services as the Portfolios reasonably
request.

Among the benefits the Board of Trustees expects to achieve in adopting the
Service Plan are the following: (1) an efficient and effective
administrative system; (2) a more efficient use of shareholder assets by
having them rapidly invested in the Portfolios, through an automatic
transfer of funds from a demand deposit account to an investment account,
with a minimum of delay and administrative detail; and (3) an efficient and
reliable shareholder records system and prompt responses to shareholder
requests and inquiries concerning their accounts.

In addition to receiving payments under the Service Plan, financial
institutions may be compensated by the Investment Adviser, a Sub-Adviser,
and/or the administrator, or affiliates thereof, for providing
administrative support services to holders of Class A or Class B shares of
the Portfolios. These payments will be made directly by the Investment
Adviser, a Sub-Adviser, and/or the administrator and will not be made from
the assets of any of the Portfolios.

During the fiscal years ended September 30, 1994 and 1993, the Portfolios
incurred shareholder service fees under the Service Plan (all of which
was received by the Distributor) as follows:

Portfolio 1994 1993
Growth Portfolio . . . . . . . . . . . . . . . . $128,423 $ 98,981
Capital Growth Portfolio . . . . . . . . . . . . 184,588 178,345
Government Income Portfolio. . . . . . . . . . . 349,642 369,151
Municipal Income Portfolio . . . . . . . . . . . 195,328 157,611
Income and Growth Portfolio . . . . . . . . . . 124,821 15,027*
Global Portfolio** . . . . . . . . . . . . . . . 15,340 --

* For the period May 24, 1993 (date of initial public investment),
to September 30, 1993.
** For the period March 29, 1994 (date of initial public investment),
to September 30, 1994.

Brokerage Transactions

When selecting brokers and dealers to handle the purchase and sale of

portfolio instruments, a Sub-Adviser looks for prompt execution of the
order at the best overall terms available. In working with dealers, a Sub-
Adviser will generally use those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. A Sub-Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees.

A Sub-Adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the
Portfolios or to a Sub-Adviser and may include:

(bullet) advice as to the advisability of investing in securities;

(bullet) security analysis and reports;

(bullet) economic studies;

(bullet) receipt of quotations for portfolio evaluations; and

(bullet) similar services.

A Sub-Adviser and its affiliates exercise reasonable judgment in selecting
brokers who offer brokerage and research services to execute securities
transactions. They determine in good faith that commissions charged by
such persons are reasonable in relationship to the value of the brokerage
and research services provided.

Research services provided by brokers may be used by a Sub-Adviser in
advising a Portfolio and other accounts. To the extent that receipt of
these services may supplant services for which a Sub-Adviser or its

affiliates might otherwise have been paid, it would tend to reduce their
expenses, but it is not expected that such reduction will be material.

During the fiscal years ended September 30, 1994 and 1993, the Portfolios
paid brokerage commissions on brokerage transactions as follows:

Portfolio 1994 1993
Growth Portfolio . . . . . . . . . . . . . . . . $159,585 $173,167
Capital Growth Portfolio . . . . . . . . . . . . 195,086 334,227
Government Income Portfolio . . . . . . . . . . -- --
Municipal Income Portfolio . . . . . . . . . . . -- --
Income and Growth Portfolio . . . . . . . . . . 116,782 25,668*
Global Portfolio** . . . . . . . . . . . . . . . 45,449 --

* For the period May 24, 1993 (date of initial public investment),
to September 30, 1993.
** For the period March 29, 1994 (date of initial public investment),
to September 30, 1994.

Wheat First Butcher & Singer Capital Markets ("Wheat First"), an affiliated
party of the Investment Adviser, received for the fiscal year ended
September 30, 1994 and 1993, brokerage commissions of $101,279 and $120,726,
respectively, for services performed on behalf of certain of the
Portfolios, as follows:

1994 1993
Growth Portfolio . . . . . . . . . . . . . . . . $ 588 $ 3,297
Capital Growth Portfolio . . . . . . . . . . . . 78,085 113,126
Income and Growth Portfolio. . . . . . . . . . . 22,606 4,303*
Global Portfolio** . . . . . . . . . . . . . . . -- --

* For the period May 24, 1993 (date of initial public investment),
to September 30, 1993.
** For the period March 29, 1994 (date of initial public investment),
to September 30, 1994.

During the fiscal year ended September 30, 1994, with respect to the Growth
Portfolio, the brokerage commissions received by Wheat First represented
0.37% of the aggregate brokerage commissions paid by the Portfolio and
represented 0.18% of the Portfolio's transactions effected through brokers.
Also during the same period, the brokerage commissions received by Wheat
First on behalf of the Capital Growth Portfolio represented 40.03% of the
aggregate brokerage commissions paid by the Portfolio and represented
35.20% of the Portfolio's transactions effected through brokers. With
respect to the Income and Growth Portfolio, during the fiscal year ended
September 30, 1994, the brokerage commissions received by Wheat First
represented 19.36% of the aggregate brokerage commissions paid by the
Portfolio and represented 11.81% of the Portfolio's transactions effected
through brokers.

The Portfolios' brokerage Transactions with affiliated broker-dealers will
comply with Rule 17e-1 under the 1940 Act.

How to Buy Shares

Except under certain circumstances described in the Prospectus, Class A
shares of the Portfolios are sold at their net asset value plus an
applicable sales charge on days the New York Stock Exchange is open for
business. Class B shares of the Portfolios are sold at their net asset
value with no sales charge on days the New York Stock Exchange is open for
business. The procedure for purchasing Class A and Class B shares of the
Portfolios is explained in the Prospectus under the section entitled "How
to Buy Shares."

Dealers will be compensated on purchases of Class A shares in accordance to
the following schedule:

Amount of Purchase Dealer Commission
Less than $2 million . 1.00%
$2 million but less than $3 million .80%
$3 million but less than $50 million .50%
$50 million but less than $100 million .25%
$100 million or more . .15%

The above commission will be paid by the Distributor and not the Trust or
its shareholders.

Distribution Plan (Class B Shares)

With respect to the Class B shares of the Portfolios, the Trust has adopted
a Plan pursuant to Rule 12b-1, which was promulgated by the SEC under the
Investment Company Act of 1940 (the "Plan"). The Plan provides for payment
of fees to the Distributor to finance any activity which is principally
intended to result in the sale of Class B shares of the Portfolios. Such
activities may include the advertising and marketing of Class B shares;
preparing, printing and distributing prospectuses and sales literature to
prospective shareholders, brokers or administrators; and implementing and
operating the Plan. Pursuant to the Plan, the Distributor may pay fees to
brokers for distribution services as to Class B shares.

The Board of Trustees expects that the adoption of the Plan will result in
the sale of a sufficient number of Class B shares of the Portfolios so as
to allow each Portfolio to achieve economic viability. It is also
anticipated that an increase in the size of each Portfolio will facilitate
more efficient portfolio management and assist each Portfolio in seeking to
achieve its investment objective.

Pursuant to the Plan, during the fiscal years ended September 30, 1994 and
1993, financial institutions (such as a broker/dealer or bank) received
fees for services provided on behalf of Class B shares of the Portfolios
as follows, all of which was received by the Distributor:

Portfolio 1994 1993
Growth Portfolio . . . . . . . . . . . . . . . . $253,834 $178,568
Capital Growth Portfolio . . . . . . . . . . . . 360,712 326,101
Government Income Portfolio . . . . . . . . . . 511,023 512,241
Municipal Income Portfolio . . . . . . . . . . . 253,801 193,150
Income and Growth Portfolio. . . . . . . . . . . 252,486 26,967*
Global Portfolio** . . . . . . . . . . . . . . . 20,749 --

* For the period May 24, 1993 (date of initial public investment), to
September 30, 1993.
** For the period March 29, 1994 (date of initial public investment), to
September 30, 1994.

Conversion to Federal Funds

The Shareholder Services Group, Inc., acts as the shareholder's agent in
depositing checks and converting them to federal funds.

Purchases at Net Asset Value

Class A shares of the Portfolios may be purchased at net asset value,
without a sales charge, by the following: advisory accounts through
registered investment advisers; bank trust departments purchasing on behalf
of their clients; Trustees, emeritus trustees, employees and retired
employees of the Trust; or directors, emeritus directors, employees and
retired employees of the Distributor, or affiliates thereof, or any
financial institution who has a sales agreement with the Distributor with
regard to the Trust. Spouses and children under age 21 of the foregoing
persons may also buy Class A shares of the Portfolios at net asset value
with no sales charge.

Determining Net Asset Value

Net asset value generally changes each day. The days on which net asset
value is calculated by each Portfolio are described in the Prospectus. Net
asset value will not be calculated on days on which the New York Stock
Exchange is closed.

Determining Market Value of Securities

Market values of each Portfolio's portfolio securities are determined as
follows:

(bullet) according to the last sale price on a national securities exchange,
if available;

(bullet) in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices, and for bonds
and other fixed income securities as determined by an independent
pricing service; or

(bullet) for short-term obligations, according to the prices as furnished
by an independent pricing service or for short-term obligations with
maturities of less than 60 days, at amortized cost, or at fair value

as determined in good faith by the Board of Trustees.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data.

Over-the-counter put options will be valued at the mean between the bid and
the asked prices. Covered call options will be valued at the last sale
price on the national exchange on which such option is traded. Unlisted
call options will be valued at the latest bid price as provided by brokers.

Following the calculation of security values in terms of currency in which
the market quotation used is expressed ("local currency"), the valuing
agent shall calculate these values in terms of U.S. dollars on the basis of
the conversion of the local currencies (if other than U.S.) into U.S.
dollars at the rates of exchange prevailing at the value time as determined
by the valuing agent.

Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of
business on each business day in New York (i.e., a day on which the
Exchange is open). In addition, European or Far Eastern securities trading
generally or in a particular country or countries may not take place on all
business days in New York. Furthermore, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days which
are not business days in New York and on which the Global Portfolio's net
asset value is not calculated. The Global Portfolio calculates net asset
value per share, and therefore effects sales, redemptions and repurchases
of its shares, as of the close of the Exchange once on each day on which
the Exchange is open. Such calculation does not take place
contemporaneously with the determination of the prices of the majority of
the portfolio securities used in such calculation. If events materially
affecting the value of such securities occur between the time when their
price is determined and the time when the Global Portfolio's net asset
value is calculated, such securities will be valued at fair value as
determined in good faith by the Board of Trustees.

Exchange Privilege

The SEC has issued an order exempting the Trust from certain provisions of

the Investment Company Act of 1940. As a result, shareholders of the
Portfolios are allowed to exchange all or some of their Class A or Class B
shares with no sales charge or contingent deferred sales charge ("CDSC"),
as described in the Prospectus. For a complete description of the exchange
privilege, see the section in the Prospectus entitled "Exchange Privilege."

Redeeming Shares

The Portfolios redeem shares at the next computed net asset value, less the
applicable CDSC, after the particular Portfolio receives the redemption
request. Redemption procedures are explained in the Prospectus under the
section entitled "Redeeming Shares." Although The Shareholder Services
Group, Inc., does not charge for telephone redemptions, it reserves the
right to charge a fee for the cost of wire-transferred redemptions.

Contingent Deferred Sales Charge

During certain periods, Class A shares of the Portfolios were eligible to
be purchased at net asset value (without a sales charge) with the proceeds
from the redemption, sale, or maturity of other investments and may,
therefore, be subject to a CDSC as explained in the prospectus. The
eligible period for the Global Portfolio was from February 22, 1994,
through and including June 30, 1994. The eligible period for the Income

and Growth Portfolio was prior to July 31, 1993. For the Growth
Portfolio, Capital Growth Portfolio, Government Income Portfolio, and
Municipal Income Portfolio, these eligible periods were (1) prior to
June 30, 1992, and (2) from December 1, 1992, through and including January
31, 1993.

Redemptions in Kind

Although the Trust intends to redeem Class A and Class B shares in cash, it
reserves the right under certain circumstances to pay the redemption price
in whole or in part by a distribution of securities from the respective
Portfolio's investment portfolio. To the extent available, such securities
will be readily marketable.

Redemption in kind will be made in conformity with applicable SEC rules,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner that the Trustees determine
to be fair and equitable.

The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, under which, with respect to each Portfolio, the Trust
is obligated to redeem Class A or Class B shares for any one shareholder in
cash only up to the lesser of $250,000 or 1% of the respective class's net
asset value during any 90-day period.

Tax Status

The Portfolios' Tax Status

The Portfolios expect to pay no federal income tax because they expect to
meet the requirements of Subchapter M of the Internal Revenue Code, as
amended, applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. To qualify for this
treatment, each Portfolio must, among other requirements:

(bullet) derive at least 90% of its gross income from dividends, interest and
gains from the sale of securities;

(bullet) derive less than 30% of its gross income from the sale of securities
held less than three months;

(bullet) invest in securities within certain statutory limits; and

(bullet) distribute to its shareholders at least 90% of its net income earned
during the year.

Each Portfolio will be treated as a single, separate entity for federal
income tax purposes so that income and losses (including capital gains and
losses) realized by a Portfolio will not be combined for tax purposes with
income and losses realized by any of the other Portfolios.

The Global Portfolio intends to qualify for and may make the election
permitted under Section 853 of the Internal Revenue Code so that
shareholders may (subject to limitations) be able to claim a credit or
deduction on their federal income tax returns for, and may be required to
treat as part of the amounts distributed to them, their pro rata portion of
qualified taxes paid by the Portfolio to foreign countries (which taxes
relate primarily to investment income). The Global Portfolio may make an
election under Section 853 of the Internal Revenue Code, provided that more
than 50% of the value of the total assets of the Global Portfolio at the
close of the taxable year consists of securities in foreign corporations.

The foreign tax credit available to shareholders is subject to certain
limitations imposed by the Internal Revenue Code.

If the Global Portfolio invests in stock of certain foreign investment
companies, the Global Portfolio may be subject to U.S. federal income
taxation on a portion of any "excess distribution" with respect to, or gain
from the disposition of, such stock. The tax would be determined by
allocating such distribution or gain ratably to each day of the Global
Portfolio's holding period for the stock. The distribution or gain so

allocated to any taxable year of the Global Portfolio, other than the
taxable year of the excess distribution or disposition, would be taxed to
the Global Portfolio at the highest ordinary income rate in effect for such
year, and the tax would be further increased by an interest charge to
reflect the value of the tax deferral deemed to have resulted from the
ownership of the foreign company's stock. Any amount of distribution or
gain allocated to the taxable year of the distribution or disposition would
be included in the Global Portfolio's investment company taxable income
and, accordingly, would not be taxable to the Global Portfolio to the
extent distributed by the Global Portfolio as a dividend to its
shareholders.

Proposed regulations have been issued which may allow the Global Portfolio
to make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U.S. federal income
taxation. At the end of each taxable year to which the election applies,
the Global Portfolio would report as ordinary income the amount by which
the fair market value of the foreign company's stock exceed the Global
Portfolio's adjusted basis in these shares. No mark to market losses would

be recognized. The effect of the election would be to treat excess
distributions and gain on dispositions as ordinary income which is not
subject to a fund level tax when distributed to shareholders as a dividend.
Alternatively, the Global Portfolio may elect to include as income and gain
their share of the ordinary earnings and net capital gain of certain
foreign investment companies in lieu of being taxed in the manner described
above.

Many futures contracts (including foreign currency futures contracts)
entered into by the Global Portfolio, certain forward foreign currency
contracts, and all listed nonequity options written or purchased by the
Global Portfolio (including options on debt securities, options on futures
contracts, options on securities indices and options on broad-based stock
indices) will be governed by Section 1256 of the Internal Revenue Code.
Absent a tax election to the contrary, gain or loss attributable to the
lapse, exercise or closing out of any such position generally will be
treated as 60% long-term and 40% short-term capital gain or loss, and on
the last trading day of the Global Portfolio's fiscal year, all outstanding
Section 1256 positions will be marked to market (i.e., treated as if such
positions were closed out at their closing price on such day), with any
resulting gain or loss recognized. Under certain circumstances, entry into
a futures contract to sell a security may constitute a short sale for
federal income tax purposes, causing an adjustment in the holding period of
the underlying security or a substantially identical security in the Global
Portfolio. Under Section 988 of the Internal Revenue Code, discussed
below, foreign currency gains or loss from foreign currency related forward
contracts, certain futures and similar financial instruments entered into
or acquired by a Global Portfolio will be treated as ordinary income or
loss.

Under the Internal Revenue Code, gains or losses attributable to

fluctuations in exchange rates which occur between the time the Global
Portfolio accrues receivables or liabilities denominated in a foreign
currency and the time the Global Portfolio actually collects such
receivables, or pays such liabilities, generally are treated as ordinary
income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain futures and
forward contracts, gains or losses attributable to fluctuations in the
value of foreign currency between the date of acquisition of the security
or contract and the date of disposition are also treated as ordinary gain
or loss. These gains or losses, referred to under the Internal Revenue
Code as "Section 988" gains or losses, may increase or decrease the amount
of the Global Portfolio's investment company taxable income to be
distributed to its shareholders as ordinary income.

A portion of the difference between the issue price of zero coupon
securities and their face value ("original issue discount") is considered
to be income to a Portfolio each year, even though the Portfolio will not
receive cash interest payments from these securities. This original issue
discount imputed income will comprise a part of the investment company
taxable income of the Portfolios which must be distributed to shareholders
in order to maintain the qualification of the Portfolios as regulated
investment companies and to avoid federal income tax at the level of the
Portfolios.

Shareholders' Tax Status

Except as described below for the Municipal Income Portfolio, unless
otherwise exempt, shareholders are subject to federal income tax on
dividends and capital gains received as cash or additional shares. With
respect to the Government Income and Municipal Income Portfolios, no
portion of any income dividend paid by a Portfolio is expected to be
eligible for the dividends received deduction available to corporations.
With respect to the Growth, Capital Growth, Income and Growth and Global
Portfolios, the dividends received deduction for corporations will apply to
ordinary income distributions to the extent the distribution represents
amounts that would qualify for the dividends received deduction to a

particular Portfolio if that Portfolio were a regular corporation and to
the extent designated by a Portfolio as so qualifying. These dividends and
any short-term capital gains are taxable as ordinary income.

Capital Gains

Shareholders will pay federal tax on long-term capital gains distributed to
them regardless of how long they have held the shares of the particular
Portfolio.

Shareholders of the Municipal Income Portfolio are not required to pay the
federal regular income tax on any dividends received from the Portfolio
that represent net interest on tax-exempt municipal bonds. However, under
the Tax Reform Act of 1986, dividends representing net interest earned on
some municipal bonds may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.

For a more complete discussion of shareholders' tax status, including a
discussion of the individual alternative minimum tax and the corporate
alternative minimum tax, see the section of the prospectus entitled "Tax
Information."

Total Return

The average annual total return for both classes of shares of the following
Portfolios for the fiscal year ended September 30, 1994, were as follows:

Since Inception
Portfolio Class A Class B Class A Class B
Growth Portfolio . . . . . -16.87% -12.48% -0.84%* 0.99%*
Capital Growth Portfolio . -6.79% -2.00% 0.68%* 2.44%*
Government Income Portfolio -7.97% -3.97% 0.14%* 1.66%*
Municipal Income Portfolio -9.35% -5.34% 4.42%* 6.00%*
Income and Growth Portfolio 0.68% 5.66% 4.30%** 8.15%**
Global***. . . . . . . . . -5.17% -1.21% -5.17% -1.21%

* For the period from April 29, 1992 (date of initial public investment),
to September 30, 1994.
** For the period from May 24, 1993 (date of initial public investment),
to September 30, 1994.
*** For the period from March 29, 1994 (date of initial public investment),
to September 30, 1994.

The average annual total return for a Portfolio is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at
the end of the period by the maximum offering price per share at the end of
the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, less any applicable sales load, adjusted over the period by any
additional shares, assuming the monthly, quarterly, or semi-annual (as
applicable) reinvestment of all dividends and distributions. Any
applicable CDSC is deducted from the ending value of the investment based
on the lesser of the original purchase price or the net asset value of
shares redeemed.

Cumulative total return reflects a Portfolio's total performance over a
specific period of time. This total return assumes and is reduced by the
payment of the maximum sales load and CDSC. The Portfolio's total return
is representative of only four months of activity since the Portfolio's
effective date.

Yield

The thirty-day yield for both classes of shares of the Portfolios for the
period ending September 30, 1994, were as follows:

Portfolio Class A Class B
Government Income Portfolio. 6.08% 5.73%
Municipal Income Portfolio . 4.56% 4.11%
Income and Growth Portfolio. 1.87% 1.57%

The yield for both classes of each Portfolio is determined by dividing the
net investment income per share (as defined by the SEC) earned by the
particular Portfolio over a thirty-day period by the maximum offering price
per share of the particular Portfolio on the last day of the period. This
value is then annualized using semi-annual compounding. This means that
the amount of income generated during the thirty-day period is assumed to
be generated each month over a twelve-month period and is reinvested every
six months. The yield does not necessarily reflect income actually earned
by the particular Portfolio because of certain adjustments required by the
SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.

To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
Portfolio, the performance will be reduced for those shareholders paying
those fees.

Tax-Equivalent Yield (Municipal Income Portfolio)

The tax-equivalent yield for Class A shares of the Municipal Income
Portfolio for the thirty-day period ended September 30, 1994, was 7.55%.
The tax-equivalent yield for the Class B shares was 6.81% for the same
period.

The tax-equivalent yield for both classes of the Municipal Income Portfolio
is calculated similarly to the yield, but is adjusted to reflect the

taxable yield that the Portfolio would have had to earn to equal its actual
yield, assuming a 39.6% tax rate (the maximum effective federal rate for
individuals) and assuming that income is 100% tax-exempt.

Tax-Equivalency Table

The Portfolio may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Portfolio's
investment portfolio generally remains free from federal regular income
tax* but may be subject to state and local taxes. Capital gains, if any,
are subject to federal, state and local tax. As the table below indicates,
a "tax-fee" investment is an attractive choice for investors, particularly
in times of narrow spreads between tax-free and taxable yields.

<TABLE>

Taxable Yield Equivalent for 1994
Federal Income Tax Bracket:
15.00% 20.00% 31.00% 36.00% 39.60%
<S> <C> <C> <C> <C> <C>
Joint Return: $1-36,900 $36,901-89,150 $89,151-140,000 $140,001-250,000 Over $250,000
Single Return: $1-22,100 $22,101-53,500 $53,501-115,000 $115,001-250,000 Over $250,000

</TABLE>

Tax-Exempt
Yield Taxable Yield Equivalent

2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00 3.53 4.17 4.35 4.69 4.97
3.50 4.12 4.86 5.07 5.47 5.79
4.00 4.71 5.56 5.80 6.25 6.62
4.50 5.29 6.25 6.52 7.03 7.45
5.00 5.88 6.94 7.25 7.81 8.28
5.50 6.47 7.64 7.97 8.59 9.11
6.00 7.06 8.33 8.70 9.38 9.93
6.50 7.65 9.03 9.42 10.16 10.76
7.00 8.24 9.72 10.14 10.94 11.59
7.50 8.82 10.42 10.87 11.72 12.42
8.00 9.41 11.11 11.59 12.50 13.25
8.50 10.00 11.81 12.32 13.28 14.07

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent.

The table above is for illustrative purposes only. It is not an indicator
of past or future performance of the Portfolio.

*
Some portion of the Portfolio's income maybe subject to the federal

alternative minimum tax and state and local taxes.

Performance Comparisons

The performance of Class A and Class B shares of each Portfolio depends
upon such variables as:

(bullet) portfolio quality;

(bullet) average portfolio maturity;

(bullet) type of instruments in which the particular Portfolio is invested;

(bullet) changes in the expenses of the Trust or Class A or Class B shares
of a particular Portfolio; and

(bullet) various other factors.

The performance of each Portfolio's Class A and Class B shares fluctuates
on a daily basis largely because net earnings and net asset value per share
fluctuate daily. Both net earnings and net asset value per share are
factors in the computation of yield and total return for each class of the
Portfolios.

From time to time each Portfolio may advertise its performance of both
classes of shares of the Portfolios compared to similar funds or portfolios
using certain indices, reporting services, and financial publications.
These may include the following:

(bullet) Lipper Analytical Services, Inc., ranks funds in various fund

categories by making comparative calculations using total
return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into account
any change in net asset value over a specified period of time.
From time to time, a Portfolio will quote its Lipper
ranking in advertising and sales literature.

(bullet) Dow Jones Industrial Average ("DJIA") is an unmanaged index
representing share prices of major industrial corporations,
public utilities, and transportation companies. Produced by
the Dow Jones & Company, it is cited as a principal indicator of
market conditions.

(bullet) Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation,
and financial and public utility companies, can be used to compare
to the total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the Standard & Poor's
index assumes reinvestments of all dividends paid by stocks
listed on its index. Taxes due on any of these distributions are
not included, nor are brokerage or other fees calculated,
in the Standard & Poor's figures.

(bullet) Consumer Price Index is generally considered to be a measure of
inflation.

(bullet) CDA Mutual Fund Growth Index is a weighted performance average
of other mutual funds with growth of capital objectives.

(bullet) Lipper Growth Fund Index is an average of the net asset-valuated
total returns for the top 30 growth funds tracked by Lipper Analytical
Services, Inc., an independent mutual fund rating service.

Shearson Lehman Government/Corporate (Total) Index is comprised
of approximately 5,000 issues, which include non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate bonds
guaranteed by the U.S. government and quasi-federal corporations; and
publicly issued, fixed-rate, non-convertible domestic bonds of
companies in industry, public utilities and finance. The average
maturity of these bonds approximates nine years. Tracked by Shearson
Lehman Brothers Inc., the index calculates total returns for one
month, three month, twelve month and ten year periods and year-to-date.

(bullet) Shearson Lehman Government Index is an unmanaged index comprised of
all publicly issued, non-convertible domestic debt of the U.S.
government, or any agency thereof, or any quasi-federal corporation
and of corporate debt guaranteed by the U.S. government. Only
notes and bonds with a minimum outstanding principal of $1 million
and a minimum maturity of one year are included.

(bullet) Morningstar, Inc., an independent rating service, is the publisher of
the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars,
and ratings are effective for two weeks.

(bullet) Russell Growth 1000 (Russell 1000 Index) is a broadly diversified
index consisting of approximately 1,000 common stocks of companies
with market

values between $20 million and $300 million that can be used to compare the
total returns of funds whose portfolios are invested primarily in growth
common stocks.

(bullet) Shearson Lehman Aggregate Bond Index is a total return index measuring
both the capital price changes and income provided by the underlying
universe of securities, weighted by market value outstanding. The
Aggregate Bond Index is comprised of the Shearson Lehman Government
Bond Index, Corporate Bond Index, Mortgage-Backed Securities Index,
and Yankee Bond Index. These indices include: U.S. Treasury
obligations, including bonds and notes; U.S. agency obligations,
including those of the Federal Farm Credit Bank, Federal Land Bank,
and the Bank for Cooperatives; foreign obligations; and
U.S. investment-grade corporate debt and mortgage-backed obligations.
All corporate debt included in the Aggregate Bond Index has a
minimum S&P rating of BBB, a minimum Moody's rating of Baa, or a
minimum Fitch rating of BBB.

(bullet) Salomon Brothers Mortgage-Backed Securities Index-15 Years includes
the average of all 15-year mortgage securities, which include Federal
Home Loan Mortgage Corporation (Freddie Mac), Federal National
Mortgage Association (Fannie Mae), and Government National Mortgage
Association (Ginnie Mae).

(bullet) Shearson Lehman Municipal Bond Index is a total return
performance benchmark for the long-term, investment-grade

tax-exempt bond market. Returns and attributes for the
Index are calculated semi-monthly using approximately 21,000
municipal bonds, which are priced by Muller Data Corporation.

From time to time, the Global Portfolio may advertise its performance of
both classes of shares of the Portfolio compared to similar funds or
portfolios using certain indices, reporting services, and financial
publications. These may include the following: Morgan Stanley Capital
International World Index, The Morgan Stanley Capital International EAFE
(Europe, Australia, Far East) index, J. P. Morgan Global Traded Bond Index,
Salomon Brothers World Government Bond Index, and the Standard & Poor's 500
Composite Stock Price Index (S&P 500). The Global Portfolio also may
compare its performance to the performance of unmanaged stock and bond
indices, including the total returns of foreign government bond markets in
various countries. All index returns are translated into U.S. dollars.
The total return calculation for these unmanaged indices may assume the
reinvestment of dividends and any distributions, if applicable, may include
withholding taxes, and generally do not reflect deductions for
administrative and management costs.

Investors may use such indices or reporting services in addition to the
Trust's Prospectus to obtain a more complete view of a particular
Portfolio's performance before investing. Of course, when comparing a

Portfolio's performance to any index, conditions such as composition of the
index and prevailing market conditions should be considered in assessing
the significance of such comparisons. When comparing funds using reporting
services, or total return and yield, investors should take into
consideration any relevant differences in funds, such as permitted

portfolio compositions and methods used to value portfolio securities and
compute net asset value.

Advertisements and other sales literature for the Trust may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
the Trust based on monthly reinvestment of dividends over a specified
period of time.

From time to time the Portfolios may advertise their performance, using
charts, graphs, and descriptions, compared to federally insured bank
products, including certificates of deposit and time deposits, and to money
market funds using the Lipper Analytical Service money market instruments
average.

Advertisements may quote performance information which does not reflect the
effect of the sales load.

Financial Statements

The financial statements for the fiscal year ended September 30, 1994, are
incorporated herein by reference to the combined Annual Report of the Trust
dated September 30, 1994 (File Nos. 33-45315 and 811-6550). You may
request a copy of the combined Annual Report free of charge by writing the
Trust or by calling 1-800-382-0016.

Appendix

Moody's Investors Service, Inc., Long-Term Municipal Debt Ratings

Aaa-bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.

Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.

A-Bonds which are rated A possess many favorable investment attributes and

are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa-Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba-Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.

Note:
Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1 and B1.

Standard and Poor's Corporation Long-Term Municipal Debt Ratings

AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.

BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.

BB, B, CCC, CC-Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposure to adverse conditions.

Plus (+) or Minus (-): The ratings from "A" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

Moody's Investors Service, Inc., Short-Term Loan Ratings

MIG1/VMIG1-This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing.

MIG2/VMIG2-This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.

Standard and Poor's Corporation Municipal Note Ratings

SP-1-Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.

SP-2-Satisfactory capacity to pay principal and interest.

Fitch Investors Service, Inc., Short-Term Debt Ratings

F-1+-Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1-Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.

F-2-Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment.

Moody's Investors Service, Inc., Commercial Paper Ratings

P-1-Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: conservative capitalization structures with moderate

reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources
of alternate liquidity.

P-2-Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.

Standard and Poor's Corporation Commercial Paper Ratings

A-1-This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
sign designation.

A-2-Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated A-1.

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:

(a) Financial Statements (Incorporated into the Statement of Additional
Information by reference to Registrant's Annual Report dated

September 30, 1994 and filed with the Commission on December 1,
1994).
(b) Exhibits:
(1) Conformed copy of Declaration of Trust of the Registrant,
with Amendment Nos. 1 and 2 (4.);
(2) Copy of By-Laws of the Registrant (2.);
(3) Not applicable;
(4)(i) Copy of Specimen Certificates for both Class A and Class
B Shares of Beneficial Interest of the Cambridge Growth
Portfolio, Cambridge Capital Growth Portfolio, Cambridge
Government Income Portfolio and Cambridge Municipal
Income Portfolio (2.);
(ii) Copy of Specimen Certificates for both Class A and Class
B Shares of Beneficial Interest of the Cambridge Income
and Growth Portfolio (4.);
(iii) Copy of Specimen Certificates for both Class A and Class
B Shares of Beneficial Interest of the Cambridge Global
Portfolio (6.);
(5)(i) Conformed copy of Management Agreement of the Registrant
with Cambridge Investment Advisors, Inc. (4.);
(a) Conformed copy of new Exhibit A to Management
Agreement to include Cambridge Global Portfolio (6.);
(ii) Conformed copy of Investment Advisory Agreement for the
Cambridge Growth Portfolio (4.);
(iii) Conformed copy of Investment Advisory Agreement for the
Cambridge Capital Growth Portfolio (4.);
(iv) Conformed copy of Investment Advisory Agreement for the
Cambridge Government Income Portfolio (6.);
(v) Conformed copy of Investment Advisory Agreement for the
Cambridge Municipal Income Portfolio (4.);
(vi) Conformed copy of Investment Advisory Agreement for the
Cambridge Income and Growth Portfolio (5.);

(vii) Conformed copy of Investment Advisory Agreement for the
Cambridge Global Portfolio (6.);

(6)(i) Conformed copy of Distributor's Contract of the
Registrant with Cambridge Distributors, Inc., through and
including Exhibit F (5.);

(ii) Conformed copy of Distributor's Contract of the
Registrant with Federated Securities Corp., through and
including Exhibit F (5.);
(7) Not applicable;
(8)(i) Conformed copy of Custodian Contract of the Registrant (4.);
(ii) Conformed copy of Administrative Services Agreement of
the Registrant (6.);
(9)(i) Conformed copy of Transfer Agency and Registrar Agreement
of the Registrant (4.);

(ii) Conformed copy of Shareholder Services Plan of the
Registrant, through and including Exhibit B (5.);

(iii) Copy of Shareholder Services Agreement of the Registrant
(2.);

(10) Not applicable;

(11)(i) Conformed copy of Independent Auditors Consent;
(ii) Conformed copy of KPMG Peat Marwick LLP opinion on
Methodology and Procedures for Accounting for Multiple
Classes of Shares;

(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (2.);
(14) Not applicable;
(15)(i) Conformed copy of Distribution Plan, through and including
Exhibit B (5.);
(ii) Copy of 12b-1 Agreement (Sales Agreement) with Cambridge
Distributors, Inc. (5.);
(iii) Copy of 12b-1 Agreement (Sales Agreement) with Federated
Securities Corp. (5.);

(16)(i) Copy of Schedules for Computation of Fund Performance Data
for Class A and Class B Shares of Cambridge Growth
Portfolio, Cambridge Capital Growth Portfolio, Cambridge
Government Income Portfolio, and Cambridge Municipal Income
Portfolio (5.);

(ii) Copy of Schedule for Computation of Fund Performance Data
for Class A and Class B Shares of Cambridge Income and
Growth Portfolio (5.);

(17) Conformed copy of Power of Attorney (4.);

(18) Not applicable.

1. Response is incorporated by reference to Registrant's Initial Registration
on Form N-1A filed January 31, 1992 (File Nos. 33-45315 and 811-6550).

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed April 14, 1992 (File Nos. 33-45315 and
811-6550).

3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed August 28, 1992 (File Nos. 33-45315 and
811-6550).

4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed May 14, 1993 (File Nos. 33-45315 and
811-6550).

5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed November 26, 1993 (File Nos. 33-45315 and
811-6550).

6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed August 3, 1994 (File Nos. 33-45315 and
811-6550).

Item 25. Persons Controlled by or Under Common Control with Registrant:

None

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of December 31, 1994

Shares of beneficial interest
no par value

Cambridge Growth Portfolio:
Class A Shares 1,354
Class B Shares 3,257
Cambridge Capital Growth Portfolio:
Class A Shares 1,707
Class B Shares 4,272
Cambridge Government Income Portfolio:
Class A Shares 1,275
Class B Shares 4,023
Cambridge Municipal Income Portfolio:
Class A Shares 630
Class B Shares 1,627

Cambridge Income and Growth Portfolio:
Class A Shares 1,077
Class B Shares 3,408
Cambridge Global Portfolio:
Class A Shares 711
Class B Shares 1,198

Item 27. Indemnification: (1.)

1. Response is incorporated by reference to Registrant's Initial Registration
on Form N-1A filed January 31, 1992 (File Nos. 33-45315 and 811-6550).

Item 28. Business and Other Connections of Investment Adviser:

(a) Cambridge Investment Advisors, Inc., located at 901 East Byrd Street,
Richmond, Virginia 23219, serves as the Company's Investment Adviser. It
is a wholly-owned subsidiary of Investment Management Group, Inc., which in
turn is a wholly- owned subsidiary of WFS Financial Corporation, Inc., a
diversified financial services holding company. The Investment Adviser was
incorporated under the laws of Virginia in 1991.

Kemper Financial Services, Inc. ("KFS"), located at 120 South LaSalle
Street, Chicago, Illinois 60603, serves as the Sub- Adviser to the
Cambridge Growth Portfolio, KFS is a wholly- owned subsidiary of Kemper
Financial Companies, Inc., which provides investment advice and manages
investment portfolios for the Kemper Insurance Companies and other
corporate, pension, profit-sharing and individual accounts.

___________________
1. Response is incorporated by reference to Registrant's Initial
Registration on Form N-1A filed January 31, 1992 (File Nos. 33-45315 and
811-6550).

Phoenix Investment Counsel, Inc. ("PIC"), located at One
American Row, Hartford, Connecticut 06115-2520, serves as the
Sub-Adviser to the Cambridge Capital Growth Portfolio. All of
the outstanding stock of PIC is owned by Phoenix Equity
Planning Corporation, an indirect subsidiary of Phoenix Home
Life Mutual Insurance Company of Hartford, Connecticut.

Pacific Investment Management Company ("PIMCO"), located at
840 Newport Center Drive, Newport Beach, California 92660,
serves as the interim Sub-Adviser to the Cambridge Government
Income Portfolio. PIMCO is a subsidiary of Pacific Mutual
Life Insurance Company and serves as investment adviser to a
number of investment companies and private accounts.

Van Kampen/American Capital Management Inc. ("VK/AC Management"),
located at One Parkview Plaza, Oakbrook Terrace, Illinois 60181,
serves as the Sub-Adviser to the Cambridge Municipal Income
Portfolio. VK/AC Management is a wholly-owned subsidiary of Van
Kampen/American Capital, Inc., which, in turn, is a wholly- owned
subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc., is
indirectly controlled by Clayton & Dubilier Associates IV Limited
Partnership, the general partners of which are Joseph L. Rice,
III, B. Charles Ames, Alberto Cribiore, Donald J. Gogel, and
Hubbard C. Howe, each of whom is a principal of Clayton, Dubilier
& Rice, Inc., a New York-based private investment firm. VK/AC
Management is an investment adviser registered under the
Investment Advisers Act of 1940 and provides investment advice to
a wide variety of individual, institutional, and investment
company clients.

Wellington Management Company ("WMC"), located at 75 State
Street, Boston, Massachusetts 02109, serves as the Sub-Adviser to
the Cambridge Income and Growth Portfolio.

Scudder, Stevens & Clark, Inc. ("Scudder"), located at 345 Park
Avenue, New York, New York, serves as the Sub-Adviser to the
Cambridge Global Portfolio.

The principal executive officers of the Trust's Investment
Adviser and the Portfolios' Sub-Advisers, and the Directors of
each, are set forth in the following tables.

(b)

<TABLE>
(1) (2) (3)
Other Substantial
Position with Business, Profession,
Name the Investment Adviser Vocation or Employment
<S> <C> <C>
Peter J. Quinn, Jr. President and Director Managing Director, Wheat,
First Butcher Singer, Inc.;
President, Cambridge
Distributors, Inc.; Director,
Investment Management
Group, Inc.

Paul F. Costello Senior Vice President Managing Director, Wheat,
First Butcher Singer, Inc.;
Senior Vice President,
Cambridge Distributors, Inc.;
President and Chief Financial
Officer, Variable Investors
Series Trust; Director,
Investment Management Group,
Inc.; President, Mentor
Income Fund, Inc., IMG Series
Trust, Mentor Series Trust
and Cash Resource Trust;
President and Treasurer,
Atlantic Capital & Research,
Inc.; Vice President and
Treasurer, Variable Stock Fund,
Inc., Monarch Investment Series
Trust, and GEICO Tax Advantage
Series Trust; Vice President,
Monarch Life Insurance Company,

GEICO Investment Services
Company, Inc., Monarch
Investment Services Company,
Inc., and Springfield Life
Insurance Company; formerly,
Director, President, and Chief
Executive Officer, First
Variable Life Insurance Company.

John Michael Ivan Secretary Managing Director and Senior
Vice President, Wheat First
Butcher Singer, Inc.; Secretary,
Mentor Series Trust and Cash
Resource Trust.

Thomas Lee Souders Treasurer Managing Director and Chief
Financial Officer, Wheat
First Butcher Singer, Inc.

</TABLE>

<TABLE>

(1) (2) (3)
Other Substantial
Position with Kemper Business, Profession,
Name Financial Services, Inc. Vocation or Employment
<S> <C> <C>
James R. Boris Director Director and Executive Vice
President, Kemper Financial
Companies, Inc.; and Chairman,
CEO and Director, Kemper
Securities, Inc.

Seamon A. Lincoln Director and Chief Director and Chairman, Kemper
Asset Investment Officer Management Company; Director
and President, Kemper
International Management, Inc.;
Director, Kemper Investment
Management Company Limited;

Trustee, Kemper Financial
Services, Inc. Profit Sharing
Plan; Senior Vice President,
Kemper Corporation and Kemper
Financial Companies, Inc.; Vice
President, Kemper Closed-End
Funds, Kemper Investors Fund,
and Kemper Mutual Funds.

David B. Mathis Director President, Chief Executive
Officer and Chairman of the
Board, Kemper Corporation;
Chairman of the Board, Centre
Reinsurance Holdings Limited;
Chairman and Director, Kemper
Reinsurance London Limited;
Director, Kemper International
Insurance Company (PTE.)
Limited, Kemper Investors Life
Insurance Company, Kemper
Reinsurance (Bermuda) Limited,
Kemper Reinsurance Company,
Kemper Securities Group
Holdings, Inc., Kemper
Securities, Inc., Mound Agency
of West Virginia, Inc., Mound
Agency, Inc., Seven Continents
Insurance Company, LTD., Centre
Reinsurance (Bermuda) Limited,
Centre Reinsurance Company
Limited, Federal Kemper
Insurance Company, Federal
Kemper Life Assurance Company,
Kemper Europe Reassurances,
S.A. (KERSA), Kemper Financial
Companies, Inc., and KERSA
Holding Company Luxembourg;
Member of Finance Committee,
Fidelity Life Association.

Charles M. Kierscht Chairman, President, Chief Chairman of the Board and
Executive Officer and Director, Kemper Asset
Director Management Company; Director,
Chairman of the Board,
President & CEO, Kemper
Financial Companies, Inc.;
Director, Executive Committee,
ICI Mutual Insurance Company;
Director and Executive Vice
President, Kemper Corporation;
Member of Board of Governors
and Executive Committee,
Investment Company Institute;
Trustee and President, Kemper
Closed-End Funds, Kemper
Investors Fund, and Kemper Mutual
Funds; Trustee, Kemper Financial
Services, Inc. Profit Sharing
Plan; Director, Federal Kemper
Life Assurance Company, Financial
Services Council, Institute for
Illinois, Investors Fiduciary
Trust Company, Kemper Investors
Life Insurance Company, Kemper
International Management, Inc.,
Kemper Investment Management
Company Limited, Kemper Sales
Company, Kemper Securities
Holdings, Inc., Kemper Securities,
Inc., Kemper Service Company,
Selected Financial Services,
Inc., Supervised Service Company,
Inc., University of Iowa Foundation,
and University of Iowa Law School
Foundation.

Robert T. Jackson Senior Executive Vice Treasurer, Chief Financial Officer
President, Chief Financial and Director, Kemper Sales Company,
Officer and Director Kemper Service Company, and

Supervised Service Company, Inc.;
Vice President and Director,
Kemper Securities Group Holdings,
Inc., Kemper Capital Markets, Inc.,
FKLA Realty Corporation, FLA Realty
Corporation, Kemper Portfolio Corp.,
KFC Portfolio Corp., and KILICO
Realty Corporation; Senior Vice
President, Kemper Corporation,
Kemper Real Estate Management
Company, and Kemper Residential
Management Company; Senior Vice
President, Treasurer (Chief
Financial Officer), and Director,
Kemper Financial Companies, Inc.;
Treasurer and Director, Kemper
International Management, Inc.,
and Kemper Investment Management
Company Limited; Vice President,
Treasurer and Director, Kemper
Real Estate, Inc.; Director,
Bilboa International Fund,
Boettcher Investment Corp.,
Galaxy Offshore, Inc., Kemper
Investors Life Insurance Company,
Kemper/Cymrot Management, Inc.,
Kemper/Cymrot, Inc., Kemper
Clearing Corp., Kemper Asset
Management Company, Kemper
Securities, Inc., and Selected
Financial Services, Inc.; Trustee,
Kemper Financial Services, Inc.
Profit Sharing Plan; Vice
President, KR 77 Fitness Center,
Inc., KR Avondale Redmond, Inc.,
KR Black Mountain, Inc., KR
Brannan Resources, Inc., KR
Clay Capital, Inc., KR
Cranbury, Inc., KR Delta

Wetlands, Inc., KR Gainesville,
Inc., KR Gulf Coast Factory
Shops, Inc., KR Halawa
Associates, Inc., KR
Lafayette Apartments, Inc.,
KR Palm Plaza, Inc., KR
Peppertree, Inc., KR Red
Hill Associates, Inc.,
KR Seagate/Gateway North,
Inc., KR Venture Way, Inc.,
KRKC, Inc., and KRKFC, Inc.

Stephen B. Timbers Senior Executive Vice President and Director,
President and Director Galaxy Offshore, Inc.,
Kemper Real Estate, Inc.,
Kemper/Cymrot Management,
Inc., and Kemper/Cymrot,
Inc.; Director and Vice
President, Kemper
Portfolio Corp., KFC
Portfolio Corp., KILICO
Realty Corporation;
Director and Finance
Committee Member, Federal
Kemper Life Assurance
Company; Director, President,
and Chief Operating Officer,
Kemper Corporation; Trustee
and Vice President, Kemper
Mutual Funds and Kemper
Closed-End Funds; Director
and Senior Vice President,
Kemper Real Estate Management
Company and Kemper Residential
Management Company; Director
and Vice President, KR 77
Fitness Center, Inc., KR
Avondale Redmond, Inc.,
KR Black Mountain, Inc.,

KR Brannan Resources, Inc.,
KR Clay Capital, Inc.,
KR Cranbury, Inc., KR Delta
Wetlands, Inc., KR Gainesville,
Inc., KR Gulf Coast Factory
Shops, Inc., KR Halawa Associates,
Inc., KR Lafayette Apartments,
Inc., KR Palm Plaza, Inc.,
KR Peppertree, Inc., KR Red
Hill Associates, Inc., KR
Seagate/Gateway North, Inc.,
KR Venture Way, Inc., KRKC, Inc.,
and KRKFC, Inc.; Director,
Bilboa International Fund,
Federal Kemper Insurance
Company, Kemper Europe
Reassurances, S.A., Kemper
Asset Management Company,
FKLA Realty Corporation,
FLA Realty Corp., Kemper
Financial Companies, Inc.,
Kemper Investors Life
Insurance Company, Kemper
Reinsurance (Bermuda) Limited,
Kemper Reinsurance Company
and Kemper Reinsurance London
Limited; Vice President,
Kemper Closed-End Funds.

John E. Peters Senior Executive Vice Director, Kemper Service
President and Director Company; Vice President,
Kemper Adjustable Rate U.S.
Government Fund, Kemper Asset
Management Company, Kemper
Blue Chip Fund, Kemper
Closed-End Funds, Kemper
Diversified Income Fund,
Kemper Environmental Services
Company, Kemper Global Income

Fund, Kemper Growth Fund,
Kemper High Yield Fund,
Kemper Income and Capital
Preservation Fund, Kemper
International Fund, Kemper
Investment Portfolios, Kemper
Investors Fund, Kemper
Municipal Bond Fund, Kemper
Short-Term Global Income Fund,
Kemper Small Capitalization
Equity Fund, Kemper State
Tax-Free Income Series,
Kemper Technology Fund, Kemper
Total Return Fund, Kemper U.S.
Government Securities Fund, and
Selected Financial Services, Inc.

Frank E. Diaz Senior Executive Chairman and Director, Supervised
Vice President Service Company, Inc.; Director
and President, Kemper Service
Company; Director, Kemper
Clearing Corp. and Kemper
Financial Companies, Inc.

William E. Chapman Executive Vice President Senior Vice President, Kemper
Sales Company.

James H. Coxon Executive Vice President Director and Vice President,
Galaxy Offshore, Inc.,
Kemper Real Estate, Inc.,
Kemper/Cymrot Management, Inc.,
and Kemper/Cymrot, Inc.; Vice
President, Kemper Retirement Fund
and Kemper Investors Fund.

Stephen G. McConahey Executive Vice President Senior Vice President and
Director, Kemper Financial
Companies, Inc.; Senior Vice
President, Kemper Corporation;

Director, Supervised Service
Company, Inc.

John E. Neal Executive Vice President Director and Senior Vice
President, Kemper Real Estate
Management Company and Kemper
Residential Management Company;
Director and President, FKLA
Realty Corporation, FLA Realty
Corporation, KFC Portfolio Corp.,
KILICO Realty Corporation, KR 77
Fitness Center, Inc., KR
Avondale Redmond, Inc.,
KR Black Mountain, Inc., KR
Brannan Resources, Inc., KR
Clay Capital, Inc., KR Cranbury,
Inc., KR Delta Wetlands, Inc.,
KR Gainesville, Inc., KR Gulf
Coast Factory Shops, Inc., KR
Halawa Associates, Inc., KR
Lafayette Apartments, Inc.,
KR Palm Plaza, Inc., KR
Peppertree, Inc., KR Red Hill
Associates, Inc., KR Seagate/
Gateway North, Inc., KR Venture
Way, Inc., KRKC, Inc., and
KRKFC, Inc.; Director and
Vice President, Kemper Real
Estate, Inc., Kemper/Cymrot
Management, Inc., and Kemper/
Cymrot, Inc.; Director, Community
Investment Corporation and
Continental Community Development
Corporation.

Gordon P. Wilson Executive Vice President Director, Kemper Investment
Management Company Limited;
Vice President and Director,
AMICO Realty Corporation,

BBC Associates, FKLA Realty
Corporation, FLA Realty
Corporation, KAAL PGA Sales,
Inc., Kemper International
Management, Inc., and Kemper
Realty Corporation; Vice
President, Kemper Global Income
Fund, Kemper International Fund,
Kemper Investors Fund, Kemper
Investors Portfolios, Kemper
Short-Term Global Income Fund,
Kemper Total Return Fund, and
The Growth Fund of Spain, Inc.

Joseph P. Beimford Senior Vice President Vice President, Galaxy Offshore,
Inc., Kemper High Income Trust,
Kemper Intermediate Government
Trust, Kemper Investors Fund,
Kemper Multi-Market Income Trust,
Kemper Municipal Bond Fund,
Kemper Municipal Income Trust,
Kemper State Tax-Free Income
Series, Kemper Strategic
Municipal Income Trust, and
Kemper U.S. Government Securities
Fund.

Robert J. Butler Senior Vice President Senior Vice President, Kemper
Service Company and Supervised
Service Company, Inc.; Vice
President, BBC Associates and
Kemper Realty Corporation.

Frank E. Collecchia Senior Vice President Senior Investment Officer,
Federal Kemper Insurance
Company, Federal Kemper Life
Assurance Company, Fidelity
Life Association, Kemper
Investors Life Insurance

Company, and Kemper Reinsurance
Company; Vice President, Galaxy
Offshore, Inc., Kemper
Adjustable Rate U.S. Government
Fund, Kemper Intermediate
Government Trust, Kemper
Investment Portfolios, Kemper
Investors Fund, Kemper
Multi-Market Income Trust,
Kemper Real Estate, Inc., KR 77
Fitness Center, Inc., KR
Avondale Redmond, Inc., KR
Black Mountain, Inc., KR
Brannan Resources, Inc., KR
Clay Capital, Inc., KR
Cranbury, Inc., KR Delta
Wetlands, Inc., KR Gainesville,
Inc., KR Gulf Coast Factory
Shops, Inc., KR Halawa
Associates, Inc., KR Lafayette
Apartments, Inc., KR Palm
Plaza, Inc., KR Peppertree,
Inc., KR Red Hill Associates,
Inc., KR Seagate/Gateway North,
Inc., KR Venture Way, Inc.,
KRKC, Inc., and KRKFC, Inc.

Beth C. Cotner Senior Vice President Trustee, Kemper Financial
Services, Inc. Profit Sharing
Plan; Vice President, Kemper
Investment Portfolios, Kemper
Investors Fund, and Kemper
Small Capitalization Equity Fund.

Richard S. Curto Senior Vice President General Partner, B R Management
Associates; Vice President,
AMICO Realty Corporation,
BBC Associates, FKLA Realty
Corporation, FLA Realty

Corporation, Investors
Brokerage Services, Inc.,
KAAL PGA Sales, Inc., Kemper
Real Estate, Inc., Kemper
Realty Corporation, KILICO
Realty Corporation, and KR 77
Fitness Center, Inc., KR
Avondale Redmond, Inc., KR
Black Mountain, Inc., KR
Brannan Resources, Inc., KR
Clay Capital, Inc., KR
Cranbury, Inc., KR Delta
Wetlands, Inc., KR Gainesville,
Inc., KR Gulf Coast Factory
Shops, Inc., KR Halawa
Associates, Inc., KR Lafayette
Apartments, Inc., KR Palm
Plaza, Inc., KR Peppertree,
Inc., KR Red Hill Associates,
Inc., KR Seagate/Gateway North,
Inc., KR Venture Way, Inc.,
KRKC, Inc., and KRKFC, Inc.;
Vice President and Assistant
Secretary, Kemper/Cymrot Management,
Inc., and Kemper/Cymrot, Inc.

Jerome L. Duffy Senior Vice President Treasurer, Kemper Closed-End
Funds, Kemper Investors Fund,
and Kemper Mutual Funds.

Harvey Glassman Senior Vice President Senior Vice President, Kemper
Sales Company.

Richard A. Goers Senior Vice President

Harold E. Guenther Senior Vice President Vice President, Galaxy
Offshore, Inc.

George Klein Senior Vice President Senior Vice President, Kemper

Asset Management Company.

Frank D. Korth Senior Vice President Vice President, Kemper
Environmental Services Fund
and Kemper Retirement Fund.

Gary A. Langbaum Senior Vice President

Stephen E. Lewis Senior Vice President Vice President, Kemper
Investment Portfolios and
Kemper Investors Fund.

Michael A. McNamara Senior Vice President Vice President, Kemper
Diversified Income Fund,
Kemper High Income Trust,
Kemper High Yield Fund,
Kemper Investment Portfolios,
and Kemper Investors Fund.

Ira Nathanson Senior Vice President Vice President, Kemper
Corporation; Senior Vice
President, Kemper Sales
Company.

James R. Neel Senior Vice President Vice President, Kemper Blue
Chip Fund.

Frank J. Rachwalski, Jr. Senior Vice President Vice President, Cash Account
Trust, Cash Equivalent Fund,
Investors Cash Trust, Kemper
Investment Portfolios, Kemper
Investors Fund, Kemper Money
Market Fund, Tax-Exempt
California Money Market Fund,
and Tax-Exempt New York Money
Market Fund.

Afzal (Tony) Raza Senior Vice President Vice President, Kemper
International Management, Inc.

Robert H. Schumacher Senior Vice President Vice President, Kemper
Adjustable Rate U.S. Government
Fund, Kemper Intermediate
Government Trust, Kemper
Investment Portfolios, Kemper
Investors Fund, and Kemper
U.S. Government Securities Fund.

John S. Serpe Senior Vice President

Robert S. Takazawa Senior Vice President Senior Vice President and
Director, Kemper Asset
Management Company.

Kenneth T. Urbaszewski Senior Vice President Vice President, Kemper High
Yield Fund, Kemper Intermediate
Government Trust, Kemper
Investment Portfolios, and
Kemper Multi-Market Income Trust.

Bruce A. Ebel Senior Vice President Senior Vice President, Kemper
Asset Management Company.

Dale S. Siligmueller Senior Vice President & Vice President and Chief
Chief Accounting Officer Accounting Officer, Kemper
Financial Companies, Inc.,
Kemper Real Estate, Inc.,
Kemper Sales Company, Kemper
Service Company, and Supervised
Service Company, Inc.; Director,
Vice President and Treasurer,
Selected Financial Services, Inc.;
Vice President and Treasurer,
Investors Brokerage Services,
Inc., Kemper Asset Management
Company, Kemper Real Estate
Management Company, Kemper
Residential Management Company,
KILICO Realty Corporation, KR

77 Fitness Center, Inc., KR
Avondale Redmond, Inc., KR
Black Mountain, Inc., KR
Brannan Resources, Inc., KR
Clay Capital, Inc., KR Cranbury,
Inc., KR Delta Wetlands, Inc.,
KR Gainesville, Inc., KR Gulf
Coast Factory Shops, Inc., KR
Halawa Associates, Inc., KR
Lafayette Apartments, Inc.,
KR Palm Plaza, Inc., KR
Peppertree, Inc., KR Red Hill
Associates, Inc., KR Seagate/
Gateway North, Inc., KR Venture
Way, Inc., KRKC, Inc., and KRKFC,
Inc.; Treasurer, Galaxy Offshore,
Inc., Kemper/Cymrot Management,
Inc., and Kemper/Cymrot, Inc.

Robert J. Williams Senior Vice President

David F. Dierenfeldt First Vice President, Vice President and Assistant
Associate General Counsel & Secretary, Kemper Investors
Assistant Secretary Fund; Secretary, Kemper/Cymrot
Management, Inc., and Kemper/
Cymrot, Inc.; Assistant Secretary,
Galaxy Offshore, Inc., Investors
Brokerage Services Insurance
Agency, Inc., Investors Brokerage
Services, Inc., Kemper Asset
Management Company, Kemper
International Management, Inc.,
Kemper Investment Management
Company Limited, Kemper Real
Estate Management Company, Kemper
Real Estate, Inc., Kemper
Residential Management Company,
Kemper Sales Company, Kemper
Service Company, KR 77 Fitness

Center, Inc., KR Avondale
Redmond, Inc., KR Black Mountain,
Inc., KR Brannan Resources, Inc.,
KR Clay Capital, Inc., KR Cranbury,
Inc., KR Delta Wetlands, Inc.,
KR Gainesville, Inc., KR Gulf
Coast Factory Shops, Inc., KR
Halawa Associates, Inc., KR
Lafayette Apartments, Inc., KR
Palm Plaza, Inc., KR Peppertree,
Inc., KR Red Hill Associates, Inc.,
KR Seagate/Gateway North, Inc.,
KR Venture Way, Inc., KRKC, Inc.,
KRKFC, Inc., Selected Financial
Services, Inc., and Supervised
Service Company, Inc.

Philip J. Collora First Vice President & Vice President and Assistant
Assistant Secretary Secretary, Kemper Closed-End Funds,
Kemper Investors Fund, and Kemper
Mutual Funds; Assistant Secretary,
Kemper International Management, Inc.

Michael K. Arends First Vice President Director, Donald L. Arends, Inc.;
Vice President, Kemper Investment
Portfolios, Kemper Investors Fund,
and Kemper Retirement Fund.

Michael A. Barrett First Vice President

Daniel J. Bukowski First Vice President

Robert S. Cassino First Vice President

Christine Chien First Vice President

Patrick H. Dudasik First Vice President

Remy M. Fisher First Vice President

Marshall L. Greenwald First Vice President

Michael E. Harrington First Vice President

Peter M. Jacobs First Vice President

Bruce H. Lauer First Vice President

Nancy A. Link First Vice President First Vice President, Kemper
Sales Company.

Susan McCrindle First Vice President Vice President, Kemper Sales
Company.

Christopher J. Mier First Vice President Vice President, Kemper
Municipal Bond Fund,
Kemper Municipal Income Trust,
Kemper State Tax-Free Income
Series, and Kemper Strategic
Municipal Income Trust.

Roberta L. Panozzo First Vice President

Harry E. Rasis First Vice President Vice President, Kemper High
Income Trust, Kemper Income
and Capital Preservation Fund,
and Kemper Investors Fund.

Terry Schreiner First Vice President

John E. Silvia First Vice President

Kai R. Sotorp First Vice President

David M. Swanson First Vice President Vice President, Kemper
Sales Company.

Christopher T. Vincent First Vice President

Kenneth M. Bazan Vice President

Foye P. Black Vice President Director, BBE Sound, Inc.,
Media Security, Inc., and
Sysgen, Inc.

Robert J. Boldt Vice President

Dale R. Burrow Vice President Vice President, Kemper
Strategic Municipal Income
Trust.

David H. Butler Vice President

Jerri I. Cohen Vice President

Catherine Cooper Vice President

Chris C. DeMaio Vice President Vice President, Kemper Service
Company and Supervised Service
Company, Inc.

Stephen P. Dexter Vice President

Daniel J. Doyle Vice President

James Fenger Vice President

August L. Geraci Vice President

Judith C. Goodwin Vice President

Robert C. Hogle Vice President

Steven A. Hoostal Vice President

Robert J. Horton Vice President

Bruce D. Innes Vice President Co-President, International

Association of Corporate and
Professional Recruiters.

William M. Keating Vice President

Carol L. Kiel Vice President

Deborah L. Koch Vice President

Robert J. Korslin Vice President Senior Vice President, Kemper
Real Estate Management Company
and Kemper Residential Management
Company.

Kathy J. Kranz Vice President

Pamela D. Krueger Vice President

Thomas J. Lefebvre Vice President

Ann T. Linehan Vice President

David J. Linehan Vice President

James C. Manthey Vice President

Karen B. McGovern Vice President

Gary L. Miller Vice President

Gene J. Miller Vice President

Edward Miner Vice President

Katherine H. Mitchell Vice President

Robert J. Moreland Vice President

G. Michael Oberst Vice President

Robert D. Payne Vice President

David A. Phillis Vice President

Susan E. Pontecore Vice President Vice President, Kemper Money
Market Fund and Tax-Exempt
California Money Market Fund.

Steve A. Radis Vice President Vice President, Kemper Sales
Company.

William M. Reckmeyer Vice President

Carolyn D. Schloss Vice President

Robert Schramm Vice President Vice President, Kemper
Service Company.

Kathleen A. Spiller Vice President

Richard B. Stern Vice President

John W. Stuebe Vice President Vice President, Cash Account
Trust and Cash Equivalent Fund.

Edith A. Thouin-Leerkamp Vice President

Jonathan W. Trutter Vice President

Michael L. Weisel Vice President

Elizabeth C. Werth Vice President Assistant Secretary, Kemper
Mutual Funds and Kemper
Retirement Fund.

Stephen R. Willson Vice President Vice President, Kemper
Strategic Municipal Income
Trust.

Mark E. Wittnebel Vice President

Larry R. Wonnacott Vice President Director, Interlinq Software
Corp.

William P. Kovacs Vice President and
Assistant Secretary

Paul M. Murphy Vice President and
Assistant Secretary

Diane E. Ratekin Assistant General Counsel &
Assistant Secretary

</TABLE>
<TABLE>

(1) (2) (3)
Other Substantial
Position with Phoenix Business, Profession,
Name Investment Counsel, Inc. Vocation or Employment
<S> <C> <C>
Patricia A. Bannan Director and President Vice President, Common Stock,
Phoenix Home Life Mutual
Insurance Company; Vice
President, Phoenix Series
Fund and The Phoenix Edge
Series Fund; Executive Vice
President, National
Securities & Research
Corporation.

Robert W. Fiondella Director Chairman, President and
Chief Executive Officer,
Phoenix Home Life Mutual
Insurance Company; Director,
Phoenix Equity Planning
Corporation, PHL Mutual
Funds Holdings, National

Securities & Research
Corporation, PM Holdings,
Inc. and Townsend Financial
Advisers, Inc.

Martin J. Gavin Director and Executive Senior Vice President,
Vice President Investment Products, Phoenix
Home Life Mutual Insurance
Company; Director and
Executive Vice President,
Phoenix Equity Planning
Corporation, PHL Mutual Funds
Holdings, Inc., National
Securities & Research
Corporation; Director, W.S.
Griffith & Co., Inc. and
Townsend Financial Advisers,
Inc.; Director and Vice
President, PM Holdings, Inc.;
Executive Vice President,
Phoenix Asset Reserve, Phoenix
California Tax-Exempt Bonds,
Inc., Phoenix Equity Opportunities
Fund, Phoenix Income and Growth
Fund, Phoenix Multi-Sector Fixed
Income Fund, Inc., and Phoenix
Worldwide Opportunities Fund.

Michael E. Haylon Director and Executive Senior Vice President, Securities
Vice President Investments, Phoenix Home Life
Mutual Insurance Company; Vice
President, Phoenix Series Fund,
The Phoenix Edge Series Fund,
and Phoenix Multi-Sector Fixed
Income Funds, Inc.; Director and
Executive Vice President, National
Securities & Research Corporation.

Philip R. McLoughlin Director Executive Vice President,
Investments, and Director, Phoenix
Home Life Mutual Insurance Company;
Director/Trustee of the Phoenix
Funds; Director and President,
Phoenix Equity Planning Corporation,
Phoenix Re Corporation (Delaware),
PM Holdings, Inc., World Trust Fund,
PHL Mutual Funds Holdings, Inc.;
Director, Chairman, and Chief
Executive Officer, National
Securities & Research Corporation;
Director, W.S. Griffith & Co., Inc.
and Townsend Financial Advisers, Inc.

Richard C. Shaw Director and Senior Senior Vice President,
Vice President International and Corporate
Development, Phoenix Home Life
Mutual Insurance Company;
Chairman, American Phoenix
Corporation; President,
Worldwide Phoenix, Limited;
Director, American Phoenix
Investment Portfolios.

Dona D. Young Director Executive Vice President,
Individual Sales & Marketing,
and General Counsel, Phoenix
Home Life Mutual Insurance
Company; Director, PHL Mutual
Funds Holdings, Inc., W.S.
Griffith & Co., Inc. and
Townsend Financial Advisers,
Inc.; Vice President, PM
Holdings, Inc.

Paul A. Atkins Senior Vice President Vice President, Institutional
Investment Sales, Phoenix Home
Life Mutual Insurance Company.

William R. Moyer Senior Vice President, Vice President, Investment
Finance, and Treasurer Products Finance, Phoenix Home
Life Mutual Insurance Company;
Senior Vice President, Finance,
Phoenix Equity Planning Corporation,
and PHL Mutual Funds Holdings,
Inc.; Senior Vice President,
Finance, and Treasurer, National
Securities & Research Corporation;
Senior Vice President, Chief
Financial Officer and Treasurer,
W.S. Griffith & Co., Inc. and
Townsend Financial Advisers, Inc.;
Vice President, the Phoenix Funds.

Michael K. Arends Vice President Portfolio Manager, Phoenix Home
Life Mutual Insurance Company;
Vice President, Phoenix Series
Fund and Phoenix Equity
Opportunities Fund; Portfolio
Manager, Kemper Investment
Portfolio Growth Fund (until
1994).

Holly S. Barrett Vice President Regional Vice President,
Phoenix Home Life Mutual
Insurance Company.

Curtiss O. Barrows Vice President Portfolio Manager, Public
Bonds, Phoenix Home Life
Mutual Insurance Company;
Vice President, Phoenix
Series Fund and The Phoenix
Edge Series Fund, and National
Securities & Research Corporation.

Kathleen A. Bloomquist Vice President Second Vice President,
Institutional Investments,

Phoenix Home Life Mutual
Insurance Company; Vice
President, Worldwide Phoenix
Limited.

James C. Bly Vice President Regional Group Pension Manager,
Phoenix Home Life Mutual
Insurance Company.

Nathaniel C. Brinn Vice President Managing Director, Private
Placements, Phoenix Home Life
Mutual Insurance Company.

Mary E. Canning Vice President Associate Portfolio Manager,
Common Stock, Phoenix Home
Life Mutual Insurance Company;
Vice President, Phoenix Series
Fund and The Phoenix Edge
Series Fund.

James M. Dolan Vice President, Assistant Vice President and Compliance
Clerk and Assistant Officer, Phoenix Equity Planning
Secretary Corporation; Vice President, the
Phoenix Funds and National
Securities & Research Corporation.

Jeanne H. Dorey Vice President Portfolio Manager, International,
Phoenix Home Life Mutual Insurance
Company; Vice President, The Phoenix
Edge Series Fund, Phoenix Multi-
Portfolio Fund, Phoenix Worldwide
Opportunities Fund and National
Securities & Research Corporation.

Catherine Dudley Vice President Portfolio Manager, Phoenix Home
Life Mutual Insurance Company;
Vice President, Multi-Portfolio
Fund, Phoenix Series Fund, The
Phoenix Edge Series Fund and

National Securities & Research
Corporation.

Jeanne T. Hanley Vice President Strategist, Common Stock, Phoenix
Home Life Mutual Insurance Company;
Vice President, The Phoenix Edge
Series Fund, Phoenix Series Fund
and National Securities & Research
Corporation.

Christopher J. Kellcher Vice President Portfolio Manager, Public Bonds,
Phoenix Home Life Mutual Insurance
Company; Vice President, Phoenix
Series Fund and The Phoenix Edge
Series Fund, and National
Securities & Research Corporation.

Michael R. Matty Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company; Vice President, Phoenix
Series Fund and National
Securities & Research Corporation.

Thomas S. Melvin, Jr. Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company; Vice President, Phoenix
Multi-Portfolio Fund; Executive
Vice President, National
Securities & Research Corporation.

Robert J. Milnamow Vice President Portfolio Manager, Common Stock,
Phoenix Home Life Mutual Insurance
Company; Vice President, Phoenix
Total Return Fund, Inc., The
Phoenix Edge Series Fund, Phoenix
Equity Opportunities Fund, and
National Securities & Research
Corporation.

Charles L. Olson Vice President Regional Marketing Manager,
Phoenix Home Life Mutual
Insurance Company.

Amy L. Robinson Vice President Managing Director, Trading,
Common Stock, Phoenix Home Life
Mutual Insurance Company; Vice
President, The Phoenix Edge Series
Fund, Phoenix Series Fund and
National Securities & Research
Corporation.

David M. Schans, C.L.U. Vice President Regional Group Pension Manager,
Phoenix Home Life Mutual Insurance
Company.

Dorothy J. Skaret Vice President Director, Public Fixed Income,
Phoenix Home Life Mutual Insurance
Company; Vice President, Phoenix
Series Fund, The Phoenix Edge
Series Fund and National
Securities & Research Corporation.

George L. Tillinghast, III Vice President Second Vice President, Institutional
Investment Marketing, Phoenix Home
Life Mutual Insurance Company.

James D. Wehr Vice President Managing Director, Public Fixed
Income, Phoenix Home Life Mutual
Insurance Company; Vice President,
Phoenix Multi-Portfolio Fund,
Phoenix Series Fund, The Phoenix
Edge Series Fund, Phoenix California
Tax-Exempt Bonds, Inc., and National
Securities & Research Corporation.

Virginia Spencer Clerk Legal Assistant, Sullivan & Worcester.

Patricia O. McLaughlin Secretary and Assistant Counsel, Phoenix Home Life Mutual

Clerk Insurance Company; Secretary,
National Securities & Research
Corporation, W.S. Griffith & Co.,
Inc. and Townsend Financial
Advisers, Inc.

</TABLE>

(1) (2) (3)
Other Substantial
Business, Profession,
Name Position with PIMCO Vocation or Employment

The information required by this Item 28 with respect to PIMCO is set forth in
the Form ADV, as amended, of PIMCO (File No. 801-7260), which is incorporated
herein by reference.

(1) (2) (3)
Position with Van Other Substantial
Kampen/American Capital Business, Profession,
Name Management Inc. Vocation or Employment

The information required by this Item 28 with respect to Van Kampen/American
Capital Management Inc. is set forth in the Form ADV, as amended, of Van
Kampen/American Capital Management Inc. (File No. 801-40808), which is
incorporated herein by reference.

(1) (2) (3)
Position with Other Substantial
Wellington Management Business, Profession,
Name Company Vocation or Employment

The information required by this Item 28 with respect to Wellington Management
Company is set forth in the Form ADV, as amended, of Wellington Management
Company (File No. 801-15908), which is incorporated herein by reference.

(1) (2) (3)
Other Substantial
Position with Scudder, Business, Profession,
Name Stevens & Clark, Inc. Vocation or Employment

The information required by this Item 28 with respect to Scudder is set forth in
the Form ADV, as amended, of Scudder (File No. 801-252), which is incorporated
herein by reference.

Item 29. Principal Underwriters:

(a) Cambridge Distributors, Inc., is the principal distributor for Class
A and Class B shares of the Registrant and acts as the principal
underwriter for the Registrant. Cambridge Distributors, Inc., is a
Virginia corporation and is an affiliate of Cambridge Investment
Advisors, Inc.
<TABLE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriters With Registrant
<S> <C> <C>
Peter J. Quinn, Jr. President and Director, President and Trustee
901 East Byrd Street Cambridge Distributors, Inc.
Richmond, VA 23219

Paul F. Costello Senior Vice President, Senior Vice President,
901 East Byrd Street Cambridge Distributors, Inc. Treasurer & Secretary
Richmond, VA 23219

Thomas Lee Souders Treasurer, Cambridge --
901 East Byrd Street Distributors, Inc.
Richmond, VA 23219

John Mark Harris Secretary, Cambridge --
901 East Byrd Street Distributors, Inc.
Richmond, VA 23219

John Michael Ivan Assistant Secretary, --
901 East Byrd Street Cambridge Distributors, Inc.
Richmond, VA 23219
</TABLE>

Item 30. Location of Accounts and Records: (1.)

1. Response is incorporated by reference to Registrant's Initial Registration
on Form N-1A filed January 31, 1992 (File Nos. 33-45315 and 811-6550).

Item 31. Management Services: Not applicable.

Item 32. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, CAMBRIDGE SERIES TRUST,

has duly caused this Amendment to its Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the
City of Richmond and Commonwealth of Virginia, on the 27th day of January,
1995. The Trust certifies that this Amendment meets all the requirements
for effectiveness under Rule 485(b).

CAMBRIDGE SERIES TRUST

By: /s/ Peter J. Quinn, Jr.
Peter J. Quinn, Jr.

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

Name Title Date

By: /s/ Peter J. Quinn, Jr. Attorney-in-Fact for January 27, 1995
Peter J. Quinn, Jr. the Persons Listed Below

Name Title Date

Daniel J. Ludeman* Chairman and Trustee
(Chief Executive Officer)

Peter J. Quinn, Jr.* President and Trustee

Paul F. Costello* Senior Vice President,
Treasurer, and Secretary
(Principal Financial and
Accounting Officer)

Arnold H. Dreyfuss* Trustee

Thomas F. Keller* Trustee

Louis W. Moelchert, Jr.* Trustee

Troy A. Peery, Jr.* Trustee

*By Power of Attorney

Exhibit 11(i)

The Trustees and Shareholders
Cambridge Series Trust

We consent to the use of our report dated November 11, 1994,
incorporated by reference herein, and to the reference to our
firm under the captions "FINANCIAL HIGHLIGHTS, CLASS A SHARES",
"FINANCIAL HIGHLIGHTS, CLASS B SHARES" and "INVESTMENT MANAGEMENT
OF THE TRUST, ADMINISTRATION OF THE TRUST, INDEPENDENT AUDITORS"
in the prospectus.

/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP

Boston, Massachusetts
January 27, 1995

Exhibit 11(ii)

The Board of Trustees
Cambridge Series Trust

The Board of Trustees
Mentor Series Trust

The Board of Trustees
Cash Resource Trust

The Board of Directors
Cambridge Investment Advisors, Inc.

The Board of Directors
Charter Asset Management, Inc.

We have examined the accompanying description of Net Asset Value
and Dividend/Distribution Determination for Multiple Classes of
Shares. Our examination included procedures to obtain reasonable
assurance about whether (1) the accompanying description presents
fairly, in all material respects, the specific control objectives
and the procedures that achieve those objectives relating to
those portions of the internal control structure for calculating
the net asset value and dividends and distributions with respect
to the allocation of income and expenses to the classes of shares
of Cambridge Series Trust, Mentor Series Trust and Cash Resource
Trust (the "Trusts") to be implemented upon commencement of
multiple class fund share sales, and (2) the control structure
policies and procedures included in the description were suitably
designed to achieve the control objectives specified in the Net
Asset Value and Dividend/Distribution Determination for Multiple
Classes of Shares, if those policies and procedures were complied
with satisfactorily. The control objectives were specified by
the Trusts. Our examination was performed in accordance with
standards established by the American Institute of Certified
Public Accountants and included those procedures we considered
necessary in the circumstances to obtain a reasonable basis for
rendering our opinion.

We did not perform procedures to determine the operating
effectiveness of policies and procedures for any period.
Accordingly, we express no opinion on the operating effectiveness
of any aspects of the policies and procedures of the Trusts' Net
Asset Value and Dividend/Distribution Determination for Multiple
Classes of Shares, individually or in the aggregate.

In our opinion, the accompanying description of the control
procedures included in the Net Asset Value and
Dividend/Distribution Determination for Multiple Classes of
Shares presents fairly, in all material respects, the relevant

aspects of the Trusts' Net Asset Value and Dividend/Distribution
Determination for Multiple Classes of Shares policies and
procedures that are to be implemented upon commencement of
multiple class fund share sales. Also, in our opinion, the
policies and procedures, as described, are suitably designed to
provide reasonable assurance that the specified control
objectives would be achieved if the described policies and
procedures were complied with satisfactorily.

The description of the control procedures included in the Net
Asset Value and Dividend/Distribution Determination for Multiple
Classes of Shares is as of May 7, 1993 and any projection of such
information to the future is subject to the risk that, because of
changes, the description may no longer portray the system in
existence. The potential effectiveness of specific policies and
procedures is subject to inherent limitations and, accordingly,
errors or irregularities may occur and not be detected.
Furthermore, the projection of any conclusions, based on our
findings, to future periods is subject to the risk that changes
may alter the validity of such conclusions.

This report is intended solely for use by the management of the
Trusts and the Securities and Exchange Commission and should be
used for any other purpose.

/s/ KPMG Peat Marwick

May 7, 1993

Exhibit I

NET ASSET VALUE AND DIVIDEND/DISTRIBUTION
DETERMINATION FOR MULTIPLE CLASSES OF SHARES

Description of the System

Cambridge Investment Advisors, Inc. and affiliates (collectively
referred to as "Cambridge" or the "Manager") intends to implement
a plan which would allow Cambridge Series Trust, Mentor Series
Trust and Cash Resource Trust ("the Trusts") to issue multiple
classes of shares in each fund of the Trusts under a Multi-Class
Distribution System ("the System"). Cambridge may also implement
multi-class distribution systems for other funds which it manages
or administers or which it or an affiliate distributes using
these same proposed procedures described herein.

The System would enable the Trusts to offer the following shares
of each fund:

(a) Class A shares would be sold subject to a front-end sales
load, would bear no Rule 12b-1 distribution fees, would be
subject to a shareholder servicing expense of up to 0.25% of
the average net assets of the Class annually, and would be
subject to a contingent deferred sales charge of up to 1.00%
if they were acquired (i) without a sales charge with the
proceeds from the redemption or sale of shares of another
investment company (which redemption did not result in the
payment by the investor of a contingent deferred sales
charge) and are redeemed within four years after such
acquisition or (ii) as part of a purchase, at net asset
value, of shares with an aggregate purchase price of $1
million or more and are redeemed within four years;

(b) Class B shares would be sold subject to no front-end sales
charges, but would be subject to a contingent deferred sales
charge of up to 1.00% on redemptions within the first year
after purchase, would bear Rule 12b-1 distribution fees of
up to 0.75% of average net assets annually (0.50% of average
net assets, in the case of some funds), and would be subject
to a shareholder servicing expense of up to 0.25% of average
net assets of the Class annually;

(c) Class C shares would be subject to a variable rate CDSC
(declining over time) for a period of several years after
purchase, would bear Rule 12b-1 distribution fees of up to
0.75% of average net assets annually, would be subject to a
shareholder servicing expense of up to 0.25% of the average
net assets of the Class annually, and would automatically
convert into Class A shares after a specified period
(currently expected to be six years) from the date of
purchase; and

(d) Class D shares would be subject to no sales charges and
no Rule 12b-1 fees and would bear lower levels of certain
other expenses than would the other classes.

The Class A, B, C and D shares of a fund will each represent
interest in the same portfolio of investments, and will be
identical in all respects, except that:

(1) Class B and Class C shares will each bear distribution
fees payable to the principal underwriter of the Fund in
question under plans adopted pursuant to Rule 12b-1 under
the Act ("Rule 12b-1"), whereas Class A shares will not bear
distribution fees, and Class D shares will not bear either
service or distribution fees;
(2) Class A, Class B, and Class C shares may bear different
administrative services fees than the Class D shares will
bear;
(3) the transfer agency fees payable by each class may differ;
(4) each class will bear its own expenses of qualifying its
shares under state "Blue Sky"' laws;
(5) Class A, Class B, and Class C shares will bear the costs
of printing the prospectuses and statements of additional
information relating to those classes whereas Class D shares
will bear the costs of printing the prospectus relating to
Class D shares; and
(6) only the Class B and Class C shares, respectively, will
have the right to vote with respect to the distribution
plans relating to those classes of shares.

Net Asset Value (NAV) and Dividend/Distribution Determination

The Trusts will be required to maintain records that account for
all classes of shares. Shares electing to be subject to a 12b-1
plan (Class B and C shares) will be charged with a fee (12b-1
fee) on a daily basis and shares subject to shareholder servicing
expense (Class A, B and C shares) will be charged shareholder
servicing expense on a daily basis. Thus, separate NAVs and/or
dividends and distributions must be calculated for each class of
shares. That is, net investment income, unrealized and realized
gains or losses will be allocated daily to each class of shares
based on the percentage of net assets relative to each class at
the beginning of the day. These balances will be accumulated by
class of shares.

On a daily basis, expenses are attributable to each class of
shares depending on the nature of the expenditures. These
expenditures fall into two categories; (1) expenses attributable
to all classes that are allocated based on net assets relative to
each class at the beginning of the day (e.g., legal, audit, etc.)
and, (2) certain expenses that have a higher cost for one class
versus the others (e.g., 12b-1 fees and transfer agent fees).
Prior to determining the day's NAV or dividends and
distributions, the following expense items must be calculated as
indicated:

(bullet) Investment Advisory Fee:

Using the beginning of the day's net assets for each
fund, calculate the current day's accrual and allocate
to each class. The effective rate used will be based on
the combined net assets of all classes of shares (i.e.,
total net assets of the Trust).

(bullet) 12b-1 fees and shareholder servicing fees:

For 12b-1 fees, calculate the current day's accrual
using the beginning of the day's net assets for Class B
and C shares.

For shareholder servicing expense, calculate the
current day's accrual using the beginning of the day's
net assets for Class A, B, and C shares.

(bullet) Class specific expenses (including Transfer Agent
fees):

Using existing budgets for each class of shares, accrue
separate daily amounts for each class.

(bullet) All other fund expenses:

Determine the daily accrual from fund level expense
budget and allocate to each class.

Internal Control Objectives

In designing accounting procedures and controls regarding the
allocation of income and expenses and the calculation of NAV and
dividends and distributions for the classes of shares the
following objectives must be met:

1. To ascertain that the direct expenses charged to each class
of shares are correctly recorded in the fund accounting
records and are allocated properly to the correct class of
shares,

2. To ascertain that income and operating expenses are
allocated properly to each class of shares based upon the
net assets relative to each class at the beginning of the
current day, and

3. To ascertain that the dividend rates and daily NAV per share
for each class of shares reflect the proper allocation of
income and operating expenses as well as the full amount of
any direct expenses charged to the respective class of
shares.

Set forth below are the additional procedures which will be
implemented to satisfy the objectives described above. These

procedures presume that the normal procedures and controls remain
in effect at State Street Bank and Trust Company for Cambridge
Series Trust and Mentor Series Trust, and Investors Fiduciary
Trust Company for Cash Resource Trust, and Cambridge
Administrative Services for Cambridge Series Trust, Charter Asset
Management and Investment Management Group, Inc. for Mentor
Series Trust, and Cambridge Investment Advisors, Inc. for Cash
Resource Trust, for all other daily fund accounting.

Presented on page I-6 is an example of a report, the Multi-Class
Pricing Worksheet (the "Worksheet") which will be used as a guide
for each class of shares, regardless of their dividend policy, to
assist in pricing the shares of the Trusts.

The primary purpose of the Worksheet is to recompute the
allocation percentages by class and to apply such percentages to
the various components of the daily net investment income (except
12b-1 fees and other expenses, if applicable, directly
attributable to a particular class) and realized/unrealized
gains/losses, and to determine the distributable net investment
income and net realized gain amounts. Additionally, the Worksheet
acts as a posting medium and control for the trial balance which
accumulates the information to arrive at the day's ending
balances for each class and total for the Trusts.

The Multi-Class Pricing Worksheet is used solely as an
illustration and may or may not resemble the actual format that
will eventually be used for the actual pricing of the Trusts.

The trial balance will be maintained for each fund in total and
by class in order to compute each class' NAV. The Worksheet also
includes a calculation of each class' NAV and acts as an
additional verification procedure.

1. For a fund that declares daily dividends of net investment
income, declares periodic distributions of net realized
gains on investments and does not distribute unrealized
gains:

Dividends/Distributions

- The distribution rate for net investment income by
class of shares will be determined either upon
completion of the Multi-Class Pricing Worksheet by
dividing daily net income by the number of current
dividend shares or by a fixed daily dividend rate
established by the Manager. The distribution rate
determined upon completion of the Multi-Class Pricing
Worksheet will be the basis for determining the source
(i.e. accumulated income or capital for income
distributions) for each distribution.

- The distribution rate for net long-term realized gains
will be determined either by taking all or a portion of

net long-term realized gains for the entire fund and
dividing by current shares outstanding or by a rate
established by the Manager.

NAV

- The NAV by class will be determined upon completion of
the Multi-Class Pricing Worksheet by dividing current
day's net assets applicable to a specific class by the
number of current shares outstanding related to that
class.

2. For a fund that distributes net investment income other
than daily, net long-term gains and net short-term gains on
a periodic basis, and does not distribute unrealized gains:

Dividends/Distributions

- The distribution rate for net investment income for
each class of shares will be determined by dividing net
income available for each class by the number of
current dividend shares outstanding for each class or
by a rate established by the Manager. The distribution
rate determined upon completion of the Multi-Class
Pricing Worksheet will be the basis for determining the
source (i.e. accumulated income or capital for income
distributions) for each distribution.

- The distribution rate for realized gains will be
determined either by taking all or a portion of net
realized gains for the entire fund and dividing by
current shares outstanding or by a rate established by
the Manager.

NAV

- After completing all posting to the respective class'
section on the trial balance, the NAV by class will be
determined by dividing the ending total net assets
applicable to the class by the number of shares
outstanding relating to that class.

Financial Reporting and Disclosure

Standard reporting practices as used in the following
descriptions refer to compliance with the current AICPA Audit and
Accounting Guide, Audits of Investment Companies with Conforming
Changes as of May 1, 1992 and Article 6 of Regulation S-X of the
Securities and Exchange Commission.

Schedule of Investments - Presented in accordance with standard
reporting practices.

Statement of Assets and Liabilities - Assets and liabilities
will be disclosed on a combined basis. Net asset value per
share data will be presented for each class as follows:

Net Asset Value Per Share (net assets/shares outstanding):
Class A Shares $__________
Class B Shares __________
Class C Shares __________
Class D Shares __________

Offering Price Per Share:
Class A Shares $__________

Shares Outstanding:
Class A Shares __________
Class B Shares __________
Class C Shares __________
Class D Shares __________

Statement of Operations - A standard reporting format will
be utilized with separate disclosure in the footnotes of
class specific expenses.

Statements of Changes in Net Assets - A standard reporting
format will be utilized with separate disclosure of
dividends and distributions. Transactions in capital share
activity for each class will be disclosed therein or within
the footnotes to the financial statements.

Financial Highlights - For each of the required reporting
periods, utilizing a standard format, we will show the
various per share data and ratios for each class, except for
portfolio turnover which will be shown in total.

Notes to Financial Statements - In addition to the standard
footnotes, the notes to the financial statements will
include additional disclosure as follows:

Footnote describing each class of shares and their
respective attributes.
Footnote describing the allocation of income, expense and
gain/loss to each class of shares and amounts of class
specific expenses charged to each class of shares.
Footnote disclosing the transactions in fund shares will
include the appropriate information for each class of
shares for the two most recent periods.