CAMBRIDGE SERIES TRUST, 497, 1995-04-14

CAMBRIDGE SERIES TRUST
497, 1995-04-14

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<PAGE>

THE MENTOR FUNDS

CROSS REFERENCE SHEET

(as required by Rule 404 (c))

Part A - The Mentor Funds

N-1A Item No. Location
- ------------ ---------

1. Cover Page...........................Cover Page
2. Synopsis.............................Cover Page; Summary of
Portfolio Expenses;
Financial Highlights
3. Condensed Financial Information......Summary of Portfolio
Expenses; Financial
Highlights
4. General Description of Registrant....Cover Page; Investment
Objectives and Policies;
General
5. Management of the Fund...............Investment Objectives
and Policies; Other Investment
Practices; Management of the Trust;
The Sub-Advisers;
Valuing Shares;
Distribution Plans;
Other Services; General;
Performance Information
5A. Management's Discussion
of Fund Performance.............(Contained in the Annual
Report of the Registrant
and the Annual Report of
Mentor Series Trust)
6. Capital Stock and Other
Securities......................How to Buy Shares;
Distributions and Taxes;
Management of the Trust;
General
7. Purchase of Securities Being
Offered.........................Sales Arrangements; How
to Buy Shares;
Management of the Trust
8. Redemption or Repurchase.............How to Buy Shares; How to
Sell Shares; How to Exchange
Shares
9. Pending Legal Proceedings............Not Applicable

<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 13, 1995
PROSPECTUS MAY , 1995
THE MENTOR FUNDS
The Mentor Funds, an open-end management investment company, is offering
shares of eight different investment portfolios by this Prospectus: Mentor
Growth Portfolio, Mentor Capital Growth Portfolio, Mentor Strategy Portfolio (a
total return fund), Mentor Income and Growth Portfolio, Mentor Perpetual Global
Portfolio (a global growth fund), Mentor Quality Income Portfolio, Mentor
Municipal Income Portfolio, and Mentor Short-Duration Income Portfolio. CERTAIN
OF THE PORTFOLIOS MAY USE "LEVERAGE" -- THAT IS, THEY MAY BORROW MONEY TO
PURCHASE ADDITIONAL PORTFOLIO SECURITIES, WHICH INVOLVES SPECIAL RISKS.
The Mentor Funds provides investors an opportunity to design their own
investment programs by investing in a variety of Portfolios offering a wide
array of investment strategies. Each Portfolio pursues its investment objectives
through the investment policies described in this Prospectus.
This Prospectus sets forth concisely the information about The Mentor Funds
that a prospective investor should know before investing. Please read this
Prospectus and retain it for future reference. You can find more detailed
information in the May , 1995 Statement of Additional Information, as amended
from time to time. For a free copy of the Statement or for other information,
please call 1-800-382-0016. The Statement has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. The
address of The Mentor Funds is P.O. Box 1357, Richmond, Virginia 23286-0109.
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 COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

RED HERRING
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.

<PAGE>
SUMMARY OF PORTFOLIO EXPENSES
Expenses are one of several factors to consider when investing in a
Portfolio. The following tables summarize your maximum transaction costs from
investing in each of the Portfolios. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in each of the Portfolios over
specified periods.
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)
Mentor Growth Portfolio...................................................................... 5.75% None
Mentor Capital Growth Portfolio.............................................................. 5.75% None
Mentor Strategy Portfolio.................................................................... 5.75% None
Mentor Income and Growth Portfolio........................................................... 5.75% None
Mentor Perpetual Global Portfolio............................................................ 5.75% None
Mentor Quality Income Portfolio.............................................................. 4.75% None
Mentor Municipal Income Portfolio............................................................ 4.75% None
Mentor Short-Duration Income Portfolio....................................................... 1.00% None
Maximum Sales Load Imposed on Reinvested Dividends............................................. None None
Exchange Fee................................................................................... None None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds)
Class A Shares*:
Mentor Short-Duration Income Portfolio.................................................. 1.00%**
Other Portfolios........................................................................ None
Class B Shares***:
</TABLE>

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF CONTINGENT DEFERRED SALES
APPLICABLE AMOUNT REDEEMED CHARGE AS A PERCENTAGE OF
(GROWTH, CAPITAL GROWTH, APPLICABLE AMOUNT REDEEMED
STRATEGY, INCOME AND (QUALITY INCOME, MUNICIPAL
YEAR SINCE GROWTH, AND GLOBAL INCOME, AND SHORT-DURATION
PURCHASE PAYMENT MADE PORTFOLIOS)**** INCOME PORTFOLIOS)****
<S> <C> <C>
First 4.0% 4.0%
Second 4.0% 4.0%
Third 3.0% 3.0%
Fourth 2.0% 2.0%
Fifth 1.0% 1.0%
Sixth None 1.0%
Seventh and Thereafter None None
</TABLE>

* A contingent deferred sales charge ("CDSC") of 1.00% is assessed on Class A
shares that were purchased without an initial sales charge as part of an
investment of over $1 million that are redeemed within one year of
purchase.
** On shares sold within one year of purchase.
*** A CDSC of 1.00% is assessed on Class B shares that are purchased pursuant
to certain asset-allocation plans and that are not otherwise subject to the
CDSC shown in the table, if those shares are redeemed within one year of
purchase. Consult Mentor Distributors, Inc.
**** The amount redeemed is computed as the lesser of the current net asset
value of the redemption amount, excluding reinvested distributions, and the
original purchase amount.
2

<PAGE>
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
INCOME SHORT-
CAPITAL AND QUALITY MUNICIPAL DURATION
GROWTH GROWTH STRATEGY GROWTH GLOBAL INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Management Fees
(after waiver)*..... 0.70% 0.80% 0.85% 0.75% 1.10% 0.50% 0.60% 0.00%
12b-1 Fees.......... None None None None None None None None
Shareholder Service
Fees................ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Other Expenses
(after waiver)*..... 0.37% 0.40% 0.37% 0.37% 0.65% 0.30% 0.30% 0.61%
Total Portfolio
Operating
Expenses........ 1.32% 1.45% 1.47% 1.37% 2.00% 1.05% 1.15% 0.86%
<CAPTION>
INCOME SHORT-
CAPITAL AND QUALITY MUNICIPAL DURATION
GROWTH GROWTH STRATEGY GROWTH GLOBAL INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
Management Fees
(after waiver)*..... 0.70% 0.80% 0.85% 0.75% 1.10% 0.50% 0.60% 0.00%
12b-1 Fees.......... 0.75% 0.75% 0.75% 0.75% 0.75% 0.50% 0.50% 0.30%
Shareholder Service
Fees................ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Total Other Expenses
(after waiver)*..... 0.37% 0.40% 0.37% 0.37% 0.65% 0.30% 0.30% 0.61%
Total Portfolio
Operating Expenses.. 2.07% 2.20% 2.22% 2.12% 2.75% 1.55% 1.65% 1.16%
</TABLE>

* In order to limit the Portfolios' operating expenses, the investment
advisers of each of the following Portfolios have agreed to limit
their compensation during the current fiscal year as shown in the
tables; in the absence of such limitations, the Portfolios'
Management Fees would be as follows: Mentor Quality Income
Portfolio -- 0.60%; Mentor Municipal Income Portfolio -- 0.60%;
Mentor Short-Duration Income Portfolio -- 0.50%. The amounts shown in
the tables reflect the Total Other Expenses and Total Portfolio
Operating Expenses each of the Portfolios expects to incur during the
current fiscal year. If the Total Portfolio Operating Expenses of any
Portfolio materially exceeds the amount shown, Mentor Investment
Group, Inc. intends to bear the Portfolio's expenses to that extent.
For their last fiscal year, the Portfolios' Total Other Expenses were
as follows: (in cases where those Expenses were reduced by fee
waivers, Total Other Expenses not reflecting fee waivers are shown in
parentheses): Mentor Growth Portfolio -- 0.31%; Mentor Capital Growth
Portfolio -- 0.65%; Mentor Strategy Portfolio -- 0.34% (0.42)%;
Mentor Income and Growth Portfolio -- 0.69% (0.78%); Mentor
Portfolio, -- 1.29% (1.83%); Mentor Quality Income Portfolio -- 0.53%
(0.55%); Mentor Municipal Income Portfolio -- 0.49% (0.58%); Mentor
Short-Duration Income Portfolio -- 0.74% (0.84%). Total Portfolio
Operating Expenses for each of the Portfolios during its last fiscal
year were as follows (in cases where those Expenses were reduced by
fee waivers, Total Portfolio Operating Expenses not reflecting fee
waivers are shown in parentheses): Mentor Growth Portfolio: Class
A -- NA; Class B -- 2.01%; Mentor Capital Growth Portfolio: Class
A -- 1.70%; Class B -- 2.45%; Mentor Strategy Portfolio: Class
A -- NA; Class B -- 2.19% (2.27%); Mentor Income and Growth
Portfolio: Class A -- 1.69% (1.78%); Class B -- 2.44% (2.53%); Mentor
Quality Income Portfolio: Class A -- 1.38% (1.40%); Class B -- 1.88%
(1.90%); Mentor Municipal Income Portfolio: Class A -- 1.24% (1.33%);
Class B -- 1.74% (1.83%); Mentor Short-Duration Income Portfolio;
Class A -- NA; Class B -- 1.29% (1.89%); Mentor Perpetual Global
Portfolio: Class A -- 2.09% (3.18%); Class B -- 2.84% (3.93%).
3

<PAGE>
EXAMPLES
You would pay the following expenses on a $1,000 investment,
assuming 5% annual return and no redemption at the end of each period:
<TABLE>
<CAPTION>
INCOME SHORT-
CAPITAL AND QUALITY MUNICIPAL DURATION
GROWTH GROWTH STRATEGY GROWTH GLOBAL INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
1 year............ $ 70 $ 71 $ 72 $ 71 $ 77 $ 58 $ 59 $ 19
3 years........... 97 101 101 98 117 79 82 37
5 years........... 126 132 133 128 159 103 108 57
10 years.......... 207 221 223 213 277 170 181 115
CLASS B SHARES
1 Year............ $ 21 $ 22 $ 23 $ 22 $ 28 $ 16 $ 17 $ 12
3 years........... 65 69 69 66 85 49 52 37
5 years........... 111 118 119 114 145 84 90 64
10 years.......... 240 253 255 245 308 185 195 141
</TABLE>

You would pay the following expenses on a $1,000 investment
assuming redemption at the end of each period:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
1 year............ $ 70 $ 71 $ 72 $ 71 $ 77 $ 58 $ 59 $ 29
3 years........... 97 101 101 98 117 79 82 37
5 years........... 126 132 133 128 159 103 108 57
10 years.......... 207 221 223 213 277 170 181 115
CLASS B SHARES
1 year............ $ 61 $ 62 $ 63 $ 62 $ 68 $ 56 $ 57 $ 52
3 years........... 95 99 99 96 115 79 82 37
5 years........... 121 128 129 124 155 94 100 64
10 years.......... 240 253 255 245 308 185 195 141
</TABLE>

The tables are provided to help you understand the expenses of
investing in each of the Portfolios and your share of the operating
expenses of each of the Portfolios. The information concerning each
Portfolio is based on its most recent fiscal year, other than
information concerning the Mentor Short-Duration Income Portfolio,
which is based on estimated expenses for the Portfolio's first fiscal
year. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
PERFORMANCE; ACTUAL EXPENSES MAY VARY. Long-term Class B shareholders
may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the rules of the National Association of
Securities Dealers, Inc.
4

<PAGE>
FINANCIAL HIGHLIGHTS
MENTOR CAPITAL GROWTH, MENTOR QUALITY INCOME,
MENTOR MUNICIPAL INCOME, MENTOR INCOME AND GROWTH, AND
MENTOR PERPETUAL GLOBAL PORTFOLIOS
(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 Portfolio's financial statements and notes
thereto, which are included in the Statement of Additional Information
and which may be obtained free of charge from the Trust. Until April
12, 1995, Mentor Quality Income Portfolio was known as "Cambridge
Government Income Portfolio"; until that time, the Portfolio was
required, among other things, to invest at least 65% of its assets in
U.S. Government securities.
CLASS A SHARES
<TABLE>
<CAPTION>

MENTOR MUNICIPAL
INCOME PORTFOLIO
MENTOR CAPITAL GROWTH PORTFOLIO MENTOR QUALITY INCOME PORTFOLIO (FORMERLY CAMBRIDGE
(FORMERLY CAMBRIDGE CAPITAL (FORMERLY CAMBRIDGE GOVERNMENT MUNICIPAL INCOME
GROWTH PORTFOLIO) INCOME PORTFOLIO) PORTFOLIO)
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992* 1994 1993 1992* 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD...... $ 15.26 $ 14.21 $ 14.18 $ 14.04 $ 14.39 $ 14.30 $ 16.05 $ 14.76
Income from investment
operations
Net investment income
(loss)............... 0.09 0.14 0.08 0.84 1.06 0.44 0.82 0.92
Net realized and
unrealized gain
(loss) on
investments.......... (0.30) 1.02 0.03 (1.30) (0.31) 0.09 (1.54) 1.32
Total from investment
operations........... (0.21) 1.16 0.11 (0.46) 0.75 0.53 (0.72) 2.24
Less distributions
Dividends from
income............... (0.04) (0.11) (0.08) (0.83) (1.06) (0.44) (0.81) (0.92)
Distributions from
capital gains........ (0.13) -- -- -- -- -- (0.10) --
Distributions in excess
of net investment
income............... -- -- -- -- (0.04) -- -- (0.03)
NET ASSET VALUE PER SHARE,
END OF PERIOD............ $ 14.88 $ 15.26 $ 14.21 $ 12.75 $ 14.04 $ 14.39 $ 14.42 $ 16.05
Total return.............. (1.37%) 8.21% 0.78% (3.39%) 5.41% 3.37% (4.83%) 16.00%
Ratios to Average Net
Assets(a)
Expenses................. 1.70% 1.49% 1.14% 1.38% 1.04% 0.36% 1.24% 0.71%
Net investment income
(loss)................. 0.53% 0.96% 1.54% 6.33% 7.31% 8.00% 5.43% 5.92%
Expense adjustment(b).... -- 0.10% 0.29% 0.01% 0.18% 0.85% 0.09% 0.68%
Supplemental Data
Net assets, end of period
(000 omitted).......... $21,181 $31,360 $20,864 $30,142 $ 47,780 $36,740 $25,056 $29,245
Portfolio turnover
rate................... 149% 192% 61% 455% 102% 9% 87% 88%
<CAPTION>

MENTOR INCOME AND
GROWTH MENTOR PERPETUAL
PORTFOLIO (FORMERLY GLOBAL PORTFOLIO
CAMBRIDGE INCOME (FORMERLY
AND GROWTH CAMBRIDGE GLOBAL
PORTFOLIO) PORTFOLIO)
SEPTEMBER 30, SEPTEMBER 30,
1992* 1994 1993** 1994***
<S> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD...... $ 14.29 $ 14.88 $ 14.14 $ 14.18
Income from investment
operations
Net investment income
(loss)............... 0.32 0.31 0.09 (0.01)
Net realized and
unrealized gain
(loss) on
investments.......... 0.47 0.64 0.73 0.06
Total from investment
operations........... 0.79 0.95 0.82 0.05
Less distributions
Dividends from
income............... (0.32) (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............ $ 14.76 $ 15.27 $ 14.88 $ 14.23
Total return.............. 5.34% 6.54% 5.54% 0.35%
Ratios to Average Net
Assets(a)
Expenses................. 0.00% 1.75% 1.56% 2.09%
Net investment income
(loss)................. 6.21% 2.20% 2.35% (0.10%)
Expense adjustment(b).... 1.26% -- 0.38% 1.09%
Supplemental Data
Net assets, end of period
(000 omitted).......... $18,801 $17,773 $ 9,849 $ 8,882
Portfolio turnover
rate................... 0% 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.
5

<PAGE>
CLASS B SHARES
<TABLE>
<CAPTION>
MENTOR MUNICIPAL
INCOME PORTFOLIO
MENTOR CAPITAL GROWTH PORTFOLIO (FORMERLY CAMBRIDGE
(FORMERLY CAMBRIDGE CAPITAL MENTOR QUALITY INCOME PORTFOLIO MUNICIPAL INCOME
GROWTH PORTFOLIO) (FORMERLY CAMBRIDGE GOVERNMENT PORTFOLIO)
SEPTEMBER 30, INCOME PORTFOLIO) SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992* 1994 1993 1992* 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD...... $ 15.23 $ 14.22 $ 14.18 $ 14.06 $ 14.40 $ 14.30 $ 16.06 $ 14.78
Income from investment
operations
Net investment income
(loss)............... (0.04) 0.05 0.46 0.82 0.99 0.41 0.74 0.82
Net realized and
unrealized gain
(loss) on
investments.......... (0.26) 1.02 0.04 (1.37) (0.31) 0.10 (1.54) 1.32
Total from investment
operations........... (0.30) 1.07 0.50 (0.55) 0.68 0.51 (0.80) 2.14
Less distributions
Dividends from
income............... -- (0.05) (0.46) (0.75) (0.99) (0.41) (0.73) (0.82)
Distributions from
capital gains........ (0.13) -- -- -- -- -- (0.10) --
Distributions in excess
of net investment
income............... -- (0.01) -- -- (0.03) -- -- (0.04)
NET ASSET VALUE PER SHARE,
END OF PERIOD............ $ 14.80 $ 15.23 $ 14.22 $ 12.76 $ 14.06 $ 14.40 $ 14.43 $ 16.06
Total return.............. (2.00%) 7.52% 0.61% (3.97%) 4.86% 3.24% (5.34%) 15.27%
Ratios to Average Net
Assets(a)
Expenses................. 2.46% 2.24% 1.86% 1.88% 1.54% 0.83% 1.74% 1.21%
Net investment income
(loss)................. (0.22%) 0.21% 0.83% 6.21% 6.81% 7.53% 4.93% 5.42%
Expense adjustment(b).... -- 0.10% 0.30% 0.02% 0.18% 0.84% 0.12% 0.68%
Supplemental Data
Net assets, end of period
(000 omitted).......... $41,106 $57,030 $25,468 $77,888 $127,346 $65,661 $46,157 $50,976
Portfolio turnover
rate................... 149% 192% 61% 455% 102% 9% 87% 88%
<CAPTION>

MENTOR INCOME AND
GROWTH MENTOR PERPETUAL
PORTFOLIO (FORMERLY GLOBAL PORTFOLIO
CAMBRIDGE INCOME (FORMERLY
AND GROWTH CAMBRIDGE GLOBAL
PORTFOLIO) PORTFOLIO)
SEPTEMBER 30, SEPTEMBER 30,
1992* 1994 1993** 1994***
<S> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE,
BEGINNING OF PERIOD...... $ 14.29 $ 14.91 $ 14.14 $ 14.18
Income from investment
operations
Net investment income
(loss)............... 0.29 0.21 0.05 (0.04)
Net realized and
unrealized gain
(loss) on
investments.......... 0.49 0.61 0.77 0.01
Total from investment
operations........... 0.78 0.82 0.82 (0.03)
Less distributions
Dividends from
income............... (0.29) (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............ $ 14.78 $ 15.28 $ 14.91 $ 14.15
Total return.............. 5.28% 5.66% 5.54% (0.21%)
Ratios to Average Net
Assets(a)
Expenses................. 0.50% 2.44% 2.31% 2.79%
Net investment income
(loss)................. 5.80% 1.51% 1.60% (0.82%)
Expense adjustment(b).... 1.26% -- 0.38% (1.14%)
Supplemental Data
Net assets, end of period
(000 omitted).......... $24,265 $43,219 $18,127 $ 7,987
Portfolio turnover
rate................... 0% 78% 13% 2%
</TABLE>

<PAGE>
FINANCIAL HIGHLIGHTS
MENTOR GROWTH, MENTOR STRATEGY, AND
MENTOR SHORT-DURATION INCOME PORTFOLIOS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIO
The following table has been audited by KPMG Peat Marwick LLP, the
Trust's independent auditors. Their report dated February 3, 1995 on
the Portfolios' financial statements for the period ended December 31,
1994 is included in the Annual Report dated December 31, 1994. This
table should be read in conjunction with each Portfolio's financial
statements and notes thereto, which are included in the Statement of
Additional Information and which may be obtained free of charge from
the Trust. The Growth, Strategy, and Short-Duration Income Portfolios
are successors to the Mentor Growth, Strategy, and Short-Duration
Income Funds, each of which was a series of shares of beneficial
interest of Mentor Series Trust, a Massachusetts business trust. Each
of those Funds offered only one class of shares prior to December 31,
1994.
<TABLE>
<CAPTION>
MENTOR GROWTH PORTFOLIO
NINE MOS.
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER
1994 1993 1992 1991 1990 1989 1988 31, 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
NET ASSET
VALUE,
BEGINNING
OF
PERIOD..... $ 13.78 $ 12.81 $ 12.16 $ 8.37 $ 9.63 $ 8.54 $ 7.45 $ 9.91
Net
investment
income
(loss)..... (0.15) (0.08) (0.06) (0.09) 0.02 0.13 0.01 (0.01)
Net realized
and
unrealized
gain (loss)
on
investments... (0.47) 2.07 1.94 4.30 (1.10) 1.35 1.24 (2.32)
Total from
investment
operations... (0.62) 1.99 1.88 4.21 (1.08) 1.48 1.25 (2.33)
Less
Distributions
Dividends
from net
investment
income... -- -- -- -- (0.05) (0.12) (0.01) --
Distributions
from
capital
gains.... (1.00) (1.02) (1.23) (0.42) (0.13) (0.27) (0.15) (0.13)
Distributions
in excess
of
capital
gains.... (0.01) -- -- -- -- -- -- --
Total
distributions.. (1.01) (1.02) (1.23) (0.42) (0.18) (0.39) (0.16) (0.13)
NET ASSET
VALUE, END
OF
PERIOD..... $ 12.15 $ 13.78 $ 12.81 $ 12.16 $ 8.37 $ 9.63 $ 8.54 $ 7.45
Total
return..... (4.48%) 15.60% 15.46% 50.30% (11.21%) 17.33% 16.78% (23.47%)
Ratios/Supplemental
Data
Net assets,
end of
period, (in
000's)..... $190,126 $186,978 $136,053 $108,719 $ 83,540 $107,315 $ 96,425 $ 92,763
Ratio of
expenses to
average net
assets..... 2.01% 2.02% 2.05% 2.17% 2.25% 2.24% 2.19% 2.18%(a)
Ratio of net
investment
income
(loss) to
average net
assets..... (1.20%) (1.12%) (0.76%) (0.80%) 0.26% 1.36% 0.16% (0.19%)(a)
Portfolio
turnover
rate..... 77% 64% 50% 40% 50% 26% 31% 33%
<CAPTION>
MENTOR
SHORT-
MENTOR STRATEGY DURATION
PORTFOLIO INCOME
YEAR YEAR PORTFOLIO
ENDED PERIOD ENDED 10/29/93* PERIOD
MARCH 4/16/85* TO DECEMBER TO 04/29/94* TO
31, 1987 3/31/86 31, 1994 12/31/93 12/31/94
<S> <C> <C> <C> <C> <C>
Per Share
Operating
Performance
NET ASSET
VALUE,
BEGINNING
OF
PERIOD..... $ 9.34 $ 6.67 $ 12.70 $ 12.50 $ 12.50
Net
investment
income
(loss)..... (0.01) (0.03) (0.06) -- 0.41
Net realized
and
unrealized
gain (loss)
on
investments 0.92 2.70 (0.40) 0.20 (0.29)
Total from
investment

operations. 0.91 2.67 (0.46) 0.20 0.12
Less
Distribution
Dividends
from net
investment
income... -- -- -- -- (0.41)

Distribution
from
capital
gains.... (0.34) -- -- -- (0.03)

Distribution
in excess
of
capital
gains.... -- --
Total
distribution (0.34) -- -- -- (0.44)
NET ASSET
VALUE, END
OF
PERIOD..... 9.91 $ 9.34 $ 12.24 $ 12.70 $ 12.18
Total
return..... 9.74% 41.77% (3.61%) 1.60% 0.95%
Ratios/Suppl
Data
Net assets,
end of
period, (in
000's)..... $113,317 $ 63,767 $ 179,274 $122,177 $ 17,144
Ratio of
expenses to
average net
assets..... 2.16% 2.43%(a) 2.19% 2.06%(a) 1.29%(a)
Ratio of net
investment
income
(loss) to
average net
assets..... (0.18%) (0.53%)(a) (0.54%) 0.08%(a) 4.90%(a)
Portfolio
turnover
rate..... 34% 35% 143% 0% 166%
</TABLE>

* Commencement of operations
(a) Determined on an annualized basis
7

INVESTMENT OBJECTIVES AND POLICIES
The Trust is offering shares of eight Portfolios by this Prospectus. Each
Portfolio has a different investment objective or objectives which it pursues
through the investment policies described below. The differences in objectives
and policies among the Portfolios can be expected to affect the investment
return of each Portfolio and the degree of market and financial risk of an
investment in each Portfolio. Except for the investment policies designated in
this Prospectus or the Statement of Additional Information as fundamental, the
investment policies described herein are not fundamental and may be changed by
approval of the Trustees without shareholder approval. There can, of course, be
no assurance that any Portfolio will achieve its investment objective. The
investment objectives of the Portfolios, other than those of the Strategy
Portfolio and the Short-Duration Income Portfolio, are fundamental policies and
may not be changed without shareholder approval.

MENTOR GROWTH PORTFOLIO (FORMERLY, MENTOR GROWTH FUND)
INVESTMENT ADVISER: CHARTER ASSET MANAGEMENT, INC. ("CHARTER")
The Growth Portfolio's investment objective is long-term capital growth.
Although the Portfolio may receive current income from dividends, interest, and
other sources, income is only an incidental consideration.
The Portfolio attempts to achieve long-term capital growth by investing in
a diversified portfolio of securities. Under normal circumstances at least 75%
of the Portfolio's assets will be invested in common stocks of companies
domiciled in or located throughout the United States. Although the Portfolio may
invest in companies of any size, the Portfolio invests principally in common
stocks of companies with market capitalizations in excess of $30 million which,
in the opinion of Charter, have demonstrated earnings, asset values, or growth
potential not yet reflected in their market price. A key indication of such
undervaluation considered by Charter is earnings growth which is above average
as compared to the S&P 500 Index. Other important factors in selecting
investments include a strong balance sheet and product leadership in niche
markets. Charter believes that such investments may offer better than average
potential for long-term capital growth.
MENTOR CAPITAL GROWTH PORTFOLIO (FORMERLY, CAMBRIDGE CAPITAL GROWTH PORTFOLIO)
INVESTMENT ADVISER: COMMONWEALTH ADVISORS, INC. ("COMMONWEALTH ADVISORS")
The investment objective of the Capital Growth Portfolio is to provide
long-term appreciation of capital. The Portfolio may invest in a wide variety of
securities which Commonwealth Advisors believes offers the potential for capital
appreciation over both the intermediate and long term. The Portfolio does not
invest for current income.
The Portfolio invests primarily in common stocks of companies believed by
Commonwealth Advisors to have potential for capital appreciation. The Portfolio
may invest without limit in preferred stocks, investment-grade bonds,
convertible preferred stocks, and convertible debentures and any other class or
type of security Commonwealth Advisors believes offers potential for capital
appreciation. In selecting investments, Commonwealth Advisors will attempt to
identify securities it believes will provide capital appreciation over the
intermediate or long term due to change in the financial condition of their
issuers, changes in financial condition, or other factors. The Portfolio also
may invest in fixed-income securities, and cash or money market investments, for
temporary defensive purposes.
8

<PAGE>
MENTOR STRATEGY PORTFOLIO (FORMERLY, MENTOR STRATEGY FUND)
INVESTMENT ADVISER: WELLESLEY ADVISORS, INC. ("WELLESLEY")
The Strategy Portfolio's investment objective is to seek high total return
on its investments. In seeking to achieve this objective, Wellesley actively
allocates the Portfolio's assets among the major asset categories of equity
securities, fixed-income securities, and money market instruments. Total return
consists of current income (including dividends, interest, and, in the case of
discounted instruments, discount accruals) and capital appreciation (including
realized and unrealized capital gains and losses).
Wellesley believes that the Portfolio has the potential to achieve
above-average investment returns at comparatively lower risk by actively
allocating its resources among the equity, debt, and money market sectors of the
market as opposed to relying solely on just one market sector. For example,
Wellesley may at times believe that the equity market holds a higher potential
for total return than the debt market and that a relatively large portion of the
Portfolio's assets should be allocated to the equity market sector. The reverse
would be true at times when Wellesley believes that the potential for total
return in the bond market is greater than that in the equity market. Wellesley
might also allocate the Portfolio's investments to short-term bonds and money
market instruments in order to earn current return and to reduce the potential
adverse effect of declines in the bond and equity markets. After determining the
portions of the Portfolio's assets to be invested in the various market sectors,
Wellesley attempts to select the securities of companies within those sectors
offering potential for above-average total return. The achievement of the
Portfolio's investment objective depends upon, among other things, the ability
of Wellesley to assess correctly the effects of economic and market trends on
different sectors of the market. The Portfolio's investments may include both
securities of U.S. issuers and securities traded principally in foreign markets.
Within the equity sector, Wellesley actively allocates the Portfolio's
assets to those industries and issuers it expects to benefit from major market
trends or which it otherwise believes offer the potential for above-average
total return. The Portfolio may purchase equity securities (including
convertible debt obligations and convertible preferred stock) sold on the New
York, American, and other U.S. or foreign stock exchanges and in the over-the-
counter market.
Within the fixed-income sector, Wellesley seeks to maximize the return on
its investments by adjusting maturities and coupon rates as well as by
exploiting yield differentials among different types of investment-grade
securities. The Portfolio may invest in debt securities of any maturity,
preferred stocks, and other fixed-income instruments, including, for example,
U.S. Government securities and corporate debt securities (including zero-coupon
securities). The Portfolio will only invest in debt securities which are rated
at the time of purchase Baa or better by Moody's Investors Service, Inc.
("Moody's") or BBB or better by Standard & Poor's ("S&P") or which, if unrated,
are deemed by Wellesley to be of comparable quality. While bonds rated Baa or
BBB are considered to be of investment grade, they have speculative
characteristics as well. A description of securities ratings is contained in the
Appendix to this Prospectus.
The money market portion of the Portfolio will contain short-term
fixed-income securities issued by private and governmental institutions. Such
securities may include, for example, U.S. Government securities; bank
obligations; Eurodollar certificates of deposit issued by foreign branches of
domestic banks; obligations of savings institutions; fully insured certificates
of deposit; and commercial paper rated within the two highest grades by S&P or
the highest grade by Moody's or, if not rated, issued by a company having an
outstanding debt issue rated at least Aa by Moody's or AA by S&P.
9

<PAGE>
MENTOR INCOME AND GROWTH PORTFOLIO (FORMERLY, CAMBRIDGE INCOME AND GROWTH
PORTFOLIO)
INVESTMENT ADVISER: COMMONWEALTH ADVISORS, INC.
SUB-ADVISER: WELLINGTON MANAGEMENT COMPANY ("WELLINGTON")
The investment objective of the Income and Growth Portfolio is to provide a
conservative combination of income and growth of capital, consistent with
capital protection. The Portfolio invests in a diversified portfolio of equity
securities of companies Wellington believes exhibit sound fundamental
characteristics and in investment-grade fixed-income securities and U.S.
Government securities, as described below.
Wellington will manage the allocation of assets among asset classes based
upon its analysis of economic conditions, relative fundamental values and the
attractiveness of each asset class, and expected future returns of each asset
class. The Portfolio will normally have some portion of its assets invested in
each asset class at all times but may invest without limit in any asset class.
The Portfolio may invest in a wide variety of equity securities, such as
common stocks and preferred stocks, as well as debt securities convertible into
equity securities or that are accompanied by warrants or other equity
securities. In selecting equity investments, Wellington will attempt to identify
securities of out-of- favor companies which Wellington believes are undervalued.
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. These decisions are based
primarily on Wellington's fundamental research and security valuations.
Within the fixed-income asset class, Wellington seeks to invest in a
portfolio that provides as high a level of current income as is consistent with
prudent investment risk. The Portfolio may invest in debt securities of any
maturity, preferred stocks, and other fixed-income instruments, including, for
example, U.S. Government securities and corporate debt securities (including
zero-coupon securities). The Portfolio will only invest in debt securities which
are rated at the time of purchase Baa or better by Moody's or BBB or better by
S&P or which, if unrated, are deemed by Wellesley to be of comparable quality.
While fixed-income securities rated Baa or BBB are considered to be of
investment grade, they have speculative characteristics as well. The Portfolio
will not necessarily dispose of a security when its rating is reduced below its
rating at the time of purchase, although Wellington will monitor the investment
to determine whether continued investment in the security will assist in meeting
the Portfolio's investment objective. A description of securities ratings is
contained in the Appendix to this Prospectus.
The Portfolio may invest up to 10% (determined at the time of investment)
of its assets in securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests in real estate. The
Portfolio will limit its investment in real estate investment trusts to 10% of
its total assets (determined at the time of investment). Such investments may
involve many of the risks of direct investment in real estate, such as declines
in the value of real estate, risks related to general and local economic
conditions, and adverse changes in interest rates. Other risks associated with
real estate investment trusts include lack of diversification, borrower default,
and voluntary liquidation.
MENTOR PERPETUAL GLOBAL PORTFOLIO (FORMERLY, CAMBRIDGE GLOBAL PORTFOLIO)
INVESTMENT ADVISER: COMMONWEALTH ADVISORS, INC.
SUB-ADVISER: PERPETUAL PORTFOLIO MANAGEMENT LIMITED ("PERPETUAL")
The investment objective of the 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,
securities convertible into common stocks, and warrants. Perpetual may invest
the Portfolio's assets in equity securities
10

<PAGE>
of companies located anywhere in the world. The Portfolio may also invest in
debt securities of U.S. and foreign issuers, although current income will be
only an incidental consideration.
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 invest all of its assets in securities
of issuers outside the United States, and for temporary defensive purposes may
at times invest all of its assets in securities of U.S. issuers. The Portfolio
may invest in securities of issuers in emerging markets, as well as more
developed markets. Investing in emerging markets generally involves more risks
than investing in developed markets. See "Investment Practices" below.
The Portfolio will generally invest in common stocks of established
companies listed on U.S. or foreign securities exchanges, but also may invest in
over-the-counter securities. The Portfolio may also invest in preferred stocks,
debt securities and fixed-income securities of private or governmental issuers
(including zero-coupon securities) which Perpetual believes offers the potential
for capital appreciation. The Portfolio may invest in closed-end investment
companies holding foreign securities. These debt and fixed income securities
will be predominantly investment-grade securities or those of equivalent quality
as determined by Perpetual. 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 Perpetual to be of comparable quality. The Portfolio will
not necessarily dispose of a security when its rating is reduced below its
rating at the time of purchase, although Perpetual will monitor the investment
to determine whether continued investment in the security will assist in meeting
the Portfolio's investment objective. Securities rated below investment grade
are commonly referred to as "junk bonds" and are predominately speculative.
Securities rated investment grade (BBB/Baa or above) may have speculative
characteristics. The Portfolio also may invest in cash or cash equivalents,
including foreign money market instruments, for temporary defensive purposes.
MENTOR QUALITY INCOME PORTFOLIO (FORMERLY, CAMBRIDGE GOVERNMENT INCOME
PORTFOLIO)
INVESTMENT ADVISER: COMMONWEALTH ADVISORS, INC.
The Quality Income Portfolio's investment objective is to seek high current
income consistent with what Commonwealth Advisors believes to be prudent risk.
The Portfolio may invest in debt securities, including both government and
corporate obligations, and in other income-producing securities, including
preferred stocks and dividend-paying common stocks. The Portfolio may also hold
a portion of its assets in cash or money market instruments. There can, of
course, be no assurance that the Portfolio will achieve its investment
objective.
The Portfolio will invest in U.S. Government securities and in debt
securities and preferred stocks rated investment grade (or, if unrated,
considered by Commonwealth Advisors to be of comparable quality). A security
will be deemed to be of "investment grade" if, at the time of investment by the
Portfolio, it is rated at least Baa3 by Moody's or BBB- by Standard & Poor's or
at a comparable rating by another nationally recognized rating organization, or,
if unrated, determined by Commonwealth Advisors to be of comparable quality.
Securities rated Baa or BBB lack outstanding investment characteristics and have
speculative characteristics and are subject to greater credit and market risks
than higher-rated securities. The Portfolio will normally invest at least 80% of
its assets in U.S. Government securities and in other securities rated at least
A by Moody's or Standard & Poor's or at a comparable rating by another
nationally recognized rating organization, or, if unrated, determined by
Commonwealth Advisors to be of comparable quality.
Commonwealth Advisors may take full advantage of the entire range of
maturities of the securities in which the Portfolio may invest and may adjust
the average maturity of the Portfolio's securities from time to time,
11

<PAGE>
depending on its assessment of relative yields on securities of different
maturities and expectations of future changes in interest rates. The Portfolio
may invest in mortgage-backed certificates and other securities representing
ownership interests in mortgage pools, including collateralized mortgage
obligations and certain stripped mortgage-backed securities (including certain
"residual" interests). See "Other investment practices" below.
MENTOR MUNICIPAL INCOME PORTFOLIO (FORMERLY, CAMBRIDGE MUNICIPAL INCOME
PORTFOLIO)
INVESTMENT ADVISER: COMMONWEALTH ADVISORS, INC.
SUB-ADVISER: VAN KAMPEN/AMERICAN CAPITAL MANAGEMENT, INC. ("VAN KAMPEN")
The investment objective of the 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 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
invested grade, or deemed by Van Kampen to be of comparable quality, at the time
of investment. The Portfolio may invest a substantial portion of its assets in
municipal securities that pay interest that is subject to federal alternative
minimum tax. The Portfolio may not be a suitable investment for investors who
are already subject to federal alternative minimum tax or who would become
subject to federal alternative minimum tax as a result of an investment in the
Portfolio.
Tax-exempt municipal securities are debt obligations issued by or on behalf
of the governments of states (including the District of Columbia) and United
States territories or possessions, and 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 income tax. The Portfolio may also invest up
to 10% of its assets in tax-exempt money market funds, which will be considered
tax-exempt municipal securities for this purpose.
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 Van Kampen considers to be of comparable
quality. These securities are below investment grade and are considered to be of
poor standing and predominantly speculative. 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. The Portfolio will not invest in securities
rated below B- by S&P or below B3 by Moody's at the time of purchase and may
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. For more detailed information
about the risks associated with investing in lower-rated securities, see "Risks
of Lower-Grade Securities" below. The Portfolio may hold a portion of its assets
in cash or money market instruments.
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 full 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.
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
12

<PAGE>
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.
RISKS OF LOWER-GRADE SECURITIES. Investors should carefully consider the
risks of owning shares of a mutual fund which invests in lower-grade securities,
commonly known as "junk bonds", 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. Lower-grade 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. The inability (or perceived inability) of
issuers to make timely payments of interest and principal would likely make the
values of securities held by the Portfolio more volatile and could limit the
Portfolio's ability to sell its securities at prices approximating the values
the Portfolio had placed on such securities. In the absence of a liquid trading
market for securities held by it, the Portfolio may be unable at times to
establish the fair value of such securities and may not be able to dispose of
such securities in a timely manner at a price which reflects the value of such
securities. The rating assigned to a security by Moody's or S&P does not reflect
an assessment of the volatility of the security's market value or of the
liquidity of an investment in the security. For more information about the
rating services' descriptions of lower-rated municipal securities, see the
Appendix to this Prospectus.
Van Kampen seeks to minimize the risks involved in investing in lower-grade
securities through diversification and careful investment analysis. However, the
amount of information about the financial condition of an issuer of lower-grade
municipal securities may not be as extensive as that which is made available by
corporations whose securities are publicly traded. When the Portfolio invests in
tax exempt securities in the lower rating categories, the achievement of the
Portfolio's goals is more dependent on Van Kampen's ability than would be the
case if the Portfolio were investing in securities in the higher rating
categories. To the extent that there is no established retail market for some of
the lower-grade 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 by 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 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.
CONCENTRATION. The Portfolio generally will not invest more than 25% of its
total assets in any one industry. 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 Van Kampen determines that the yields available from obligations
in a particular segment of the market justify the additional risks associated
with such concentration.
13

<PAGE>
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 to invest more than 25% of its assets in industrial
development bonds or in issuers located in any individual state, although Van
Kampen 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.
MENTOR SHORT-DURATION INCOME PORTFOLIO (FORMERLY, MENTOR SHORT-DURATION INCOME
FUND)
INVESTMENT ADVISER: COMMONWEALTH INVESTMENT COUNSEL, INC. ("COMMONWEALTH
INVESTMENT COUNSEL")
The Short-Duration Income Portfolio's investment objective is to seek
current income. As a secondary objective, the Portfolio seeks preservation of
capital, to the extent consistent with its objective of current income. The
Portfolio will normally invest at least 65% of its assets in debt securities
with a "duration" of three years or less. The Portfolio may invest in U.S.
Government securities and debt obligations of private issuers and in preferred
stocks and dividend-paying common stocks, and may hold a portion of its assets
in cash or money market instruments.
Traditionally, a debt security's "term to maturity" has been used to
evaluate the sensitivity of the security's price to changes in interest rates
(the security's interest-rate "volatility"). However, a security's term to
maturity measures only the period of time until the last payment of principal or
interest on the security, and does not take into account the timing of the
various payments of principal or interest to be made prior to the instrument's
maturity. By contrast, "duration" is a measure of the full stream of payments to
be received on a debt instrument, including both interest and principal
payments, based on their present values. Duration measures the periods of time
between the present time and the time when the various interest and principal
payments are scheduled or, in the case of a callable bond, expected to be
received, and weights them by their present values.
There are some situations where even the standard duration calculation does
not properly reflect the interest-rate volatility of a security. For example,
floating and variable rate securities often have final maturities of ten years
or more; however, their interest-rate volatility is determined based principally
on the period of time until their interest rates are reset and on the terms on
which they may be reset. Another example where a security's interest-rate
volatility is not properly measured by its duration is the case of mortgage
securities. The stated final maturity of such securities may be up to 30 years,
but the actual cash flow on the securities will be determined by the prepayment
rates on the underlying mortgage loans. Therefore, the duration of such a
security can change if prepayment rates change. In these and other similar
situations, Commonwealth Investment Counsel will estimate a security's duration
using sophisticated analytical techniques that take into account such factors as
the expected prepayment rate on the security and how the prepayment rate might
change under various market conditions.
The Portfolio will invest in debt securities and preferred stocks of
investment grade, and the Portfolio will seek under normal market conditions to
maintain a portfolio of securities with a dollar-weighted average rating of A or
better. A security will be considered to be of "investment grade" if, at the
time of investment by the Portfolio, it is rated at least Baa3 by Moody's or
BBB- by S&P or the equivalent by another nationally recognized rating
organization or, if unrated, determined by Commonwealth Investment Counsel to be
of comparable quality. Securities rated Baa or BBB lack outstanding investment
characteristics and have speculative characteristics and are subject to greater
credit and market risks than higher-rated securities. A description of
securities ratings is contained in the Appendix to this Prospectus.
14

<PAGE>
The Portfolio may invest in mortgage-backed certificates and other
securities representing ownership interests in mortgage pools, including
collateralized mortgage obligations and certain stripped mortgage-backed
securities (including certain "residual" interests). See "Other investment
practices" below.
OTHER INVESTMENT PRACTICES
Each of the Portfolios (except as noted below) may engage in the other
investment practices described below. See the Statement of Additional
Information for a more detailed description of these practices and certain risks
they may involve.
MORTGAGE-BACKED SECURITIES; OTHER ASSET-BACKED SECURITIES. Each of the
Strategy, Short-Duration Income, Quality Income, and Income and Growth
Portfolios may invest in mortgage-backed certificates and other securities
representing ownership interests in mortgage pools, including collateralized
mortgage obligations and, in the case of the Quality Income and Short-Duration
Income Portfolios, "residual" interests therein (described more fully below).
Interest and principal payments on the mortgages underlying mortgage-backed
securities are passed through to the holders of the mortgage-backed securities.
Mortgage-backed securities currently offer yields higher than those available
from many other types of fixed-income securities but because of their prepayment
aspects, their price volatility and yield characteristics will change based on
changes in prepayment rates. As a result, mortgage-backed securities are less
effective than other securities as a means of "locking in" long-term interest
rates. Generally, prepayment rates increase if interest rates fall and decrease
if interest rates rise. For many types of mortgage-backed securities, this can
result in unfavorable changes in price and yield characteristics in response to
changes in interest rates and other market conditions. For example, as a result
of their prepayment aspects, mortgage-backed securities have less potential for
capital appreciation during periods of declining interest rates than other
fixed-income securities of comparable maturities, although such obligations may
have a comparable risk of decline in market value during periods of rising
interest rates.
Mortgage-backed securities have yield and maturity characteristics that are
dependent upon the mortgages underlying them. Thus, unlike traditional debt
securities, which may pay a fixed rate of interest until maturity when the
entire principal amount comes due, payments on these securities may include both
interest and a partial payment of principal. In addition to scheduled loan
amortization, payments of principal may result from the voluntary prepayment,
refinancing, or foreclosure of the underlying mortgage loans. Such prepayments
may significantly shorten the effective durations of mortgage-backed securities,
especially during periods of declining interest rates. Similarly, during periods
of rising interest rates, a reduction in the rate of prepayments may
significantly lengthen the effective durations of such securities.
Each of the Strategy, Short-Duration, and Quality Income Portfolios may
invest in stripped mortgage-backed securities. Stripped mortgage-backed
securities are usually structured with two classes that receive different
portions of the interest and principal distributions on a pool of mortgage
assets. A Portfolio may invest in both the interest-only -- or "IO" -- class
and the principal-only -- or "PO" -- class. The yield to maturity and price of
an IO class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Portfolio's average
duration and net asset value. This would typically be the case in an environment
of falling interest rates. If the underlying mortgage assets experience greater
than anticipated prepayments of principal, a Portfolio may under some
circumstances fail to fully recoup its initial investment in these securities.
Conversely, POs tend to increase in value if prepayments are greater than
anticipated and decline if prepayments are slower than anticipated.
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<PAGE>
Certain mortgage-backed securities held by the Portfolios may permit the
issuer at its option to "call," or redeem, its securities. If an issuer were to
redeem securities held by a Portfolio during a time of declining interest rates,
the Portfolio may not be able to reinvest the proceeds in securities providing
the same investment return as the securities redeemed.
Each of the Strategy, Quality Income, and Short-Duration Income Portfolios
may invest in securities representing interests in other types of financial
assets, such as automobile-finance receivables or credit-card receivables. Such
securities may or may not be secured by the receivables themselves or may be
unsecured obligations of their issuers.
OTHER MORTGAGE-RELATED SECURITIES. The Quality Income and Short-Duration
Income Portfolios may also invest in other types of mortgage-related securities,
including any securities that directly or indirectly represent a participation
in, or are secured by and payable from, mortgage loans or real property,
including collateralized mortgage obligation "residual" interests, as well as
new types of mortgage-related securities that may be developed and marketed from
time to time. "Residual" interests represent the right to any excess cash flow
remaining after all other payments are made among the various tranches of
interests issued by structured mortgage-backed vehicles. The values of such
interests are extremely sensitive to changes in interest rates and in prepayment
rates on the underlying mortgages. In the event of a significant change in
interest rates or other market conditions, the value of an investment by the
Portfolio in such interests could be substantially reduced and the Portfolio may
be unable to dispose of the interests at prices approximating the values the
Portfolio had previously assigned to them or to recoup its initial investment in
the interests.
ZERO-COUPON SECURITIES. Each of the Income and Growth, Global, Quality
Income, and Short-Duration Income Portfolios may at times invest in so-called
"zero-coupon" bonds. Zero-coupon bonds are issued at a significant discount from
face value and pay interest only at maturity rather than at intervals during the
life of the security. Because zero-coupon bonds do not pay current interest,
their value is subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest currently. Zero-coupon bonds allow
an issuer to avoid the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than bonds that pay
interest currently. Even though such bonds do not pay current interest in cash,
a Portfolio is nonetheless required for federal income tax purposes to accrue
interest income on such investments and to distribute such amounts at least
annually to shareholders. Thus, a Portfolio could be required at times to
liquidate other investments in order to satisfy this distribution requirement.
PREMIUM SECURITIES. Certain of the Portfolios may at times invest in
securities bearing coupon rates higher than prevailing market rates. Such
"premium" securities are typically purchased at prices greater than the
principal amount payable on maturity. Although a Portfolio generally amortizes
the amount of any such premium into income, the Portfolio may recognize a
capital loss if such premium securities are called or sold prior to maturity and
the call or sale price is less than the purchase price. Additionally, a
Portfolio may recognize a capital loss if it holds such securities to maturity.
OPTIONS AND FUTURES. Each of the Portfolios other than the Municipal Income
Portfolio and the Income and Growth Portfolio may buy and sell put and call
options on securities it owns or plans to purchase to hedge against changes in
net asset value or, with the exception of the Income and Growth Portfolio, to
realize a greater current return. In addition, through the purchase and sale of
futures contracts and, with the exception of the Income and Growth Portfolio,
related options, each of the Portfolios may at times seek to hedge against
fluctuations in net asset value. In addition, to the extent consistent with
applicable law, the Growth, Strategy, Quality Income, and Short-Duration Income
Portfolios may buy and sell futures contracts and related options to increase
its investment return. The Strategy Portfolio may buy and sell options and
futures contracts (including index options and
16

<PAGE>
futures contracts) to implement changes in its asset allocations among various
market sectors, pending the sale of its existing investment and reinvestments in
new securities. The Global Portfolio also may purchase and write call and put
options on securities indices and other financial indices and on currencies.
INDEX FUTURES AND OPTIONS. Each of the Portfolios other than the Income and
Growth Portfolio may buy and sell index futures contracts ("index futures") and
options on index futures and on indices for hedging purposes (or may purchase
warrants whose value is based on the value from time to time of one or more
foreign securities indices). An "index futures" contract is a contract to buy or
sell units of a particular bond or stock index at an agreed price on a specified
future date. Depending on the change in value of the index between the time when
a Portfolio enters into and terminates an index futures or option transaction,
the Portfolio realizes a gain or loss. The Growth, Strategy, Quality Income, and
Short-Duration Income Portfolios may also, to the extent consistent with
applicable law, buy and sell index futures and options to increase investment
return.
RISKS RELATED TO OPTIONS AND FUTURES STRATEGIES. Options and futures
transactions involve costs and may result in losses. Certain risks arise because
of the possibility of imperfect correlations between movements in the prices of
futures and options and movements in the prices of the underlying security or
index or of the securities held by a Portfolio that are the subject of a hedge.
The successful use by a Portfolio of the strategies described above further
depends on the ability of its investment adviser or sub-adviser to forecast
market movements correctly. Other risks arise from a Portfolio's potential
inability to close out futures or options positions. Although a Portfolio will
enter into options or futures transactions only if its investment adviser or
sub-adviser believes that a liquid secondary market exists for such option or
futures contract, there can be no assurance that a Portfolio will be able to
effect closing transactions at any particular time or at an acceptable price.
Transactions in options and futures contracts involve brokerage costs and may
require a Portfolio to segregate assets to cover its outstanding positions. For
more information, see the Statement of Additional Information. Federal tax
considerations may also limit a Portfolio's ability to engage in options and
futures transactions.
Each Portfolio's futures contract transactions will be conducted on
recognized exchanges. In general, however, a Portfolio will purchase and sell
options in transactions in the over-the-counter markets. A Portfolio's ability
to terminate options in the over-the-counter markets may be more limited than
for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to the Portfolio. A Portfolio will, however, engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of its investment adviser, the pricing
mechanism and liquidity of the over-the-counter markets are satisfactory and the
participants are responsible parties likely to meet their contractual
obligations.
A Portfolio will not purchase futures or options on futures or sell futures
if as a result the sum of the initial margin deposits on the Portfolio's
existing futures positions and premiums paid for outstanding options on futures
contracts would exceed 5% of the Portfolio's assets. (For options that are
"in-the-money" at the time of purchase, the amount by which the option is
"in-the-money" is excluded from this calculation.) In addition, the Growth
Portfolio will not purchase puts, calls, straddles, spreads, and any combination
thereof if, by reason thereof, the value of its aggregate investment in these
securities will exceed 5% of its total assets.
LEVERAGE. Each Portfolio other than the Growth, Quality Income and Strategy
Portfolios may borrow money to invest in additional securities to seek current
income. This technique, known as "leverage," increases a Portfolio's market
exposure and risk. When a Portfolio has borrowed money for leverage and its
investments increase or decrease in value, the Portfolio's net asset value will
normally increase or decrease more than if it had not borrowed money for this
purpose. The interest that a Portfolio must pay on borrowed money will reduce
its net investment income, and may also either offset any potential capital
gains or increase any losses. The Short-
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<PAGE>
Duration Income Portfolio currently intends to use leverage in order to adjust
the dollar-weighted average duration of its portfolio. The Portfolios will not
always borrow money for investment and the extent to which a Portfolio will
borrow money, and the amount it may borrow, depends on market conditions and
interest rates. Successful use of leverage depends on an investment adviser's or
sub-adviser's ability to predict market movements correctly. The Municipal
Income Portfolio may borrow directly or through reverse repurchase agreements
(as described below) up to 5% of its total assets and may pledge up to 10% of
the value of those assets to secure such borrowings. With respect to the other
Portfolios, the amount of leverage (including leverage to the extent employed by
a Portfolio through "reverse" repurchase agreements, "dollar-roll" transactions,
and forward commitments, described below) that can exist at any one time will
not exceed 33 1/3% of the value of the Portfolio's total assets.
SECURITIES LOANS, REPURCHASE AGREEMENTS, AND FORWARD COMMITMENTS. Each
Portfolio, other than the Municipal Income Portfolio, may lend portfolio
securities and may enter into repurchase agreements with banks, broker/dealers,
and other recognized financial institutions. With respect to securities loans,
each of the Growth, Strategy, and Short-Duration Income Portfolios may enter
into such transactions on up to 25% of its assets, and each of the Capital
Growth, Global, Income and Growth, and Quality Income Portfolios may enter into
such transactions on up to one-third of its assets. With respect to repurchase
agreements, each of the Growth, Strategy, and Short-Duration Income Portfolios
may enter into such transactions on up to 25% of its assets. These transactions
must be fully collateralized at all times, but involve some risk to a Portfolio
if the other party should default on its obligations and the Portfolio is
delayed or prevented from recovering the collateral. Each Portfolio, other than
the Growth and Strategy Portfolios, may enter into "reverse" repurchase
agreements. Each Portfolio, other than the Growth, Strategy, and Municipal
Income Portfolios, may enter into "dollar-roll" transactions. "Reverse"
repurchase agreements and "dollar-roll" transactions generally involve the sale
by a Portfolio of securities held by it and an agreement to repurchase the
securities (or, in the case of dollar rolls, similar securities) at an agreed-
upon price, date, and interest payment. Each Portfolio also may enter into
forward commitments, in which a Portfolio buys securities for future delivery.
Reverse repurchase agreements, dollar-roll transactions, and forward commitments
may increase overall investment exposure and may result in losses.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and manage
prepayment risks, the Quality Income, Income and Growth, Global, and
Short-Duration Income Portfolios may engage in dollar roll transactions with
respect to mortgage-related securities by GNMA, FNMA, and 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.
FOREIGN SECURITIES. Each Portfolio other than the Growth and Municipal
Income Portfolios may invest in securities principally traded in foreign
markets. The Capital Growth and Income and Growth Portfolios will limit such
investments to 15% and 10%, respectively, of their total assets. Since foreign
securities are normally denominated and traded in foreign currencies, the values
of a Portfolio's assets may be affected favorably or unfavorably by currency
exchange rates and exchange control regulations. There may be less information
publicly available about a foreign company than about a U.S. company, and
foreign companies are not generally subject to accounting, auditing, and
financial reporting standards and practices comparable to those in the United
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<PAGE>
States. The securities of some foreign companies are less liquid and at times
more volatile than securities of comparable U.S. companies. Foreign brokerage
commissions and other fees are also generally higher than in the United States.
Foreign settlement procedures and trade regulations may involve certain risks
(such as delay in payment or delivery of securities or in the recovery of a
Portfolio's assets held abroad) and expenses not present in the settlement of
domestic investments.
In addition, there may be a possibility of nationalization or expropriation
of assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability, and diplomatic developments which could
affect the value of a Portfolio's investments in certain foreign countries.
Legal remedies available to investors in certain foreign countries may be more
limited than those available with respect to investments in the United States or
in other foreign countries. The laws of some foreign countries may limit a
Portfolio's ability to invest in securities of certain issuers located in those
foreign countries. Special tax considerations apply to foreign securities. A
Portfolio may buy or sell foreign currencies and options and futures contracts
on foreign currencies for hedging purposes in connection with its foreign
investments as described more fully below.
The risks described above are typically increased to the extent that a
Portfolio invests in securities traded in underdeveloped and developing nations,
which are sometimes referred to as "emerging markets."
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Each Portfolio other than the
Growth and Municipal Income Portfolios may engage in foreign currency exchange
transactions to protect against uncertainty in the level of future currency
exchange rates. A Portfolio may engage in foreign currency exchange transactions
in connection with the purchase and sale of portfolio securities ("transaction
hedging") and to protect against changes in the value of specific portfolio
positions ("position hedging").
A Portfolio also may engage in transaction hedging to protect against a
change in foreign currency exchange rates between the date on which a Portfolio
contracts to purchase or sell a security and the settlement date, or to "lock
in" the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. A Portfolio may purchase or sell a foreign currency on a spot (or
cash) basis at the prevailing spot rate in connection with transaction hedging.
A Portfolio may also enter into contracts to purchase or sell foreign
currencies at a future date ("forward contracts") and may purchase and sell
foreign currency futures contracts, for hedging and not for speculation. A
foreign currency forward contract is a negotiated agreement to exchange currency
at a future time at a rate or rates that may be higher or lower than the spot
rate. Foreign currency futures contracts are standardized exchange-traded
contracts and have margin requirements. For transaction hedging purposes, a
Portfolio may also purchase and, except for the Income and Growth Portfolio,
sell call and put options on foreign currency futures contracts and on foreign
currencies.
A Portfolio may engage in position hedging to protect against a decline in
value relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in value of a currency in
which securities the Portfolio intends to buy are denominated). For position
hedging purposes, a Portfolio may purchase or sell foreign currency futures
contracts and foreign currency forward contracts, and may, except for the Income
and Growth Portfolio, purchase and sell put and call options on foreign currency
futures contracts and on foreign currencies. In connection with position
hedging, a Portfolio may also purchase or sell foreign currency on a spot basis.
INTEREST RATE TRANSACTIONS. In order to attempt to protect the value of a
portfolio from interest rate fluctuations and to adjust the interest-rate
sensitivity of the portfolio, the Global, Quality Income, and Short-Duration
Income Portfolios may enter into interest rate swaps and other interest rate
transactions, such as interest rate caps,
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<PAGE>
floors, and collars. Interest rate swaps involve the exchange by a 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). The purchase of an interest rate cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling the 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 the 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. Each Portfolio intends to use these interest rate transactions
as a hedge and not as a speculative investment. A Portfolio's ability to engage
in certain interest rate transactions may be limited by tax considerations. The
use of interest rate swaps and other interest rate transactions is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If a
Portfolio's investment adviser or sub-adviser is incorrect in its forecasts of
market values, interest rates, or other applicable factors, the investment
performance of a Portfolio would be less favorable than what it would have been
if this investment technique were not used.
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.
PORTFOLIO TURNOVER. The length of time a Portfolio has held a particular
security is not generally a consideration in investment decisions. A change in
the securities held by a Portfolio is known as "portfolio turnover." As a result
of each Portfolio's investment policies, under certain market conditions its
portfolio turnover rate may be higher than that of other mutual funds. Portfolio
turnover generally involves some expense to a Portfolio, including brokerage
commissions or dealer mark-ups and other transaction costs on the sale of
securities and reinvestment in other securities. Such transactions may result in
realization of taxable gains. The portfolio turnover rates for the ten most
recent fiscal years (or for the life of a Portfolio if shorter) are contained in
the section "Financial Highlights."
VALUING SHARES
Each Portfolio calculates the net asset value of a share of each class by
dividing the total value of its assets, less liabilities, by the number of its
shares outstanding. Shares are valued as of the close of regular trading on the
New York Stock Exchange each day the exchange is open. Portfolio securities for
which market quotations are readily available are stated at market value.
Short-term investments that will mature in 60 days or less are stated at
amortized cost, which approximates market value. All other securities and assets
are valued at their fair values. 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.
SALES ARRANGEMENTS
This Prospectus offers investors two classes of shares which bear sales
charges in different forms and amounts and which bear different levels of
expenses:
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CLASS A SHARES. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any charges when they are redeemed, except that (i) shares of the Short-Duration
Income Portfolio are subject to a 1% contingent deferred sales charge (a "CDSC")
and (ii) sales at net asset value in excess of $1 million are subject to a CDSC.
Certain purchases of Class A shares qualify for reduced sales charges. Class A
shares currently bear no 12b-1 fees. See "How to Buy Shares -- Class A shares."
CLASS B SHARES. Class B shares are sold without an initial sales charge,
but are subject to a CDSC of up to 4% if redeemed within five or six years,
depending on the Portfolio. Class B Shares also bear 12b-1 fees. Class B shares
provide an investor the benefit of putting all of the investor's dollars to work
from the time the investment is made, but will have a higher expense ratio and
pay lower dividends than Class A shares due to the 12b-1 fees. See "How to Buy
Shares -- Class B shares."
WHICH ARRANGEMENT IS FOR YOU? The decision as to which class of shares
provides a suitable investment for an investor depends on a number of factors,
including the amount and intended length of the investment. Investors making
investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. For more information about these sales arrangements, consult
your investment dealer or Mentor Distributors. Sales personnel may receive
different compensation depending on which class of shares they sell. Shares may
only be exchanged for shares of the same class of another Mentor fund. See "How
to Exchange Shares."
HOW TO BUY SHARES
You can open a Portfolio account with as little as $1,000 and make
additional investments at any time with as little at $100. Investments under
IRAs maintained or sponsored by Wheat First Butcher Singer, Inc. ("WFBS"), an
affiliate of Mentor Distributors, and whose trustee is State Street Bank and
Trust Company, and investments under qualified retirement plans are subject to a
minimum initial investment of $250. The minimum initial investment may be waived
for current and retired Trustees, and current and retired employees of the Trust
or Mentor Distributors. You can buy Portfolio shares by completing the enclosed
New Account Form and sending it to Mentor Distributors along with a check or
money order, through your financial institution, which may be an investment
dealer, a bank, or another institution, or through automatic investing. If you
do not have a dealer, Mentor Distributors can refer you to one.
AUTOMATIC INVESTMENT PLAN. Once you have made the initial minimum
investment in a Portfolio, you can make regular investments of $50 or more on a
monthly or quarterly basis through automatic deductions from your bank checking
account. Application forms are available from your investment dealer or through
Mentor Distributors.
Shares are sold at a Portfolio's net asset value next determined after
Mentor Distributors receives your purchase order. In most cases, in order to
receive that day's public offering price, Mentor Distributors or your investment
dealer must receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment dealer, the
dealer must receive your order before the close of regular trading on the New
York Stock Exchange to receive that day's public offering price.
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CLASS A SHARES
The public offering of Class A shares is the net asset value plus a sales
charge. The Portfolio receives the net asset value. The sales charge varies
depending on the size of your purchase and is allocated between your investment
dealer and Mentor Distributors. The current sales charges for the GROWTH,
CAPITAL GROWTH, STRATEGY, INCOME AND GROWTH, AND GLOBAL PORTFOLIOS are:
<TABLE>
<CAPTION>
SALES CHARGE
AS A SALES CHARGE
PERCENTAGE OF AS A
PUBLIC PERCENTAGE OF
OFFERING NET AMOUNT DEALER
PRICE INVESTED COMMISSION*
<S> <C> <C> <C>
Less than $50,000..................................................... 5.75% 5.82% 5.00%
$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>

The current sales charges for the QUALITY INCOME AND MUNICIPAL INCOME
PORTFOLIOS are:
<TABLE>
<CAPTION>
SALES CHARGE
AS A SALES CHARGE
PERCENTAGE OF AS A
PUBLIC PERCENTAGE OF
OFFERING NET AMOUNT DEALER
PRICE INVESTED 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>

* At the discretion of Mentor Distributors, the entire sales charge may at times
be reallowed to dealers. The Staff of the Securities and Exchange Commission
has indicated that dealers who receive more than 90% of the sales charge may
be considered underwriters.
Shares of the SHORT-DURATION INCOME PORTFOLIO are sold subject to a sales
charge of 1%. In addition, a CDSC of 1.00% is imposed on redemptions of shares
of the Portfolio made within one year of the purchase of such shares. The
following types of shares may be redeemed without charge at any time: (i) shares
acquired by reinvestment of distributions and (ii) shares otherwise exempt from
the CDSC, as described in "How to Buy Shares -- General" below. For other
shares, the amount of the charge is determined as a percentage of the lesser of
the current market value or the cost of the shares being redeemed. Mentor
Distributors receives the proceeds of any CDSC.
There is no initial sales charge on purchases of Class A shares of $1
million or more. However, a CDSC of 1.00% is imposed on redemptions of such
shares within the first year after purchase, based on the lower of the shares'
cost and current net asset value. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC. In determining whether a CDSC is
payable, the Portfolio will first redeem shares not subject to any charge.
Mentor Distributors receives the entire amount of any CDSC you pay. (Except as
stated below, Mentor Distributors pays investment dealers of record commissions
on sales of Class A shares of $1 million or
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more based on an investor's cumulative purchases during the one-year period
beginning with the date of the initial purchase at net asset value and each
subsequent one-year period beginning with the first net asset value purchase
following the end of the prior period.)
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment dealer or Mentor Distributors for details about Quantity
Discounts and Accumulated Purchases, Letters of Intent, the Reinvestment
Privilege, Concurrent Purchases, and the Automatic Investment Plan. Descriptions
are also included in the New Account Form and in the Statement of Additional
Information. Shares may be sold at net asset value to certain categories of
investors, and the CDSC may be waived under certain circumstances. See "How to
Buy Shares -- General" below.
Mentor Distributors, the investment advisers, 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 are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within five or six years of purchase,
depending on the Portfolio. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment of distributions
and (ii) shares otherwise exempt from the CDSC, as described in "How to Buy
Shares -- General" below. For other shares, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed. The amount of the CDSC will depend on the number
of years since you invested and the dollar amount being redeemed, according to
the following table:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF CHARGE AS A PERCENTAGE OF
APPLICABLE AMOUNT APPLICABLE AMOUNT
REDEEMED (GROWTH, CAPITAL REDEEMED (QUALITY INCOME,
GROWTH, STRATEGY, INCOME MUNICIPAL INCOME, AND
AND GROWTH, AND GLOBAL SHORT- DURATION INCOME
YEAR SINCE PURCHASE PAYMENT MADE PORTFOLIOS) PORTFOLIOS)
<S> <C> <C>
First 4.0% 4.0%
Second 4.0% 4.0%
Third 3.0% 3.0%
Fourth 2.0% 2.0%
Fifth 1.0% 1.0%
Sixth None 1.0%
Seventh and Thereafter None None
</TABLE>

No CDSC is imposed upon the redemption of Class B shares purchased pursuant
to certain asset-allocation plans and that are not otherwise subject to the CDSC
shown above. However, a CDSC of 1.00% is imposed on redemptions of such shares
within the first year after purchase, based on the lower of the shares' cost and
current net asset value. Consult Mentor Distributors.
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Any shares acquired by reinvestment of distributions will be redeemed
without a CDSC. In determining whether a CDSC is payable, the Portfolio will
first redeem shares not subject to any charge. Mentor Distributors receives the
entire amount of any such CDSC. Consult Mentor Distributors.
In determining whether a CDSC is payable on any redemption, the Portfolio
will first redeem shares not subject to any charge, and then shares held longest
during the five- or six-year period, as the case may be. For this purpose, the
amount of any increase in a shares's value above its initial purchase price is
not regarded as a share exempt from the CDSC. Thus, when a share that has
appreciated in value is redeemed during the five- or six-year period, a CDSC is
assessed on its initial purchase price. For information on how sales charges are
calculated if you exchange your shares, see "How to Exchange Shares." Mentor
Distributors receives the entire amount of any CDSC you pay.
REINVESTMENT PRIVILEGE. If you redeem Class B shares of any of the
Portfolios, you have a one-time right, within 60 days, to reinvest the
redemption proceeds plus the amount of the CDSC you paid at the next-determined
net asset value. Mentor Distributors must be notified in writing by you or by
your financial institution of the reinvestment for you to recover the CDSC. If
you redeem shares in any of the Portfolios, there may be tax consequences.
GENERAL
A Portfolio may sell its Class A shares without a sales charge and may
waive the CDSC on shares redeemed by the Trust's current and retired Trustees
(and their families), current and retired employees (and their families) of
Mentor Distributors, each investment adviser or sub-adviser, and each their
affiliates, registered representatives and other employees (and their families)
of broker-dealers having sales agreements with Mentor Distributors, employees
(and their families) of financial institutions having sales agreements with
Mentor Distributors (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Portfolio shares), financial
institution trust departments investing an aggregate of $1 million or more in
one or more funds in the Mentor family of funds, clients of certain
administrators of tax-qualified plans, employer-sponsored retirement plans,
tax-qualified plans when proceeds from repayments of loans to participants are
invested (or reinvested) in the Mentor family of funds, shares redeemed under a
Portfolio's Systematic Withdrawal Plan (limited to 10% of a shareholder's
account in any calendar year), and "wrap accounts" for the benefit of clients of
financial planners adhering to certain standards established by a Portfolio's
distributor. In addition, a Portfolio may sell shares without a CDSC in
connection with the acquisition by the Portfolio of assets of an investment
company or personal holding company. In addition, the CDSC may be waived in the
case of (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, including the shares of a shareholder who owns the shares with his or
her spouse as joint tenants with right of survivorship, provided that the
redemption is requested within one year of the death or initial determination of
disability; (ii) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified retirement
plan following retirement; (b) distributions from an IRA, Keogh Plan, or
Custodial Account under Section 403(b)(7) of the Internal Revenue Code following
attainment of age 59 1/2; and (c) a tax-free return of an excess contribution to
an IRA; (iii) redemptions by pension or profit sharing plans sponsored by WFBS
or an affiliate; and (iv) redemptions by pension or profit sharing plans of
which WFBS or any affiliate serves as a plan fiduciary. In addition, certain
retirement plans with over 200 employees may purchase Class A shares at net
asset value without a sales charge.
Shareholders of other Portfolios may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of a Portfolio at net
asset value.
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If you are considering redeeming or exchanging shares of a Portfolio or
transferring shares to another person shortly after purchase, you should pay for
those shares with a certified check to avoid any delay in redemption, exchange
or transfer. Otherwise the Portfolio may delay payment until the purchase price
of those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date.
To eliminate the need for safekeeping, the Trust will not issue
certificates for your shares unless you request them. Mentor Distributors may,
at its expense, provide additional promotional incentives or payments to dealers
that sell shares of the Portfolios. In some instances, these incentives or
payments may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all classes of
shares.
Because of the relatively high cost of maintaining accounts, each Portfolio
reserves the right to redeem, upon not less than 60 days' notice, any Portfolio
account below $500 as a result of redemptions. A shareholder may, however, avoid
such a redemption by a Portfolio by increasing his investment in shares of that
Portfolio to a value of $500 or more during such 60-day period.
DISTRIBUTION PLANS (CLASS B SHARES)
Mentor Distributors, Inc. (formerly, Cambridge Distributors, Inc.), having
its principal office at 901 East Byrd Street, Richmond, Virginia 23219, is the
principal distributor for the Portfolios' shares.
Each of the Portfolios has adopted a Distribution Plan under Rule 12b-1
with respect to its Class B shares (each, a "Class B Plan") providing for
payments by the Portfolio to Mentor Distributors from the assets attributable to
the Portfolio's Class B Shares at the annual rates set out under "Summary of
Portfolio Expenses -- Annual Portfolio Operating Expenses" above. The Trustees
may reduce the amount of payments or suspend the Class B Plan for such periods
as they may determine. Mentor Distributors also receives the proceeds of any
CDSC imposed on redemptions of shares.
Payments under the Plans are intended to compensate Mentor Distributors for
services provided and expenses incurred by it as principal underwriter of a
Portfolio's Class B shares. Mentor Distributors 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 Mentor
Distributors 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 Mentor Distributors. Mentor Distributors may
suspend or modify such payments to dealers. Such payments are also subject to
the continuation of the relevant Distribution Plan, the terms of any agreements
between dealers and Mentor Distributors, and any applicable limits imposed by
the National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
You can sell your shares in any Portfolio to the Portfolio any day the New
York Stock Exchange is open, either directly to the Portfolio or through your
investment dealer. The Portfolio will only redeem shares for which it has
received payment.
SELLING SHARES DIRECTLY TO A PORTFOLIO. Send a signed letter of instruction
or stock power form, along with any certificates that represent shares you want
to sell to the Mentor family of funds, c/o . The price you will receive
is the next net asset value calculated after your request is received in proper
form less any applicable CDSC. In order to receive that day's net asset value,
your request must be received before the close of regular trading on the New
York Stock Exchange. If you sell shares having a net asset value of $50,000 or
more or if you
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want your redemption proceeds payable to you at a different address or to
someone else, the signatures of registered owners or their legal representatives
must be guaranteed by a bank, broker-dealer or certain other financial
institutions. See the Statement of Additional Information for more information
about where to obtain a signature guarantee. Stock power forms are available
from your investment dealer, Mentor Distributors and many commercial banks.
Mentor Distributors usually requires additional documentation for the sale of
shares by a corporation, partnership, agent or fiduciary, or surviving joint
owner. Contact Mentor Distributors for details.
SELLING SHARES BY TELEPHONE. You may use Mentor Distributors Telephone
Redemption Privilege to redeem shares from your account unless you have notified
Mentor Distributors of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the Account Application, Mentor Distributors
will be authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide Mentor Distributors with his or her account
registration and address as it appears on Mentor Distributors' records. Mentor
Distributors will employ these and other reasonable procedures to confirm that
instructions communicated by telephone are genuine; if it fails to employ
reasonable procedures, Mentor Distributors may be liable for any losses due to
unauthorized or fraudulent instructions. For information, consult Mentor
Distributors. During periods of unusual market changes and shareholder activity,
you may experience delays in contacting Mentor Distributors by telephone in
which case you may wish to submit a written redemption request, as described
above, or contact your investment dealer, as described below. The Telephone
Redemption Privilege may be modified or terminated without notice.
SELLING SHARES THROUGH YOUR INVESTMENT DEALER. Your dealer must receive
your request before the close of regular trading on the New York Stock Exchange
to receive that day's net asset value. Your dealer will be responsible for
furnishing all necessary documentation to Mentor Distributors, and may charge
you for its services.
The Portfolio generally sends you payment for your shares the business day
after your request is received. Under unusual circumstances, the Portfolio may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
SYSTEMATIC WITHDRAWAL PROGRAM. You may redeem Class A or B shares of a
Portfolio through periodic withdrawals for a predetermined amount. Only
shareholders with accounts valued at $10,000 or more are eligible to
participate. Class B shares redeemed under the Systematic Withdrawal program are
not subject to a CDSC, but the aggregate withdrawals of Class B shares in any
year are limited to 10% of the value of the account at the time of enrollment.
Contact Mentor Distributors for more information.
HOW TO EXCHANGE SHARES
You can exchange your shares in a Portfolio worth at least $1,000 for
shares of the same class of any other Portfolio at net asset value beginning 15
days after purchase. You may also exchange shares of any Portfolio for shares of
Cash Resource U.S. Government Money Market Fund (the "Cash Fund"). If you
exchange shares subject to a CDSC, the transaction will not be subject to the
CDSC. However, when you redeem the shares acquired through the exchange, the
redemption may be subject to the CDSC, depending upon when you originally
purchased the shares, using the schedule of any Portfolio into or from which you
have exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. For purposes of computing the CDSC, the
length of time you have owned your shares will be measured from the date of
original purchase and will not be affected by any exchange. (If you exchange
your shares for shares of the Cash Fund, the period when you hold shares of the
Cash Fund will not be included in calculating the length of time you have owned
the shares subject to the CDSC, although the CDSC charged will be reduced by the
amount of any payments collected by the Cash Fund under its distribution plan in
respect of those shares.)
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To exchange your shares, simply complete an Exchange Authorization Form and
send it to the Mentor family of funds, c/o Exchange Authorization Forms
are available by calling or writing Mentor Distributors. For federal income tax
purposes, an exchange is treated as a sale of shares and generally results in a
capital gain or loss. A Telephone Exchange Privilege is currently available.
Mentor Distributors' procedures for telephonic transactions are described above
under "How to Sell Shares." The Telephone Exchange Privilege is not available if
you were issued certificates for shares which remain outstanding. Ask your
investment dealer or Mentor Distributors for a prospectus relating to Cash
Resource U.S. Government Money Market Fund. Shares of certain of the Portfolios
may not available to residents of all states.
The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have an
adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Mentor Distributors or the Trustees
believe doing so would be in the best interests of a Portfolio, the Portfolio
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges, or reject any exchange. Shareholders would be
notified of any such action to the extent required by law. Consult Mentor
Distributors before requesting an exchange by calling 1-800-382-0016. See the
Statement of Additional Information to find out more about the exchange
privilege.
Exchanges to and from the Mentor Growth, Strategy, and Short-Duration
Income Portfolios are not available at the date of this Prospectus (although
exchanges among those Portfolios are currently available). Consult Mentor
Distributors as to the availability of such exchanges in the future.
DISTRIBUTIONS AND TAXES
Dividends, if any, are declared daily and paid to all shareholders invested
in a Portfolio on a record date as follows: monthly for the Quality Income,
Short-Duration Income, and Municipal Income Portfolios; quarterly for the Income
and Growth Portfolio; semi-annually for the Capital Growth Portfolio; and
annually for the Growth, Strategy, and Global Portfolios. Any net realized
capital gains will be distributed at least annually for all Portfolios. All
dividends and distributions will be invested in additional shares of the same
class of a Portfolio unless a shareholder requests in writing to receive the
dividend or distribution in cash.
Each Portfolio intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders.
All Portfolio distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will be taxed as
such, regardless of how long you have held the shares (although the loss on a
sale of shares held for less than six months will be treated as long-term
capital loss to the extent of any capital gain distribution received with
respect to those shares). Distributions will be taxable as described above
whether received in cash or in shares through the reinvestment of distributions.
Early in each year the Trust will notify you of the amount and tax status of
distributions paid to you by your Portfolio for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in a Portfolio. You should consult your tax adviser to determine the
precise effect of an investment in a Portfolio on your particular tax situation.
To permit the Quality Income and Short-Duration Income Portfolios to
maintain more stable monthly distributions, each of those Portfolios may from
time to time pay out less than the entire amount of net investment income earned
in any particular period. Any such amount retained by a Portfolio would be
available to stabilize
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future distributions. As a result, the distributions paid by either Portfolio
for any particular period may be more or less than the amount of net investment
income actually earned by the Portfolio during that period.
MUNICIPAL INCOME PORTFOLIO. Distributions designated by the Portfolio as
"exempt-interest dividends" are not generally subject to federal income tax.
However, if you receive Social Security and railroad retirement benefits, you
should consult your tax adviser to determine what effect, if any, an investment
in the Portfolio may have on the taxation of your benefits. In addition, an
investment in the Portfolio may result in liability for federal alternative
maximum tax and for state and local taxes, both for individual and corporate
shareholders.
All Portfolio distributions other that exempt-interest dividends will be
taxable to you as ordinary income, except that any distributions of net
long-term capital gains will be taxable to you as such, regardless of how long
you have held your shares. Distributions will be taxable as described above
whether received in cash or in shares through the reinvestment of distributions.
The Portfolio may at times purchase municipal securities at a discount from
the price at which they were initially issued. For federal income tax purposes,
some or all of the market discount will be included in the Portfolio's ordinary
income and will be taxable to shareholders as such when it is distributed to
them.
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the
conduct of the Trust's business. COMMONWEALTH ADVISORS, INC. (formerly,
Cambridge Investment Advisors, Inc.) acts as investment manager of each of the
Portfolios other than the Growth, Strategy, and Short-Duration Income
Portfolios. WELLESLEY ADVISORS, INC. acts as investment manager to the Strategy
Portfolio; Charter Asset Management, Inc. acts as investment manager to the
Growth Portfolio; and COMMONWEALTH INVESTMENT COUNSEL, INC. acts as investment
manager to the Short-Duration Income Portfolio. Each of the investment advisers
is a wholly-owned subsidiary of Mentor Investment Group, Inc. (formerly
Investment Management Group, Inc.) ("MIG"), which is a wholly-owned subsidiary
of Wheat First Butcher Singer, Inc. ("WFBS"). WFBS, through other subsidiaries,
also engages in securities brokerage, investment banking, and related
businesses. Each of the Trust's investment advisers is located at 901 East Byrd
Street, Richmond, Virginia.
Each of the Portfolios pays management fees to its manager at the annual
rates described above under "Summary of Portfolio Expenses -- Annual Portfolio
Expenses", except that the Global Portfolio pays fees equal to 1.10% of its
average daily net assets 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
fees paid by the Growth, Capital Growth, Income and Growth, and Global
Portfolios are higher than those paid by many other mutual funds. An investment
manager may from time to time voluntarily waive some or all of its investment
advisory fees and may terminate any such voluntary waiver of some or all of its
investment advisory fees at any time in its sole discretion.
Commonwealth Advisors was incorporated under the laws of Virginia in 1991.
All of its directors and officers serve as directors or officers of other
investment advisory firms affiliated with WFBS. Commonwealth Advisors has served
as investment adviser to each of the Portfolios identified above since their
inception; however, prior to April 12, 1995, all investment decisions for each
of the Portfolios were made by sub-advisers to those Portfolios. For certain of
the Portfolios, Commonwealth Advisors now furnishes a continuous investment
program. All of the investment advisory personnel of Commonwealth Advisors have
substantial experience in the investment advisory field and provide advisory
services to other mutual funds in the Mentor family of funds.
Commonwealth Investment Counsel currently has assets under management in
excess of $3.2 billion, and serves as investment adviser to Cash Resource Trust
and IMG Institutional Trust, both open-end investment
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companies, and Mentor Income Fund, Inc., a closed-end investment company. P.
Michael Jones, Senior Vice President of Commonwealth Investment Counsel, and
Charles W. Grant and Stephen Henderson, Managing Director and Associate Vice
President, respectively, of Commonwealth Investment Counsel, are primarily
responsible for the day-to-day management of the Mentor Short-Duration Income
Portfolio and the Quality Income Portfolio. Messrs. Jones, Grant, and Henderson
are also portfolio managers at Commonwealth Advisors. Mr. Jones, Director of
Fixed Income Research at Commonwealth Investment Counsel, has eight years of
investment management experience. He served previously as Senior Vice President
of Ryland Capital Management, Inc. and as Vice President of Alliance Capital
Management. Mr. Grant has fourteen years of investment management experience. He
served previously as President and Chief Investment Officer of Ryland Capital
Management, Inc. Mr. Henderson, who is Portfolio Manager at Commonwealth
Investment Counsel, has six years of investment management experience. John G.
Davenport is a Managing Director of Commonwealth Investment Counsel and a
portfolio manager at Commonwealth Advisors; he is primarily responsible for the
day-to- day management of the Mentor Capital Growth Portfolio. Mr. Davenport has
eleven years of investment management experience. He served previously as
Director of Equity Research at Lowe, Brockenbrough, Tierney & Tattersall.
Charter is a registered investment adviser with total assets under
management exceeding $254 million. Charter provides investment management and
advisory services to a wide variety of individual and institutional clients. Mr.
Theodore W. Price is primarily responsible for the day-to-day management of the
Growth Portfolio. Mr. Price has been Chief Investment Officer of Charter since
January 1992. Prior to that time, he served as Senior Vice President of MIG
since 1986. He has thirty years of investment management experience.
Wellesley is a newly organized investment advisory firm. Each of its
directors and officers serves as director or officer of other investment
advisory firms affiliated with WFBS. Mr. Donald R. Hays, President of Wellesley,
is primarily responsible for the day-to-day management of the Strategy
Portfolio. Mr. Hays has been a Managing Director of Wheat, First Securities,
Inc. since 1984. He has twenty-five years of investment management experience.
THE SUB-ADVISERS
VAN KAMPEN/AMERICAN CAPITAL MANAGEMENT INC. ("Van Kampen") serves as the
sub-adviser to the Municipal Income Portfolio. Van Kampen, located at One
Parkview Plaza, Oakbrook Terrace, Illinois 60181, was incorporated in 1990 and
commenced operations in 1992. Van Kampen currently provides investment advice to
a wide variety of individual, institutional, and investment company clients. Van
Kampen 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. As of December 31, 1994, Van Kampen, together with its affiliates, managed
or supervised approximately $49.6 billion of assets.
David C. Johnson and William V. Grady are co-managers of the Municipal
Income Portfolio. Mr. Johnson is First Vice President of Van Kampen/American
Capital. Mr. Johnson joined Van Kampen/American Capital in 1989 and has served
as portfolio manager of the Municipal Income Portfolio since that time. 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 portfolios. 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. For its services as sub-adviser,
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Commonwealth Advisors pays Van Kampen a fee at the annual rate of 0.30% of the
Portfolio's average net assets.
WELLINGTON MANAGEMENT COMPANY ("Wellington") serves as sub-adviser to the
Income and Growth Portfolio. Wellington, 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,
Wellington had discretionary investment management authority with respect to
approximately $82.0 billion in assets. Wellington and its predecessor
organizations have provided investment advisory services to investment companies
since 1933 and to investment counseling clients since 1960. For its services as
sub-adviser, Commonwealth Advisors pays Wellington a fee at the annual rate
expressed as a percentage of the Portfolio's assets as follows: 0.325% on the
first $50 million in 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.
Paul D. Kaplan, Senior Vice President of Wellington, and Arnold C.
Schneider III, Senior Vice President of Wellington, have served as portfolio
managers to the Portfolio since its inception in May 1993. 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 Wellington since 1982 and Mr. Schneider has
been a portfolio manager with Wellington since 1987.
PERPETUAL PORTFOLIO MANAGEMENT LTD. ("Perpetual") serves as sub-adviser to
the Global Portfolio. Perpetual manages portfolios of Perpetual Unit Trust and
of private individuals, charities, pension plans, and life assurance companies.
Scott McGlashan, a Director of Perpetual, is primarily responsible for the
day-to-day management of the Global Portfolio. He has over twelve years of
experience in specialist international funds management. For its services as
sub-adviser to the Global Portfolio, Perpetual receives an annual fee from
Commonwealth Advisors expressed as a percentage of the Portfolio's assets as
follows: 0.55% on the first $75 million in assets, and 0.50% on assets over $75
million.
The Trustees have approved an investment advisory and management agreement
with Mentor Perpetual Investment Advisors, L.C. ("Mentor Perpetual"), a Virginia
corporation. If the agreement is approved by shareholders, Mentor Perpetual
would become the investment adviser to the Portfolio, and the Portfolio's
advisory arrangements with Commonwealth Advisors and Perpetual would be
terminated. Mentor Perpetual is owned equally by Perpetual plc, the parent
company of Perpetual and MIG, the parent company of Commonwealth Advisors. All
of the investment advisory personnel of Mentor Perpetual are employees of
Perpetual, and Mr. McGlashan would continue to be primarily responsible for the
day-to-day management of the Global Portfolio. The Portfolio would pay fees to
Mentor Perpetual at the same rate it currently pays to Commonwealth Advisors.
Subject to the general oversight of the Trustees, each Portfolio's
investment adviser or sub-adviser manages its respective Portfolios in
accordance with the stated policies of the Portfolio. Each makes investment
decisions for a Portfolio and places the purchase and sale orders for the
Portfolios' transactions. In addition, each pays the salaries of all officers
and employees who are employed by both it and the Trust. The Trust pays all
expenses not assumed by the investment advisers and sub-advisers, or MIG,
including, among other things, Trustees' fees, auditing, accounting, legal,
custodial, investor servicing, and shareholder reporting expenses, and payments
under the Portfolios' Class B Plans.
In selecting broker-dealers, the investment adviser or sub-adviser may
consider research and brokerage services furnished to it and its affiliates.
Subject to seeking the best overall terms available, a Portfolio's investment
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adviser or sub-adviser may consider sales of shares of the Trust (and, if
permitted by law, of the other Portfolios in the Mentor family) as a factor in
the selection of broker-dealers.
Until April 12, 1995, Scudder, Stevens & Clark served as sub-adviser to
Perpetual Global Portfolio; Phoenix Investment Counsel, Inc. served as
sub-adviser to the Mentor Capital Growth Portfolio; and Pacific Investment
Management Company served as sub-adviser to the Mentor Quality Income Portfolio
(when that Portfolio was known as the Cambridge Government Income Portfolio).
OTHER SERVICES
ADMINISTRATIVE SERVICES. Mentor Investment Group, Inc., 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. MIG provides these services to each of the
Portfolios at an annual rate of 0.10% of each Portfolio's average net assets.
MIG may voluntarily reimburse a portion of its administrative fee.
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 are Portfolio shareholders. 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. 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.
In addition to receiving payments under the Service Plan, financial
institutions may be compensated by a Portfolio's investment adviser, a
sub-adviser, and/or MIG, 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 a Portfolio's investment adviser,
sub-adviser, and/or MIG and will not be made from the assets of any of the
Portfolios.
GENERAL
The Trust is a Massachusetts business trust organized on January 20, 1992.
A copy of the Agreement and Declaration of Trust of the Trust, which is governed
by Massachusetts law, is on file with the Secretary of State of the Commonwealth
of Massachusetts.
The Trust is an open-end, diversified, series management investment company
with an unlimited number of authorized shares of beneficial interest. Shares of
the Trust may, without shareholder approval, be divided into two or more series
of shares representing separate investment portfolios. Any such series of shares
may be further divided without shareholder approval into two or more classes of
shares having such preferences and special or relative rights and privileges as
the Trustees determine. The Trust's shares are currently divided into eight
series, each representing one Portfolio. Each series issues shares of two
classes, Class A and Class B. Each share has one vote, with fractional shares
voting proportionally. Shares of each series will vote together as a single
series except when required by law or determined by the Trustees. Shares of each
Portfolio are freely transferable, are
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entitled to dividends as declared by the Trustees, and, if the Portfolio were
liquidated, would receive the net assets of that Portfolio. The Trust may
suspend the sale of shares at any time and may refuse any order to purchase
shares. Although the Trust is not required to hold annual meetings of its
shareholders, shareholders have the right to call a meeting to elect or remove
Trustees, or to take other actions as provided in the Agreement and Declaration
of Trust.
On May , 1995, Mentor Growth Fund, Mentor Strategy Fund, and Mentor
Short-Duration Income Fund, series of shares of Mentor Series Trust, a
Massachusetts business trust, were reorganized as the Mentor Growth Portfolio,
Mentor Strategy Portfolio, and Mentor Short-Duration Income Portfolio,
respectively.
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as custodian for each Portfolio, except that State Street
Bank & Trust Company, P.O. Box 8602, Boston, Massachusetts 02266 serves as
custodian for the Global Portfolio. , is transfer agent and dividend
disbursing agent for the Portfolios. The Trust's independent auditors are KPMG
Peat Marwick LLP, One Boston Place, Boston, Massachusetts 02108.
PERFORMANCE INFORMATION
Yield and total return data may from time to time be included in
advertisements about the Portfolios. A Portfolio's "yield" is calculated by
dividing the Portfolio's annualized net investment income per share during a
recent 30-day period by the maximum public offering price per share on the last
day of that period. "Total return" for the life of a Portfolio through the most
recent calendar quarter represents the actual rate of return on an investment of
$1,000 in the Portfolio reflecting (in the case of Class B shares and in the
case of Class A shares of the Short-Duration Income Portfolio) the deduction of
any applicable CDSC. Total return may also be presented for other periods or
based on investment at reduced sales charge levels or at net asset value. Any
quotation of total return or yield for a Portfolio's shares not reflecting a
CDSC would be reduced if such sales charges were reflected. Quotations of yield
or total return for a period when an expense limitation was in effect will be
greater than if the limitation had not been in effect. A Portfolio's performance
may be compared to various indices. See the Statement of Additional Information.
Information may be presented in advertisements about a Portfolio describing the
background and professional experience of the Portfolio's investment adviser,
sub-adviser, or any portfolio manager.
All data is based on a Portfolio's past investment results and does not
predict future performance. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of the Portfolio, and
the Portfolio's operating expenses. Investment performance also often reflects
the risks associated with a Portfolio's investment objective and policies. These
factors should be considered when comparing a Portfolio's investment results to
those of other mutual funds and other investment vehicles.
As permitted by applicable law, performance information for a Portfolio
whose investment adviser or sub-adviser has changed may be presented only for
periods after the change was effected.
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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
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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.
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THE MENTOR FUNDS
PROSPECTUS
AN OPEN-END MANAGEMENT
INVESTMENT COMPANY
(Bullet) Mentor Growth Portfolio
(Bullet) Mentor Capital Growth Portfolio
(Bullet) Mentor Strategy Portfolio
(Bullet) Mentor Income and Growth Portfolio
(Bullet) Mentor Perpetual Global Portfolio
(Bullet) Mentor Quality Income Portfolio
(Bullet) Mentor Municipal Income Portfolio
(Bullet) Mentor Short-Duration Income Portfolio
May , 1995
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