MENTOR FUNDS, 485APOS, 1997-11-07

MENTOR FUNDS
485APOS, 1997-11-07

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1997

REGISTRATION NO. 33-45315
FILE NO. 811-6550

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)

PRE-EFFECTIVE AMENDMENT NO. _ ( )

POST-EFFECTIVE AMENDMENT NO. 14 (X)

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)

AMENDMENT NO. 16 (X)

(CHECK APPROPRIATE BOX OR BOXES)

MENTOR FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

901 EAST BYRD STREET
RICHMOND, VIRGINIA 23219
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(804) 782-3648
(REGISTRANT'S TELEPHONE NUMBER)

PAUL F. COSTELLO
PRESIDENT
901 EAST BYRD STREET
RICHMOND, VIRGINIA 23219
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
TIMOTHY W. DIGGINS, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MA 02110

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE

(CHECK APPROPRIATE BOX)

( ) IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)

<PAGE>

( ) ON (date) PURSUANT TO PARAGRAPH (B)

( ) 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)

( ) ON (DATE) PURSUANT TO PARAGRAPH (A)(1)

(X) 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)

( ) ON (DATE) PURSUANT TO PARAGRAPH (A)(2) OF RULE 485

IF APPROPRIATE, CHECK THE FOLLOWING BOX:

( ) THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR
A PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT

THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OR AMOUNT OF
SECURITIES UNDER THE SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2. A RULE
24F-2 NOTICE FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 WAS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1996.

THIS POST-EFFECTIVE AMENDMENT RELATES ONLY TO THE MENTOR GROWTH
OPPORTUNITIES PORTFOLIO. NO INFORMATION RELATING TO ANY OTHER SERIES OF THE
REGISTRANT IS AMENDED, DELETED OR SUPERSEDED HEREBY.

<PAGE>

MENTOR FUNDS
CROSS REFERENCE SHEET

(as required by Rule 404(a))

Part A - Mentor Funds - Mentor Growth Opportunities Portfolio

N-1A Item No. Location

1. Cover Page . . . . . . . . . . . . Cover Page

2. Synopsis . . . . . . . . . . . . . Cover Page; Expense Summary;
3. Condensed Financial Information . . Not applicable

4. General Description of Registrant . Cover Page; Investment
Objectives and Policies;
General

5. Management of the Fund . . . . . . Investment Objective
and Policies; Other
Investment Practices
and Risks;
How the Portfolio Values
its Shares; General
Information; Management;
Performance Information

5A. Management's Discussion
of Fund Performance . . . . . . . Not Applicable

6. Capital Stock and Other
Securities . . . . . . . . . . . How to Buy Shares; How
to Exchange Shares;
How Distributions are Made;
Taxes; Management; General
Information

7. Purchase of Securities Being
Offered . . . . . . . . . . . . . How to Buy Shares; How to
Exchange Shares; Management;
Distribution Plan

8. Redemption or Repurchase . . . . . How to Buy Shares; How
to Sell Shares; How to
Exchange Shares
9. Pending Legal Proceedings . . . . . Not Applicable

Part B - - Mentor Growth Opportunities Portfolio

N-1A Item No. Location

10. Cover Page . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . Table of Contents
12. General Information and History . Cover Page; Introduction

13. Investment Objectives and
Policies . . . . . . . . . . . . Investment Restrictions;
Certain Investment
Techniques (Part III)

14. Management of the Fund . . . . . . Management of the Trust;
Principal Holders of
Securities; Investment
Advisory Services;
Administrative Services;
Shareholder Servicing
Plan; Brokerage
Transactions; Distribution;
Members of Investment
Management Teams
15. Control Persons and Principal
Holders of Securities . . . . . Principal Holders of
Securities
16. Investment Advisory and Other
Services . . . . . . . . . . . . Management of the Trust;
Principal Holders of
Securities; Investment
Advisory Services;
Administrative Services;
Shareholder Servicing
Plan; Brokerage
Transactions; Distribution;
Custodian

17. Brokerage Allocation . . . . . . . Brokerage Transactions

18. Capital Stock and Other
Securities . . . . . . . . . . . How to Buy Shares;
Distribution; Determining
Net Asset Value; Taxes;
Shareholder Liability
19. Purchase; Redemption and Pricing
of Securities Being Offered . . Brokerage Transactions;
Distribution;
Determining Net Asset
Value; Redemptions in
Kind
20. Tax Status . . . . . . . . . . . . Investment Restrictions;
Taxes

21. Underwriters . . . . . . . . . . . Distribution

22. Calculations of Performance Data . Performance Information;
Performance Comparisons
23. Financial Statements . . . . . . . Not applicable

Part C

Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement

The Cross Reference Sheets in respect of Part A of the prospectuses in
respect of the Class A (if any) and Class B shares of the Portfolios and the
prospectuses in respect of the Class A (if any) and Class B shares of the
Portfolios, all of which are included in Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A filed electronically on
November 29, 1997 (File Nos. 33-45315; 811-6550), are incorporated into this
Registration Statement by reference. The Cross Reference Sheet in respect of
Part A of the Institutional Shares Prospectus and in respect of Part B,
included in Post-Effective Amendment No. 13 to the Registrant's Registration
Statement on Form N-1A filed electronically on March 4, 1997 (File Nos.
33-45315, 811-6560) are incorporated into the Registration Statement
by reference.

<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 7, 1997

PROSPECTUS January ___, 1998
Class A and B shares

MENTOR GROWTH OPPORTUNITIES PORTFOLIO

Mentor Growth Opportunities Portfolio seeks long-term capital appreciation.
The Portfolio invests primarily in publicly traded common stocks of "small-cap"
companies -- typically with market capitalizations anywhere between $30 million
and $750 million. Mentor Investment Advisors, LLC is the Portfolio's investment
adviser. The Portfolio is a series of shares of Mentor Funds.

This Prospectus sets forth concisely the information about the Portfolio
that a prospective investor should know before investing. Please read this
Prospectus and retain it for future reference. Investors can find more detailed
information in the January ___, 1998 Statement of Additional Information, as
amended from time to time. For a free copy of the Statement, call Mentor
Investment Group, LLC at 1-800-869-6042. The Statement has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference. The Portfolio's address is P.O. Box 1357, Richmond, Virginia
23218-1357.

-------------------------

[NAME OF DISTRIBUTOR]
Distributor

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN-
TATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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.

-1-

<PAGE>

Expense summary

Expenses are one of several factors to consider when investing in
the Portfolio. Expenses shown reflect the expenses the Portfolio expects to
incur in its first fiscal year with respect to its Class A and Class B shares.
The Examples show the cumulative expenses attributable to a hypothetical $1,000
investment in the Class A and Class B shares of the Portfolio over specified
periods.

Shareholder Transaction Expenses: Class A Class B
------- -------
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)(1) 5.75% None
Maximum Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None(2) 4.0% in the first year,
(as a percentage of the lower of the original declining to 1.0% in the
purchase price or redemption proceeds)(3) fifth year, and eliminated
thereafter(4)
Redemption Fees None None
Exchange Fee None None
</TABLE>

(1) 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.

(2) 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 $1,000,000 that are redeemed within one year of purchase.

(3) The amount redeemed is computed as the lesser of the current net asset value
of the shares redeemed, and the original purchase price of the shares. See "How
to buy shares - Class B shares."

(4) Shares purchased as part of asset-allocation plans pursuant to the BL
Purchase Program are subject to a CDSC of 1.00%, if the shares are redeemed
within one year of purchase. See "How to Buy Shares -- the BL Purchase Program."

Annual Portfolio Operating Expenses:
(as a percentage of average net assets) Class A Class B
------- -------
Management Fees 1.00% 1.00%
12b-1 Fees 0.00% 0.75%
Shareholder Service Fee 0.25% 0.25%
Other Expenses (after expense limitation)* 0.33% 0.33%
---- ----
Total Portfolio Operating Expenses (after 1.58% 2.33%
expense limitation)*

- -----------------
* Other Expenses and Total Portfolio Operating Expenses reflect a voluntary
expense limitation currently in effect. In the absence of the expense
limitation, Other Expenses are expected to be ___% for Class A and Class B
shares and Total Portfolio Operating Expenses are expected to be ____% for Class
A shares and ____% for Class B shares.

-2-

<PAGE>

Examples

An investment of $1,000 in the Portfolio would incur the following
expenses assuming 5% annual return and no redemption:

Class A Class B
------- -------
1 year $73 $24
3 years $105 $73

An investment of $1,000 in the Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each period:

Class A Class B
------- -------
1 year $73 $64
3 years $105 $103

This information is provided to help investors understand the expenses
of investing in the Portfolio and an investor's share of the estimated operating
expenses for the Portfolio. The Examples should not be considered a
representation of future performance; actual expenses may be more or less than
those shown.

Investment objective and policies

The Portfolio's investment objective is to seek long-term capital
appreciation. The Portfolio will invest primarily in a diversified portfolio of
equity securities of "small-cap" companies that Mentor Investment Advisors,
L.L.C., the Portfolio's investment adviser ("Mentor Advisors"), believes offer
the potential for long-term capital appreciation.

"Small-cap" companies are companies typically with market
capitalizations of anywhere between $30 million and $750 million, although the
Portfolio may invest in securities of companies of any size, larger or smaller,
if Mentor Advisors believes that such investments are consistent with the
Portfolio's investment objective. Mentor Advisors seeks to identify small-cap
companies that have the potential, based on superior or niche products or
services, operating characteristics, management, or other factors, for long-term
capital appreciation. Equity securities in which the Portfolio may invest
include common stocks, preferred stocks, and warrants, and securities
convertible into common or preferred stocks.

The Portfolio will not invest for current income. The Portfolio may
hold a portion of its assets in cash or money market investments. There can, of
course, be no assurance that the Portfolio will achieve its investment
objective.

Mentor Advisors may under unusual circumstances implement temporary
"defensive" strategies in order to reduce fluctuations in the value of the
Portfolio's assets. At those times, the Portfolio may invest any portion of its
assets in cash or cash equivalents, money market instruments, or other
short-term, high-quality investments Mentor Advisors considers consistent with
such defensive strategies. It is impossible to predict when, or for how long,
the Portfolio will use these defensive strategies.

-3-

<PAGE>

in limited volume. As a result, the prices of these securities may fluctuate
more sharply than those of other securities, and the Portfolio may experience
some difficulty in establishing or closing out positions in these securities at
prevailing market prices.

There may be less publicly available information about the issuers of
these securities or less market interest in such securities than in the case of
larger companies, and it may take a longer period of time for the prices of such
securities to reflect the full value of their issuers' underlying earnings
potential or assets. Some securities of smaller issuers may be restricted as to
resale or may otherwise be highly illiquid. The ability of the Portfolio to
dispose of such securities may be greatly limited, and the Portfolio may have to
continue to hold such securities during periods when Mentor Advisors would
otherwise have sold the security. It is possible that Mentor Advisors or its
affiliates or clients may hold securities issued by the same issuers, and may in
some cases have acquired the securities at different times, on more favorable
terms, or at more favorable prices, than the Portfolio.

Other investment practices and risks

The Portfolio may engage in the other investment practices described
below. See the Statement of Additional Information for a more detailed
description of certain of these practices and risks they may involve.

Options and futures. The Portfolio may buy and sell call and put
options to hedge against changes in net asset value or to realize a greater
current return. In addition, through the purchase and sale of futures contracts
and related options, the Portfolio may at times seek to hedge against
fluctuations in net asset value and, to the extent consistent with applicable
law, to increase its investment return.

The Portfolio's ability to engage in options and futures strategies
will depend on the availability of liquid markets in such instruments. It is
impossible to predict the amount of trading interest that may exist in various
types of options or futures contracts. Therefore, there is no assurance that the
Portfolio will be able to utilize these instruments effectively for the purposes
stated above. Transactions in options and futures involve certain risks which
are described below and in the Statement of Additional Information.

Index futures and options. The 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 future"
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 the Portfolio enters into and terminates an index
futures or option transaction, the Portfolio realizes a gain or loss. The
Portfolio may also, to the extent consistent with applicable law, buy and sell
index futures and options to increase its 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 the securities held by the Portfolio that are the subject of a hedge.
The successful use by the Portfolio of the strategies described above further
depends on the ability of Mentor Advisors to forecast market movements
correctly. Other risks arise from the Portfolio's potential inability to close
out futures and options positions. Although the Portfolio will enter into
options and futures transactions only if Mentor Advisors believes that a liquid
secondary market exists for such options or futures contract, there can be no
assurance that the Portfolio will be able to effect closing transactions at any
particular time or at an acceptable price. Certain provisions of the Internal
Revenue Code may limit the Portfolio's ability to engage in options and futures
transactions.

-4-

<PAGE>

their obligations to the Portfolio. The Portfolio will, however, engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of Mentor Advisors, the pricing
mechanism and liquidity of the over-the-counter markets are satisfactory and the
participants are responsible parties likely to meet their obligations.

The 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.)

Repurchase agreements; securities loans. The Portfolio may enter into
repurchase agreements and securities loans. Under a repurchase agreement, the
Portfolio purchases a debt instrument for a relatively short period (usually not
more than one week), which the seller agrees to repurchase at a fixed time and
price, representing the Portfolio's cost plus interest. Under a securities loan,
the Portfolio lends portfolio securities. The Portfolio will enter into
repurchase agreements and securities loans only with commercial banks and with
registered broker-dealers who are members of a national securities exchange or
market makers in government securities, and in the case of repurchase
agreements, only if the debt instrument subject to the repurchase agreement is a
U.S. Government security. These transactions must be fully collateralized at all
times, but involve some risk to the Portfolio if the other party should default
on its obligations and the Portfolio is delayed or prevented from recovering the
collateral. If the other party should become involved in bankruptcy or
insolvency proceedings, it is possible that the Portfolio may be treated as an
unsecured creditor and be required to return the underlying collateral to the
other party's estate.

----------------------

Except for investment policies designated in this Prospectus or the
Statement of Additional Information as fundamental, the investment objective and
policies described herein are not fundamental and may be changed by the Trustees
without shareholder approval. All percentage limitations on investments will
apply at the time of investment and will not be considered violated unless an
excess or deficiency occurs or exists immediately after and as a result of the
investment.

Management

The Trustees of Mentor Funds (the "Trust") are responsible for
generally overseeing the conduct of the Portfolio's business. Mentor Investment
Advisors, LLC ("Mentor Advisors"), located at 901 East Byrd Street, Richmond,
Virginia 23219, acts as investment adviser to the Portfolio. Mentor Investment
Group, LLC ("Mentor Investment Group") serves as administrator to the Portfolio.
As compensation for its services as administrator, the Fund pays Mentor
Investment Group a fee, accrued daily and paid monthly, at an annual rate of
.10% of the average value of the Fund's daily assets.

Mentor Advisors is a wholly owned subsidiary of Mentor Investment
Group, LLC ("Mentor Investment Group") which is in turn a subsidiary of Wheat
First Butcher Singer, Inc. ("Wheat First Butcher Singer"), a diversified
financial services holding company. Wheat First Butcher Singer, through other
subsidiaries, also engages in securities brokerage, investment banking, and
related businesses. EVEREN Capital Corporation has a 20% ownership in Mentor
Investment Group and may acquire additional ownership based principally on the
amount of Mentor Investment Group's revenues derived from assets attributable to
clients of EVEREN Securities, Inc. and its affiliates. Mentor Advisors and its
affiliates serve as investment adviser to twenty-three separate investment
portfolios in the Mentor Family of Funds with total assets under management of
more than $9 billion. All investment decisions for the Portfolio are made by
investment teams at Mentor Advisors.

-5-

<PAGE>

Mentor Investment Group has informed the Portfolio that Wheat First
Butcher Singer will be acquired by First Union Corp. ("First Union"), in a
transaction expected to occur as early as December 1997. First Union is a global
financial services company with approximately $140 billion in assets and $10
billion in total stockholders' equity. The proposed arrangement does not
contemplate any changes in the management or operations of Mentor Investment
Group or any of its subsidiaries, including Mentor Advisors.

Subject to the general oversight of the Trustees, Mentor Advisors
manages the Portfolio in accordance with the stated policies of the Portfolio.
Mentor Advisors makes investment decisions for the Portfolio and places the
purchase and sale orders for the Portfolio's portfolio transactions. In
selecting broker-dealers, Mentor Advisors may consider research and brokerage
services furnished to it and its affiliates. Subject to seeking the best overall
terms available, Mentor Advisors may consider sales of shares of the Portfolio
(and, if permitted by law, of other funds in the Mentor family) as a factor in
the selection of broker-dealers to execute portfolio transactions for the
Portfolio. Mentor Advisors may at times cause the Portfolio to pay commissions
to broker-dealers affiliated with Mentor Advisors.

Expenses incurred in the operation of the Portfolio or otherwise
allocated to the Portfolio, including but not limited to taxes, interest,
brokerage fees and commissions, fees to Trustees who are not officers,
directors, stockholders, or employees of Wheat First Butcher Singer and its
subsidiaries, SEC fees and related expenses, state Blue Sky qualification fees,
charges of the custodian and transfer and dividend disbursing agents, outside
auditing, accounting, and legal services, certain investor servicing fees and
expenses, charges for the printing of prospectuses and statements of additional
information for regulatory purposes or for distribution to shareholders, certain
shareholder report charges and charges relating to corporate matters, are borne
by the Portfolio.

Portfolio turnover. The length of time the Portfolio has held a
particular security is not generally a consideration in investment decisions.
The investment policies of the Portfolio may lead to frequent changes in the
Portfolio's investments, particularly in periods of volatile market movements. A
change in the securities held by the Portfolio is known as "portfolio turnover."
Portfolio turnover generally involves some expense to the Portfolio, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities. Such sales may result in
realization of taxable capital gains. The Portfolio's annual portfolio turnover
rate is expected to be less than 200% for the current fiscal year.

How the Portfolio values its shares

The Portfolio calculates the net asset value of its shares 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 has been determined to approximate the fair market value
of such investments. All other securities and assets are valued at their fair
values. The net asset value for Class A shares will generally 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, and any differences in the expenses of
the different classes.

-6-

<PAGE>

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:

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 sales at net asset value in
excess of $1 million are subject to a contingent deferred sales charge (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 years.
Class B shares also bear 12b-1 fees. Class B shares provide an investor the
benefit of putting all of the investor's money to work from the time the
investment is made, but have a higher expense ratio and pay lower dividends than
Class A shares due to the 12b-1 fees. If you purchase shares through an
asset-allocation program, you may also be eligible to purchase Class B shares
through the "BL Purchase Program." 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. Investors purchasing shares through an asset-allocation program
may wish to purchase shares through the BL Purchase Program. For more
information about these sales arrangements, consult your investment dealer or
the [Distributor]. 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 certain other funds in the Mentor family and for
shares of Cash Resource U.S. Government Money Market 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 as $100. Investments under
IRAs and 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, Mentor Investment
Group, LLC ("Mentor Investment Group") or its affiliates. You can buy Portfolio
shares by completing the enclosed New Account Form and sending it to [Name of
Distributor], the Portfolio's distributor (the "Distributor"), along with a
check or money order made payable to Mentor Funds, 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 Investment
Group can refer you to one.

Automatic investment plan. Once you have made the initial minimum
investment in the 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 the Distributor.

Shares are sold at a price based on the Portfolio's net asset value
next determined after the Distributor receives your purchase order. In most
cases, in order to receive that day's public offering price, the Distributor
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 ensure that the Distributor receives your order before the close of regular
trading on the New York Stock Exchange for you to receive that day's public
offering price.

-7-

<PAGE>

Class A Shares. The public offering price 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 the Distributor. The current sales charges
for Class A shares of the Portfolio are as follows:

Sales Charge as Sales Charge as
a Percentage of a Percentage of
Public Offering Net Amount Dealer
Price Invested Commission*
--------------- --------------- -----------
<S> <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>
- ----------------------

* At the discretion of the Distributor, 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.

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. A CDSC is also imposed on any shares purchased
without a sales charge as part of a purchase of shares of $1 million or more
under a purchase accumulation plan. Contact the Distributor for more
information.

You may be eligible to buy Class A shares at reduced sales
charges. Consult your investment dealer or the Distributor 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, including to shareholders of other mutual funds who
invest in the Portfolio in response to certain promotional activities, and the
CDSC may be waived under certain circumstances. The sales charges shown above
will not apply to shares purchased by you if you purchase shares through EVEREN
Securities, Inc. with the redemption proceeds received by you within the
preceding 90 days from the sale of shares of any non-Mentor open-end mutual
fund. No CDSC will apply to these purchases. EVEREN Securities, Inc. may
compensate your investment dealer in connection with any such purchase. See "How
to buy shares --- General" below.

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 years
of purchase. The following types of shares may be redeemed without charge: (i)
shares acquired by reinvestment of distributions and (ii) shares otherwise
exempt from the CDSC, as described in the Example below. The amount of CDSC 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 in the shares being redeemed and the dollar amount
being redeemed, according to the following table:

Years Since Purchase Payment Made CDSC
--------------------------------- ----
1 4.0%
2 4.0%
3 3.0%
4 2.0%
5 1.0%
6+ None

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<PAGE>

The BL Purchase Program. If you purchase Class B shares through an
asset-allocation program sponsored by your broker-dealer or other financial
institution, you may elect to participate in the BL Purchase Program. Shares
purchased through this program are not subject to the CDSC shown above. Rather,
a CDSC of 1.00% will be 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. Your broker-dealer or other financial institution is responsible
for making the election on your behalf to invest through the Program.
Accordingly, if you wish to purchase shares through this Program, you should
instruct your broker-dealer or financial institution to do so.

General. [Name of Distributor], located at [address], serves as
distributor of the Portfolio's shares. The Distributor is not obligated to sell
any specific amount of shares of the Portfolio. The Distributor's telephone
number is ___________.

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 Investment Group, Mentor Advisors, and their affiliates,
registered representatives and other employees (and their families) of
broker-dealers having sales agreements with the Distributor, employees (and
their families) of financial institutions having sales agreements with the
Distributor (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, 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 funds in the Mentor family, shares redeemed under the 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 Mentor Investment Group or
its affiliates. The Portfolio may sell shares without a sales charge or 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 on an excess contribution to
an IRA; (iii) redemptions by pension or profit sharing plans sponsored by Mentor
Investment Group or an affiliate; and (iv) redemptions by pension or profit
sharing plans of which Mentor Investment Group 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. The Portfolio
may sell its Class A shares without a sales charge to shareholders of other
mutual funds who invest in other funds in the Mentor family in response to
certain promotional activities (in which case a CDSC of 1% may apply for a
period of years after purchase). Contact the Distributor. If you invest through
a broker-dealer or other financial institution, your broker-dealer or other
financial institution will be responsible for electing on your behalf to take
advantage of any of these reduced sales charges or waivers described above.
Please instruct your broker-dealer or other financial institution accordingly.

Shareholders of other funds in the Mentor family may be entitled
to exchange their shares for, or reinvest distributions from their funds in,
shares of the Portfolio at net asset value.

In determining whether a CDSC is payable in respect of the shares
redeemed, the Portfolio will first redeem the shares held longest (together with
any shares received upon reinvestment of distributions with respect to those
shares). Any of the shares being redeemed which were acquired by reinvestment of
distributions will

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<PAGE>

be redeemed without a CDSC, and amounts representing capital appreciation will
not be subject to a CDSC. See the Example below.

Example:

You have purchased 100 shares at $10 per share. The second year after your
purchase, your investment's net asset value per share has increased by $2 to
$12, and you have gained 10 additional shares through dividend reinvestment. If
you redeem 50 of those shares (including shares purchased through reinvestment
of distributions on those 100 shares) at this time, your CDSC will be calculated
as follows:

o Proceeds of 50 shares redeemed at $12 per share $600
o Minus proceeds of 10 shares not subject to a CDSC
because they were acquired through dividend reinvestment
(10 x $12) -120
o Minus appreciation on remaining shares, also not subject
to CDSC (40 x $2) -80
----
o Amount subject to a CDSC $400

The Distributor receives the entire amount of any CDSC you pay.
Consult the Distributor for more information.

If you are considering redeeming or exchanging shares of the
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.

Because of the relatively high cost of maintaining accounts, the
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 the Portfolio by increasing his investment
in shares of the Portfolio to a value of $500 or more during such 60-day period.

The Distributor, Mentor Advisors, and affiliates thereof, at their
own expense and out of their own assets, may also provide other compensation to
dealers in connection with sales of the Portfolio. Such 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 Portfolio'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. Certain dealers may not sell all classes
of shares.

In all cases Mentor Advisors or the Distributor reserves the right
to reject any particular investment.

Reinvestment Privilege. If you redeem Class A or B shares of the
Portfolio, you have a one-time right, within 60 days, to reinvest the redemption
proceeds plus the amount of CDSC you paid, if any, at the next- determined net
asset value. Front-end sales charges will not apply to such reinvestment. The
Distributor must be notified in writing by you or by your financial institution
of the reinvestment for you to recover the CDSC, or to eliminate the front-end
sales charge. If you redeem shares in the Portfolio, there may be tax
consequences.

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<PAGE>

Distribution Plan (Class B Shares)

The Distributor is not obligated to sell any specific amount of
shares of the Portfolio.

The Portfolio has adopted a Distribution Plan under Rule 12b-1
with respect to its Class B shares (the "Plan") providing for payments by the
Portfolio to the Distributor from the assets attributable to the Portfolio's
Class B shares at the annual rate set out under "Summary of Portfolio Expenses -
Annual Portfolio Operating Expenses" above. The Trustees may reduce the amount
of payments or suspend the Plan for such periods as they may determine. The
Distributor also receives the proceeds of any CDSC imposed on redemptions of
shares.

Payments under the Plan are intended to compensate the Distributor
for services provided and expenses incurred by it as principal underwriter of
the Portfolio's Class B shares. The Distributor may select financial
institutions (such as a broker/dealer or bank) to provide sales support services
as agents for their clients or customers who beneficially own Class B shares of
the Portfolio. Financial institutions will receive fees from the Distributor
based upon Class B shares owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined
from time to time by the Distributor. The Distributor may suspend or modify such
payments to dealers. Such payments are also subject to the continuation of the
Plan, the terms of any agreements between dealers and the Distributor, and any
applicable limits imposed by the National Association of Securities Dealers,
Inc.

Mentor Distributors, L.L.C., a subsidiary of Mentor Investment
Group, provides certain services to the Distributor in respect of the promotion
of the shares of the Portfolio. In return for these services, the Distributor
pays to Mentor Distributors a portion of the payments received by the
Distributor under the Plan.

How to sell shares

You can sell your shares 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 the Portfolio. Send a signed letter of
instruction and stock power form, along with any certificates that represent
shares you want to sell, to Mentor Funds, c/o Boston Financial Data Services,
Inc. ("BFDS"), 2 Heritage Drive, North Quincy, Massachusetts 02171. The price
you will receive is the net asset value next 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 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, the Distributor,
and many commercial banks. The Distributor usually requires additional
documentation for the sale of shares by a corporation, partnership, agent,
fiduciary, or surviving joint owner. Contact the Distributor for details.

Selling shares by telephone. You may use the Telephone Redemption
Privilege to redeem shares from your account unless you have notified the
Distributor of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the New Account Form, the Distributor 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 the Distributor with his or her account
registration and address as it appears on the Distributor's records. The
Distributor will employ these and other reasonable procedures to confirm that
instructions communicated by telephone are genuine; if it fails to employ
reasonable procedures, the

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<PAGE>

Distributor may be liable for any losses due to unauthorized or fraudulent
instructions. For more information, consult the Distributor. During periods of
unusual market changes and shareholder activity, you may experience delays in
contacting the Distributor 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 and the
Distributor 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 the Distributor,
and may charge you for its services.

Systematic Withdrawal Program. You may redeem Class A or B shares
of the 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 the Distributor for more information.

General. 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.

The Portfolio reserves the right, if conditions exist which make
cash payments undesirable, to honor any request for redemption by making payment
in whole or in part in securities valued in the same way as they would be valued
for purposes of computing the Portfolio's per share net asset value. If payment
is made in securities, a shareholder may incur brokerage expenses in converting
those securities into cash.

How to exchange shares

Except as otherwise described below, you can exchange your shares
in the Portfolio worth at least $1,000 for shares of the same class of certain
other Portfolios of Mentor Funds, with different investment objectives and
policies, at net asset value beginning 15 days after purchase. You may also
exchange shares of the 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 a 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
the Portfolio from which your first exchange was effected. 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, and any CDSC
payable on redemption of your shares will be reduced by the amount of any
payment collected by the Cash Fund under its distribution plan in respect of
those shares. Contact the Distributor for information.)

To exchange your shares, simply complete an Exchange Authorization
Form and send it to Mentor Funds, c/o BFDS, 2 Heritage Drive, North Quincy,
Massachusetts 02171. Exchange Authorization Forms are available by calling or
writing the Distributor. 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. The Distributor's 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 you investment dealer or the
Distributor for a prospectus relating to other Portfolios of Mentor Funds or the
Cash Fund. Shares of certain of the Portfolios may not be available to residents
of all states.

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<PAGE>

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 the Distributor or the Trustees
believe doing so would be in the best interests of the 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 the
Distributor before requesting an exchange by calling ____________. See the
Statement of Additional Information to find out more about the exchange
privilege.

How distributions are made

The Portfolio distributes net investment income and any net
realized capital gains at least annually. Distributions from capital gains are
made after applying any available capital loss carryovers. All Portfolio
distributions will be invested in additional Portfolio shares, unless the
shareholder instructs the Portfolio otherwise.

Taxes

The 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. The Portfolio will distribute substantially all of
its net investment income and capital gain net income on a current basis.

All Portfolio distributions will be taxable to shareholders as
ordinary income, except that any distributions of net capital gain will be taxed
as long-term capital gain, regardless of how long a shareholder has held the
shares (although the loss on a sale of shares held for six months or less 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
shareholders of the amount and tax status of distributions paid by the Portfolio
for the preceding year. In buying or selling securities for the Portfolio,
Mentor Advisors will not normally take into account the effect any purchase or
sale of securities will have on the tax positions of the Portfolio's
shareholders.

Shareholders of the Portfolio who are U.S. citizens or residents
may be able to claim a foreign tax credit or deduction on their U.S. income tax
returns with respect to foreign taxes paid by the Portfolio. If, at the end of
the fiscal year of the Portfolio, more than 50% of the Portfolio's total assets
are represented by securities of foreign corporations, the Portfolio intends to
make an election permitted by the Internal Revenue Code to treat any foreign
taxes it paid as paid by its shareholders. In that case, shareholders who are
U.S. citizens, U.S. corporations, and, in some cases, U.S. residents will be
required to include in U.S. taxable income their pro rata share of such taxes,
but may then be entitled to claim a foreign tax credit or deduction (but not
both) for their share of such taxes.

The foregoing is a summary of certain federal income tax
consequences of investing in the Portfolio. Dividends and distributions also may
be subject to state and local taxes. Shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state, or local taxes.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Portfolio, including the possibility
that distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

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<PAGE>

Other services

Shareholder Servicing Plan. The Trust has adopted a Shareholder
Servicing Plan (the "Service Plan") with respect to the Class A and Class B
shares of the Portfolio. Under the Service Plan, financial institutions will
enter into shareholder service agreements with the Trust 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 at a rate not exceeding 0.25% of the average
daily net assets of the Class A or Class B shares of the Portfolio. 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 personnel, 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
Portfolio; assisting clients in changing dividend options, account designations,
and addresses; and providing such other services as the Portfolio reasonably
requests.

In addition to receiving payments under the Service Plan,
financial institutions may be compensated by Mentor Advisors and/or Mentor
Investment Group, or affiliates thereof, for providing administrative support
services to holders of Class A or Class B shares of the Portfolio. These
payments will be made directly by Mentor Advisors and/or Mentor Investment Group
and will not be made from the assets of the Portfolio.

General Information

Mentor Funds (the "Trust") is a Massachusetts business trust
organized on January 20, 1992 A copy of the Agreement and Declaration of 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 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 eleven
series, one representing the Portfolio, the others representing other Portfolios
with varying investment objectives and policies. The Portfolio's shares are
currently divided into four classes. Only shares of the Portfolio's Class A and
B shares are being offered by this Prospectus. The Portfolio also offers other
classes of shares with different sales charges and expenses. Because of these
different sales charges and expenses, the investment performance of the classes
will vary. For more information, including your eligibility to purchase any
other class of shares, contact [Name of Distributor].

Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote together as a single class except
when required by law or determined by the Trustees. Shares of the Portfolio are
freely transferable, are entitled to dividends as declared by the Trustees, and,
if the Portfolio were liquidated, would receive the net assets of the Portfolio.
The Trust may suspend the sale of shares at any time and may refuse any order to
purchase shares. Although neither the Portfolio nor the Trust is required to
hold annual meetings of 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.

In the interest of economy and convenience, the Portfolio will not
issue certificates for its shares except at the shareholder's request.

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<PAGE>

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105, serves as the Portfolio's custodian. State Street Bank and
Trust Company, c/o Boston Financial Data Services, Inc., 2 Heritage Drive, North
Quincy, Massachusetts 02171, serves as the Portfolio's transfer and dividend
agent.

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<PAGE>

Performance Information

Yield and total return data may from time to time be included in
advertisements about Class A and Class B shares of the Portfolio. The
Portfolio's "yield" for each class of shares 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 one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the
Portfolio at the maximum public offering price (in the case of Class A shares)
and reflecting (in the case of Class B shares) 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. Investment
performance of different classes of shares of the Portfolio will differ. Any
quotation of investment performance not reflecting the maximum initial sales
charge or CDSC would be reduced if such sales charges were reflected. Quotations
of yield and total return for a period when an expense limitation was in effect
will be greater than if the limitation had not been in effect. The Portfolio's
performance may be compared to various indices. See the Statement of Additional
Information. Information may be presented in advertisements about the Portfolio
describing the background and professional experience of the Portfolio's
investment adviser or its investment personnel.

All data is based on the 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's investments, the Portfolio's operating expenses and the class of
shares purchased. Investment performance also often reflects the risks
associated with the Portfolio's investment objective and policies. These factors
should be considered when comparing the Portfolio's investment results to those
of other mutual funds and other investment vehicles.

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<PAGE>

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Portfolio. This Prospectus does not constitute an
offer in any State in which, or to any person to whom, such offering may not
lawfully be made. This Pro spectus omits certain information contained in the
Registration Statement, to which reference is made, filed with the Securities
and Exchange Commission. Items which are thus omitted, including contracts and
other documents referred to or summarized herein, may be obtained from the
Commission upon payment of the prescribed fees.

Additional information concerning the securities offered hereby and the
Portfolio is to be found in the Registration Statement, including various
exhibits thereto and financial statements included or incorporated therein,
which may be inspected at the office of the Commission.

Table of Contents

Expense summary....................................................
Investment objective and policies..................................
Other investment practices and risks...............................
Management.........................................................
How the Portfolio values its shares................................
Sales arrangements.................................................
How to buy shares..................................................
Distribution Plan (Class B Shares).................................
How to sell shares.................................................
How to exchange shares.............................................
How distributions are made.........................................
Taxes..............................................................
Other services.....................................................
General information................................................
Performance information............................................

MENTOR
GROWTH OPPORTUNITIES
PORTFOLIO

----------

PROSPECTUS

----------

[Name of Distributor]

<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 7, 1997

PROSPECTUS January ___, 1998
Institutional Class

MENTOR GROWTH OPPORTUNITIES PORTFOLIO

-------------------------

[NAME OF DISTRIBUTOR]
Distributor

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<PAGE>

Expense summary

Expenses are one of several factors to consider when investing in the
Portfolio. Expenses shown reflect the expenses the Portfolio expects to incur in
its first full fiscal year. The Example shows the cumulative expenses
attributable to a hypothetical $1,000 investment in the Portfolio over specified
periods.

Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None

Annual Portfolio Operating Expenses:
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees 0.00%
Other Expenses (after expense limitation)* 0.33%
----
Total Portfolio Operating Expenses (after 1.33%
expense limitation)*

- -------------------
* Other Expenses and Total Portfolio Operating Expenses reflect a voluntary
expense limitation. In the absence of the expense limitation, Other Expenses are
expected to be ____% and Total Portfolio Operating Expenses are expected to be
____%.

Example

An investment of $1,000 in the Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each period:

1 year $
3 years $

This information is provided to help investors understand the expenses of
investing in the Portfolio and an investor's share of the estimated operating
expenses of the Portfolio. The Example should not be considered a representation
of future performance; actual expenses may be more or less than those shown.

Investment objective and policies

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<PAGE>

characteristics, management, or other factors, for long-term capital
appreciation. Equity securities in which the Portfolio may invest include common
stocks, preferred stocks, and warrants, and securities convertible into common
or preferred stocks.

Investments in small-cap companies. Small-cap companies may offer
greater opportunities for capital appreciation than other companies, but may
also involve greater risks. They may have limited product lines, markets, or
financial resources, or may depend on a limited management group. Their
securities may trade less frequently and in limited volume. As a result, the
prices of these securities may fluctuate more sharply than those of other
securities, and the Portfolio may experience some difficulty in establishing or
closing out positions in these securities at prevailing market prices.

Other investment practices and risks

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<PAGE>

option transaction, the Portfolio realizes a gain or loss. The Portfolio may
also, to the extent consistent with applicable law, buy and sell index futures
and options to increase its investment return.

The Portfolio generally expects that its options transactions will be
conducted on recognized exchanges. The Portfolio may in certain instances
purchase and sell options in the over-the-counter markets. The 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. The Portfolio will, however, engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of Mentor Advisors, the pricing
mechanism and liquidity of the over-the-counter markets are satisfactory and the
participants are responsible parties likely to meet their obligations.

--------------------

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<PAGE>

Management

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<PAGE>

the Portfolio's investments, particularly in periods of volatile market
movements. A change in the securities held by the Portfolio is known as
"portfolio turnover." Portfolio turnover generally involves some expense to the
Portfolio, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestment in other
securities. Such sales may result in realization of taxable capital gains. The
Portfolio's annual portfolio turnover rate is expected to be less than 200% for
the current fiscal year.

How the Portfolio values its shares

Purchase of shares

Shares are sold at a price based on the Portfolio's net asset value
next determined after a purchase order is received by the Portfolio. In most
cases, in order to receive that day's public offering price, your order must be
received by the Trust or [Name of Distributor], [address] ("[Name of
Distributor]"), before the close of regular trading on the New York Stock
Exchange. The Distributor is not obligated to sell any specific amount of shares
of the Portfolio.

An investor may make an initial purchase of shares in the Portfolio by
submitting completed application materials along with a purchase order, and by
making payment to the Distributor or the Trust. Investors will be required to
make minimum initial investments of $500,000 and minimum subsequent investments
of $25,000. Investments made through advisory accounts maintained with
investment advisers registered under the Investment Advisers Act of 1940
(including "wrap" accounts) are not subject to these minimum investment
requirements. The Portfolio reserves the right at any time to change the initial
and subsequent investment minimums required of investors. If an investor
purchases shares of the Portfolio through EVEREN Securities, Inc. with the
redemption proceeds received by the investor within the preceding 90 days from
the sale of shares of any nonMentor open-end mutual fund, EVEREN Securities,
Inc. may compensate the investor's investment consultant in connection with that
purchase.

Shares of the Portfolio may be purchased by (i) paying cash, (ii)
exchanging securities acceptable to Mentor Advisors, or (iii) a combination of
such securities and cash. Purchase of shares of the Portfolio in exchange for
securities is subject in each case to the determination by Mentor Advisors that
the securities to be exchanged are acceptable for purchase by the Portfolio.
Securities accepted by Mentor Advisors in exchange for Portfolio shares will be
valued in the same manner as the Portfolio's assets as of the time of the
Portfolio's next determination of net asset value after such acceptance. All
dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Portfolio and must be delivered to the Portfolio upon receipt by the investor
from the issuer. A gain or loss for federal income tax purposes would be
realized upon the exchange by an investor that is subject to federal income
taxation, depending upon the investor's basis in the securities tendered. A
shareholder who wishes to purchase shares by exchanging securities should obtain
instructions by calling the Distributor at 1-800-869-6042.

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<PAGE>

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 Portfolio 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.

In all cases Mentor Advisors or the Distributor reserves the right to
reject any particular investment.

Redemption of shares

A shareholder may redeem all or any portion of its shares in the
Portfolio any day the New York Stock Exchange is open by sending a signed letter
of instruction and stock power form, along with any certificates that represent
shares the shareholder wants to sell, to the Portfolio c/o: Mentor Institutional
Trust, P.O. Box 1357, Richmond, Virginia 23286-0109 or to the Distributor.
Redemptions will be effected at the net asset value per share of the Portfolio
next determined after the receipt by the Portfolio of redemption instructions in
"good order" as described below. 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. The Portfolio will only redeem shares for which it has
received payment. A check for the proceeds will normally be mailed on the next
business day after a request in good order is received.

A redemption request will be considered to have been made in "good
order" if the following conditions are satisfied:

(1) the request is in writing, states the number of shares to be
redeemed, and identifies the shareholder's Portfolio account
number;

(2) the request is signed by each registered owner exactly as
the shares are registered; and

(3) if the shares to be redeemed were issued in certificate
form, the certificates are endorsed for transfer (or are
accompanied by an endorsed stock power) and accompany the
redemption request.

If shares to be redeemed represent an investment made by check, the Trust
reserves the right not to transmit the redemption proceeds to the shareholder
until the check has been collected, which may take up to 15 days after the
purchase date.

The Portfolio reserves the right to require signature guarantees. A
guarantor of a signature must be an eligible guarantor institution, which term
includes most banks and trust companies, savings associations, credit unions,
and securities brokers or dealers. The purpose of a signature guarantee is to
protect shareholders against the possibility of fraud. The Distributor usually
requires additional documentation for the sale of shares by a corporation,
partnership, agent, fiduciary, or surviving joint owner. Contact the Distributor
for details.

The Distributor may facilitate any redemption request. There is no extra
charge for this service.

Other information concerning redemption. Under unusual circumstances, the
Portfolio may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities law. In addition, the Portfolio reserves the
right, if conditions exist which make cash payments undesirable, to honor any
request for redemption by making payment in whole or in part in securities
valued in the same way as they would be valued for purposes of computing the
Portfolio's per share net asset value. If payment is made in securities, a
shareholder may incur brokerage expenses in converting those securities into
cash.

-7-

<PAGE>

How distributions are made

Taxes

General Information

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<PAGE>

eleven series, one representing the Portfolio, the others representing other
Portfolios with varying investment objectives and policies. The Portfolio's
shares are currently divided into four classes. Only shares of the Portfolio's
Institutional Class (Class D) are being offered by this Prospectus. The
Portfolio also offers other classes of shares with different sales charges and
expenses. Because of these different sales charges and expenses, the investment
performance of the classes will vary. For more information, including your
eligibility to purchase any other class of shares, contact [Name of
Distributor].

In the interest of economy and convenience, the Portfolio will not
issue certificates for its shares except at the shareholder's request.

Performance Information

Yield and total return data may from time to time be included in
advertisements about the Class D shares of the Portfolio. The Portfolio's
"yield" for each class of shares is calculated by dividing the Portfolio's
annualized net investment income per share during a recent 30-day period by its
net asset value on the last day of that period. "Total return" for the life of
the Class D shares of the Portfolio through the most recent calendar quarter
represents the average annual compounded rate of return on an investment of
$1,000 in the shares over the period. Total return may also be presented for
other periods or based on investment at reduced sales charge levels or at net
asset value. Investment performance for different classes of shares of the
Portfolio will differ. Quotations of yield and total return for a period when an
expense limitation was in effect will be greater than if the limitation had not
been in effect. The Portfolio's performance may be compared to various indices.
See the Statement of Additional Information. Information may be presented in
advertisements about the Portfolio describing the background and professional
experience of the Portfolio's investment adviser or its investment personnel.

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<PAGE>

MENTOR
GROWTH OPPORTUNITIES
PORTFOLIO

----------

PROSPECTUS

----------

[Name of Distributor]

<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 7, 1997

PROSPECTUS January ___, 1998
Class E shares

MENTOR GROWTH OPPORTUNITIES PORTFOLIO

-------------------------

[NAME OF DISTRIBUTOR]
Distributor

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<PAGE>

Expense summary

Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee None
Exchange Fee None

Annual Portfolio Operating Expenses:
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees 0.00%
Shareholder Service Fee 0.25%
Other Expenses (after expense limitation)* 0.33%
----
Total Portfolio Operating Expenses (after 1.58%
expense limitation)*

Example

An investment of $1,000 in the Portfolio would incur the following
expenses, assuming 5% annual return and redemption at the end of each period:

1 year $
3 years $

Investment objective and policies

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<PAGE>

to identify small-cap companies that have the potential, based on superior or
niche products or services, operating characteristics, management, or other
factors, for long-term capital appreciation. Equity securities in which the
Portfolio may invest include common stocks, preferred stocks, and warrants, and
securities convertible into common or preferred stocks.

Other investment practices and risks

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<PAGE>

-----------------------

-4-

<PAGE>

Management

-5-

<PAGE>

How the Portfolio values its shares

Purchase of shares

Class E shares of the Portfolio are available to shareholders who
invest or maintain a Portfolio account with the assistance of a broker-dealer,
financial consultant, or similar service provider (a "financial intermediary").

Shares are sold at a price based on the Portfolio's net asset value
next determined after a purchase order is received by the Portfolio. In most
cases, in order to receive that day's public offering price, your order must be
received by the Trust or [Name of Distributor], [address] (the "Distributor"),
before the close of regular trading on the New York Stock Exchange. The
Distributor is not obligated to sell any specific amount of shares of the
Portfolio.

An investor may make an initial purchase of shares in the Portfolio by
submitting completed application materials along with a purchase order, and by
making payment to the Distributor or the Trust, or through a financial
intermediary. If you purchase shares through your financial intermediary, your
financial intermediary will be responsible for forwarding any necessary
documentation and payments to the Distributor.

Investors will be required to make minimum initial investments of
$500,000 and minimum subsequent investments of $25,000. Investments made through
advisory accounts maintained with investment advisers registered under the
Investment Advisers Act of 1940 (including "wrap" accounts) are not subject to
these minimum investment requirements. The Portfolio reserves the right at any
time to change the initial and subsequent investment minimums required of
investors. If an investor purchases shares of the Portfolio through EVEREN
Securities, Inc. with the redemption proceeds received by the investor within
the preceding 90 days from the sale of shares of any non-Mentor open-end mutual
fund, EVEREN Securities, Inc. may compensate the investor's investment
consultant in connection with that purchase.

If you buy shares through a financial intermediary, the financial
intermediary must ensure that the Distributor receives your order before the
close of regular trading on the New York Stock Exchange for you to receive that
day's public offering price.

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<PAGE>

Portfolio shares will be valued in the same manner as the Portfolio's assets as
of the time of the Portfolio's next determination of net asset value after such
acceptance. All dividends and subscription or other rights which are reflected
in the market price of accepted securities at the time of valuation become the
property of the Portfolio and must be delivered to the Portfolio upon receipt by
the investor from the issuer. A gain or loss for federal income tax purposes
would be realized upon the exchange by an investor that is subject to federal
income taxation, depending upon the investor's basis in the securities tendered.
A shareholder who wishes to purchase shares by exchanging securities should
obtain instructions by calling the Distributor at 1-800-869-6042.

The Distributor, Mentor Advisors, and affiliates thereof, at their own
expense and out of their own assets, may provide compensation to dealers in
connection with sales of shares of the Portfolio. Such compensation may 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 Portfolio 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.

In all cases Mentor Advisors or the Distributor reserves the right to
reject any particular investment.

Shareholder Servicing Plan; financial intermediaries. The Portfolio has
adopted a Shareholder Servicing Plan (the "Plan") with respect to its Class E
shares. Under the Plan, financial intermediaries may enter into shareholder
service agreements with the Portfolio to provide administrative support to their
customers who hold Class E shares of the Portfolio. In return for providing
these support services, a financial intermediary may receive payments at a rate
not exceeding 0.25% of the average daily net assets of the Portfolio
attributable to the Class E shares held by its customers. These support services
may include, but are not limited to, the following: providing office space,
equipment, telephone facilities, and various personnel, including clerical,
supervisory, and computer personnel, 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 Portfolio; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Portfolio reasonably requests.

In addition to receiving payments under the Plan, financial
intermediaries may be compensated by Mentor Advisors and/or Mentor, or
affiliates thereof, for providing administrative support services to holders of
Class E shares of the Portfolio. These payments will be made directly by Mentor
Advisors and/or Mentor and will not be made from the assets of the Portfolio.

When you effect transactions with the Portfolio (including, for
example, purchases, sales, or redemptions of shares) through a financial
intermediary, your financial intermediary, and not the Portfolio, will be
responsible for taking all steps, and furnishing all necessary documentation, to
effect the transactions. Your financial intermediary may charge for these
services. Certain financial intermediaries may not effect transactions with the
Portfolio for their clients.

Redemption of shares

You can sell your shares to the Portfolio any day the New York Stock
Exchange is open, either directly to the Portfolio or through your financial
intermediary.

Selling shares directly to the Portfolio. A shareholder may redeem all
or any portion of its shares in the Portfolio any day the New York Stock
Exchange is open by sending a signed letter of instruction and stock power form,
along with any certificates that represent shares the shareholder wants to sell,
to the Portfolio c/o: Mentor Funds, P.O. Box 1357, Richmond, Virginia 23286-0109
or to the Distributor. Redemptions will be effected at

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<PAGE>

the net asset value per share of the Portfolio next determined after the receipt
by the Portfolio of redemption instructions in "good order" as described below.
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. The
Portfolio will only redeem shares for which it has received payment. A check for
the proceeds will normally be mailed on the next business day after a request in
good order is received.

Selling shares through your financial intermediary. Your financial
intermediary must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. If you redeem
your shares through a financial intermediary, your financial intermediary will
be responsible for delivering your redemption request and all necessary
documentation to the Portfolio and may charge you for its services.

General. A redemption request will be considered to have been made in
"good order" if the following conditions are satisfied:

(1) the request is in writing, states the number of shares to be
redeemed, and identifies the shareholder's Portfolio account
number;

(2) the request is signed by each registered owner exactly as the
shares are registered; and

(3) if the shares to be redeemed were issued in certificate form, the
certificates are endorsed for transfer (or are accompanied by an
endorsed stock power) and accompany the redemption request.

If shares to be redeemed represent an investment made by check, the
Trust reserves the right not to transmit the redemption proceeds to the
shareholder until the check has been collected, which may take up to 15 days
after the purchase date.

The Distributor may facilitate any redemption request. There is no
extra charge for this service.

Other information concerning redemption. Under unusual circumstances,
the Portfolio may suspend redemptions, or postpone payment for more than seven
days, as permitted by federal securities law. In addition, the Portfolio
reserves the right, if conditions exist which make cash payments undesirable, to
honor any request for redemption by making payment in whole or in part in
securities valued in the same way as they would be valued for purposes of
computing the Portfolio's per share net asset value. If payment is made in
securities, a shareholder may incur brokerage expenses in converting those
securities into cash.

How distributions are made

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<PAGE>

Taxes

General Information

The Trust is an open-end 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 eleven
series, one representing the Portfolio, the others representing other Portfolios
with varying investment objectives and policies. The Portfolio's shares are
currently divided into four classes. Only shares of the Portfolio's Class E
shares are being offered by this Prospectus. The Portfolio also offers other
classes of shares with different sales charges and expenses. Because of these
different sales charges and expenses, the investment performance of the classes
will vary. For more information, including your eligibility to purchase any
other class of shares, contact [Name of Distributor].

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<PAGE>

In the interest of economy and convenience, the Portfolio will not
issue certificates for its shares except at the shareholder's request.

Performance Information

Yield and total return data may from time to time be included in
advertisements about the Class E shares of the Portfolio. The Portfolio's
"yield" for each class of shares is calculated by dividing the Portfolio's
annualized net investment income per share during a recent 30-day period by its
net asset value on the last day of that period. "Total return" for the life of
the Class E shares of the Portfolio through the most recent calendar quarter
represents the average annual compounded rate of return on an investment of
$1,000 in the shares over the period. Total return may also be presented for
other periods or based on investment at reduced sales charge levels or at net
asset value. Investment performance for different classes of shares of the
Portfolio will differ. Quotations of yield and total return for a period when an
expense limitation was in effect will be greater than if the limitation had not
been in effect. The Portfolio's performance may be compared to various indices.
See the Statement of Additional Information. Information may be presented in
advertisements about the Portfolio describing the background and professional
experience of the Portfolio's investment adviser or its investment personnel.

-10-

<PAGE>

MENTOR
GROWTH OPPORTUNITIES
PORTFOLIO

----------

PROSPECTUS

----------

[Name of Distributor]

<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 7, 1997

MENTOR FUNDS

STATEMENT OF ADDITIONAL INFORMATION

(Mentor Growth Opportunities Portfolio)

January ___, 1998

This Statement of Additional Information relates to the Mentor Growth
Opportunities Portfolio (the "Portfolio"). The Portfolio is a series of shares
of beneficial interest of Mentor Funds (the "Trust"). The Portfolio currently
offers four classes of shares (Class A, Class B, Class D-Institututional, and
Class E shares). This Statement is not a prospectus and should be read in
conjunction with the relevant prospectus of the Portfolio. A copy of any
prospectus can be obtained upon request made to Mentor Investment Group, L.L.C.,
at P.O. Box 1357, Richmond, Virginia 23286-0109, or calling Mentor Investment
Group, L.L.C. at (800) 869-6042.

TABLE OF CONTENTS

CAPTION PAGE
------- ----
GENERAL .................................................................2
INVESTMENT RESTRICTIONS...................................................2
CERTAIN INVESTMENT TECHNIQUES.............................................3
MANAGEMENT OF THE TRUST...................................................5
PRINCIPAL HOLDERS OF SECURITIES...........................................8
INVESTMENT ADVISORY AND OTHER SERVICES....................................8
BROKERAGE.................................................................9
DETERMINATION OF NET ASSET VALUE.........................................11
TAX STATUS...............................................................13
THE DISTRIBUTOR..........................................................15
INDEPENDENT ACCOUNTANTS..................................................15
CUSTODIAN................................................................15
PERFORMANCE INFORMATION..................................................15
SHAREHOLDER LIABILITY....................................................19
MEMBERS OF INVESTMENT MANAGEMENT TEAMS...................................19
RATINGS ................................................................21

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 statement 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.

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<PAGE>

GENERAL

Mentor Funds (the "Trust") is a Massachusetts business trust organized
on January 20, 1992 as Cambridge Series Trust.

INVESTMENT RESTRICTIONS

As fundamental investment restrictions, which may not be changed with
respect to the Portfolio without approval by the holders of a majority of the
outstanding shares of that Portfolio, the Portfolio may not:

1. Purchase any security (other than U.S. Government securities)
if as a result: (i) as to 75% of such Portfolio's total
assets, more than 5% of the Portfolio's total assets (taken at
current value) would then be invested in securities of a
single issuer, or (ii) more than 25% of the Portfolio's total
assets would be invested in a single industry.

2. Acquire more than 10% of the voting securities of any issuer.

3. Act as underwriter of securities of other issuers except to
the extent that, in connection with the disposition of
portfolio securities, it may be deemed to be an underwriter
under certain federal securities laws.

4. Issue any class of securities which is senior to the
Portfolio's shares of beneficial interest.

5. Purchase or sell securities on margin (but the Portfolio may
obtain such short-term credits as may be necessary for the
clearance of transactions). (Margin payments in connection
with transactions in futures contracts, options, and other
financial instruments are not considered to constitute the
purchase of securities on margin for this purpose.)

6. Purchase or sell real estate or interests in real estate,
including real estate mortgage loans, although it may purchase
and sell securities which are secured by real estate and
securities of companies that invest or deal in real estate or
real estate limited partnership interests. (For purposes of
this restriction, investments by the Portfolio in
mortgage-backed securities and other securities representing
interests in mortgage pools shall not constitute the purchase
or sale of real estate or interests in real estate or real
estate mortgage loans.)

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<PAGE>

7. Borrow more than 33 1/3% of the value of its total assets less
all liabilities and indebtedness (other than such borrowings)
not represented by senior securities.

8. Purchase or sell commodities or commodity contracts, except
that the Portfolio may purchase or sell financial futures
contracts, options on futures contracts, and futures
contracts, forward contracts, and options with respect to
foreign currencies, and may enter into swap transactions.

9. Make loans, except by purchase of debt obligations in which
the Portfolio may invest consistent with its investment
policies or by entering into repurchase agreements.

In addition, it is contrary to the current policy of the Portfolio,
which policy may be changed without shareholder approval, to:

1. Invest in oil, gas, or other mineral leases, rights, or
royalty contracts or in real estate (although the Portfolio
may invest in securities of issuers that invest or deal in the
foregoing types of assets or securities that are secured by or
represent interests in real estate).

2. Invest in (a) securities which at the time of such investment
are not readily marketable, (b) securities restricted as to
resale, and (c) repurchase agreements maturing in more than
seven days, if, as a result, more than 15% of the Portfolio's
net assets (taken at current value) would then be invested in
securities described in (a), (b), and (c).

3. Invest in securities of other registered investment companies,
except by purchases in the open market involving only
customary brokerage commissions and as a result of which not
more than 5% of its total assets (taken at current value)
would be invested in such securities, or except as part of a
merger, consolidation, or other acquisition.

4. Make short sales or purchase puts, calls, straddles, spreads,
or any combination thereof (other than futures contracts,
options on futures contracts or indices, and options on
foreign currencies).

5. Invest in securities of any issuer if, to the knowledge of the
Portfolio, officers and Trustees of the Portfolio and officers
and directors of Mentor Advisors who beneficially own more
than 0.5% of the shares or securities of that issuer together
own more than 5%.

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<PAGE>

All percentage limitations on investments will apply at the time of
investment and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of such investment. Except
for the investment restrictions listed above as fundamental or to the extent
designated as such in the relevant prospectus with respect to the Portfolio, the
other investment policies described in this Statement or in such prospectus are
not fundamental and may be changed by approval of the Trustees. As a matter of
policy, the Trustees would not materially change the Portfolio's investment
objective without shareholder approval.

The Investment Company Act of 1940, as amended (the "1940 Act"),
provides that a "vote of a majority of the outstanding voting securities" of the
Portfolio means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Portfolio, and (2) 67% or more of the shares present
at a meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.

CERTAIN INVESTMENT TECHNIQUES

Set forth below is information concerning certain investment techniques
in which each Portfolio may engage, and certain of the risks they may entail.

Repurchase Agreements

A Portfolio may enter into repurchase agreements. A repurchase
agreement is a contract under which the Portfolio acquires a security for a
relatively short period (usually not more than one week) subject to the
obligation of the seller to repurchase and the Portfolio to resell such security
at a fixed time and price (representing the Portfolio's cost plus interest). It
is the Trust's present intention to enter into repurchase agreements only with
member banks of the Federal Reserve System and securities dealers meeting
certain criteria as to creditworthiness and financial condition established by
the Trustees of the Trust and only with respect to obligations of the U.S.
government or its agencies or instrumentalities or other high quality short term
debt obligations. Repurchase agreements may also be viewed as loans made by a
Portfolio which are collateralized by the securities subject to repurchase. The
investment adviser will monitor such transactions to ensure that the value of
the underlying securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest factor. If the
seller defaults, a Portfolio could realize a loss on the sale of the underlying
security to the extent that the proceeds of sale including accrued interest are
less than the resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or insolvency
proceedings, a Portfolio may incur delay and costs in selling the underlying
security or may suffer a loss of principal and interest if a Portfolio is
treated as an unsecured creditor and required to return the underlying
collateral to the seller's estate.

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<PAGE>

Loans of Portfolio Securities

A Portfolio may lend its portfolio securities, provided: (1) the loan
is secured continuously by collateral consisting of U.S. Government Securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Portfolio may at any
time call the loan and regain the securities loaned; (3) a Portfolio will
receive any interest or dividends paid on the loaned securities; and (4) the
aggregate market value of securities of any Portfolio loaned will not at any
time exceed one-third (or such other limit as the Trustee may establish) of the
total assets of the Portfolio. Cash collateral received by a Portfolio may be
invested in any securities in which the Portfolio may invest consistent with its
investment policies. In addition, it is anticipated that a Portfolio may share
with the borrower some of the income received on the collateral for the loan or
that it will be paid a premium for the loan. Before a Portfolio enters into a
loan, its investment adviser considers all relevant facts and circumstances
including the creditworthiness of the borrower. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. Although voting rights or rights to consent with
respect to the loaned securities pass to the borrower, a Portfolio retains the
right to call the loans at any time on reasonable notice, and it will do so in
order that the securities may be voted by a Portfolio if the holders of such
securities are asked to vote upon or consent to matters materially affecting the
investment. A Portfolio will not lend portfolio securities to borrowers
affiliated with the Portfolio.

When-Issued Securities

The Portfolio may from time to time purchase securities on a
"when-issued" basis. Debt securities are often issued on this basis. The price
of such securities, which may be expressed in yield terms, is fixed at the time
a commitment to purchase is made, but delivery and payment for the when-issued
securities take place at a later date. Normally, the settlement date occurs
within one month of the purchase. During the period between purchase and
settlement, no payment is made by the Portfolio and no interest accrues to the
Portfolio. To the extent that assets of the Portfolio are held in cash pending
the settlement of a purchase of securities, that Portfolio would earn no income.
While the Portfolio may sell its right to acquire when-issued securities prior
to the settlement date, the Portfolio intends actually to acquire such
securities unless a sale prior to settlement appears desirable for investment
reasons. At the time the Portfolio makes the commitment to purchase a security
on a when-issued basis, it will record the transaction and reflect the amount
due and the value of the security in determining the Portfolio's net asset
value. The market value of the when-issued securities may be more or less than
the purchase price payable at the settlement date. The Portfolio will establish
a segregated account in which it will maintain cash and U.S. Government
Securities or other high-grade debt obligations at least equal in value to
commitments for when-issued securities. Such segregated securities either will
mature or, if necessary, be sold on or before the settlement date.

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<PAGE>

Options

The Portfolio may purchase and sell put and call options on its
portfolio securities to enhance investment performance and to protect against
changes in market prices.

Covered call options. The Portfolio may write covered call options on
its securities to realize a greater current return through the receipt of
premiums than it would realize on its securities alone. Such option transactions
may also be used as a limited form of hedging against a decline in the price of
securities owned by the Portfolio.

A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the underlying securities (or comparable
securities satisfying the cover requirements of the securities exchanges), or
has the right to acquire such securities through immediate conversion of
securities.

In return for the premium received when it writes a covered call
option, the Portfolio gives up some or all of the opportunity to profit from an
increase in the market price of the securities covering the call option during
the life of the option. The Portfolio retains the risk of loss should the price
of such securities decline. If the option expires unexercised, the Portfolio
realizes a gain equal to the premium, which may be offset by a decline in price
of the underlying security. If the option is exercised, the Portfolio realizes a
gain or loss equal to the difference between the Portfolio's cost for the
underlying security and the proceeds of sale (exercise price minus commissions)
plus the amount of the premium.

The Portfolio may terminate a call option that it has written before it
expires by entering into a closing purchase transaction. The Portfolio may enter
into closing purchase transactions in order to free itself to sell the
underlying security or to write another call on the security, realize a profit
on a previously written call option, or protect a security from being called in
an unexpected market rise. Any profits from a closing purchase transaction may
be offset by a decline in the value of the underlying security. Conversely,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from a closing purchase transaction is likely to be offset in whole or in part
by unrealized appreciation of the underlying security owned by the Portfolio.

Covered put options. The Portfolio may write covered put options in
order to enhance its current return. Such options transactions may also be used
as a limited form of hedging against an increase in the price of securities that
the Portfolio plans to purchase. A put option gives the holder the right to
sell, and obligates the writer to buy, a security at the exercise price at any
time before the expiration date. A put option is "covered" if the writer
segregates

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<PAGE>

cash and high-grade short-term debt obligations or other permissible collateral
equal to the price to be paid if the option is exercised.

In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Portfolio also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Portfolio assumes the
risk that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.

The Portfolio may terminate a put option that it has written before it
expires by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.

Purchasing put and call options. The Portfolio may also purchase put
options to protect portfolio holdings against a decline in market value. This
protection lasts for the life of the put option because the Portfolio, as a
holder of the option, may sell the underlying security at the exercise price
regardless of any decline in its market price. In order for a put option to be
profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction costs
that the Portfolio must pay. These costs will reduce any profit the Portfolio
might have realized had it sold the underlying security instead of buying the
put option.

The Portfolio may purchase call options to hedge against an increase in
the price of securities that the Portfolio wants ultimately to buy. Such hedge
protection is provided during the life of the call option since the Portfolio,
as holder of the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying security's market
price. In order for a call option to be profitable, the market price of the
underlying security must rise sufficiently above the exercise price to cover the
premium and transaction costs. These costs will reduce any profit the Portfolio
might have realized had it bought the underlying security at the time it
purchased the call option.

The Portfolio may also purchase put and call options to enhance its
current return.

Risks involved in the sale of options. Options transactions involve
certain risks, including the risks that the Portfolio's investment adviser will
not forecast interest rate or market movements correctly, that the Portfolio may
be unable at times to close out such positions, or that hedging transactions may
not accomplish their purpose because of imperfect market correlations. The
successful use of these strategies depends on the ability of the Portfolio's
investment adviser to forecast market and interest rate movements correctly.

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<PAGE>

An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. If no secondary market were to
exist, it would be impossible to enter into a closing transaction to close out
an option position. As a result, the Portfolio may be forced to continue to
hold, or to purchase at a fixed price, a security on which it has sold an option
at a time when its investment adviser believes it is inadvisable to do so.

Higher than anticipated trading activity or order flow or other
unforeseen events might cause The Options Clearing Corporation or an exchange to
institute special trading procedures or restrictions that might restrict the
Trust's use of options. The exchanges have established limitations on the
maximum number of calls and puts of each class that may be held or written by an
investor or group of investors acting in concert. It is possible that the Trust
and other clients of the Portfolios' investment advisers may be considered such
a group. These position limits may restrict the Trust's ability to purchase or
sell options on particular securities.

Options which are not traded on national securities exchanges may be
closed out only with the other party to the option transaction. For that reason,
it may be more difficult to close out unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.

Government regulations, particularly the requirements for qualification
as a "regulated investment company" under the Internal Revenue Code, may also
restrict the Trust's use of options.

Futures Contracts

In order to hedge against the effects of adverse market changes the
Portfolio may buy and sell futures contracts. The Portfolio may also, to the
extent permitted by applicable law, buy and sell futures contracts and options
on futures contracts to increase the Portfolio's current return. All such
futures and related options will, as may be required by applicable law, be
traded on exchanges that are licensed and regulated by the Commodity Futures
Trading Commission (the "CFTC").

Index Futures Contracts and Options. The Portfolio may invest in debt
index futures contracts and stock index futures contracts, and in related
options. A debt index futures contract is a contract to buy or sell units of a
specified debt index at a specified future date at a price agreed upon when the
contract is made. A unit is the current value of the index. Debt index futures
in which the Portfolios are presently expected to invest are not now available,
although such futures contracts are expected to become available in the future.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. A unit is the current value of the stock index.

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<PAGE>

The following example illustrates generally the manner in which index
futures contracts operate. The Standard & Poor's 100 Stock Index is composed of
100 selected common stocks, most of which are listed on the New York Stock
Exchange. The S&P 100 Index assigns relative weightings to the common stocks
included in the Index, and the Index fluctuates with changes in the market
values of those common stocks. In the case of the S&P 100 Index, contracts are
to buy or sell 100 units. Thus, if the value of the S&P 100 Index were $180, one
contract would be worth $18,000 (100 units x $180). The stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the stock index at the expiration of the contract.
For example, if the Portfolio enters into a futures contract to buy 100 units of
the S&P 100 Index at a specified future date at a contract price of $180 and the
S&P 100 Index is at $184 on that future date, the Portfolio will gain $400 (100
units x gain of $4). If the Portfolio enters into a futures contract to sell 100
units of the stock index at a specified future date at a contract price of $180
and the S&P 100 Index is at $182 on that future date, the Portfolio will lose
$200 (100 units x loss of $2).

The Portfolio may purchase or sell futures contracts with respect to
any securities indexes. Positions in index futures may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.

In order to hedge the Portfolio's investments successfully using
futures contracts and related options, the Portfolio must invest in futures
contracts with respect to indexes or sub- indexes the movements of which will,
in its judgment, have a significant correlation with movements in the prices of
the Portfolio's securities.

Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser the right, in
return for the premium paid, to assume a position in an index futures contract
(a long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the option.
Upon exercise of the option, the holder would assume the underlying futures
position and would receive a variation margin payment of cash or securities
approximating the increase in the value of the holder's option position. If an
option is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash based on the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.

As an alternative to purchasing and selling call and put options on
index futures contracts, each of the Portfolios which may purchase and sell
index futures contracts may purchase and sell call and put options on the
underlying indexes themselves to the extent that such options are traded on
national securities exchanges. Index options are similar to options

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<PAGE>

on individual securities in that the purchaser of an index option acquires the
right to buy (in the case of a call) or sell (in the case of a put), and the
writer undertakes the obligation to sell or buy (as the case may be), units of
an index at a stated exercise price during the term of the option. Instead of
giving the right to take or make actual delivery of securities, the holder of an
index option has the right to receive a cash "exercise settlement amount". This
amount is equal to the amount by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of the exercise, multiplied by
a fixed "index multiplier".

The Portfolio may purchase or sell options on stock indices in order to
close out its outstanding positions in options on stock indices which it has
purchased. The Portfolio may also allow such options to expire unexercised.

Compared to the purchase or sale of futures contracts, the purchase of
call or put options on an index involves less potential risk to the Portfolio
because the maximum amount at risk is the premium paid for the options plus
transactions costs. The writing of a put or call option on an index involves
risks similar to those risks relating to the purchase or sale of index futures
contracts.

Margin Payments. When the Portfolio purchases or sells a futures
contract, it is required to deposit with its custodian an amount of cash, U.S.
Treasury bills, or other permissible collateral equal to a small percentage of
the amount of the futures contract. This amount is known as "initial margin".
The nature of initial margin is different from that of margin in security
transactions in that it does not involve borrowing money to finance
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit that is returned to the Portfolio upon termination of the
contract, assuming the Portfolio satisfies its contractual obligations.

Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market". These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when the Portfolio sells a futures contract and the value of the
underlying index rises above the delivery price, the Portfolio's position
declines in value. The Portfolio then pays the broker a variation margin payment
equal to the difference between the delivery price of the futures contract and
the value of the index underlying the futures contract. Conversely, if the price
of the underlying index falls below the delivery price of the contract, the
Portfolio's futures position increases in value. The broker then must make a
variation margin payment equal to the difference between the delivery price of
the futures contract and the value of the index underlying the futures contract.

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<PAGE>

When the Portfolio terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Portfolio, and the Portfolio realizes a loss or a gain. Such closing
transactions involve additional commission costs.

Special Risks of Transactions in Futures Contracts and Related Options

Liquidity risks. Positions in futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market for such
futures. Although the Trust intends to purchase or sell futures only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular contract or at any particular time.
If there is not a liquid secondary market at a particular time, it may not be
possible to close a futures position at such time and, in the event of adverse
price movements, the Portfolio would continue to be required to make daily cash
payments of variation margin. However, in the event financial futures are used
to hedge portfolio securities, such securities will not generally be sold until
the financial futures can be terminated. In such circumstances, an increase in
the price of the portfolio securities, if any, may partially or completely
offset losses on the financial futures.

In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions in such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
such a market will develop. Although the Portfolio generally will purchase only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. In the event no such market exists
for particular options, it might not be possible to effect closing transactions
in such options with the result that the Portfolio would have to exercise the
options in order to realize any profit.

Hedging risks. There are several risks in connection with the use by
the Portfolio of futures contracts and related options as a hedging device. One
risk arises because of the imperfect correlation between movements in the prices
of the futures contracts and options and movements in the underlying index or
movements in the prices of the Portfolio's securities which are the subject of a
hedge. The Portfolio's investment adviser will, however, attempt to reduce this
risk by purchasing and selling, to the extent possible, futures contracts and
related options on securities and indexes the movements of which will, in its
judgment, correlate closely with movements in the value of the underlying index
and the Portfolio's portfolio securities sought to be hedged.

Successful use of futures contracts and options by the Portfolio for
hedging purposes is also subject to its investment adviser's ability to predict
correctly movements in the direction of the market. It is possible that, where
the Portfolio has purchased puts on futures contracts

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<PAGE>

to hedge its portfolio against a decline in the market, the index on which the
puts are purchased may increase in value and the value of securities held in the
portfolio may decline. If this occurred, the Portfolio would lose money on the
puts and also experience a decline in value in its portfolio securities. In
addition, the prices of futures, for a number of reasons, may not correlate
perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures market are subject to margin
deposit requirements. Such requirements may cause investors to close futures
contracts through offsetting transactions which could distort the normal
relationship between the underlying index and futures markets. Second, the
margin requirements in the futures markets are less onerous than margin
requirements in the securities markets in general, and as a result the futures
markets may attract more speculators than the securities markets do. Increased
participation by speculators in the futures markets may also cause temporary
price distortions. Due to the possibility of price distortion, even a correct
forecast of general market trends by the Portfolio's investment adviser may
still not result in a successful hedging transaction over a very short time
period.

Other Risks. The Portfolio will incur brokerage fees in connection with
its futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while the Portfolio
may benefit from the use of futures and related options, unanticipated changes
in interest rates or stock price movements may result in a poorer overall
performance for the Portfolio than if it had not entered into any futures
contracts or options transactions. Moreover, in the event of an imperfect
correlation between the futures position and the portfolio position which is
intended to be protected, the desired protection may not be obtained and the
Portfolio may be exposed to risk of loss, which may be unlimited.

Reverse Repurchase Agreements

The Portfolio may enter into reverse repurchase agreements in which the
Portfolio sells securities and agrees to repurchase them at a mutually agreed
date and price. Generally, the effect of such a transaction is that the
Portfolio can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. Such transactions are advantageous if the interest cost to the
Portfolio of the reverse repurchase transaction is less than the cost of
otherwise obtaining the cash.

The Portfolio may also enter into reverse repurchase agreements in
which the Portfolio sells securities and agrees to repurchase them at a mutually
agreed date and price. Generally, the effect of such a transaction is that the
Portfolio can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. Such

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<PAGE>

transactions are advantageous if the interest cost to the Portfolio of the
reverse repurchase transaction is less than the cost of otherwise obtaining the
cash.

Reverse repurchase agreements may be viewed as a borrowing by the
Portfolio, secured by the security which is the subject of the agreement. In
addition to the general risks involved in leveraging, reverse repurchase
agreements involve the risk that, in the event of the bankruptcy or insolvency
of the Portfolio's counterparty, the Portfolio would be unable to recover the
security which is the subject of the agreement, the amount of cash or other
property transferred by the counterparty to the Portfolio under the agreement
prior to such insolvency or bankruptcy is less than the value of the security
subject to the agreement, or the Portfolio may be delayed or prevented, due to
such insolvency or bankruptcy, from using such cash or property or may be
required to return it to the counterparty or its trustee or receiver.

Segregation of Assets

The Portfolio may at times segregate assets in respect of certain
transactions in which the Portfolio enters into a commitment to pay money or
deliver securities at some future date (such as futures contracts or reverse
repurchase agreements, to the extent not used for leverage). Any such segregated
account will be maintained by the Trust's custodian and may contain cash, U.S.
government securities, liquid high grade debt obligations, or other appropriate
assets.

Loans of Portfolio Securities

The Portfolio may lend its portfolio securities, provided: (1) the loan
is secured continuously by collateral consisting of U.S. Government Securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Portfolio may at any
time call the loan and regain the securities loaned; (3) the Portfolio will
receive any interest or dividends paid on the loaned securities; and (4) the
aggregate market value of securities of any Portfolio loaned will not at any
time exceed one-third (or such other limit as the Trustee may establish) of the
total assets of the Portfolio. Cash collateral received by the Portfolio may be
invested in any securities in which the Portfolio may invest consistent with its
investment policies. In addition, it is anticipated that the Portfolio may share
with the borrower some of the income received on the collateral for the loan or
that it will be paid a premium for the loan. Before the Portfolio enters into a
loan, its investment adviser considers all relevant facts and circumstances
including the creditworthiness of the borrower. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. Although voting rights or rights to consent with
respect to the loaned securities pass to the borrower, the Portfolio retains the
right to call the loans at any time on reasonable notice, and it will do so in
order that the securities may be voted by the Portfolio if the holders of such
securities are asked to vote upon or consent to matters materially affecting the
investment. The Portfolio will not lend portfolio securities to borrowers
affiliated with the Portfolio.

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<PAGE>

MANAGEMENT OF THE TRUST

The following table provides biographical information with respect to
each Trustee and officer of the Trust. Each Trustee who is an "interested
person" of the Trust, as defined in the 1940 Act, is indicated by an asterisk.

Position Held Principal Occupation
Name and Address with Portfolio During Past 5 Years
- ---------------- -------------- -------------------

Stanley F. Pauley Trustee Chairman and Chief Executive Officer,
Carpenter Company; Trustee, Mentor
Institutional Trust; Trustee, Cash
Resource Trust.

Louis W. Moelchert, Jr. Trustee Vice President of Business and
Finance, University of Richmond;
Trustee, Mentor Institutional Trust;
Trustee, Cash Resource Trust;
Director, America's Utility Fund, Inc.

Thomas F. Keller Trustee Retired; formerly Dean, Fuqua School
of Business, Duke University; Trustee,
Mentor Institutional Trust; Trustee,
Cash Resource Trust.

Arnold H. Dreyfuss Trustee Retired; formerly, Chairman and Chief
Executive Officer, Hamilton
Beach/Proctor-Silex, Inc.; Trustee,
Mentor Institutional Trust; Trustee,
Cash Resource Trust.

*Daniel J. Ludeman Chairman; Chairman and Chief Executive Officer,
Trustee Mentor Investment Group, LLC;
Managing Director of Wheat, First
Securities, Inc.; Managing Director of
Wheat First Butcher Singer; Director,
Wheat First Securities, Inc. and
Mentor Income Fund, Inc.; Chairman and
Trustee, Mentor Institutional Trust;
Chairman and Trustee, Cash Resource
Trust; Director, America's Utility
Fund, Inc.

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<PAGE>

Position Held Principal Occupation
Name and Address with Portfolio During Past 5 Years
- ---------------- -------------- -------------------
Troy A. Peery, Jr. Trustee President, Heilig-Meyers Company.
Trustee, The Mentor Funds; Trustee,
Cash Resource Trust.

*Peter J. Quinn, Jr. Trustee President, Mentor Distributors, LLC;
Managing Director, Mentor Investment
Group, LLC; Managing Director, Wheat
First Butcher Singer, Inc.; formerly,
Senior Vice President/Director of
Mutual Funds, Wheat First Butcher
Singer, Inc.

Paul F. Costello President Managing Director, Mentor Investment
Group, LLC, Wheat First Butcher
Singer, and Mentor Investment
Advisors, LLC; President, Mentor
Income Fund, The Mentor Funds, and
Cash Resource Trust; Executive Vice
President and Chief Administrative
Officer, America's Utility Fund, Inc.;
Director, Mentor Perpetual Advisors,
LLC and Mentor Trust Company.

Terry L. Perkins Treasurer Senior Vice President, Mentor
Investment Group, LLC; Treasurer, Cash
Resource Trust, Mentor Income Fund
Inc., The Mentor Funds, and America's
Utility Fund, Inc.; formerly,
Treasurer and Comptroller, Ryland
Capital Management, Inc.

Michael Wade Assistant Vice President, Mentor Investment
Treasurer Group, LLC; Assistant Treasurer,
Cash Resource Trust, Mentor Income
Fund, Inc., The Mentor Funds, and
America's Utility Fund, Inc.;
formerly, Senior Accountant, Wheat
First Butcher Singer, Inc.,; Audit
Senior, BDO Seidman.

John M. Ivan Clerk Managing Director, Director of
Compliance, Senior Vice President, and
Assistant General Counsel, Wheat,
First Securities, Inc.; Managing
Director, Mentor Investment Advisors,
LLC; Clerk, Cash Resource Trust;
Secretary, The Mentor Funds.

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The table below shows the fees paid to each Trustee by the Trust for
the 1996 fiscal year and the fees paid to each Trustee by all funds in the
Mentor family (including the Trust) during the 1996 calendar year.

Total compensation
Aggregate compensation from all
Trustees from the Trust complex funds
- -------- ---------------------- ------------------
Daniel J. Ludeman 0 0
Arnold H. Dreyfuss $200 $12,200
Thomas F. Keller $175 $11,175
Louis W. Moelchert, Jr. $200 $12,200
Stanley F. Pauley $200 $12,200
Troy A. Peery, Jr. $175 $11,175
Peter J. Quinn, Jr. $ 0 $ 0

- -------------

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<PAGE>

The Trustees do not receive pension or retirement benefits from the
Trust.

The Agreement and Declaration of Trust of the Trust provides that the
Trust will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved because of
their offices with the Trust, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not acted in good faith
in the reasonable belief that their actions were in the best interests of the
Trust or that such indemnification would relieve any officer or Trustee of any
liability to the Trust or its Shareholders by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of his or her duties. The Trust,
at its expense, provides liability insurance for the benefit of its Trustees and
officers.

PRINCIPAL HOLDERS OF SECURITIES

As of January ___, 1998, the Portfolio had no shares outstanding.

INVESTMENT ADVISORY AND OTHER SERVICES

Mentor Advisors acts as investment adviser to the Portfolio pursuant to
a Investment Advisory and Management Agreement with the Trust. Mentor Investment
Group ("Mentor") acts as administrator to the Portfolio pursuant to an
Administration Agreement with the Trust. Subject to the supervision and
direction of the Trustees, Mentor Advisors manages the Portfolio's portfolio in
accordance with the stated policies of the Portfolio and of the Trust. Mentor
Advisors makes investment decisions for the Portfolio and places the purchase
and sale orders for portfolio transactions. Mentor furnishes the Portfolio with
certain statistical and research data, clerical help, and certain accounting,
data processing, and other services required by the Portfolio, assists in
preparation of certain reports to shareholders of the Portfolio, tax returns,
and filings with the SEC and state Blue Sky authorities, and generally assists
in all aspects of the Portfolio's operations. Mentor Advisors and Mentor bear
all their expenses in connection with the performance of their services. In
addition, Mentor Advisors and Mentor pay the salaries of all officers and
employees who are employed by them and the Trust.

Mentor Advisors provides the Portfolio with investment officers who are
authorized to execute purchases and sales of securities. Investment decisions
for the Portfolio and for the other investment advisory clients of Mentor
Advisors and its affiliates are made with a view to achieving their respective
investment objectives. Investment decisions are the product of many factors in
addition to basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more other
clients are selling the security. In some instances, one client may sell a
particular security to another client. It also sometimes happens that two or
more clients

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<PAGE>

simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in Mentor Advisors's opinion is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio securities
for one or more clients will have an adverse effect on other clients. In the
case of short-term investments, the Treasury area of Wheat First Butcher Singer
handles purchases and sales under guidelines approved by investment officers of
the Trust. Mentor Advisors employs professional staffs of portfolio managers who
draw upon a variety of resources, including Wheat for research information for
the Portfolio.

The proceeds received by the Portfolio for each issue or sale of its
shares, and all income, earnings, profits, and proceeds thereof, subject only to
the rights of creditors, are specifically allocated to the Portfolio, and
constitute the underlying assets of the Portfolio. The underlying assets of the
Portfolio will be segregated on the Trust's books of account, and will be
charged with the liabilities in respect of the Portfolio and with a share of the
general liabilities of the Trust. Expenses with respect to any two or more
Portfolios of the Trust may be allocated in proportion to the net asset values
of the respective Portfolios except where allocations of direct expenses can
otherwise be fairly made.

Expenses incurred in the operation of the Portfolio or otherwise
allocated to the Portfolio, including but not limited to taxes, interest,
brokerage fees and commissions, fees to Trustees who are not officers,
directors, stockholders, or employees of Wheat First Butcher Singer and
subsidiaries, SEC fees and related expenses, state Blue Sky qualification fees,
charges of the custodian and transfer and dividend disbursing agents, outside
auditing, accounting, and legal services, investor servicing fees and expenses,
charges for the printing of prospectuses and statements of additional
information for regulatory purposes or for distribution to shareholders, certain
shareholder report charges and charges relating to corporate matters, are borne
by the Portfolio.

The Investment Advisory and Management Agreement and the Administration
Agreement are subject to annual approval (commencing in 1997) by (i) the
Trustees or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Portfolio, provided that in either event
the continuance is also approved by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, Mentor Advisors,
or Mentor, by vote cast in person at a meeting called for the purpose of voting
on such approval. The Management Contract is terminable without penalty, on not
more than sixty days' notice and not less than thirty days' notice, by the
Trustees, by vote of the holders of a majority of the Portfolio's shares, or by
Mentor Advisors. The Administration Agreement is terminable without penalty,
immediately upon notice, by the Trustees or by vote of the holders of a majority
of the Portfolio's shares, and on not less than thirty days' notice by Mentor.
Each of the agreements will terminate automatically in the event of its
assignment.

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<PAGE>

The Trust has adopted a Shareholder Servicing Plan (the "Service Plan")
with respect to the Portfolio's Class A, Class B shares, and Class E shares.
Pursuant to the Service Plan, financial institutions will enter into shareholder
service agreements with the Portfolio to provide administrative support services
to their customers who from time to time may be record or beneficial owners of
shares of the Portfolio. In return for providing these support services, a
financial institution may receive payments from the Portfolio at a rate not
exceeding .25% of the average daily net assets of the relevant class of shares
of the Portfolio owned by the financial institution's customers for whom it is
the holder of record or with whom it has a servicing relationship. The Service
Plan is designed to stimulate financial institutions to render administrative
support services to the Portfolio and its shareholders. These administrative
support services include, but are not limited to, the following functions:
providing office space, equipment, telephone facilities, and various personnel
including clerical, supervisory, and computer personnel 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
Portfolio; assisting clients in changing dividend options, account designations
and addresses; and providing such other services as the Portfolio reasonably
requests. The Service Plan may be terminated with respect to a particular class
at any time by (i) a vote of the majority of the Trustees who are not
"interested persons" of the Trust (as defined in the 1940 Act) or (ii) a vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
a particular class.

In addition to receiving payments under the Service Plan, financial
institutions may be compensated by Mentor Advisors and/or Mentor, or affiliates
thereof, for providing administrative support services to holders of Class A,
Class B, or Class E shares of the Portfolio. These payments will be made
directly by Mentor Advisors and/or Mentor, as applicable, and will not be made
from the assets of the Portfolio.

BROKERAGE

Transactions on U.S. stock exchanges, commodities markets, and futures
markets and other agency transactions involve the payment by the Portfolio of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Portfolio usually includes an undisclosed dealer
commission or mark-up. In underwritten offerings, the price paid by the
Portfolio includes a disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and sales of
portfolio securities by the Portfolio will be with the issuer or with
underwriters of or dealers in those securities, acting as

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<PAGE>

principal. Accordingly, the Portfolio would not ordinarily pay significant
brokerage commissions with respect to securities transactions.

It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, Mentor Advisors receives brokerage and research services and other
similar services from many broker-dealers with which it places the Portfolio's
portfolio transactions and from third parties with which these broker-dealers
have arrangements. These services include such matters as general economic and
market reviews, industry and company reviews, evaluations of investments,
recommendations as to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news services and personal
computers utilized by the investment advisers' managers and analysts. Where the
services referred to above are not used exclusively by Mentor Advisors for
research purposes, Mentor Advisors, based upon its own allocations of expected
use, bears that portion of the cost of these services which directly relates to
its non-research use. Some of these services are of value to Mentor Advisors and
its affiliates in advising various of its clients (including the Portfolio),
although not all of these services are necessarily useful and of value in
managing the Portfolio.

Mentor Advisors places all orders for the purchase and sale of
portfolio investments for the Portfolio and buys and sells investments for the
Portfolio through a substantial number of brokers and dealers. Mentor Advisors
seeks the best overall terms available for the Portfolio, except to the extent
it may be permitted to pay higher brokerage commissions as described below. In
doing so, Mentor Advisors, having in mind the Portfolio's best interests,
considers all factors it deems relevant, including, by way of illustration,
price, the size of the transaction, the nature of the market for the security or
other investment, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker-dealer involved and the quality of service
rendered by the broker-dealer in other transactions.

As permitted by Section 28(e) of the 1934 Act, and by the Investment
Advisory and Management Agreement, Mentor Advisors may cause the Portfolio to
pay a broker-dealer which provides "brokerage and research services" (as defined
in the 1934 Act) to it an amount of disclosed commission for effecting
securities transactions on stock exchanges and other transactions for the
Portfolio on an agency basis in excess of the commission which another
broker-dealer would have charged for effecting that transaction. Mentor
Advisors' authority to cause the Portfolio to pay any such greater commissions
is also subject to such policies as the Trustees may adopt from time to time.
Mentor Advisors does not currently intend to cause the Portfolio to make such
payments. It is the position of the staff of the Securities and Exchange
Commission that Section 28(e) does not apply to the payment of such greater
commissions in

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<PAGE>

"principal" transactions. Accordingly, Mentor Advisors will use its best efforts
to obtain the best overall terms available with respect to such transactions, as
described above.

Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to such other policies as the Trustees
may determine, Mentor Advisors may consider sales of shares of the Portfolio
(and, if permitted by law, of the other Mentor funds) as a factor in the
selection of broker-dealers to execute portfolio transactions for the Portfolio.

The Trustees have determined that portfolio transactions for the Trust
may be effected through Wheat, First Securities, Inc. ("Wheat") or EVEREN
Securities, Inc. ("EVEREN"), broker-dealers affiliated with Mentor Advisors. The
Trustees have adopted certain policies incorporating the standards of Rule 17e-l
issued by the SEC under the 1940 Act which requires, among other things, that
the commissions paid to Wheat and EVEREN must be reasonable and fair compared to
the commissions, fees, or other remuneration received by other brokers in
connection with comparable transactions involving similar securities during a
comparable period of time. Wheat and EVEREN will not participate in brokerage
commissions paid by the Portfolio to other brokers or dealers. Over-the-counter
purchases and sales are transacted directly with principal market makers except
in those cases in which better prices and executions may be obtained elsewhere.
The Portfolio will in no event effect principal transactions with Wheat or
EVEREN in over-the-counter securities in which Wheat or EVEREN makes a market,
as the case may be.

Under rules adopted by the SEC, neither Wheat nor EVEREN may execute
transactions for the Portfolio on the floor of any national securities exchange,
but either may effect transactions for the Portfolio by transmitting orders for
execution and arranging for the performance of this function by members of the
exchange not associated with them. Wheat and EVEREN will be required to pay fees
charged to those persons performing the floor brokerage elements out of the
brokerage compensation it receives from the Portfolio. The Trust has been
advised by Wheat that, on most transactions, the floor brokerage generally
constitutes from 5% and 10% of the total commissions paid.

DETERMINATION OF NET ASSET VALUE

The Portfolio determines net asset value per share of each class of
shares each day the New York Stock Exchange (the "Exchange") is open. Currently,
the Exchange is closed Saturdays, Sundays, and the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving, and Christmas.

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<PAGE>

Securities for which market quotations are readily available are valued
at prices which, in the opinion of the Trustees or Mentor Advisors, most nearly
represent the market values of such securities. Currently, such prices are
determined using the last reported sale price or, if no sales are reported (as
in the case of some securities traded over-the-counter), the last reported bid
price, except that certain U.S. Government securities are stated at the mean
between the last reported bid and asked prices. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost, which
approximates market value. All other securities and assets are valued at their
fair value following procedures approved by the Trustees. Liabilities are
deducted from the total, and the resulting amount is divided by the number of
shares of the particular class outstanding.

Reliable market quotations are not considered to be readily available
for long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities, or certain foreign securities. These investments are stated at fair
value on the basis of valuations furnished by pricing services approved by the
Trustees, which determine valuations for normal, institutional- size trading
units of such securities using methods based on market transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders.

If any securities held by the Portfolio are restricted as to resale,
Mentor Advisors determines their fair values. The fair value of such securities
is generally determined as the amount which the Portfolio could reasonably
expect to realize from an orderly disposition of such securities over a
reasonable period of time. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Portfolio in connection with such disposition). In addition,
specific factors are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of the same class
(both at the time of purchase and at the time of valuation), the size of the
holding, the prices of any recent transactions or offers with respect to such
securities and any available analysts' reports regarding the issuer.

Generally, trading in certain securities (such as foreign securities)
is substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Portfolio's shares are computed as of such times. Also, because of the
amount of time required to collect and process trading information as to large
numbers of securities issues, the values of certain securities (such as
convertible bonds, U.S. Government securities, and tax-exempt securities) are
determined based on market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange which will not be reflected in the computation of the
Portfolio's net asset value. If events materially affecting the value of such
securities occur during

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<PAGE>

such period, then these securities will be valued at their fair value following
procedures approved by the Trustees.

TAX STATUS

The Portfolio intends to qualify each year and elect to be taxed as a
regulated investment company under Subchapter M of the United States Internal
Revenue Code of 1986, as amended (the "Code").

As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Portfolio will not be subject to federal
income tax on any of its net investment income or net realized capital gains
that are distributed to shareholders. As a series of Massachusetts business
trust, the Portfolio will not under present law be subject to any excise or
income taxes in Massachusetts.

In order to qualify as a "regulated investment company," the Portfolio
must, among other things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, gains from the
sale or other dispositions of stock, securities, or foreign currencies, and
other income (including gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies; (b) derive less than 30% of its gross income from the sale or other
disposition of certain assets (including stock and securities) held less than
three months; (c) diversify its holdings so that, at the close of each quarter
of its taxable year, (i) at least 50% of the value of its total assets consists
of cash, cash items, U.S. Government Securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Portfolio and not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any issuer (other than U.S. Government Securities). In
order to receive the favorable tax treatment accorded regulated investment
companies and their shareholders, moreover, the Portfolio must in general
distribute at least 90% of its interest, dividends, net short-term capital gain,
and certain other income each year.

An excise tax at the rate of 4% will be imposed on the excess, if any,
of the Portfolio's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Portfolio's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Portfolio so elects) plus undistributed amounts from prior years. The
Portfolio intends to make distributions sufficient to avoid imposition of the
excise tax. Distributions declared by the Portfolio during October, November, or
December to shareholders of record on a date in any such month and paid by the
Portfolio during the following January will be treated for federal tax purposes
as paid by the Portfolio and received by shareholders on December 31 of the year
in which declared.

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<PAGE>

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

The Portfolio is required to withhold 31% of all income dividends and
capital gain distributions, and 31% of the gross proceeds of all redemptions of
Portfolio shares, in the case of any shareholder who does not provide a correct
taxpayer identification number, about whom the Portfolio is notified that the
shareholder has under reported income in the past, or who fails to certify to
the Portfolio that the shareholder is not subject to such withholding.
Tax-exempt shareholders are not subject to these back-up withholding rules so
long as they furnish the Portfolio with a proper certification.

The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions. Dividends and distributions also may be subject to state
and federal taxes. Shareholders are urged to consult their tax advisers
regarding specific questions as to federal, state or local taxes. The foregoing
discussion relates solely to U.S. federal income tax law. Non-U.S. investors
should consult their tax advisers concerning the tax consequences of ownership
of shares of the Portfolio, including the possibility that distributions may be
subject to a 30% United States withholding tax (or a reduced rate of withholding
provided by treaty).

THE DISTRIBUTOR

[Name of Distributor] ("[Name of Distributor]") is the Trust's
distributor. [Name of Distributor] is acting on a best efforts basis in the
continuous offering of the Trust's shares.

The Portfolio makes payments to [Name of Distributor] in accordance
with its Distribution Plan in respect of its Class B shares adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Plan").

Continuance of the Plan is subject to annual approval by a vote of the
Trustees, including a majority of the Trustees who are not interested persons of
the Portfolio and who have no direct or indirect interest in the Plan or related
arrangements (the "Qualified Trustees"), cast in person at a meeting called for
that purpose. All material amendments to the Plan must be likewise approved by
the Trustees and the Qualified Trustees. The Plan may not be amended in order to
increase materially the costs which the Portfolio may bear for distribution
pursuant to such Plan

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<PAGE>

without also being approved by a majority of the outstanding Class B shares of
the Portfolio. The Plan terminates automatically in the event of its assignment
and may be terminated without penalty, at any time, by a vote of a majority of
the Qualified Trustees or by a vote of a majority of the outstanding Class B
shares of the Portfolio.

If Plan payments are made to reimburse [Name of Distributor] for
payments to dealers based on the average net asset value of Portfolio shares
attributable to shareholders for whom the dealers are designated as the dealer
of record, "average net asset value" attributable to a shareholder account means
the product of (i) the Portfolio's average daily share balance of the account
and (ii) the Portfolio's average daily net asset value per share (or the average
daily net asset value per share of the class, if applicable). For administrative
reasons, [Name of Distributor] may enter into agreements with certain dealers
providing for the calculation of "average net asset value" on the basis of
assets of the accounts of the dealer's customers on an established day in each
quarter.

Financial institutions receiving payments from [Name of Distributor] as
described above may be required to comply with various state and federal
regulatory requirements, including among others those regulating the activities
of securities brokers or dealers.

INDEPENDENT ACCOUNTANTS

_______________ are the Portfolio's independent auditors, providing
audit services, tax return review, and other tax consulting services.

CUSTODIAN

The custodian of the Portfolio, Investors Fiduciary Trust Company, is
located at 127 West 10th Street, Richmond, Virginia 64105. A custodian's
responsibilities include generally safeguarding and controlling the Portfolio's
cash and securities, handling the receipt and delivery of securities, and
collecting interest and dividends on the Portfolio's investments.

PERFORMANCE INFORMATION

Total return is determined by calculating the actual investment return
on a $1,000 (or a larger amount depending on the minimum investment for a
particular class) investment in the Portfolio at the beginning of the applicable
period, and at the maximum public offering price for Class A shares, and net
asset value for all other classes of shares. Total return may also be presented
for other periods. Total return calculations assume deduction of the Portfolio's
maximum front-end or contingent deferred sales charge, if applicable, and
reinvestment of all Portfolio distributions at net asset value on their
respective investment dates.

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<PAGE>

Total return may be presented for other periods or without giving
effect to any front-end or contingent deferred sales charge. Any quotation of
total return not reflecting such sales charges would be reduced if such sales
charges were reflected.

All data for the Portfolio are based on past performance and do not
predict future results.

Independent statistical agencies measure the Portfolio's investment
performance and publish comparative information showing how the Portfolio, and
other investment companies, performed in specified time periods. Agencies whose
reports are commonly used for such comparisons are set forth below. From time to
time, the Portfolio may distribute these comparisons to its shareholders or to
potential investors. The agencies listed below measure performance based on the
basis of their own criteria rather than on the basis of the standardized
performance measures described above.

Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated
by Lipper, reflecting generally changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of
performance periods, for example year-to-date, 1-year, 5-year, and
10-year performance. Lipper classifies mutual funds by investment
objective and asset category.

Morningstar, Inc. distributes mutual fund ratings twice a month. the
ratings are divided into five groups: highest, above average, neutral,
below average and lowest. They represent a fund's historical
risk/reward ratio relative to other funds with similar objectives. The
performance factor is a weighted-average assessment of the Portfolio's
3- year, 5-year, and 10-year total return performance (if available)
reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of
the fund. The ratings are derived from a purely quantitative system
that does not utilize the subjective criteria customarily employed by
rating agencies such as Standard & Poor's Corporation and Moody's
Investor Service, Inc.

Weisenberger's Management Results publishes mutual fund rankings and is
distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year performance. Mutual funds are ranked in
general categories (e.g., international bond, international equity,
municipal bond, and maximum capital gain). Weisenberger rankings do not
reflect deduction of sales charges or fees.

Independent publications may also evaluate the Portfolio's performance.
Certain of those publications are listed below, at the request of Mentor
Distributors, Inc., an affiliate of Mentor Advisors, which bears full
responsibility for their use and the descriptions appearing below.

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<PAGE>

From time to time any or all of the Portfolio may distribute evaluations by or
excerpts from these publications to its shareholders or to potential investors.
The following illustrates the types of information provided by these
publications.

Business Week publishes mutual fund rankings in its Investment Figures
of the Week column. The rankings are based on 4-week and 52-week total
return reflecting changes in net asset value and the reinvestment of
all distributions. They do not reflect deduction of any sales charges.
Portfolios are not categorized; they compete in a large universe of
over 2,000 funds. The source for rankings is data generated by
Morningstar, Inc.

Investor's Business Daily publishes mutual fund rankings on a daily
basis. The rankings are depicted as the top 25 funds in a given
category. The categories are based loosely on the type of fund, e.g.,
growth funds, balanced funds, U.S. government funds, GNMA funds, growth
and income funds, corporate bond funds, etc. Performance periods for
sector equity funds can vary from 4 weeks to 39 weeks; performance
periods for other fund groups vary from 1 year to 3 years. Total return
performance reflects changes in net asset value and reinvestment of
dividends and capital gains. The rankings are based strictly on total
return. They do not reflect deduction of any sales charges Performance
grades are conferred from A+ to E. An A+ rating means that the fund has
performed within the top 5% of a general universe of over 2000 funds;
an A rating denotes the top 10%; an A- is given to the top 15%, etc.

Barron's periodically publishes mutual fund rankings. The rankings are
based on total return performance provided by Lipper Analytical
Services. The Lipper total return data reflects changes in net asset
value and reinvestment of distributions, but does not reflect deduction
of any sales charges. The performance periods vary from short-term
intervals (current quarter or year-to-date, for example) to long-term
periods (five-year or ten-year performance, for example). Barron's
classifies the funds using the Lipper mutual fund categories, such as
Capital Appreciation Portfolios, Growth Portfolios, U.S. Government
Portfolios, Equity Income Portfolios, Global Portfolios, etc.
Occasionally, Barron's modifies the Lipper information by ranking the
funds in asset classes. "Large funds" may be those with assets in
excess of $25 million; "small funds" may be those with less than $25
million in assets.

The Wall Street Journal publishes its Mutual Portfolio Scorecard on a
daily basis. Each Scorecard is a ranking of the top-15 funds in a given
Lipper Analytical Services category. Lipper provides the rankings based
on its total return data reflecting changes in net asset value and
reinvestment of distributions and not reflecting any sales charges. The
Scorecard portrays 4-week, year-to-date, one-year and 5-year
performance; however, the ranking is based on the one-year results. The
rankings for any given category appear approximately once per month.

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<PAGE>

Fortune magazine periodically publishes mutual fund rankings that have
been compiled for the magazine by Morningstar, Inc. Portfolios are
placed in stock or bond fund categories (for example, aggressive growth
stock funds, growth stock funds, small company stock funds, junk bond
funds, Treasury bond funds etc.), with the top-10 stock funds and the
top-5 bond funds appearing in the rankings. The rankings are based on
3- year annualized total return reflecting changes in net asset value
and reinvestment of distributions and not reflecting sales charges.
Performance is adjusted using quantitative techniques to reflect the
risk profile of the fund.

Money magazine periodically publishes mutual fund rankings on a
database of funds tracked for performance by Lipper Analytical
Services. The funds are placed in 23 stock or bond fund categories and
analyzed for five-year risk adjusted return. Total return reflects
changes in net asset value and reinvestment of all dividends and
capital gains distributions and does not reflect deduction of any sales
charges. Grades are conferred (from A to E): the top 20% in each
category receive an A, the next 20% a B, etc. To be ranked, a fund must
be at least one year old, accept a minimum investment of $25,000 or
less and have had assets of at least $25 million as of a given date.

Financial World publishes its monthly Independent Appraisals of Mutual
Portfolios, a survey of approximately 1000 mutual funds. Portfolios are
categorized as to type, e.g., balanced funds, corporate bond funds,
global bond funds, growth and income funds, U.S. government bond funds,
etc. To compete, funds must be over one year old, have over $1 million
in assets, require a maximum of $10,000 initial investment, and should
be available in at least 10 states in the United States. The funds
receive a composite past performance rating, which weighs the
intermediate - and long-term past performance of each fund versus its
category, as well as taking into account its risk, reward to risk, and
fees. An A+ rated fund is one of the best, while a D- rated fund is one
of the worst. The source for Financial World rating is Schabacker
investment management in Rockville, Maryland.

Forbes magazine periodically publishes mutual fund ratings based on
performance over at least two bull and bear market cycles. The funds
are categorized by type, including stock and balanced funds, taxable
bond funds, municipal bond funds, etc. Data sources include Lipper
Analytical Services and CDA Investment Technologies. The ratings are
based strictly on performance at net asset value over the given cycles.
Portfolios performing in the top 5% receive an A+ rating; the top 15%
receive an A rating; and so on until the bottom 5% receive an F rating.
Each fund exhibits two ratings, one for performance in "up" markets and
another for performance in "down" markets.

Kiplinger's Personal Finance Magazine (formerly Changing Times),
periodically publishes rankings of mutual funds based on one-, three-
and five-year total return performance reflecting changes in net asset
value and reinvestment of dividends and

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<PAGE>

capital gains and not reflecting deduction of any sales charges.
Portfolios are ranked by tenths: a rank of 1 means that a fund was
among the highest 10% in total return for the period; a rank of 10
denotes the bottom 10%. Portfolios compete in categories of similar
funds -- aggressive growth funds, growth and income funds, sector
funds, corporate bond funds, global governmental bond funds,
mortgage-backed securities funds, etc. Kiplinger's also provides a
risk-adjusted grade in both rising and falling markets. Portfolios are
graded against others with the same objective. The average weekly total
return over two years is calculated. Performance is adjusted using
quantitative techniques to reflect the risk profile of the fund.

U.S. News and World Report periodically publishes mutual fund rankings
based on an overall performance index (OPI) devised by Kanon Bloch
Carre & Co., a Boston research firm. Over 2000 funds are tracked and
divided into 10 equity, taxable bond and tax-free bond categories.
Portfolios compete within the 10 groups and three broad categories. The
OPI is a number from 0-100 that measures the relative performance of
funds at least three years old over the last 1, 3, 5 and 10 years and
the last six bear markets. Total return reflects changes in net asset
value and the reinvestment of any dividends and capital gains
distributions and does not reflect deduction of any sales charges.
Results for the longer periods receive the most weight.

The 100 Best Mutual Portfolios You Can Buy (1992), authored by Gordon
K. Williamson. The author's list of funds is divided into 12 equity and
bond fund categories, and the 100 funds are determined by applying four
criteria. First, equity funds whose current management teams have been
in place for less than five years are eliminated. (The standard for
bond funds is three years.) Second, the author excludes any fund that
ranks in the bottom 20 percent of its category's risk level. Risk is
determined by analyzing how many months over the past three years the
fund has underperformed a bank CD or a U.S. Treasury bill. Third, a
fund must have demonstrated strong results for current three-year and
five-year performance. Fourth, the fund must either possess, in Mr.
Williamson's judgment, "excellent" risk-adjusted return or "superior"
return with low levels of risk. Each of the 100 funds is ranked in five
categories: total return, risk/volatility, management, current income
and expenses. The rankings follow a five- point system: zero designates
"poor"; one point means "fair"; two points denote "good"; three points
qualify as a "very good"; four points rank as "superior"; and five
points mean "excellent."

SHAREHOLDER LIABILITY

Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation, or instrument entered into or executed
by

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<PAGE>

the Trust or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the Portfolio's property for all loss and expense of any
shareholder held personally liable for the obligations of the Portfolio. Thus
the risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Portfolio would be unable to
meet its obligations.

MEMBERS OF INVESTMENT MANAGEMENT TEAMS

The following persons are investment personnel of Mentor Advisors:

Mentor Investment Advisors, LLC

Cash Management

R. Preston Nuttall, CFA -- Managing Director, Chief Investment Officer Mr.
Nuttall has more than thirty years of investment management experience. Prior to
Mentor Advisors, he led short-term fixed-income management for fifteen years at
Capitoline Investment Services, Inc. He has his undergraduate degree in
economics from the University of Richmond and his graduate degree in finance
from the Wharton School at the University of Pennsylvania.

Hubert R. White III -- Senior Vice President, Portfolio Manager Mr. White has
thirteen years of investment management experience. Prior to joining Mentor
Advisors, he served for five years as portfolio manager with Capitoline
Investment Services. He has his undergraduate degree in business from the
University of Richmond.

Kathryn T. Allen -- Senior Vice President, Portfolio Manager Ms. Allen has
sixteen years of investment management experience and specializes in tax-free
trades. Prior to joining Mentor Advisors, Ms. Allen was portfolio group manager
at PNC Institutional Management Corporation. She has her undergraduate degree
in commerce and business administration from the University of Alabama.

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RATINGS

The rating services' descriptions of corporate bonds are:

Moody's Investors Service, Inc.:

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.

Standard & Poor's:

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

AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.

A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.

-31-

<PAGE>

BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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
bonds in this category than for bonds in higher rated categories.

A-1 and Prime-1 Commercial Paper Ratings

The rating A-1 (including A-1+) is the highest commercial paper rating assigned
by S&P. Commercial paper rated A-1 by S&P has the following characteristics:

o liquidity ratios are adequate to meet cash requirements;

o long-term senior debt is rated "A" or better;

o the issuer has access to at least two additional channels of
borrowing;

o basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances;

o typically, the issuer's industry is well established and the issuer
has a strong position within the industry; and

o the reliability and quality of management are unquestioned.

Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by S&P to have overwhelming safety characteristics are designated
A-1+.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:

o evaluation of the management of the issuer;

o economic evaluation of the issuer's industry or industries and an
appraisal of speculative- type risks which may be inherent in certain
areas;

o evaluation of the issuer's products in relation to competition and
customer acceptance;

o liquidity;

o amount and quality of long-term debt;

-32-

<PAGE>

o trend of earnings over a period of ten years;

o financial strength of parent company and the relationships which
exist with the issuer; and

o recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations
to meet such obligations.

-33-

<PAGE>

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits:

(a) Financial Statements and Supporting Schedules

(1) Financial Statements:
Statements of Assets and Liabilities -- September 30, 1996*
Statements of Operations -- year ended September 30, 1996*
Statements of Changes in Net Assets -- years/periods ended
September 30, 1996 and September 30, 1995*
Financial Highlights *(+)
Notes to Financial Statements*

(2) Supporting Schedules:
Schedule I -- Portfolio of investments owned -- September 30,
1996*
Schedule II through IX omitted because the required matter is
not present.

_____________

* Incorporated by reference to Part B to this Registration Statement.

(+) Incorporated by reference to Part A to this Registration Statement.

(b) Exhibits:

(1)(i) Conformed copy of Declaration of Trust of the
Registrant, with Amendments No. 1 and 2 (2);

(ii) Amendment No. 5 to the Declaration of Trust of the
Registrant (10);

(2) Copy of By-Laws of the Registrant (1);

(3) Not applicable;

(4)(i) Copy of Specimen Certificates for both Class A and
Class B Shares of Beneficial Interest for each New
Portfolio (6);

(ii) Copy of Specimen Certificate for Institutional Shares of
Beneficial Interest for each Portfolio (10);

(5)(i) (a)Conformed copy of Management Agreement of the Registrant
(Capital Growth, Income and Growth, Quality Income, and
Municipal Income Portfolios) (2);
(b)Conformed copy of New Exhibit A to Management
Agreement(4);
(c)Form of Instrument of Transfer of Management Agreement
(8);

(ii) Form of Investment Advisory Agreement for the
Municipal Income Portfolio (8);

(iii) (a)Conformed copy of Investment Advisory Agreement
for the Income and Growth Portfolio (3);
(b)Form of Instrument of Transfer of Investment Advisory
Agreement (Income and Growth Portfolio) (8);

(iv) Form of Investment Advisory and Management Agreement
for the Global Portfolio (8);

(v) (a)Form of Investment Advisory and Management
Agreement for the Growth Portfolio (6);
(b)Form of Instrument of Transfer of Investment Advisory
and Management Agreement (Growth Portfolio) (8);

(vi) (a)Form of Investment Advisory and Management
Agreement for the Strategy Portfolio (6);
(b)Form of Instrument of Transfer of Investment Advisory
and Management Agreement (Strategy Portfolio) (8);

(vii) (a)Form of Investment Advisory and Management Agreement for
the Short-Duration Income Portfolio (6);
(b)Form of Instrument of Transfer of Investment Advisory
and Management Agreement (Short-Duration Income
Portfolio) (8);

(viii) (a)Form of Investment Advisory and Management
Agreement for the Balanced Portfolio (6);
(b)Form of Instrument of Transfer of Investment Advisory
and Management Agreement (Balanced Portfolio) (8);

(ix) Form of Investment Advisory and Management Agreement
(Institutional U.S. Government Money Market Portfolio) (9);

(x) Form of Investment Advisory and Management Agreement
(Institutional U.S. Government Money Market Portfolio) (9);

(xi) Form of Investment Advisory and Management Agreement
(Growth Opportunities Portfolio) (11);

(6)(i) (a)Conformed copy of Distributor's Contract of the
Registrant, through and including
Exhibit I (3);
(b) Form of Instrument of Transfer of Distributor's
Contract (8);

(ii) Form of New Exhibit J to the Distributor's Contract in
respect of the Class A and B shares of the Growth,
Strategy, Short-Duration Income Portfolios and the
Balanced Portfolio (6);

(iii) Form of New Exhibit K to the Distributor's Contract in
respect of Institutional Shares of each of the Portfolios
(10);

(7) Not applicable;

(8)(i) Conformed copy of Custodian Contract of the Registrant
with Investors Fiduciary Trust Company (2);

(ii) Conformed copy of Custodian Contract of the Registrant
with State Street Bank and Trust Company (2);

(iii) (a)Form of Administration Agreement of the
Registrant in respect of each Portfolio (6);
(b) Form of Instrument of Transfer of Administration
Agreement (8);

(iv) Form of Custodian Contract with State Street Bank
and Trust Company in respect of foreign securities(7);

(9)(i) Conformed copy of Transfer Agency and Registrar
Agreement of the Registrant (2);

(ii) (a) Conformed copy of Shareholder Services Plan of the
Registrant through and including Exhibit B in respect of
the Capital Growth, Quality Income, Municipal Income,
Income and Growth, and Global Portfolios (3);
(b) Form of Instrument of Transfer of Shareholder Services
Plan (8);

(c) Form of New Exhibit C to the Shareholder Services Plan
in respect of the Class A and B shares of the Growth,
Strategy, Short-Duration Income Portfolios and the
Balanced Portfolio (6);

(d) Form of New Exhibit D to Shareholder Services Plan in
respect of Class A and B shares of the Growth Opportunities
Portfolio (11);

(10) Not applicable;

(11)(i) Conformed copy of Independent Auditors Consent (10);

(ii) Conformed copy of KPMG Peat Marwick LLP opinion on
Methodology and Procedures for Accounting for Multiple
Classes of Shares (5);

(12) Not applicable;

(13) Conformed copy of Initial Capital Understanding (1);

(14) Not applicable;

(15)(i) Conformed copy of Distribution Plan (Capital Growth, Income
and Growth, Municipal Income, Quality Income, and Global
Portfolios);

(ii) (a)Copy of 12b-1 Agreement (Sales Agreement) with
Mentor Distributors, Inc. (3);
(b)Form of Instrument of Transfer of 12b-1 Agreement
(Sales Agreement) (8);

(iii) Form of Plan of Distribution pursuant to Rule 12b-1 in
respect of the Growth Portfolio (6);

(iv) Form of Plan of Distribution pursuant to Rule 12b-1 in
respect of the Strategy Portfolio (6);

(v) Form of Plan of Distribution pursuant to Rule
12b-1 in respect of the Short-Duration Income
Portfolio (6);

(vi) Form of Plan of Distribution pursuant to Rule 12b-1 in
respect of the Balanced Portfolio (6);

(vii) Form of Plan of Distribution pursuant to Rule 12b-1 in
respect of the Growth Opportunities Portfolio (11);

(16)(i) Schedules for Computation of Performance
(all Portfolios)(8)

(18) Amended and Restated Rule 18f-3(d) Plan (10)

(27)(i) Financial Data Schedules of Class A Shares (8)

(ii) Financial Data Schedules of Class B Shares (8)

(iii) Financial Data Schedule in respect of the Balanced
Portfolio. (8)

1. Incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed April 14, 1992.
2. Incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed May 14, 1993.
3. Incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed November 26, 1993.
4. Incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed August 3, 1994.
5. Incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed January 27, 1995.
6. Incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed March 15, 1995.
7. Incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed January 15, 1996.

8. Incorporated by reference to Registrant's Post-Effective Amendment No. 11
on Form N-1A filed November 29, 1996.
9. Incorporated by reference to Registrant's Post-Effective Amendment No. 12
on Form N-1A filed January 22, 1997.

10. Incorporated by reference to Registrant's Post-Effective Amendment No. 13
on Form N-1A filed March 4, 1997.
11. Filed herewith.

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

Reference is made to "Principal Holders of Securities" in Part
B of this Registration Statement

Item 26. Number of Holders of Securities as of September 30, 1997: *

Multiclass Portfolios Class A Class B

Capital Growth Portfolio 3,738 7,680
Global Portfolio 2,781 7,369
Growth Portfolio 4,112 27,298
Income and Growth Portfolio 2,668 6,179
Municipal Income Portfolio 651 1,235
Quality Income Portfolio 1,815 3,759
Short-Duration Income Portfolio 467 1,379
Strategy Portfolio 1,838 17,085

Single Class Portfolios

Balanced Portfolio 5

Mentor Institutional U.S. Government Money Market Portfolio 58

Mentor Institutional Money Market Portfolio 0

Item 27. Indemnification:

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

Item 28. Business and Other Connections of Investment Advisers

The business and other connections of each director, officer, or partner
of the entities below in which such director, officer, or partner is or has
been, at any time during the past two fiscal years, engaged for his own account
or in the capacity of director, officer, employee, partner, or trustee are set
forth in the following tables.

(a) The following is additional information with respect to the
directors and officers of Mentor Investment Advisors, LLC:

Business, Profession,
Vocation or Employment
Position with during the past
Name Investment Adviser two fiscal years

John G. Davenport Managing Director Managing Director,
Mentor Investment
Group, LLC.

R. Preston Nuttall Managing Director Managing Director,
Mentor Investment
Group, LLC.

Paul F. Costello Managing Director Managing Director,
Mentor Investment
Group, LLC; President,
Mentor Institutional
Trust,
Mentor Income Fund,
and Cash Resource
Trust; Executive Vice
President and Chief
Administrative Officer,
America's Utility Fund,
Inc.; Senior Vice
President, Mentor
Distributors, LLC;
Director, Mentor
Perpetual Advisors, LLC.

Theodore W. Price Managing Director Managing Director,
Mentor Investment
Group, LLC.

P. Michael Jones Managing Director Managing Director,
Mentor Investment
Group, LLC.

Peter J. Quinn, Jr. Managing Director Managing Director,
Mentor Investment
Group, LLC.

-3-

<PAGE>

Daniel J. Ludeman Chairman Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC.

Karen H. Wimbish Managing Director Managing Director,
Mentor Investment
Gropup, LLC.

Thomas L. Souders Treasurer Managing Director and
Chief Financial
Officer, Wheat, First
Securities, Inc.;
Treasurer, Mentor
Distributors, LLC.

Robert P. Wilson Assistant Treasurer Managing Director and
Treasurer, Wheat,
First Securities,
Inc.; Assistant
Treasurer, Mentor
Distributors, Inc.

John M. Ivan Secretary Managing Director,
Assistant General
Counsel, and Director
of Compliance, Wheat,
First Securities, Inc.;
Clerk, Cash Resource
Trust; Secretary,
Mentor Institutional
Trust and Mentor
Distributors, LLC.

Howard T. Macrae, Jr. Assistant Secretary Assistant Secretary,
Mentor Investment
Advisors, LLC and
Mentor Distributors,
LLC.

(b) The following is additional information with respect to the directors and
officers of Mentor Perpetual Advisors, LLC ("Mentor Perpetual"):

<TABLE>

Other Substantial
Position with the Business, Profession,
Name Investment Advisor Vocation or Employment
<S> <C> <C>
Scott A. McGlashan President Director, Perpetual
Portfolio Management
Limited.

Martyn Arbib Director Chairman, Perpetual
Portfolio Management
Limited.

Roger C. Cornick Director Deputy Chairman -
Marketing, Perpetual
Portfolio Management
Limited.

Paul F. Costello Director Managing Director, Mentor
Investment Group, LLC
and Mentor Investment
Advisors, LLC; President,
Mentor Institutional
Trust, Mentor Income
Fund, and Cash Resource
Trust; Executive Vice
President and Chief
Administrative Officer,
America's Utility Fund,
Inc.; and Senior Vice
President, Mentor
Distributors, LLC.

Daniel J. Ludeman Director Chairman and Chief
Executive Officer,
Mentor Investment
Group, LLC; Director,
Wheat First Securities,
Inc.; Managing Director,
Wheat First Butcher
Singer, Inc.

David S. Mossop Director Director, Perpetual
Portfolio Management
Limited

Peter J. Quinn, Jr. Director Managing Director,
Mentor Investment
Group, LLC.

Roderick A. Smyth Managing Director Managing Director,
Mentor Investment
Group, LLC.

</TABLE>

(c) The following is a list of the general partners and Senior Vice Presidents
of Wellington Management Company, LLP, located at 75 State Street, Boston
Massachusetts 02109:

Kenneth L. Abrams Paul D. Kaplan Robert D. Rands
Nicholas C. Adams John C. Keogh Eugene E. Record, Jr.
Rand L. Alexander Mark T. Lynch John R. Ryan
Deborah L. Allinson Nanch T. Lukitsh Joseph H. Schwartz
Nancy T. August Christine S. Manfredi David W. Scudder
James H. Averill Patrick J. McCloskey Binkley C. Shorts
Marie-Claude Bernal Earl E. McEvoy Trond Skramstad
William N. Booth Duncan M. McFarland Catherine A. Smith
Paul Braverman Paul M. Mecray, III Stephen A. Soderberg
William D. Dilanni Matthew E. Megargel Harriett Tee Taggart
Pamela Dippel James N. Mordy Perry M. Traquina
Robert W. Doran Diane C. Nordin Gene R. Tremblay
Charles T. Freeman Edward P. Owens Mary Ann Tynan
Laurie A. Gabriel Saul J. Pannell Ernst H. von Metzsch
Frank J. Gilday Thomas L. Pappas Clare Villari
John H. Gooch David M. Parker James L. Walters
Nicholas P. Greville Jonathan M. Payson Kim Williams
William C.S. Hicks Stephen M. Pazuk Frank V. Wisneski

(d) The following is additional information with respect to the directors
and officers of Van Kampen American Capital Management Inc., located
at One Parkview Plaza, Oakbrook Terrace, Illinois 60181-4486:

Other Substantial
Position with Business, Profession,
Name Investment Advisor Vocation or Employment
---- ------------------ ----------------------
Don G. Powell Chairman and Director Chairman and Director,
VK/AC Holding, Inc.,
Van Kampen American
Capital, Inc., Van
Kampen American Capital
Distributors, Inc.,
Van Kampen American
Capital Asset
Management, Inc., Van
Kampen American Capital
Investment Advisory
Corp., and Van
Kampen American Capital
Advisors, Inc.

Philip N. Duff Chief Executive Officer President and Chief
Executive Officer,
VK/AC Holding, Inc.
and Van Kampen American
Capital, Inc.

Dennis J. McDonnell President and Chief Executive Vice
Operating Officer President, VK/AC
Holding, Inc. and Van
Kampen American
Capital, Inc.;
President and Chief
Operating Officer, Van
Kampen American
Capital Advisors, Inc.,
Van Kampen American
Capital Asset
Management, Inc.,
and Van Kampen
American Capital
Investment Advisory
Corp.

Ronald A. Nyberg Executive Vice President Executive Vice
and General Counsel President and General
Counsel, VK/AC Holding,
Inc., Van Kampen
American Capital, Inc.,
Van Kampen American
Capital Distributors,
Inc., Van Kampen
American Asset
Management, Inc., Van
Kampen American
Investment Advisory
Corp., and Van Kampen
American Capital
Advisors, Inc.

William R. Rybak Executive Vice President Executive Vice
and Chief Financial President and Chief
Officer Financial Officer,
VK/AC Holding, Inc.,
Van Kampen American
Capital, Inc., Van
Kampen American Capital
Distributors, Inc.,
Van Kampen American
Capital Asset
Management Inc., Van
Kampen American
Capital Investment
Advisory Corp., and
Van Kampen American
Capital Advisors, Inc.

Peter W. Hegel Executive Vice President Executive Vice
President, Van Kampen
American Capital Asset
Management, Inc.,
Van Kampen American
Capital Investment
Advisory Corp., and
Van Kampen American
Capital Advisors, Inc.

Alan T. Sachtleben Executive Vice President Executive Vice
President, Van Kampen
American Capital
Asset Management, Inc.,
Van Kampen American
Capital Investment
Advisory Corp., and
Van Kampen American
Capital Advisors, Inc.

* The address of Mentor Investment Group, LLC, Wheat, First Securities,
Inc., Wheat First Butcher Singer, Inc., Mentor Funds, Mentor Income
Fund, Inc., Mentor Investment Advisors, LLC, and Mentor Perpetual
Advisors, LLC is 901 East Byrd Street, Richmond, VA 23219. The address
of Ryland Capital Management, Inc. and RAC Income Fund, Inc. is 11000
Broken Land Parkway, Columbia, MD 21044. The address of Perpetual
Portfolio Management Limited is 48 Hart Street, Henley-on-Thames, Oxon,
England, RG92AZ.

Item 29. Principal Underwriters:

(a) Mentor Distributors, LLC is the principal distributor for the
Registrant's shares and acts as the principal underwriter for the
Registrant.

-10-

Mentor Distributors, LLC is a Virginia corporation and is an
affiliate of Mentor Investment Advisors, LLC.

NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITERS WITH REGISTRANT

Peter J. Quinn, Jr. President and Director Trustee
901 East Byrd Street
Richmond, VA 23219

Paul F. Costello Senior Vice President President
901 East Byrd Street
Richmond, VA 23219

Thomas L. Souders Treasurer None
901 East Byrd Street
Richmond, VA 23219

John M. Harris Secretary None
901 East Byrd Street
Richmond, VA 23219

John M. Ivan Assistant Secretary Secretary
901 East Byrd Street
Richmond, VA 23219

Item 30. Location of Accounts and Records:

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

Item 31. Management Services

None.

Item 32. Undertakings:

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

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

(c) The registrant undertakes to file a post-effective amendment
to this Registration Statement containing financial statements
for the Global Opportunities Fund, which financial statements
need not be certified, within four to six months from the effective
date of this amendment.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE MENTOR FUNDS, has duly
caused this Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Richmond and the Commonwealth of Virginia, on
the 6th day of November, 1997.

MENTOR FUNDS

By: /s/ Paul F. Costello
Paul F. Costello

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

Name Title Date

* November 7, 1997
- -----------------------
Daniel J. Ludeman Chairman and Trustee
(Chief Executive
Officer)

/s/ Peter J. Quinn, Jr. Trustee November 7, 1997
- -----------------------
Peter J. Quinn, Jr.

* November 7, 1997
- -----------------------
Arnold H.
Dreyfuss Trustee

* November 7, 1997
- -----------------------
Thomas F. Keller Trustee

* November 7, 1997
- -----------------------
Louis W. Moelchert, Jr. Trustee

*
- ----------------------- Trustee November 7, 1997
Stanley F. Pauley

* November 7, 1997
- -----------------------
Troy A. Peery, Jr. Trustee

/s/ Paul F. Costello November 7, 1997
- ------------------------
Paul F. Costello President

/s/ Terry L. Perkins November 7, 1997
- ------------------------
Terry L. Perkins Treasurer (Principal Financial
and Accounting Officer)

*/s/ Peter J. Quinn, Jr. Attorney-in-fact November 7, 1997
- ------------------------
Peter J. Quinn, Jr.

EXHIBIT INDEX

Exhibit Page

(5)(xi) Form of Investment Advisory and Management Agreement
(Growth Opportunities Portfolio)

(9)(ii)(d) Form of new Exhibit D to Shareholders Service Plan
for each Portfolio;

(15)(vii) Form of Plan of Distribution (Growth Opportunities
Portfolio)

MENTOR FUNDS

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

This Investment Advisory and Management Agreement dated as of ,
1998 between MENTOR FUNDS, a Massachusetts business trust (the "Trust"), and
MENTOR INVESTMENT ADVISORS, LLC, a Virginia limited liability company (the
"Manager").

WITNESSETH:

That in consideration of the mutual covenants herein contained, it is
agreed as follows:

1. SERVICES TO BE RENDERED BY THE MANAGER TO TRUST.

(a) The Manager, at its expense, will furnish continuously an
investment program for the Mentor Growth Opportunities Portfolio, a series of
the Trust (the "Portfolio"), will determine what investments shall be purchased,
held, sold, or exchanged by the Portfolio and what portion, if any, of the
assets of the Portfolio shall be held uninvested and shall make changes in the
Portfolio's investments. In the performance of its duties, the Manager will
comply with the provisions of the Agreement and Declaration of Trust and Bylaws
of the Portfolio and the Portfolio's stated investment objectives, policies, and
restrictions, and will use its best efforts to safeguard and promote the welfare
of the Portfolio and to comply with other policies which the Trustees may from
time to time determine and shall exercise the same care and diligence expected
of the Trustees.

(b) The Manager, at its expense, except as such expense is paid by the
Portfolio as provided in Section 1(e), will furnish all necessary investment and
related management facilities, including salaries of personnel, required for it
to execute its duties faithfully. The Manager will pay the compensation, if any,
of certain officers of the Trust carrying out the investment management and
related duties provided for by this Agreement.

(c) The Manager, at its expense, shall place all orders for the
purchase and sale of portfolio investments for the Portfolio's account with
brokers or dealers selected by the Manager. In the selection of such brokers or
dealers and the placing of such orders, the Manager shall give primary
consideration to securing for the Portfolio the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
doing so, the Manager, bearing in mind the Portfolio's best interests at all
times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience, and financial
stability

A8-1

<PAGE>

of the broker or dealer involved, and the quality of service rendered by the
broker or dealer in other transactions. Subject to such policies as the Trustees
of the Trust may determine, the Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Portfolio to pay a broker or dealer
that provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission that another broker or dealer would have charged for
effecting that transaction, if the Manager determines in good faith that such
amount of commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall responsibilities
with respect to the Portfolio and to other clients of the Manager as to which
the Manager exercises investment discretion.

(d) The Trust, on behalf of the Portfolio, hereby authorizes any entity
or person associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Portfolio which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and the Portfolio hereby consents to the
retention of compensation for such transactions in accordance with Rule
11a2-2(T)(2)(iv).

(e) The Manager shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Manager pursuant to this Section 1
other than as provided in Section 3.

2. OTHER AGREEMENTS, ETC.

It is understood that any of the shareholders, Trustees, officers, and
employees of the Trust may be a shareholder, director, officer, or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Portfolio. It is also understood that the Manager and any person controlled
by or under common control with the Manager have and may have advisory,
management, service, or other agreements with other organizations and persons,
and may have other interests and business.

3. COMPENSATION TO BE PAID BY THE PORTFOLIO TO THE MANAGER.

As compensation for the services performed and the facilities furnished
and expenses assumed by the Manager, including the services of any consultants
retained by the Manager, the Portfolio shall pay the Manager, as promptly as
possible after the last day of each month, a fee, calculated daily, at the
annual rates of % of the Portfolio's average daily net assets. The first
payment of the fee shall be made as promptly as possible at the end of the month
next succeeding the effective date of this Agreement, and shall constitute a
full payment of the fee due the Manager for all services prior to that date. If
this Agreement is terminated as of any date that is not the last day of a month,
such fee shall be paid as promptly as possible after

A8-2

<PAGE>

such date of termination, shall be based on the average daily net assets of the
Portfolio in that period from the beginning of such month to such date of
termination, and shall be that proportion of such average daily net assets as
the number of business days in such period bears to the number of business days
in such month. The average daily net assets of the Portfolio shall in all cases
be based only on business days and be computed as of the time of the regular
close of business of the New York Stock Exchange, or such other time as may be
determined by the Trustees. Each such payment shall be accompanied by a report
of the Trust prepared either by the Trust or by a reputable firm of independent
accountants which shall show the amount properly payable to the Manager under
this Agreement and the detailed computation thereof.

4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT.

This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Portfolio, and by the vote, cast
in person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager.

5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.

This Agreement shall become effective upon its execution and shall
remain in full force and effect continuously thereafter until the close of
business on , 2000 (unless terminated automatically as set forth
in Section 4), and shall continue for successive one-year periods thereafter, if
approved in accordance with Section 6, until terminated by either party hereto
at any time by not more than sixty days nor less than thirty days written notice
delivered or mailed by registered mail, postage prepaid, to the other party.
Such action by the Trust with respect to termination may be taken either (i) by
vote of a majority of its Trustees, or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund.

Termination of this Agreement pursuant to this Section 5 will be
without the payment of any penalty.

6. ANNUAL APPROVAL.

For additional terms after the initial term of this Agreement, this
Agreement shall be submitted for approval to the Trustees annually and shall
continue in effect only so long as specifically approved annually by vote of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval.

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7. CERTAIN DEFINITIONS.

For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Portfolio means the affirmative vote, at a
duly called and held meeting of such shareholders, (a) of the holders of 67% or
more of the shares of the Portfolio present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio entitled to vote at such meeting are present in person
or by proxy, or (b) of the holders of more than 50% of the outstanding shares of
the Portfolio entitled to vote at such meeting, whichever is less.

For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person," and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940, as amended, and the
Rules and Regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940, as amended, and the Rules
and Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934, as amended, and
the Rules and Regulations thereunder.

8. NON-LIABILITY OF MANAGER.

In the absence of willful misfeasance, bad faith, or gross negligence
on the part of the Manager, or reckless disregard of its obligations and duties
hereunder, the Manager shall not be subject to any liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services hereunder.

9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.

A copy of the Agreement and Declaration of Trust of Mentor
Institutional Trust (the "Trust") is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust for the Fund as Trustees and
not individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers, or shareholders of the Fund but are binding
only upon the assets and property of the Fund.

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IN WITNESS WHEREOF, MENTOR FUNDS and MENTOR INVESTMENT ADVISORS, LLC,
have each caused this instrument to be signed in duplicate in its behalf by its
President or Vice President thereunto duly authorized, all as of the day and
year first above written.

MENTOR FUNDS
on behalf of Mentor Growth Opportunities Portfolio

By:_____________________________________

MENTOR INVESTMENT ADVISORS, LLC

By:______________________________________

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Exhibit 9(ii)(d)

EXHIBIT D
TO THE
SHAREHOLDER SERVICE PLAN

MENTOR FUNDS

Mentor Growth Opportunities Portfolio - Class A
Mentor Growth Opportunities Portfolio - Class B

This Plan is adopted by Mentor Funds (the "Trust") (formerly Cambridge
Series Trust) with respect to the Portfolios of the Trust, and with respect to
the classes of shares of such Portfolios, if any, set forth above.

In compensation for services provided pursuant to this Plan,
Administrators will be paid a monthly fee computed at the annual rate not to
exceed .25 of 1% of the average aggregate net asset value of the shares of all
participating classes or Portfolios, as the case may be, held during each month.

WITNESS the due execution hereof this day of January, 1998.

MENTOR FUNDS

By:
------------------------
President

PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1

MENTOR GROWTH OPPORTUNITIES PORTFOLIO

This PLAN OF DISTRIBUTION has been adopted by Mentor Funds (the
"Trust") on behalf of Mentor Growth Opportunities Portfolio, a series of shares
of beneficial interest of the Trust (the "Portfolio").

RECITALS

A. The Trust intends to engage in business as an open-end, diversified
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "Act"); and

B. The Portfolio desires to adopt a Plan of Distribution pursuant to
Rule 12b-1 under the 1940 Act in respect of its Class B shares, and the Trustees
of the Trust have determined that there is a reasonable likelihood that adoption
of this Plan of Distribution will benefit the Portfolio and its shareholders;
and

C. The Portfolio intends to employ a distributor as principal
underwriter of the securities of which it is the issuer (the "Distributor");

NOW, THEREFORE, the Trust, on behalf of the Portfolio, hereby adopts
this Plan of Distribution (the "Plan") in respect of the Portfolio's Class B
shares, in accordance with Rule 12b-1 under the 1940 Act on the following terms
and conditions:

1. The Portfolio shall pay to the Distributor a distribution fee for
expense related to distribution of its Class B shares at the annual rate of 0.75
of one percent (0.75%) of the

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Portfolio's average daily net assets attributable to its Class B shares, such
fee to be calculated and accrued daily and paid monthly. In addition, the
Distributor will receive a contingent deferred sales charge, as described in the
Trust's prospectus, upon Class B shares of the Portfolio redeemed by a
shareholder who has held such shares for a period of five years or less. The
contingent deferred sales charge will not offset amounts to be paid to the
Distributor under the Plan of Distribution.

2. The amount set forth in paragraph 1 of this Plan shall be paid for
the Distributor's services as distributor of the Class B shares of the Portfolio
in accordance with the Distribution Agreement between the Distributor and the
Trust and may be spent by the Distributor or its agents on any activities or
expenses related to the sale and repurchase of the Portfolio's Class B shares,
including, but not limited to, commissions and other compensation to persons who
engage in or support distribution and repurchase of shares; printing of
prospectuses and reports for other than existing shareholders; advertising;
preparation and distribution of sales literature; and overhead, travel and
telephone expenses.

3. This Plan shall not take effect until it has been approved by a vote
of Class B shares constituting at least a majority of the outstanding voting
securities, as defined in the 1940 Act, of such class.

4. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Trustees and
(b) those Trustees who are not "interested persons" of the Trust (as defined in
the 1940 Act) and have no direct or indirect financial interest in the operation
of this Plan or any agreements related to it (the "Rule 12b-1 Trustees"), cast
in person at a meeting or meetings called for the purpose of voting on this Plan
and such related agreements.

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<PAGE>

5. This Plan shall continue in effect for successive periods of one
year from its execution for so long as such continuance is specifically approved
at least annually in the manner provided for approval of this Plan in paragraph
4.

6. Any person authorized to direct the disposition of monies paid or
payable by the Portfolio pursuant to this Plan or any related agreement shall
provide to the Trustees and the Trustees shall review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made.

7. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees or by vote of Class B shares constituting a majority of the
outstanding voting securities of such class.

8. This Plan may not be amended to increase materially the amount of
distribution expenses provided for in paragraph 1 hereof unless such amendment
is approved in the manner provided for initial approval in paragraph 3 hereof,
and no material amendment to the Plan shall be made unless such amendment is
approved in the manner provided for initial approval in paragraph 4 hereof.

9. While this Plan is in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the 1940 Act) of the
Trust shall be committed to the discretion of the Trustees who are themselves
not interested persons.

10. The Trust shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 6 hereof for a period of
not less than six years from the date of execution this Plan, or of the
agreements or of such reports, as the case may be, the first two years in an
easily accessible place.

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<PAGE>

A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of this instrument are not binding upon any of the Trustees, officers, or
shareholders of the Trust but are binding only upon the assets and property of
the Trust.

IN WITNESS WHEREOF, the Trust has executed this Plan of Distribution as
of the date first above written.

MENTOR FUNDS
on behalf of the Mentor Growth Opportunities Portfolio

By: __________________________
President

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