CASH RESOURCE TRUST /MA/, 485BPOS, 1998-01-30

CASH RESOURCE TRUST /MA/
485BPOS, 1998-01-30

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As filed with the Securities and Exchange Commission on January 30, 1998

Registration No. 33-65818
File No. 811-7862
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
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/ / Pre-Effective Amendment No.
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Post-Effective Amendment No. 7 /X/
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY /X/
ACT OF 1940 ---

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Amendment No. 9 /X/
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(Check appropriate box or boxes)

CASH RESOURCE TRUST
(Exact name of registrant as specified in charter)

901 East Byrd Street
Richmond, Virginia 23219
(Address of principal executive offices)

Registrant's Telephone Number, including Area Code (804) 782-3647
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PAUL F. COSTELLO, President
901 East Byrd Street
Richmond, Virginia 23219
(Name and address of agent for service)
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Copy to:
TIMOTHY W. DIGGINS, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
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It is proposed that this filing will become effective (check appropriate box):

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immediately upon filing pursuant to paragraph (b)
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on [date] pursuant to paragraph (b)
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X 60 days after filing pursuant to paragraph (a)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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-1-

<PAGE>

If appropriate, check the following box:

- ---
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- ---

THIS POST-EFFECTIVE AMENDMENT RELATES SOLEY TO CLASS B SHARES OF THE
REGISTRANT. NO INFORMATION RELATING TO CLASS A SHARES OF THE REGISTRANT IS
AMENDED OR SUPERSEDED HEREBY.

-2-

<PAGE>

CASH RESOURCE TRUST
CROSS REFERENCE SHEET

(as required by Rule 404(c))

Part A
<TABLE>
<CAPTION>

N-1A Item No. Location
<S> <C>
1. Cover Page..................................................... Cover Page
2. Synopsis....................................................... Cover Page; Expense summary
3. Condensed Financial Information................................ Not applicable
4. General Description of Registrant.............................. Investment Objectives and Policies;
Selection of Investments;
How a Fund's performance
is calculated;
General Information
5. Management of the Fund......................................... Management; Other
Services; General Information
5A. Management's Discussion
of Fund Performance.......................................... Not Applicable
6. Capital Stock and Other
Securities................................................... How to Buy Shares; How to
Sell Shares; How to Exhchange
Shares; Tax Information;
Dividends; General Information

7. Purchase of Securities Being
Offered...................................................... How to Buy Shares; How to Sell Shares;
How to Exchange Shares
8. Redemption or Repurchase....................................... How to Buy Shares; How to Sell Shares;
How to Exchange Shares;
Financial Institutions

9. Pending Legal Proceedings...................................... Not Applicable

</TABLE>

-3-

<PAGE>

Part B
<TABLE>
<CAPTION>

N-1A Item No. Location
<S> <C>
10. Cover Page.................................................... Cover Page
11. Table of Contents............................................. Cover Page
12. General Information and History............................... Not Applicable
13. Investment Objectives and
Policies.................................................... Investment Objective and Policies
of the Trust; Investment
Restrictions; Portfolio Turnover
14. Management of the Fund........................................ Management of the Trust
15. Control Persons and Principal
Holders of Securities....................................... Management of the Trust;
Principal Holders of Securities
16. Investment Advisory and Other
Services.................................................... Management of the Trust;
Investment Advisory and other
Securities; Custodian; Independent
Auditors
17. Brokerage Allocation.......................................... Management of the Trust
18. Capital Stock and Other
Securities.................................................. Determination of Net Asset Value;
Taxes; Distribution; Organization
19. Purchase, Redemption and Pricing
of Securities Being Offered................................. Management of the Trust;
Determination of Net Asset Value;
Distribution
20. Tax Status.................................................... Taxes
21. Underwriters.................................................. Not applicable
22. Calculations of Yield Quotations
of Money Market Funds....................................... Performance Information
23. Financial Statements.......................................... Financial Statements
</TABLE>

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.

-4-

<PAGE>

P R O S P E C T U S April __, 1998
Class B Shares

Cash Resource Trust

Cash Resource Money Market Fund
Cash Resource U.S. Government Money Market Fund
Cash Resource Tax-Exempt Money Market Fund
Cash Resource California Tax-Exempt Money Market Fund
Cash Resource New York Tax-Exempt Money Market Fund

The Cash Resource Funds are designed for investors who seek current income
consistent with preservation of capital and maintenance of liquidity. The Funds
are diversified investment portfolios of Cash Resource Trust (the "Trust").

An investment in the Trust is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that a Fund will be able to maintain a
stable net asset value of $1.00 per share. Federal law permits Cash Resource
California Tax-Exempt Money Market Fund and Cash Resource New York Tax-Exempt
Money Market Fund to invest more of their assets in the securities of a single
issuer than other money market funds; as a result, an investment in those Funds
may involve greater risks than an investment in other types of money market
funds.

This Prospectus explains concisely what you should know before
investing in Class B shares of a Fund. Please read it carefully and keep
it for future reference. You can find more detailed information about
the Funds in the September 30, 1997 Statement of Additional Information,
as amended from time to time. For a free copy of the Statement, call
1-800-382-0016. The Statement has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by
reference.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.

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

<PAGE>

EXPENSE SUMMARY

Expenses are one of several factors to consider when investing in the
Funds. The following table summarizes your maximum transaction costs from an
investment in Class B shares of each of the Funds and expenses expected to be
incurred by each Fund with respect to its Class B shares during the first year
when those shares are offered. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Class B shares of the
Funds over specified periods.

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

(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) 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."

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

<PAGE>

</TABLE>
<TABLE>
<CAPTION>
Cash Cash
Cash Resource Resource
Cash Cash Resource Resource California New York
Resource U.S. Government Tax-Exempt Tax-Exempt Tax-Exempt
Money Market Money Market Money Market Money Market Money Market
Fund Fund Fund Fund Fund
------------ --------------- ------------ ------------ ------------
<S> <C>
Annual Fund Operating Expenses
(as a percentage of average net
assets)
Management Fees .19% .19% .22% .22% .10%*
12b-1 Fees .75% .75% .75% .75% .75%*
Shareholder Service Fees .25% .25% .25% .25% .25%
Other Expenses .29% .24% .16% .20% .32%
Total Fund Operating Expenses 1.48% 1.43% 1.38% 1.42% 1.42%*
1.42
</TABLE>

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

*reflecting expense limitation

Examples

Your investment of $1,000 in Class B shares of a Fund would incur
the following expenses, assuming 5% annual return and redemption at the
end of each period:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C>
Cash Resource Money Market Fund $15 $47 $81 $177
Cash Resource U.S. Government Money
Market Fund $15 $45 $78 $171
Cash Resource Tax-Exempt Money Market
Fund $14 $44 $76 $166
Cash Resource California Tax-Exempt Money
Market Fund $14 $45 $78 $170
Cash Resource New York Tax-Exempt Money
Market Fund $14 $45 $78 $170
</TABLE>

Your investment of $1,000 in Class B shares of a Fund would incur
the following expenses, issuing 5% annual return and no redemption:

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C>
Cash Resource Money Market Fund $55 $77 $91 $177
Cash Resource U.S. Government Money
Market Fund $55 $75 $88 $171
Cash Resource Tax-Exempt Money Market
Fund $54 $74 $86 $166
Cash Resource California Tax-Exempt Money
Market Fund $54 $75 $88 $170
Cash Resource New York Tax-Exempt Money
Market Fund $54 $75 $88 $170
</TABLE>

The table is provided to help you understand the expenses of investing in
each of the Funds and your share of the estimated operating expenses of the
Funds. Expenses shown for the New York Tax-Exempt Money Market Fund reflect
expense limitations currently in effect. In the absence of the limitations,
Management Fees, and Total Fund Operating Expenses would be .22% and 1.29%,
respectively, for the New York Tax-Exempt Money Market Fund. The Examples do not
represent past or future expense levels. Actual returns and expenses may be
greater or less than those shown. Federal regulations require the Examples to
assume a 5% annual return, but actual annual return will vary. Because of the
12b-1 fees payable by the Funds, long-term shareholders may pay more in
aggregate sales charges than the maximum initial sales charge permitted by the
National Association of Securities Dealers, Inc.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Money Market Fund and the U.S. Government
Money Market Fund is to seek as high a rate of current income as Mentor
Investment Advisors, LLC, the Funds' investment advisor ("Mentor Advisors")
believes is consistent with preservation of capital and maintenance of
liquidity. The investment objective of each of the other Funds is to seek as
high a rate of current income exempt from federal income tax (and, in the case
of the California Tax-Exempt Money Market Fund, California personal income tax,
or, in the case of the New York Tax-Exempt Money Market Fund, New York State and
City personal income taxes) as Mentor Advisors believes is consistent with
preservation of capital and maintenance of liquidity. The Funds seek their
objectives through the investment policies described below. Because each of the
Funds is a money market fund, it will only invest in the types of investments
described below under "Selection of Investments".

The investment objective and policies of each Fund may, unless otherwise
specifically stated, be changed by the Trustees without a vote of the
shareholders. As a matter of policy, the Trustees would not materially change
the investment objective of a Fund without shareholder approval. None of the
Funds is intended to be a complete investment program, and there is no assurance
the Funds will achieve their objectives.

Cash Resource Money Market Fund

The Money Market Fund invests in a portfolio of high-quality money market
instruments consisting exclusively of:

(Bullet) bank certificates of deposit (CD's): negotiable certificates issued
against funds deposited in a commercial bank for a definite period
of time and earning a specified return.

(Bullet) bankers' acceptances: negotiable drafts or bills of exchange, which
have been "accepted" by a bank, meaning, in effect, that the bank
has unconditionally agreed to pay the face value of the instrument
on maturity.

(Bullet) prime commercial paper: high-grade, short-term obligations issued by
banks, corporations, and other issuers.

(Bullet) corporate obligations: high-grade, short-term obligations other than
prime commercial paper.

(Bullet) U.S. Government securities: marketable securities issued or
guaranteed as to principal or interest by the U.S. Government or by
its agencies or instrumentalities.

(Bullet) repurchase agreements: with respect to U.S. Treasury or U.S.
Government securities.

Cash Resource U.S. Government Money Market Fund

The U.S. Government Money Market Fund invests exclusively in U.S. Treasury
bills, notes, and bonds, and other obligations issued or guaranteed as to
principal or interest by the U.S. Government, its agencies, or
instrumentalities, and in repurchase agreements with respect to such
obligations. Certain of these obligations, including U.S. Treasury bills, notes,
and bonds, mortgage participation certificates issued or guaranteed by the
Government National Mortgage Association, and Federal Housing Administration
debentures, are supported by the full faith and credit of the United States.
Other U.S. Government securities issued by federal agencies or government-
sponsored enterprises are not supported by the full faith and credit of the
United States. These securities include obligations supported by the right of
the issuer to borrow from the U.S. Treasury, such as obligations of Federal Home
Loan Banks, and obligations supported only by the credit of an instrumentality,
such as Federal National Mortgage Association bonds.

<PAGE>
Short-term U.S. Government obligations generally are considered among the
safest short-term investments. Because of their added safety, the yields
available from U.S. Government obligations are generally lower than the yields
available from comparable corporate debt securities. The U.S. Government
guarantee of securities owned by the Fund does not guarantee the net asset value
of the Fund's shares, which the Fund seeks to maintain at $1.00 per share.

Cash Resource Tax-Exempt Money Market Fund

The Tax-Exempt Money Market Fund invests, as a fundamental policy, at least
80% of its net assets in Tax-Exempt Securities (as described below). The Fund
may invest the remainder of its assets in investments of any kind in which any
of the other Funds may invest.

The Fund will invest in only the following types of Tax-Exempt Securities:
(i) municipal notes; (ii) municipal bonds; (iii) municipal securities backed by
the U.S. Government or any of its agencies or instrumentalities; (iv) tax-exempt
commercial paper; (v) participation interests in any of the foregoing; and (vi)
unrated securities or new types of tax-exempt instruments which become available
in the future if Mentor Advisors determines they meet the quality standards
discussed below (collectively, "Tax-Exempt Securities"). (In the case of any
such new types of tax-exempt instruments, this Prospectus would be revised as
may be appropriate to describe such instruments.) In connection with the
purchase of Tax-Exempt Securities, the Fund may acquire stand-by commitments,
which give the Fund the right to resell the security to the dealer at a
specified price. Stand-by commitments may provide additional liquidity for the
Fund but are subject to the risk that the dealer may fail to meet its
obligations. The Fund does not generally expect to pay additional consideration
for stand-by commitments or to assign any value to them.

Tax-Exempt Securities are debt obligations issued by a state (including the
District of Columbia), a U.S. territory or possession, or any of their political
subdivisions, the interest from which is, in the opinion of bond counsel, exempt
from federal income tax. These securities are issued to obtain funds for various
public purposes, such as the construction of public facilities, the payment of
general operating expenses, or the refunding of outstanding debts. They may also
be issued to finance various private activities, including the lending of funds
to public or private institutions for the construction of housing, educational,
or medical facilities and may also include certain types of private activity and
industrial development bonds issued by public authorities to finance privately
owned or operated facilities. Short-term Tax-Exempt Securities are generally
issued as interim financing in anticipation of tax collections, revenue
receipts, or bond sales to finance various public purposes.

The two principal classifications of Tax-Exempt Securities are general
obligation and special obligation (or revenue) securities. General obligation
securities involve the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues. Their payment may
depend on an appropriation by the issuer's legislative body. The characteristics
and methods of enforcement of general obligation securities vary according to
the law applicable to the particular issuer. Special obligation securities are
payable only from the revenues derived from a particular facility or class of
facilities, or a specific revenue source, and generally are not payable from the
unrestricted revenues of the issuer. Industrial development and private activity
bonds are in most cases special obligation securities, the credit quality of
which is directly related to the private user of a facility.

For purposes of the Fund's policy to invest at least 80% of its net assets in
Tax-Exempt Securities, the Fund will not treat obligations as Tax-Exempt
Securities for purposes of measuring compliance with such policy if they would
give rise to interest income subject to federal alternative minimum tax for
individuals. To the extent that the Fund invests in these securities, individual
shareholders of the Fund, depending on their own tax status, may

<PAGE>
be subject to federal alternative minimum tax on the part of the Fund's
distributions derived from these securities. In addition, an investment in the
Fund may cause corporate shareholders to be subject to (or result in an
increased liability under) the alternative minimum tax because tax-exempt income
is generally included in the alternative minimum taxable income of corporations.

The ability of governmental issuers to meet their obligations will depend
primarily on the availability of tax and other revenues to those governments and
on their fiscal conditions generally. The amounts of tax and other revenues
available to governmental issuers may be affected from time to time by economic,
political, and demographic conditions affecting a particular state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state, and local aid to
issuers of such securities may also affect their ability to meet their
obligations. Payments of principal and interest on special obligation securities
will depend on the economic condition of the facility or specific revenue source
from whose revenues the payments will be made, which in turn could be affected
by economic, political, and demographic conditions affecting a particular state.
Any reduction in the actual or perceived ability of an issuer of Tax-Exempt
Securities in a particular state to meet its obligations (including a reduction
in the rating of its outstanding securities) would likely affect adversely the
market value and marketability of its obligations and could adversely affect the
values of Tax-Exempt Securities issued by others in that state as well.

The Fund may invest without limit in high quality taxable money market
instruments of any type in which the other Funds may invest at any time when
Mentor Advisors believes that market conditions make pursuing the Fund's basic
investment strategy inconsistent with the best interests of shareholders. It is
impossible to predict when, or for how long, the Fund will use these alternative
defensive strategies.

California Tax-Exempt Money Market Fund

The California Tax-Exempt Money Market Fund will normally invest at least 80%
of its assets in California Tax-Exempt Securities, which are debt obligations
issued by the State of California, or any of its political subdivisions, or its
agencies, instrumentalities, or other governmental units, the interest from
which is, in the opinion of bond counsel, exempt from federal income tax and
California personal income tax. (This 80% requirement is a fundamental policy of
the Fund.) The Fund may invest the remainder of its assets in investments of any
kind described under "Selection of Investments" below.

California Tax-Exempt Securities are issued to obtain funds for various
public purposes, such as the construction of public facilities, the payment of
general operating expenses, or the refunding of outstanding debts. They may also
be issued to finance various private activities, including the lending of funds
to public or private institutions for the construction of housing, educational,
or medical facilities and may also include certain types of private activity and
industrial development bonds issued by public authorities to finance privately
owned or operated facilities. Short-term California Tax-Exempt Securities are
generally issued as interim financing in anticipation of tax collections,
revenue receipts, or bond sales to finance various public purposes.

The two principal classifications of California Tax-Exempt Securities are
general obligation and special obligation (or revenue) securities. General
obligation securities involve the credit of an issuer possessing taxing power
and are payable from the issuer's general unrestricted revenues. Their payment
may depend on an appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation securities vary
according to the law applicable to the particular issuer. Special obligation
securities are payable only from the revenues derived from a particular facility
or class of facilities, or a specific revenue source, and generally are not
payable from the unrestricted revenues of the issuer. Industrial development and
private activity

<PAGE>

bonds are in most cases special obligation securities, the credit quality of
which is directly related to the private user of the facilities.

The Fund will invest in the following types of California Tax-Exempt
Securities: (i) municipal notes; (ii) municipal bonds; (iii) municipal
securities backed by the U.S. Government or any of its agencies or
instrumentalities; (iv) tax-exempt commercial paper; (v) participation interests
in any of the foregoing; and (vi) unrated securities or new types of tax-exempt
instruments which become available in the future if Mentor Advisors determines
they meet the quality standards discussed below. (In the case of any such new
types of tax-exempt instruments, this Prospectus would be revised as may be
appropriate to describe such instruments.) In connection with the purchase of
California Tax-Exempt Securities, the Fund may acquire stand-by commitments,
which give the Fund the right to resell the security to the dealer at a
specified price. Stand-by commitments may provide additional liquidity for the
Fund but are subject to the risk that the dealer may fail to meet its
obligations. The Fund does not generally expect to pay additional consideration
for stand-by commitments or to assign any value to them.

The Fund will normally invest at least 80% of its assets in debt
obligations the interest from which is, in the opinion of bond counsel, exempt
from federal income tax and that will not give rise to interest income subject
to federal alternative minimum tax for individuals. To the extent the Fund
invests in these securities, individual shareholders of the Fund, depending on
their own tax status, may be subject to federal alternative minimum tax on the
part of the Fund's distributions derived from these securities. In addition, an
investment in the Fund may cause corporate shareholders to be subject to (or
result in an increased liability under) the alternative minimum tax because
tax-exempt income is generally included in the alternative minimum taxable
income of corporations.

Since the Fund invests primarily in California Tax-Exempt Securities, the
value of the Fund's shares may be especially affected by factors pertaining to
the economy of California and other factors specifically affecting the ability
of issuers of California Tax-Exempt Securities to meet their obligations; an
investment in the Fund may as a result involve greater risk than an investment
in other types of money market funds.

The ability of governmental issuers to meet their obligations will depend
primarily on the availability of tax and other revenues to those governments and
on their fiscal conditions generally. The amounts of tax and other revenues
available to governmental issuers may be affected from time to time by economic,
political, and demographic conditions affecting a particular state. In addition,
constitutional or statutory restrictions may limit a government's power to raise
revenues or increase taxes. The availability of federal, state, and local aid to
issuers of such securities may also affect their ability to meet their
obligations. Payments of principal and interest on special obligation securities
will depend on the economic condition of the facility or specific revenue source
from whose revenues the payments will be made, which in turn could be affected
by economic, political, and demographic conditions affecting the State of
California. Any reduction in the actual or perceived ability of an issuer of
California Tax-Exempt Securities to meet its obligations (including a reduction
in the rating of its outstanding securities) would likely adversely affect the
market value and marketability of its obligations and could adversely affect the
values of California Tax-Exempt Securities issued by others as well.

The Fund may invest in high quality taxable money market instruments at any
time when Mentor Advisors believes that market conditions make pursuing the
Fund's basic investment strategy inconsistent with the best interest of
shareholders. These instruments may include: bank certificates of deposit,
banker's acceptances, prime commercial paper, high quality short-term corporate
obligations, short-term U.S. government securities or repurchase agreements, or
any other securities Mentor Advisors considers consistent with such defensive
strategies.

<PAGE>

New York Tax-Exempt Money Market Fund

The New York Tax-Exempt Money Market Fund will normally invest at least 80%
of its assets in New York Tax-Exempt Securities, which are debt obligations
issued by the State of New York, or any of its political subdivisions, or its
agencies, instrumentalities, or other governmental units (or of other
governmental issuers, such as U.S. territories), the interest from which is, in
the opinion of bond counsel, exempt from federal income tax and New York State
and City personal income taxes. (This 80% requirement is a fundamental policy of
the Fund.) The Fund may invest the remainder of its assets in investments of any
kind described under "Selection of Investments" below.

New York Tax-Exempt Securities are issued to obtain funds for various
public purposes, such as the construction of public facilities, the payment of
general operating expenses, or the refunding of outstanding debts. They may also
be issued to finance various private activities, including the lending of funds
to public or private institutions for the construction of housing, educational,
or medical facilities and may also include certain types of private activity and
industrial development bonds issued by public authorities to finance privately
owned or operated facilities. Short-term New York Tax-Exempt Securities are
generally issued as interim financing in anticipation of tax collections,
revenue receipts, or bond sales to finance various public purposes.

The two principal classifications of New York Tax-Exempt Securities are
general obligation and special obligation (or revenue) securities. General
obligation securities involve the credit of an issuer possessing taxing power
and are payable from the issuer's general unrestricted revenues. Their payment
may depend on an appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation securities vary
according to the law applicable to the particular issuer. Special obligation
securities are payable only from the revenues derived from a particular facility
or class of facilities, or a specific revenue source, and generally are not
payable from the unrestricted revenues of the issuer. Industrial development and
private activity bonds are in most cases special obligation securities, the
credit quality of which is directly related to the private user of the
facilities.

The Fund will invest in the following types of New York Tax-Exempt
Securities: (i) municipal notes; (ii) municipal bonds; (iii) municipal
securities backed by the U.S. Government or any of its agencies or
instrumentalities; (iv) tax-exempt commercial paper; (v) participation interests
in any of the foregoing; and (vi) unrated securities or new types of tax-exempt
instruments which become available in the future if Mentor Advisors determines
they meet the quality standards discussed below. (In the case of any such new
types of tax-exempt instruments, this Prospectus would be revised as may be
appropriate to describe such instruments.) In connection with the purchase of
New York Tax-Exempt Securities, the Fund may acquire stand-by commitments, which
give the Fund the right to resell the security to the dealer at a specified
price. Stand-by commitments may provide additional liquidity for the Fund but
are subject to the risk that the dealer may fail to meet its obligations. The
Fund does not generally expect to pay additional consideration for stand-by
commitments or to assign any value to them.

<PAGE>

Since the Fund invests primarily in New York Tax-Exempt Securities, the
value of the Fund's shares may be especially affected by factors pertaining to
the economy of New York and other factors specifically affecting the ability of
issuers of New York Tax-Exempt Securities to meet their obligations; an
investment in the Fund may as a result involve greater risk than an investment
in other types of money market funds.

The ability of governmental issuers to meet their obligations will depend
primarily on the availability of tax and other revenues to those governments and
on their fiscal conditions generally. The amounts of tax and other revenues
available to governmental issuers may be affected from time to time by economic,
political, and demographic conditions affecting the State or City of New York.
In addition, constitutional or statutory restrictions may limit a government's
power to raise revenues or increase taxes. The availability of federal, state,
and local aid to issuers of such securities may also affect their ability to
meet their obligations. Payments of principal and interest on special obligation
securities will depend on the economic condition of the facility or specific
revenue source from whose revenues the payments will be made, which in turn
could be affected by economic, political, and demographic conditions affecting a
particular state. Any reduction in the actual or perceived ability of an issuer
of New York Tax-Exempt Securities to meet its obligations (including a reduction
in the rating of its outstanding securities) would likely adversely affect the
market value and marketability of its obligations and could adversely affect the
values of New York Tax-Exempt Securities issued by others as well.

Selection of Investments

Each Fund will invest only in U.S. dollar-denominated high-quality
securities and other U.S. dollar-denominated money market instruments meeting
credit criteria which the Trustees believe present minimal credit risk.
"High-quality securities" are (i) commercial paper or other short-term
obligations rated in one of the two highest short-term rating categories by at
least two nationally recognized rating services (or, if only one rating service
has rated the security, by that service), (ii) obligations rated at least AA by
Standard & Poor's or Aa by Moody's Investors Service, Inc. at the time of
investment, and (iii) unrated securities determined by Mentor Advisors to be of
comparable quality. Each Fund will maintain a dollar-weighted average maturity
of 90 days or less and will not invest in securities with remaining maturities
of more than 397 days. A Fund may invest in variable or floating-rate securities
which bear interest at rates subject to periodic adjustment or which provide for
periodic recovery of principal on demand. Under certain conditions, these
securities may be deemed to have remaining maturities equal to the time
remaining until the next interest adjustment date or the date on which principal
can be recovered on demand. Each of the Funds follows investment and valuation
policies designed to maintain a stable net asset value of $1.00 per share,
although there is no assurance that these policies will be successful.

Considerations of liquidity and preservation of capital mean that a Fund
may not necessarily invest in money market instruments paying the highest
available yield at a particular time. Consistent with its investment objective,
a Fund will attempt to maximize yields by portfolio trading and by buying and
selling portfolio investments in anticipation of or in response to changing
economic and money market conditions and trends. Each Fund may also invest to
take advantage of what Mentor Advisors believes to be temporary disparities in
the yields of different segments of the high-quality money market or among
particular instruments within the same segment of the market. These policies, as
well as the relatively short maturity of obligations purchased by the

<PAGE>
Funds, may result in frequent changes in the Funds' portfolios. The Funds will
not usually pay brokerage commissions in connection with the purchase or sale of
portfolio securities.

The portfolio of a Fund will be affected by general changes in interest
rates resulting in increases or decreases in the values of the obligations held
by the Fund. The values of the obligations in a Fund's portfolio can be expected
to vary inversely to changes in prevailing interest rates. Although the Funds'
investment policies are designed to minimize these changes and to maintain a net
asset value of $1.00 per share, there is no assurance that these policies will
be successful. Withdrawals by shareholders could require the sale of portfolio
investments at a time when such a sale might not otherwise be desirable.

Diversification and concentration policies

Each Fund is a "diversified" investment company under the Investment
Company Act of 1940. This means that each Fund may invest up to 25% of its total
assets in the securities of one or more issuers, and is limited with respect to
the remaining portion of its assets to investing 5% or less of its total assets
in the securities of any one issuer (other than the U.S. government). However,
under the current rules governing money market funds, the Funds (other than the
Tax-Exempt Money Market and the California and New York Tax-Exempt Money Market
Funds) generally may not invest more than 5% of their assets in any one issuer
(other than the U.S. government).

The Money Market Fund may invest without limit in obligations of domestic
branches of U.S. banks and U.S. branches of foreign banks (if it can be
demonstrated that they are subject to the same regulations as U.S. banks). At
times when the Fund has concentrated its investments in bank obligations, the
values of its portfolio securities may be especially affected by factors
pertaining to the issuers of such obligations.

Because of the relatively small number of issuers of California Tax-Exempt
Securities and New York Tax-Exempt Securities, the California and New York
Tax-Exempt Funds are more likely to invest a higher percentage of their assets
in the securities of a single issuer than investment companies that invest in a
broader range of securities. This practice involves an increased risk of loss to
a Fund if an issuer were unable to make interest or principal payments or if the
market value of these securities were to decline.

Neither the Tax-Exempt Money Market Fund, the California Tax-Exempt Money
Market Fund, nor the New York Tax-Exempt Money Market Fund (each, a "Tax-Exempt
Fund" and collectively, the "Tax-Exempt Funds") will invest more than 25% of its
total assets in any one industry. Governmental issuers of Tax-Exempt Securities,
California Tax-Exempt Securities, or New York Tax-Exempt Securities are not
considered part of any "industry." However, Securities backed only by the assets
and revenues of nongovernmental users may for this purpose be deemed to be
issued by such nongovernmental users, and the 25% limitation would apply to such
obligations.

It is nonetheless possible that a Tax-Exempt Fund may invest more than 25%
of its assets in a broader segment of the Tax-Exempt Securities market (or the
California Tax-Exempt or New York Tax-Exempt Securities Markets, as the case may
be), such as revenue obligations of hospitals and other health care facilities,
housing agency revenue obligations, or airport revenue obligations. This would
be the case only if Mentor Advisors determined that the yields available from
obligations in a particular segment of the market justified the additional risks
associated with such concentration. Although such obligations could be supported
by the credit of governmental users or by the credit of nongovernmental users
engaged in a number of industries, economic, business, political, and other
developments generally affecting the revenues of such users (for example,
proposed legislation or pending court decisions affecting the financing of such
projects and market factors affecting the demand for their services or products)
may have a general adverse effect on all Tax-Exempt Securities in such a market

<PAGE>

segment. Each of the Tax-Exempt Funds reserves the right to invest more than 25%
of its assets in industrial development bonds and private activity bonds or
notes.

The Tax-Exempt Money Market Fund also reserves the right to invest more
than 25% of its assets in securities relating to any one or more states
(including the District of Columbia), U.S. territories or possessions, or any of
their political subdivisions. As a result of such an investment, the performance
of that Fund may be especially affected by factors pertaining to the economy of
the relevant state and other factors specifically affecting the ability of
issuers of such securities to meet their obligations. As a result, the value of
the Fund's shares may fluctuate more widely than the value of shares of a fund
investing in securities relating to a greater number of different states.

Other Investment Practices

A Fund may also engage to a limited extent in the following investment
practices, each of which involves certain special risks. The Statement of
Additional Information contains more detailed information about these practices.

Foreign investments. The Money Market Fund may invest in obligations of
foreign issuers and in bank certificates of deposit and bankers' acceptances
payable in U.S. dollars and issued by foreign banks (including U.S. branches of
foreign banks) or by foreign branches of U.S. banks. These investments subject
the Fund to investment risks different from those associated with domestic
investments. Such risks include adverse political and economic developments in
foreign countries, the imposition of withholding taxes on interest income,
seizure or nationalization of foreign deposits, or the adoption of other
governmental restrictions which may adversely affect the payment of principal
and interest on such obligations. Legal remedies available to investors in
certain foreign countries may be more limited than those available with respect
to investments in the U.S. or in other foreign countries. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Fund's assets held
abroad) and expenses not present in the settlement of domestic investments. In
addition, foreign securities may be less liquid than U.S. securities, and
foreign accounting and disclosure standards may differ from U.S. standards.
Special tax considerations apply to foreign investments.

Repurchase agreements. Under a repurchase agreement, a Fund 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 Fund's cost plus interest. A Fund will enter into repurchase agreements only
with commercial banks and with registered broker-dealers who are members of a
national securities exchange or market makers in government securities, and only
if the debt instrument subject to the repurchase agreement is a U.S. Government
security. Although Mentor Advisors will monitor repurchase agreement
transactions to ensure that they will be fully collateralized at all times, a
Fund bears a risk of loss if the other party defaults on its obligation and the
Fund is delayed or prevented from exercising its rights to dispose of the
collateral. If the other party should become involved in bankruptcy or
insolvency proceedings, it is possible that a Fund may be treated as an
unsecured creditor and required to return the collateral to the other party's
estate.

Securities lending. A Fund may lend portfolio securities to broker-dealers.
These transactions must be fully collateralized at all times with cash or
short-term debt obligations, but involve some risk to a Fund if the other party
should default on its obligation and the Fund is delayed or prevented from
exercising its rights in respect of the collateral. Any investment of collateral
by a Fund would be made in accordance with the Fund's investment objective and
policies described above.

<PAGE>
Dividends

The Trust determines the net income of each Fund as of the close of regular
trading on the New York Stock Exchange (the "Exchange") each day the Exchange is
open. Each determination of a Fund's net income includes (i) all accrued
interest on the Fund's investments, (ii) plus or minus all realized and
unrealized gains and losses on the Fund's investments, (iii) less all accrued
expenses of the Fund. Each Fund's investments are valued at amortized cost
according to Securities and Exchange Commission Rule 2a-7. A Fund will not
normally have unrealized gains or losses so long as it values its investments by
the amortized cost method.

Daily dividends. Each Fund declares all of its net income as a distribution
on each day it is open for business, as a dividend to shareholders of record
immediately prior to the close of regular trading on the Exchange. Shareholders
whose purchase of shares of a Fund is accepted at or before 12:00 noon on any
day will receive the dividend declared by the Fund for that day; shareholders
who purchase shares after 12:00 noon will begin earning dividends on the next
business day after the Fund accepts their order. A Fund's net income for
Saturdays, Sundays, and holidays is declared as a dividend on the preceding
business day. Dividends for the immediately preceding calendar month will be
paid on the fifteenth day of each calendar month (or, if that day is not a
business day, on the next business day), except that a Fund's schedule for
payment of dividends during the month of December may be adjusted to assist in
tax reporting and distribution requirements. A shareholder who withdraws the
entire balance of an account at any time during a month will be paid all
dividends declared through the time of the withdrawal. Since the net income of
each Fund is declared as a dividend each time it is determined, the net asset
value per share of each Fund normally remains at $1 per share immediately after
each determination and dividend declaration.

You can choose from two distribution options: (1) automatically reinvest
all distributions from a Fund in additional shares of that Fund; or (2) receive
all distributions in cash. If you wish to change your distribution option, you
should contact your Financial Institution (as defined below), who will be
responsible for forwarding the necessary instructions to the Trust's transfer
agent, Investors Fiduciary Trust Company ("IFTC"). If you do not select an
option when you open your account, all distributions will be reinvested. You
will receive a statement confirming reinvestment of distributions in additional
shares of a Fund promptly following the month in which the reinvestment occurs.

Tax information

Federal taxes. Each Fund 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 income taxes on income (and
gains, if any) it distributes to shareholders. Each Fund will distribute
substantially all of its ordinary income (and net capital gains, if any) on a
current basis.

Dividends paid by a Tax-Exempt Fund that are derived from exempt-interest
income (known as "exempt-interest dividends") and that are designated as such
may be treated by the Fund's shareholders as items of interest excludable from
their federal gross income. (Shareholders should consult their own tax adviser
with respect to whether exempt-interest dividends would be excludable from gross
income if the shareholder were treated as a "substantial user" of facilities
financed by an obligation held by a Tax-Exempt Fund or a "related person" to
such a user under the Internal Revenue Code.) If a shareholder receives an
exempt-interest dividend with respect to any share held for six months or less,
any loss on the sale or exchange of that share will be disallowed to the extent
of the amount of the exempt-interest dividend. To the extent dividends paid to
shareholders are derived from taxable income (for example, from interest on
certificates of deposit) or from gains, such dividends will be subject to
federal income tax, whether they are paid in the form of cash or additional
shares.

<PAGE>

If a Tax-Exempt Fund holds certain "private activity bonds" ("industrial
development bonds" under prior law), dividends derived from interest on such
obligations will be classified as an item of tax preference which could subject
certain shareholders to alternative minimum tax liability. Corporate
shareholders must also take all exempt-interest dividends into account in
determining "adjusted current earnings" for purposes of calculating their
alternative minimum tax liability.

Shareholders receiving Social Security benefits or Railroad Retirement Act
benefits should note that all exempt-interest dividends will be taken into
account in determining the taxability of such benefits. Early in each year your
Fund will notify you of the amount and tax status of distributions paid to you
by the Fund for the preceding year.

State taxes (California Tax-Exempt Money Market Fund). To the extent
exempt-interest dividends are derived from interest on California Tax-Exempt
Securities, such distributions will be exempt from California personal income
tax (but not from California franchise and corporate income tax). For California
tax purposes, distributions derived from investments in other than (i)
California Tax-Exempt Securities and (ii) obligations of the United States (or
other obligations) which pay interest exempt from California personal income
taxation when held by an individual will be taxable as ordinary income or as
long-term capital gain, whether paid in cash or reinvested in additional shares.
Interest derived from California Tax-Exempt Securities is not subject to the
California alternative minimum tax on individuals, and California personal
income tax does not apply to any portion of Social Security or railroad
retirement benefits. Interest on indebtedness incurred or continued to purchase
or carry the Fund's shares generally will not be deductible for California
personal income tax purposes. An investment in the Fund may result in liability
for state and/or local taxes for shareholders subject to tax by states other
than California.

State taxes (New York Tax-Exempt Money Market Fund). To the extent
exempt-interest dividends are derived from interest on New York Tax-Exempt
Securities, such distributions will be exempt from New York State and New York
City personal income taxes. However, an investment in the Fund may result in
liability for state and/or local taxes for individual shareholders subject to
taxation by states other than New York State or cities other than New York City,
because the exemption from New York State and New York City personal income
taxes does not prevent such other jurisdictions from taxing individual
shareholders on dividends received from the Fund. In addition, distributions
derived from interest on tax-exempt securities other than New York Tax Exempt
Securities will be treated as taxable ordinary income for purposes of the New
York State and New York City personal income taxes.

Exempt-interest dividends, including those derived from New York Tax-Exempt
Securities, are included in a corporation's net investment income for purposes
of calculating such corporation's New York State corporate franchise tax and New
York City general corporation tax and will be subject to such taxes to the
extent that a corporation's net investment income is allocated to New York State
and/or New York City.

All or a portion of interest on indebtedness incurred or continued to
purchase or carry the Fund's shares generally will not be deductible for federal
or New York State and New York City personal income tax purposes.

For New York State and City personal income tax purposes, distributions of
net long-term gains will be taxable at the same rates as ordinary income.

General. The foregoing is a summary of certain federal, California, and New
York State and New York City income tax consequences of investing in the Funds.
You should consult your tax adviser to determine the precise effect of an
investment in each Fund on your particular tax situation.

<PAGE>

Management

The Trustees are responsible for generally overseeing the conduct of the
Trust's business. Mentor Investment Advisors, L.L.C., located at 901 East Byrd
Street, Richmond, Virginia 23219, serves as investment adviser to each of the
Funds, providing investment advisory services and advising and assisting the
officers of the Trust in taking such steps as are necessary or appropriate to
carry out the decisions of the Trustees. Subject to such policies as the
Trustees may determine, Mentor Advisors furnishes a continuing investment
program for the Funds and makes investment decisions on their behalf.

Mentor Advisors is a wholly owned subsidiary of 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

<PAGE>

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 $11
billion. All investment decisions for the Portfolio are made by
investment teams at Mentor Advisors.

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 January 31, 1998. 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.

Each Fund pays management fees to Mentor Advisors monthly at the following
annual rates (based on the average daily net assets of the Fund): 0.22% of the
first $500 million of the Fund's average net assets; 0.20% of the next $500
million; 0.175% of the next $1 billion; 0.16% of the next $1 billion; and 0.15%
of any amounts over $3 billion.

The Funds pay all expenses not assumed by Mentor Advisors, including
Trustees' fees, auditing, legal, custodial, investor servicing, and shareholder
reporting expenses, and payments under their Distribution Plans. General
expenses of the Trust will be charged to the assets of each Fund on a basis that
the Trustees deem fair and equitable, which may be based on the relative assets
of each Fund or the nature of the services performed and relative applicability
to each Fund. Expenses directly charged or attributable to a Fund will be paid
from the assets of that Fund.

Mentor Advisors places all orders for purchases and sales of the
investments of each Fund. In selecting broker-dealers, Mentor Advisors may
consider research and brokerage services furnished to it and its affiliates.

<PAGE>

Subject to seeking the most favorable price and execution available, Mentor
Advisors may consider sales of shares of the Funds (and, if permitted by law, of
the other funds in the Mentor family) as a factor in the selection of
broker-dealers.

How to buy shares

Class B shares of the Funds are sold without an initial sales charge,
but are subject to a CDSC of up to 4% if redeemed within six years. Class B
shares of the Funds may be exchanged for Class B shares offered by certain other
mutual funds in the Mentor Family of Funds. If you exchange your Class B
shares of a Cash Resource Fund for Class B shares of another mutual fund in the
Mentor Family, and then later redeem your shares in that other Fund, the period
of time when you held the Class B shares of the Cash Resource Fund which you
exchanged will be included in determining whether a CDSC will apply to the
redemption.

You can open a Fund 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, or its
affiliates. You can buy Fund shares by completing the enclosed New Account Form
and sending it to Mentor Distributors, the Fund'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.

Because each Fund seeks to be fully invested at all times, investments must
be in Same Day Funds to be accepted. Investments which are accepted at or before
12:00 noon will be invested at the net asset value determined at that time;
investments accepted after 12:00 noon will receive the net asset value
determined at the close of regular trading on the Exchange. "Same Day Funds" are
funds credited by the applicable regional Federal Reserve Bank to the account of
the Trust at its designated bank. When payment in Same Day Funds is available to
the Trust, the Trust will accept the order to purchase shares at the net asset
value next determined.

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

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.
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

<PAGE>

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
--------------------------------- -----------
<S> <C>
1 4.0%
2 4.0%
3 3.0%
4 2.0%
5 1.0%
6 1.0%
7+ None

</TABLE>

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.

A Fund 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 Fund 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 a Fund'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. A Fund may sell shares without a sales charge or a CDSC in
connection with the acquisition by the Fund 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

<PAGE>

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. 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 waivers. Please instruct your
broker-dealer or other financial institution accordingly.

In determining whether a CDSC is payable in respect of the shares redeemed, a
Fund 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 be redeemed without a CDSC. 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 a Fund 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 Fund 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.

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 Fund. 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 Fund'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 B shares of a Fund, 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. The Distributor
must be notified in writing by you or by your financial institution of the
reinvestment for you to recover the CDSC. If you redeem shares in a Fund, there
may be tax consequences.

<PAGE>

Distribution Plan

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

Each of the Funds has adopted a Distribution Plan (the "Plan") under Rule 12b-1
with respect to its Class B shares (the "Plan") providing for payments by the
Fund to the Distributor from the assets attributable to the Fund's Class B
shares at the annual rate set out under "Summary of Fund Expenses - Annual Fund
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 Fund'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 Fund. 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.

How to sell shares

You can sell your shares to the Fund any day the New York Stock Exchange is
open, either directly to the Fund or through your investment dealer. The Fund
will only redeem shares for which it has received payment.

Selling shares directly to the Fund. 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

<PAGE>

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
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 Fund
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 Fund generally sends you payment for your shares the business day
after your request is received. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.

The Fund 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 Fund's per share net asset value. If payment is made
in securities, a shareholder may incur brokerage expenses in converting those
securities into cash.

<PAGE>

How to exchange shares

Except as otherwise described below, you can exchange your Class B shares in a
Fund worth at least $1,000 for Class B shares of mutual funds in the Mentor
Family of Funds, with different investment objectives and policies, at net asset
value beginning 15 days after purchase. 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 Fund 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
of shares of the Fund from which you originally exchanged and will not be
affected by any exchange.

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 Funds of Mentor Funds or the Cash Fund. Shares of
certain of the Funds may not be available to residents of all states.

The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have an
adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where the Distributor or the Trustees
believe doing so would be in the best interests of the Fund, the Fund 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.

Other services

Shareholder Servicing Plan. The Trust has adopted a Shareholder Servicing Plan
(the "Service Plan") with respect to the Class B shares of the Funds. 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 Fund 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 B shares of the Fund. These
administrative services may include, but are not limited to, the following
functions: providing

<PAGE>

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 Fund; assisting
clients in changing dividend options, account designations, and addresses; and
providing such other services as the Fund 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 B shares of the Fund. These payments will be made directly by
Mentor Advisors and/or Mentor Investment Group and will not be made from the
assets of the Fund.

How a Fund's Performance is Calculated

Yield and effective yield data may from time to time be included in
advertisements about Class A and Class B shares of the Funds. "Yield" of a class
of shares is calculated by dividing a Fund's annualized net investment income
per share of that class during a recent seven-day period by the net asset value
per share of that class on the last day of that period. "Effective yield"
compounds that yield for a year and is, for that reason, greater than a Fund's
yield. "Tax-equivalent" yield of a class of shares shows the effect on
performance of the tax-exempt status of distributions received from a Tax-Exempt
Fund. It reflects the approximate yield that a taxable investment must earn for
shareholders at stated income levels to produce an after-tax yield equivalent to
the Fund's tax-exempt yield. Quotations of yield for any period when an expense
limitation was in effect will be greater than if the limitation had not been in
effect. A Fund's performance may be compared to various indices. See the
Statement of Additional Information.

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

<PAGE>
General Information

Cash Resource Trust is a Massachusetts business trust organized on June 14,
1993. 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, diversified 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, and are currently divided
into five series of shares. Under the Agreement and Declaration of Trust, a
Fund's shares may be further divided, without shareholder approval, into two or
more classes of shares having such preferences or special or relative rights and
privileges as the Trustees may determine. Each Fund issues shares in two
classes, Class A and Class C shares. Class A shares are not subject to any
CDSC, and pay expenses at a lower rate than Class C shares, which will affect
performances. Contact Mentor Investment Group for information concerning Class
A shares, at 1-800-869-6042. Each share has one vote, with fractional shares
voting proportionally. Shares of each Fund are freely transferable, are entitled
to dividends as declared by the Trustees, and, if a Fund were liquidated, would
receive the net assets of the Fund. The Trust may suspend the sale of shares of
any Fund at any time and may refuse any order to purchase shares. Although the
Trust is not required to hold annual meetings of its shareholders, shareholders
have the right to call a meeting to elect or remove Trustees, or to take other
actions as provided in the Agreement and Declaration of Trust. The Trust will
not issue certificates for its Class B shares.

Investors Fiduciary Trust Company, located at 127 West 10th Street, Kansas
City, Missouri 64105, is the transfer agent and dividend-paying agent for the
Trust. IFTC engages at its own expense certain Financial Institutions, including
Wheat, First Securities, Inc. and EVEREN, to perform bookkeeping, data
processing, and administrative services pertaining to the maintenance of
shareholder accounts. State Street Bank and Trust Company, c/o Boston Financial
Data Services, Inc., 2 Heritage Drive, North Quincy, Massachusetts 02171,
serves as the Fund's transfer and dividend agent.

If you own fewer shares of a Fund than a minimum amount set by the Trustees
(presently 500 shares), the Trust may choose to redeem your shares and pay you
for them. You will receive at least 30 days written notice before the Trust
redeems your shares, and you may purchase additional shares at any time to avoid
a redemption. The Trust may also redeem shares if you own shares of any Fund or
of the Trust above any maximum amount set by the Trustees. There is presently no
maximum, but the Trustees may establish one at any time, which could apply to
both present and future shareholders.

The Trust may send a single copy of shareholder reports and communications
to an address where there is more than one registered shareholder with the same
last name, unless a shareholder at that address requests, by calling or writing
his Financial Institution or Mentor Distributors that the Trust do otherwise.

<PAGE>

No person has been authorized to
give any information or to make any
representations other than those [logo]
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 Trust.
This Prospectus does not constitute an Cash Resource Trust
offer in any State in which, or to any Class B Shares
person to whom, such offering may not
lawfully be made. This Prospectus omits
certain information contained in the
Registration Statement, to which -----------------
reference is made, filed with the PROSPECTUS
Securities and Exchange Commission. -----------------
Items which are thus omitted, including
contracts and other documents referred
to or summarized herein, may be obtained April __, 1998
from the Commission upon payment of the
prescribed fees.

Additional information concerning
the securities offered hereby and the
Trust 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.

Cash Resource Trust
901 East Byrd Street [logo]
Richmond, VA 23219
(800) 382-0016

1998 Mentor Distributors, LLC

CPA 040

<PAGE>

CASH RESOURCE TRUST

FORM N-1A
PART B

STATEMENT OF ADDITIONAL INFORMATION

CLASS B SHARES

April , 1998

This Statement of Additional Information contains information which may
be of interest to investors but which is not included in the Class B Shares
Prospectus dated April , 1998 (the "Prospectus") of Cash Resource Money Market
Fund, Cash Resource U.S. Government Money Market Fund, Cash Resource Tax-Exempt
Money Market Fund, Cash Resource California Tax-Exempt Money Market Fund, and
Cash Resource New York Tax-Exempt Money Market Fund (each a "Fund" and
collectively the "Funds"), each of which is a series of shares of Cash Resource
Trust (the "Trust"). This Statement is not a prospectus and is only authorized
for distribution when accompanied or preceded by the Prospectus of the Funds
dated April , 1998. This Statement should be read together with the
Prospectus, as amended from time to time. Investors may obtain a free copy of
the Prospectus by calling Mentor Distributors, Inc. ("Mentor Distributors"), the
Trust's distributor, at (800) 382-0016.

Table of Contents

Page

INVESTMENT OBJECTIVES AND POLICIES OF THE TRUST........................... 2
INVESTMENT RESTRICTIONS................................................... 6
MANAGEMENT OF THE TRUST................................................... 9
PRINCIPAL HOLDERS OF SECURITIES........................................... 13
INVESTMENT ADVISORY AND OTHER SERVICES.................................... 14
DETERMINATION OF NET ASSET VALUE.......................................... 18
TAXES..................................................................... 20
DISTRIBUTION.............................................................. 22
ORGANIZATION.............................................................. 24
PORTFOLIO TURNOVER........................................................ 25
CUSTODIAN................................................................. 25
INDEPENDENT AUDITORS...................................................... 25
PERFORMANCE INFORMATION................................................... 25
INVESTMENT PROFESSIONALS OF MENTOR INVESTMENT ADVISORS, LLC............... 34
SHAREHOLDER LIABILITY..................................................... 35
FINANCIAL STATEMENTS...................................................... 35

-1-

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES OF THE TRUST

The investment objectives and policies of each of the Funds are
described in the Prospectus. This Statement contains additional information
concerning certain investment practices and investment restrictions of the
Funds.

Except as described below under "Investment Restrictions," the
investment objectives and policies described in the Prospectus and in this
Statement are not fundamental, and the Trustees may change the investment
objectives and policies of a Fund without a vote of shareholders.

Except as otherwise noted below, the following descriptions of certain
investment policies and techniques are applicable to all of the Funds. All
references to the Adviser refer to the investment adviser or sub-adviser, if
any, of the Funds.

Repurchase Agreements

Each Fund may enter into repurchase agreements. A repurchase agreement
is a contract under which a Fund 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 Fund to resell such security at a fixed time and price
(representing a Fund's cost plus interest). It is each Fund'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 a Fund
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 Fund which are collateralized
by the securities subject to repurchase. The 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 Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
the 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 Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor and required to return the
underlying collateral to the seller's estate.

Securities Loans

A Fund 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 Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of the securities loaned will not at any time exceed one-third of
the total assets of such Fund. In

-2-

<PAGE>

addition, it is anticipated that a Fund 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 Fund enters into a loan, the 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 Fund 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 Fund
if the holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. A Fund will not lend portfolio securities
to borrowers affiliated with the Trust.

Foreign Securities

Cash Resource Money Market Fund may invest in U.S. dollar denominated
foreign securities which meet the criteria applicable to the Fund's domestic
investments, and in certificates of deposit issued by U.S. branches of foreign
banks and foreign branches of U.S. banks. Investment by the Fund in foreign
securities is subject to the limitations set forth in the Prospectus.

Investments in foreign securities may involve considerations different
from investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.

In determining whether to invest in securities of foreign issuers, the
Adviser will consider the likely impact of foreign taxes on the net yield
available to the Fund and its shareholders. Income received by the Fund from
sources within foreign countries may be reduced by withholding and other taxes
imposed by such countries. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to determine
the effective rate of foreign tax in advance since the amount of the Fund's
assets to be invested in various countries is not known, and tax laws and their
interpretations may change from time to time and may change without advance
notice. Any such taxes paid by the Fund will reduce its net income available for
distribution to shareholders.

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<PAGE>

Tax-Exempt Securities

General description. As used in the prospectus and in this Statement
with reference to Cash Resource Tax-Exempt Money Market Fund, Cash Resource
California Tax-Exempt Money Market Fund, and Cash Resource New York Tax-Exempt
Money Market Fund, the term "Tax-Exempt Securities" includes debt obligations
issued by a state, its political subdivisions (for example, counties, cities,
towns, villages, districts and authorities) and their agencies,
instrumentalities or other governmental units, the interest from which is, in
the opinion of bond counsel, exempt from federal income tax. "California
Tax-Exempt Securities" are Tax-Exempt Securities issued by the State of
California, or any of its political subdivisions, or its agencies,
instrumentalities, or other governmental units, the interest from which is, in
the opinion of bond counsel, also exempt from California personal income tax.
"New York Tax-Exempt Securities" are Tax-Exempt Securities issued by the State
of New York, or any of its political subdivisions, or its agencies,
instrumentalities, or other governmental units (or of other governmental
issuers, such as U.S. territories), the interest from which is, in the opinion
of bond counsel, also exempt from New York State and City personal income taxes.
For purposes of the section, the term "Tax-Exempt Securities" include California
Tax-Exempt Securities and New York Tax-Exempt Securities. Such obligations are
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities, such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and sewer
works. Other public purposes for which Tax- Exempt Securities may be issued
include the refunding of outstanding obligations or the payment of general
operating expenses. Short-term Tax-Exempt Securities are generally issued by
state and local governments and public authorities as interim financing in
anticipation of tax collections, revenue receipts, or bond sales to finance such
public purposes. In addition, certain types of "private activity" bonds may be
issued by public authorities to finance such projects as privately operated
housing facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal, student loans, or the obtaining
of funds to lend to public or private institutions for the construction of
facilities such as educational, hospital and housing facilities. Other types of
private activity bonds, the proceeds of which are used for the construction,
repair or improvement of, or to obtain equipment for, privately operated
industrial or commercial facilities, may constitute Tax-Exempt Securities,
although the current federal tax laws place substantial limitations on the size
of such issues. Tax-Exempt Securities also include tax-exempt commercial paper,
which are promissory notes issued by municipalities to enhance their cash flows.

Participation interests. A Fund may invest in Tax-Exempt Securities
either by purchasing them directly or by purchasing certificates of accrual or
similar instruments evidencing direct ownership of interest payments or
principal payments, or both, on Tax- Exempt Securities, provided that, in the
opinion of counsel to the initial seller of each such certificate or instrument,
any discount accruing on the certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on the related Tax-

-4-

<PAGE>

Exempt Securities will be exempt from federal income tax to the same extent as
interest on the Tax-Exempt Securities. A Fund may also invest in Tax-Exempt
Securities by purchasing from banks participation interests in all or part of
specific holdings of Tax- Exempt Securities. These participations may be backed
in whole or in part by an irrevocable letter of credit or guarantee of the
selling bank. The selling bank may receive a fee from a Fund in connection with
the arrangement. A Fund will not purchase such participation interests unless it
receives an opinion of counsel or a ruling of the Internal Revenue Service that
interest earned by it on Tax-Exempt Securities in which it holds such
participation interests is exempt from federal, California and New York personal
income taxes, as the case may be. No Fund expects to invest more than 5% of its
assets in participation interests.

Stand-by commitments. When a Fund purchases Tax-Exempt Securities, it
has the authority to acquire stand-by commitments from banks and broker-dealers
with respect to those Tax-Exempt Securities. A stand-by commitment may be
considered a security independent of the state tax-exempt security to which it
relates. The amount payable by a bank or dealer during the time a stand-by
commitment is exercisable, absent unusual circumstances, would be substantially
the same as the market value of the underlying Tax-Exempt Security to a third
party at any time. Each Fund expects that stand-by commitments generally will be
available without the payment of direct or indirect consideration. No Fund
expects to assign any value to stand-by commitments.

Yields. The yields on Tax-Exempt Securities depend on a variety of
factors, including general money market conditions, effective marginal tax
rates, the financial condition of the issuer, general conditions of the
tax-exempt security market, the size of a particular offering, the maturity of
the obligation and the rating of the issue. The ratings of Moody's Investors
Service, Inc. and Standard & Poor's represent their opinions as to the quality
of the Tax-Exempt Securities which they undertake to rate. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality. Consequently, Tax-Exempt Securities with the same maturity and interest
rate but with different ratings may have the same yield. Yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, due to such factors as changes
in the overall demand or supply of various types of Tax-Exempt Securities or
changes in the investment objectives of investors. Subsequent to purchase by a
Fund, an issue of Tax-Exempt Securities or other investments may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. Neither event will require the elimination of an
investment from a Fund's portfolio, but Mentor Advisors will consider such an
event in its determination of whether a Fund should continue to hold an
investment in its portfolio.

"Moral obligation" bonds. The Funds do not currently intend to invest
in so-called "moral obligation" bonds, where repayment is backed by a moral
commitment of an entity other than the issuer, unless the credit of the issuer
itself, without regard to the "moral obligation," meets the investment criteria
established for investments by the Funds.

-5-

<PAGE>

Additional risks. Securities in which a Fund may invest, including
Tax-Exempt Securities, are subject to the provisions of bankruptcy, insolvency
and other laws affecting the rights and remedies of creditors, such as the
federal Bankruptcy Code (including special provisions related to municipalities
and other public entities), and laws, if any, which may be enacted by Congress
or state legislatures extending the time for payment of principal or interest,
or both, or imposing other constraints upon enforcement of such obligations.
There is also the possibility that as a result of litigation or other conditions
the power, ability or willingness of issuers to meet their obligations for the
payment of interest and principal on their Tax-Exempt Securities may be
materially affected. There is no assurance that any issuer of a Tax-Exempt
Security will make full or timely payments of principal or interest or remain
solvent.

From time to time, proposals have been introduced before Congress for
the purpose of restricting or eliminating the federal income tax-exemption for
interest on debt obligations issued by states and their political subdivisions.
Federal tax laws limit the types and amounts of tax-exempt bonds issuable for
certain purposes, especially industrial development bonds and private activity
bonds. Such limits may affect the future supply and yields of these types of
Tax-Exempt Securities. Further proposals limiting the issuance of tax-exempt
bonds may well be introduced in the future. If it appeared that the availability
of Tax-Exempt Securities for investment by a Fund and the value of the Fund's
portfolio could be materially affected by such changes in law, the Trustees of
the Trust would reevaluate a Fund's investment objectives and policies and
consider changes in the structure of the Fund or its dissolution.

INVESTMENT RESTRICTIONS

The Trust has adopted the following restrictions applicable to all of
the Funds (except where otherwise noted), which may not be changed without the
affirmative vote of a "majority of the outstanding voting securities" of a Fund,
which is defined in the Investment Company Act of 1940, as amended (the "1940
Act") to mean the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund 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.

A Fund may not:

1. Borrow money in excess of 10% of the value (taken at the lower of
cost or current value) of its total assets (not including the amount borrowed)
at the time the borrowing is made, and then only from banks as a temporary
measure (not for leverage) in situations which might otherwise require the
untimely disposition of portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional investments are
purchased.

-6-

<PAGE>

2. Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under the federal securities laws.

3. Purchase or sell real estate, although it may purchase securities
of issuers which deal in real estate, securities which are secured by interests
in real estate, and securities representing interests in real estate, and it may
acquire and dispose of real estate or interests in real estate acquired through
the exercise of its rights as a holder of debt obligations secured by real
estate or interests therein.

4. Purchase or sell commodities or commodity contracts.

5. Make loans, except by purchase of debt obligations in which a Fund
may invest consistent with its investment policies and by entering into
repurchase agreements and securities loans.

6. As to 75% of its assets, invest in securities of any issuer if,
immediately after such investment, more than 5% of the total assets of the Fund
(taken at current value) would be invested in the securities of such issuer;
provided that this limitation does not apply to securities issued or guaranteed
as to principal or interest by the U.S. Government or its agencies or
instrumentalities.

7. Acquire more than 10% of the voting securities of any issuer,
except that with respect to the Cash Resource California Tax-Exempt Money Market
Fund and Cash Resource New York Tax-Exempt Money Market Fund this restriction
only applies to 25% of such Fund's assets.

8. Invest more than 25% of its assets in any one industry, except that
Cash Resource Money Market Fund may invest without limit in obligations of
domestic branches of U.S. banks and U.S. branches of foreign banks (if it can be
demonstrated that they are subject to the same regulation as U.S. banks).

9. Issue any class of securities which is senior to a Fund's shares of
beneficial interest, except as consistent with or permitted by the 1940 Act or
as permitted by rule or order of the Securities and Exchange Commission.

Other than the Cash Resource California Tax-Exempt Money Market Fund
and Cash Resource New York Tax-Exempt Money Market Fund, a Fund may not:

1. Pledge, hypothecate, mortgage, or otherwise encumber its assets in
excess of 15% of its total assets (taken at the lower of cost and current value)
and then only in connection with borrowings permitted by restriction 1 above.

-7-

<PAGE>

2. Purchase securities on margin, expect such short-term credits as may
be necessary for the clearance of purchase and sales of securities.

3. Make short sales of securities or maintain a short position for the
account of a Fund unless at all times when a short position is open it owns an
equal amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and in equal amount to, the securities sold short.

4. Invest in securities of any issuer, if, to the knowledge of a Fund,
officers and Trustees of the Trust and officers and directors of the Adviser who
beneficially own more than 0.5% of the securities of that issuer together own
more than 5% of such securities.

5. Make investments for the purpose of gaining control of a company's
management.

In addition, it is contrary to the current policy of the Trust, which
may be changed without shareholder approval, to invest in the securities of
other registered open-end investment companies.

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 and those designated
in the Prospectus as fundamental, the investment policies described in the
Prospectus and this Statement are not fundamental and may be changed by approval
of the Trustees. As a matter of policy, the Trustees would not materially change
a Fund's investment objective without shareholder approval.

-8-

<PAGE>

MANAGEMENT OF THE TRUST

Principal Occupation
Position Held With During Past
Name and Address A Fund Five Years
- ---------------- ------------------- --------------------
<S> <C>
Daniel J. Ludeman* Chairman and Chairman and Chief Executive
901 E. Byrd Street Trustee Officer Mentor Investment
Richmond, VA 23219 Group, Inc.; Managing Director
of Wheat First Butcher Singer,
Inc. Director, Wheat, First
Securities, Inc., Mentor
Income Fund, Inc., and
America's Utility Fund, Inc.;
Chairman and Trustee, Mentor
Funds and Mentor Institutional
Trust.

Arnold H. Dreyfuss Trustee Chairman, Eskimo Pie
P.O. Box 18156 Corporation Trustee, Mentor
Richmond, Virginia 23226 Funds and Mentor Institutional
Trust; Director, Mentor Income
Fund, Inc. and America's
Utility Fund, Inc.; formerly,
Chairman and Chief Executive
Officer, Hamilton
Beach/Proctor-Silex, Inc.

Thomas F. Keller Trustee Professor of Business Dean,
Fuqua School of Business Administration and former
Duke University Fuqua School of Business, Duke
Durham, NC 27706 University; Trustee, Mentor
Funds and Mentor Institutional
Trust; Director, Mentor Income Fund,
Inc. and America's Utility Fund, Inc.

Louis W. Moelchert, Jr. Trustee Vice President for
University of Richmond Investments; University of
Richmond, VA 23173 Richmond; Trustee, Mentor
Funds and Mentor Institutional
Trust; Director, Mentor Income
Fund, Inc. and America's
Utility Fund, Inc.
</TABLE>

-9-

<PAGE>

Principal Occupation
Position Held With During Past
Name and Address A Fund Five Years
- ---------------- ------------------- --------------------
<S> <C>

Troy A. Peery, Jr. Trustee President, Heilig-
Heilig-Meyers Company Meyers Company;
2235 Staples Mill Road Trustee, Mentor Funds and
Richmond, Virginia 23230 Mentor Institutional Trust;
Director, Mentor Income
Fund, Inc. and America's
Utility Fund, Inc.

Peter J. Quinn, Jr.* Trustee President, Mentor
901 E. Byrd Street Distributors, Inc.; Managing
Richmond, VA 23219 Director, Mentor Investment
Group, LLC, and Wheat First
Butcher Singer, Inc.;
formerly, Senior Vice
President/Director of Mutual
Funds, Wheat First Butcher
Singer, Inc.; Trustee, Mentor
Funds and Mentor Institutional
Trust; Director, Mentor Income
Fund, Inc. and America's
Utility Fund, Inc.

Arch T. Allen, III Trustee Attorney at law, Raleigh,
North Carolina; Trustee,
Mentor Funds and Cash Resource
Trust; Director, Mentor Income
Fund, Inc. and America's
Utility Fund, Inc.; formerly,
Vice Chancellor for
Development and University
Relations, University of North
Carolina at Chapel Hill.

Weston E. Edwards Trustee President, Weston Edwards &
Associates; Trustee Mentor
Funds and Cash Resource Trust;
Director, Mentor Income Fund,
Inc. and America's Utility
Fund, Inc.; Founder and
Chairman, The Housing
Roundtable; formerly,
President, Smart Mortgage
Access, Inc.

Jerry R. Barrentine Trustee President, J.R. Barretine &
Associates; Trustee, Mentor
Funds and Cash Resource Trust;
Director, Mentor Income Fund,
Inc. and America's Utility
Fund, Inc.; formerly,
Executive Vice President and
Chief Financial Officer,
Barclays/American Mortgage
Director Corporation; Managing
Partner, Barrentine Lott &
Associates.

J. Garnett Nelson Trustee Consultant, Mid-Atlantic
Holdings, LLC; Trustee, Mentor
Funds and Cash Resource Trust;
Director, Mentor Income Fund,
Inc., America's Utility Fund,
Inc., GE Investment Funds,
Inc., and Lawyers Title
Corporation; Member,
Investment Advisory Committee,
Virginia Retirement System;
formerly, Senior Vice
President, The Life Insurance
Company of Virginia.
</TABLE>

-10-

<PAGE>

Principal Occupation
Position Held With During Past
Name and Address A Fund Five Years
- ---------------- ------------------- --------------------
<S> <C>
Paul F. Costello President Managing Director, Wheat First
901 E. Byrd Street Butcher Singer, Inc. and
Richmond, VA 23219 Mentor Investment Group, LLC;
President, Mentor Funds,
Mentor Income Fund, Inc.,
Mentor Institutional Trust,
and America's Utility Fund, Inc.;
Director, Mentor Perpetual
Advisors, LLC

</TABLE>

-11-

<PAGE>

Principal Occupation
Position Held With During Past
Name and Address A Fund Five Years
- ---------------- ------------------- --------------------
<S> <C>
Terry L. Perkins Treasurer Senior
901 E. Byrd Street Vice President,
Richmond, VA 23219 Mentor Investment
Group, LLC; Treasurer,
Mentor Institutional Trust,
Mentor Funds, and Mentor
Income Fund, Inc.; Treasurer
and Senior Vice President,
America's Utility Fund, Inc.;
formerly, Treasurer and
Comptroller, Ryland Capital
Management, Inc.

Michael Wade Assistant Treasurer Vice President, Mentor
901 E. Byrd Street Investment Group, LLC
Richmond, VA 23219 Assistant Treasurer, Mentor
Income Fund, Inc., Mentor
Funds, Mentor Institutional
Trust, and America's Utility
Fund; formerly, Senior
Accountant, Wheat First
Butcher Singer, Inc., Audit
Senior, BDO Seidman.

John M. Ivan Secretary Managing Director and Director
10700 North Park Drive of Compliance and Assistant
Glen Allen, VA 23060 General Counsel, Wheat, First
Securities, Inc.; Managing
Director and Assistant
Secretary, Wheat First Butcher
Singer, Inc. Clerk, Mentor
Institutional Trust;
Secretary, Mentor Income Fund,
Inc. and Mentor Funds.
</TABLE>

- ------------------------
* This Trustee is deemed to be an "interested person" of a Fund as defined in
the 1940 Act.

-12-

<PAGE>

Except as stated above, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown above,
although in some cases they have held different positions with such employers.

The table below shows the fees paid to each Trustee by the Trust for
the current 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 -- --
Arnold H. Dreyfuss 6,000 12,200
Thomas F. Keller 6,000 12,200
Louis W. Moelchert, Jr. 6,000 12,200
Stanley F. Pauley* 6,000 12,200
Troy A. Peery, Jr. 5,500 11,175
Peter J. Quinn, Jr. -- --
Arch T. Allen, III+ -- --
Weston E. Edwards + -- --
Jerry R. Barrentine+ -- --
J. Garnett Nelson+ -- --

- ---------------
*Resigned as Trustee effective December 22, 1997.

+Elected Trustee December 22, 1997.

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 duties. The Trust, at its
expense, may provide liability insurance for the benefit of its Trustees and
officers.

PRINCIPAL HOLDERS OF SECURITIES

As of January 1, 1998, the officers and Trustees of the Trust owned as
a group less than one percent of the outstanding shares of each Fund. To the
knowledge of the Trust, no person owned of record or beneficially more than 5%
of the outstanding shares of any Fund as of that date except [to be supplied by
amendment].

-13-

<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES

Under a Management Contract (the "Management Contract") between the
Trust and Mentor Investment Advisors, LLC ("Mentor Advisors"), Mentor Advisors,
at its expense, provides the Funds with investment advisory services and advises
and assists the officers of the Trust in taking such steps as are necessary or
appropriate to carry out the decisions of its Trustees regarding the conduct of
business of the Trust and each Fund.

Until November 1, 1996, Commonwealth Advisors, Inc. served as
investment advisor to each of the Funds then in existence, and Commonwealth
Investment Counsel, Inc. served as sub-adviser to each of those Funds. On that
date, Commonwealth Investment Counsel, Inc. was reorganized as Mentor Investment
Advisors, LLC, which became investment advisor to the Funds in place of
Commonwealth Advisors, Inc.

The table below shows amounts paid to Mentor Advisors (or, for periods
prior to November 1, 1996, to Commonwealth Advisors) by each Fund for the
periods indicated:

<TABLE>
<CAPTION>
(In Thousands)

Fiscal year Fiscal Year Fiscal Year
ended ended ended
July 31, 1995 July 31, 1996 July 31, 1997
------------- ------------- -------------
<S> <C>
Cash Resource Money Market Fund $ 616 $ 1,173 $ 4,041
Cash Resource U.S. Government
Money Market Fund $ 2,098 $ 2,660 $ 4,470
Cash Resource Tax-Exempt Money
Market Fund $ 487 $ 632 $ 1,326
Cash Resource California
Tax-Exempt Money Market Fund $ -- $ -- $ 121
Cash Resource New York
Tax-Exempt Money Market Fund $ -- $ -- $ 11

</TABLE>

-14-

<PAGE>

The amounts shown above as having been paid under the Management
Contract to Commonwealth Advisors, Inc. or Mentor Advisors reflect expense
reductions as follows, which are due to an expense limitation:

<TABLE>
<CAPTION>
(In Thousands)

Fiscal year Fiscal year Fiscal year
ended ended ended
July 31, 1995 July 31, 1996 July 31, 1997
------------- ------------- -------------
<S> <C>
Cash Resource Money Market Fund $ 0 $ 0 $ 0
Cash Resource U.S. Government
Money Market Fund $ 0 $ 0 $ 0
Cash Resource Tax-Exempt
Money Market Fund $ 49 $ 0 $ 0
Cash Resource California Tax-Exempt
Money Market Fund $ -- $ -- $ 0
Cash Resource New York Tax-Exempt
Money Market Fund $ -- $ -- $ 11

</TABLE>

Mentor Advisors makes available to the Trust, without expense to the
Trust, the services of such of its directors, officers, and employees as may
duly be elected Trustees or officers of the Trust, subject to his individual
consent to serve and to any limitations imposed by law. Mentor Advisors pays
the compensation and expenses of officers and executive employees of the Trust.
Mentor Advisors also provides investment advisory research and statistical
facilities and all clerical services relating to such research, statistical, and
investment work. Mentor Advisors pays the Trust's office rent.

Under the Management Contract, the Trust is responsible for all of its
other expenses, including clerical salaries not related to investment
activities; fees and expenses incurred in connection with membership in
investment company organizations; brokers' commissions; payment for portfolio
pricing services to a pricing agent, if any; legal expenses; auditing expenses;
accounting expenses; taxes and governmental fees; fees and expenses of the
transfer agent and investor servicing agents of the Trust; the cost of preparing
share certificates or any other expenses, including clerical expenses, incurred
in connection with the issue, sale, underwriting, redemption, or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of the Trustees of the Trust who are not affiliated
with Mentor Advisors; the cost of preparing and distributing reports and
notices to shareholders; public and investor relations expenses; and fees and
disbursements of custodians of a Fund's assets. The Trust is also responsible
for its expenses incurred in connection with litigation, proceedings, and claims
and the legal obligation it may have to indemnify its officers and Trustees with
respect thereto.

-15-

<PAGE>

Mentor Advisors has agreed that, if in any year the aggregate expenses
of any Fund (including fees pursuant to the Management Contract but excluding
interest, taxes, brokerage and distribution fees and, with the prior written
consent of the necessary state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over the Trust,
Mentor Advisors will reimburse the Trust for such excess expense. This expense
reimbursement obligation is not limited to the amount of Mentor Advisors' fees.
Such expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.

The Management Contract provides that Mentor Advisors shall not be
subject to any liability to a Fund or to any shareholder for any act or omission
in the course of, or connected with, its rendering services under the relevant
contract in the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its duties.

The Management Contract may be terminated without penalty by vote of
the Trustees as to any Fund or by the shareholders of that Fund, or by Mentor
Advisors on 30 days written notice. The Management Contract also terminates
without payment of any penalty in the event of its assignment. In addition, the
Management Contract may be amended only by a vote of the shareholders of the
affected Fund(s), and provides that it will continue in effect from year to year
(in the case of the California and New York Tax- Exempt Funds, beginning in
1998) only so long as such continuance is approved at least annually with
respect to each Fund by vote of either the Trustees or the shareholders of a
Fund, and, in either case, by a majority of the Trustees who are not "interested
persons" of Mentor Advisors. In such a case, the vote of the shareholders is
the affirmative vote of a "majority of the outstanding voting securities" as
defined in the 1940 Act.

Mentor Advisors may place portfolio transactions with broker-dealers
which furnish, without cost, certain research, statistical, and quotation
services of value to it and its affiliates in advising the Funds and other
clients, provided that it will always seek best price and execution with
respect to transactions. Certain investments may be appropriate for a Fund and
for other clients advised by Mentor Advisors . Investment decisions for a Fund
and other clients are made with a view to achieving their respective investment
objectives and after consideration of such factors as their current holdings,
availability of cash for investment, and the size of their investments
generally. Frequently, a particular security may be bought or sold for only one
client or in different amounts and at different times for more than one but less
than all clients. Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security. In addition,
purchases or sales of the same security may be made for two or more clients of
Mentor Advisors on the same day. In such event, such transactions will be
allocated among the clients in a manner believed by Mentor Advisors to be
equitable to each. In some cases, this procedure could have an adverse effect on
the price or amount of the securities purchased or sold by a Fund. Purchase and
sale orders for a Fund may be combined with those of other clients of Mentor
Advisors in the interest of achieving the most favorable net results for the
Fund.

-16-

<PAGE>

Brokerage and Research Services. Transactions on U.S. stock exchanges
and other agency transactions involve the payment by a Fund of negotiated
brokerage commissions. Such commissions vary among different brokers. Also, a
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign securities
often involve the payment of fixed brokerage commissions, which are generally
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 a Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by a Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.

Mentor Advisors places all orders for the purchase and sale of
portfolio securities for the Funds and buy and sell securities for the Funds
through a substantial number of brokers and dealers. In so doing, it uses its
best efforts to obtain for the Funds the best price and execution available. In
seeking the best price and execution, Mentor Advisors , having in mind the
Funds' 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, 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.

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 research, statistical, and quotation services from broker-dealers
which execute portfolio transactions for the clients of such advisers.
Consistent with this practice, Mentor Advisors may receive research,
statistical, and quotation services from many broker-dealers with which it
places a Fund's portfolio transactions. These services, which in some cases may
also be purchased for cash, include such matters as general economic and
security market reviews, industry and company reviews, evaluations of
securities, and recommendations as to the purchase and sale of securities. Some
of these services are of value to Mentor Advisors and its affiliates in
advising various of their clients (including the Funds), although not all of
these services are necessarily useful and of value in managing the Funds. The
management fees paid by the Funds are not reduced because Mentor Advisors and
its affiliates receive such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934,
and by the Management Contract , Mentor Advisors may cause a Fund to pay a
broker-dealer which provides brokerage and research services to Mentor Advisors
an amount of disclosed commission for effecting a securities transaction for
that Fund in excess of the commission which another broker-dealer would have
charged for effecting that transaction. Mentor Advisors' authority to cause a
Fund to pay any such greater commissions in also subject to such policies as the
Trustees may adopt from time to time.

Brokerage Commissions. It is anticipated that most purchases and sales
of portfolio investments will be with the issuer or with major dealers in money
market instruments acting as principal. Accordingly, it is not anticipated that

-17-

<PAGE>

the Funds will pay significant brokerage commissions. In underwritten offerings,
the price paid by a Fund includes a disclosed, fixed commission or discount
retained by the underwriter. There is generally no stated commission in the case
of securities purchased from or sold to dealers, but the prices of such
securities usually include an undisclosed dealer's mark-up or mark-down. None of
the Funds incurred brokerage or underwriting commissions in the 1994 , 1995 or
1996 fiscal years.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each class of a Fund is determined
twice each day as of 12:00 noon and as of the close of regular trading
(generally 4:00 p.m. New York time) on each day the New York Stock Exchange is
open for trading. The New York Stock Exchange is normally closed on the
following national holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.

The valuation of each Fund's portfolio securities is based upon its
amortized cost, which does not take into account unrealized securities gains or
losses. This method involves initially valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. By using amortized cost valuation, each Fund seeks to
maintain a constant net asset value of $1.00 per share, despite minor shifts in
the market value of its portfolio securities. While this method provides
certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Fund would
receive if it sold the instrument. During periods of declining interest rates,
the quoted yield on shares of a Fund may tend to be higher than a like
computation made by a fund with identical investments utilizing a method of
valuation based on market prices and estimates of market prices for all of its
portfolio instruments. Thus, if the use of amortized cost by a Fund resulted in
a lower aggregate portfolio value on a particular day, a prospective investor in
that Fund would be able to obtain a somewhat higher yield if he purchased shares
of the Fund on that day, than would result from investment in a fund utilizing
solely market values, and existing investors in a Fund would receive less
investment income. The converse would apply on a day when the use of amortized
cost by a Fund resulted in a higher aggregate portfolio value. However, as a
result of certain procedures adopted by the Trust, the Trust believes any
difference will normally be minimal.

The valuation of a Fund's portfolio instruments at amortized cost is
permitted by Securities and Exchange Commission Rule 2a-7 and certain procedures
adopted by the Trustees. Under these procedures, a Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less, and invest in
securities determined by the Trustees to be of high quality with minimal credit
risks. The Trustees have also established procedures designed to stabilize, to
the extent reasonably possible, a Fund's price per share as computed for the
purpose of distribution, redemption and repurchase at $1.00. In the event Mentor
Advisors determines that a deviation in net asset value from $1.00 per share
may result in material dilution or is otherwise unfair to existing shareholders,
it will take such corrective action as it believes necessary and appropriate,

-18-

<PAGE>

including informing the President of the Trust; the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
the average portfolio maturity; withholding dividends; redemption of shares in
kind; or establishing a net asset value per share by using readily available
market quotations.

Since the net income of a class of shares of each Fund is declared as a
dividend each time it is determined, the net asset value per share remains at
$1.00 per share immediately after such determination and dividend declaration.
Any increase in the value of a shareholder's investment in a Fund representing
the reinvestment of dividend income is reflected by an increase in the number of
shares of a Fund in the shareholder's account on the last day of each month (or,
if that day is not a business day, on the next business day). It is expected
that a Fund's net income will be positive each time it is determined. However,
if because of realized losses on sales of portfolio investments, a sudden rise
in interest rates, or for any other reason the net income of a Fund determined
at any time is a negative amount, a Fund will offset such amount allocable to
each then shareholder's account from dividends accrued during the month with
respect to such account. If at the time of payment of a dividend by a Fund
(either at the regular monthly dividend payment date, or, in the case of a
shareholder who is withdrawing all or substantially all of the shares in an
account, at the time of withdrawal), such negative amount exceeds a
shareholder's accrued dividends, the Fund will reduce the number of outstanding
shares by treating the shareholder as having contributed to the capital of the
Fund that number of full and fractional shares which represent the amount of the
excess. Each shareholder is deemed to have agreed to such contribution in these
circumstances by his or her investment in a Fund.

Should a Fund incur or anticipate, with respect to its respective
portfolio, any unusual or unexpected significant expense or loss which would
affect disproportionately the Fund's income for a particular period, the
Trustees would at that time consider whether to adhere to the dividend policy
described above or to revise it in light of the then prevailing circumstances in
order to ameliorate to the extent possible the disproportionate effect of such
expense or loss on then existing shareholders. Such expenses or losses may
nevertheless result in a shareholder's receiving no dividends for the period
during which the shares are held and receiving upon redemption a price per share
lower than that which was paid.

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

TAXES

Each Fund of the Trust 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").

-19-

<PAGE>

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

Other than dividends from Cash Resource Tax-Exempt Money Market Fund
that are excludable from income, distributions from a Fund will be taxable to a
shareholder whether received in cash or additional shares. Such distributions
that are designated as capital gains distributions will be taxable as such,
regardless of how long Fund shares are held, while other taxable distributions
will be taxed as ordinary income. Loss on the sale of Fund shares held for less
than six months will be treated as a long term capital loss to the extent of any
capital gain distribution received with respect to such shares (and will be
disallowed to the extent of exempt-interest dividends received with respect to
such shares). Also interest on indebtedness incurred to purchase shares of Cash
Resource Tax-Exempt Money Market Fund may be nondeductible.

In order to qualify as a "regulated investment company," a Fund 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 but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies and (b) 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 a Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities (other than those of U.S. Government Securities or other
regulated investment companies) of any issuer or of two or more issuers which
the Portfolio controls and which are engaged in the same, similar, or related
trades or businesses. In order to receive the favorable tax treatment accorded
regulated investment companies and their shareholders, moreover, a Fund must in
general distribute at least 90% of the sum of its taxable net investment
income,its net tax-exempt income, and the excess, if any, of net short-term
capital gains over net long-term capital losses for such year. To satisfy these
requirements, a Fund may engage in investment techniques that affect the amount,
timing and character of its income and distributions.

If a Portfolio failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the Portfolio would be
subject to tax on its taxable income at corporate rates, and all distributions
from earnings and profits, including any distributions of net tax-exempt income
and net long-term capital gains, would be taxable to shareholders as ordinary
income. In addition, a Portfolio could be required to recognize unrealized
gains, pay substantial taxes and interest and make substantial distributions
before requalifying as a regulated investment company that is accorded special
tax treatment.

An excise tax at the rate of 4% will be imposed on the excess, if any,
of each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund'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 Fund so elects) plus undistributed amounts from prior years. Each Fund

-20-

<PAGE>

intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by a Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.

Distributions from a Portfolio (other than exempt-interest dividends,
as discussed below) will be taxable to shareholders as ordinary income to the
extent derived from the Portfolio's investment income and net short-term gains.
Pursuant to the Taxpayer Relief Act of 1997 (the "1997 Act"), two different tax
rates apply to net capital gains (that is, the excess of net gains from capital
assets held for more than more than one year over net losses from capital assets
held for not more than one year). One rate (generally 28%) applies to net gains
on capital assets held for more than one year but not more than 18 months (28%
rate gains) and a second, preferred rate (generally 20%) applies to the balance
of such net capital gains ("adjusted net capital gains"). Distributions of net
capital gains will be treated in the hands of shareholders as 28% rate gains to
the extent designated by the Portfolio as deriving from net gains from assets
held for more than one year but not more than 18 months, and the balance will be
treated as adjusted net capital gains. Distributions of 28% rate gains and
adjusted net capital gains will be taxable to shareholders as such, regardless
of how long a shareholder has held the shares in the Portfolio.

Each Fund is required to withhold 31% of all income dividends and
capital gain distributions, and 31% of the gross proceeds of all redemptions of
Fund shares, in the case of any shareholder who does not provide a correct
taxpayer identification number, about whom a Fund is notified that the
shareholder has underreported income in the past, or who fails to certify to a
Fund that the shareholder is not subject to such withholding. Shareholders who
fail to furnish their current tax identification numbers are subject to a
penalty of $50 for each such failure unless the failure is due to reasonable
cause and not willfull neglect. An individual's taxpayer identification number
is his or her Social Security number. Tax-exempt shareholders are not subject to
these back-up withholding rules so long as they furnish the Fund with a proper
certification.

Exempt-interest dividends. A Fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the close of each
quarter of the Fund's taxable year, at least 50% of the total value of the
Fund's assets consists of obligations the interest on which is exempt from
federal income tax. Distributions that a Fund properly designates as
exempt-interest dividends are treated as interest excludable from shareholders'
gross income for federal income tax purposes but may be taxable for federal
alternative minimum tax purposes and for state and local purposes. If a Fund
intends to be qualified to pay exempt-interest dividends, the Fund may be
limited in its ability to enter into taxable transactions involving forward
commitments, repurchase agreements, financial futures and options contracts on
financial futures, tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a Fund paying
exempt-interest dividends is not deductible. The portion of interest that is not
deductible is equal to the total interest paid or accrued on the indebtedness,
multiplied by the percentage of a Fund's total distributions (not including
distributions from net long-term capital gains) paid to the shareholder that are
exempt-interest dividends. Under rules used by the Internal Revenue Service for
determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.

In general, exempt-interest dividends, if any, attributable to interest
received on certain private activity obligations and certain industrial
development bonds will not be tax-exempt to any shareholders who are
"substantial users" of the facilities financed by such obligations or bonds or
who are "related persons" of such substantial users.

A Fund which is qualified to pay exempt-interest dividends will inform
investors within 60 days of the Fund's fiscal year-end of the percentage of its
income distributions designated as tax-exempt. The percentage is applied
uniformly to all distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be substantially
different from the percentage of a Fund's income that was tax-exempt during the
period covered by the distribution.

-21-

<PAGE>

Securities issued or purchased at a discount. A Fund's investment in
securities issued at a discount and certain other obligations will (and
investments in securities purchased at a discount may) require the Fund to
accrue and distribute income not yet received. In order to generate sufficient
cash to make the requisite distributions, a Fund may be required to sell
securities in its portfolio that it otherwise would have continued to hold.

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, local, foreign and other taxes. Shareholders are urged to consult their
tax advisers regarding specific questions as to federal, state , local, or
foreign 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 Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).

DISTRIBUTION

Mentor Distributors, Inc. is the principal underwriter of the
continually offered shares of each of the Funds pursuant to a Distribution
Agreement between Mentor Distributors and the Trust. Mentor Distributors is not
obligated to sell any specific amount of shares of any Fund and will purchase
shares of a Fund for resale only against orders for shares.

The Trust, on behalf of each Fund, has adopted a Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act (each, a "Plan") and repect
of the Fund's Class B shares. The purpose of each Plan is to permit a Fund to
compensate Mentor Distributors for services provided and expenses incurred by it
in promoting the sale of shares of the Funds, reducing redemptions, or
maintaining or improving services provided to shareholders by Mentor
Distributors or Financial Institutions. Each Plan provides for payments by each
Fund to Mentor Distributors at the annual rate of up to 0.75% of the Fund's
average daily net assets, subject to the authority of the Trustees to reduce the
amount of payments or to suspend the Plans as to any Fund for such periods as
they may determine. Subject to these limitations, the amount of such payments
and the specific purposes for which they are made shall be determined by the
Trustees.

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<PAGE>

Continuance of a 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 Trust, and have no direct or indirect financial interest in the operation of
the Plan and related agreements (the "Qualified Trustees"), cast in person at a
meeting called for that purpose. All material amendments to a Plan must be
likewise approved by the Trustees and the Qualified Trustees.

A Plan may not be amended in order to increase materially the costs
which a Fund may bear for distribution pursuant to the Plan without also being
approved by a majority of the outstanding voting securities of that Fund. Each
Plan terminates automatically in the event of its assignment and may be
terminated as to any Fund without penalty, at any time, by a vote of

-23-

<PAGE>

a majority of the outstanding voting securities of the Fund or by a vote of a
majority of the Qualified Trustees.

ORGANIZATION

The Trust is an open-end investment company established under the laws
of The Commonwealth of Massachusetts by Agreement and Declaration of Trust dated
June 14, 1993.

Shares entitle their holders to one vote per share, with fractional
shares voting proportionally; however, separate votes will be taken by each Fund
on matters affecting an individual Fund. Additionally, approval of the
Management Contract is a matter to be determined separately by each Fund. Shares
have noncumulative voting rights. Although a Fund is not required to hold annual
meetings of its shareholders, shareholders have the right to call a meeting to
elect or remove Trustees or to take other actions as provided in the Declaration
of Trust. Shares have no preemptive or subscription rights, and are
transferable. Shares are entitled to dividends as declared by the Trustees, and
if a Fund were liquidated, the shares of that Fund would receive the net assets
of that Fund. The Trust may suspend the sale of shares at any time and may
refuse any order to purchase shares.

Additional Funds may be created from time to time with different
investment objectives. Any additional Funds may be managed by investment
advisers other than Mentor Advisors . In addition, the Trustees have the
right, subject to any necessary regulatory approvals, to create more than one
class of shares in a Fund, with the classes being subject to different charges
and expenses and having such other different rights as the Trustees may
prescribe and to terminate any Fund of the Trust.

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<PAGE>

PORTFOLIO TURNOVER

The portfolio turnover rate of a Fund is defined by the Securities and
Exchange Commission as the ratio of the lesser of annual sales or purchases to
the monthly average value of the portfolio, excluding from both the numerator
and the denominator securities with maturities at the time of acquisition of one
year or less. Under that definition, the Funds will have no portfolio turnover.
Portfolio turnover generally involves some expense to a Fund, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities.

CUSTODIAN

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, is the custodian of the Trust's assets. The custodian's
responsibilities include safeguarding and controlling the Trust's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Trust's investments. The custodian does not
determine the investment policies of the Trust or decide which securities the
Trust will buy or sell.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, located at 99 High Street, Boston, Massachusetts
02110, are the Trust's independent auditors, providing audit services, tax
return preparation, and other tax consulting services and assistance and
consultation in connection with the review of various Securities and Exchange
Commission filings.

PERFORMANCE INFORMATION

All of the performance information provided below relates to the Class
B shares of the Funds. Class B Shares pay higher fees under this distribution
plan and their yield would, accordingly, be lower. In addition, Class B may be
subject to a contingent deferred sales charge upon redemption.

Based on the seven-day period ended July 31, 1997, Cash Resource Money
Market Fund's yield was 4.84% and its effective yield was 4.95%. Based on the
seven-day period ended July 31, 1997, Cash Resource U.S. Government Money
Market Fund's yield was 4.80% and its effective yield was 4.91%. See below for
information on how these Funds' yields and effective yields are calculated.

Based on the seven-day period ended July 31, 1997, Cash Resource
Tax-Exempt Money Market Fund's tax-exempt yield was 2.99%, and its tax-exempt
effective yield was 3.03%. A shareholder in a 31.00% federal tax bracket would
have to earn 4.33% from a taxable investment to produce an after-tax yield
equal to the Fund's tax-exempt yield of 2.99% and an effective yield of 4.39%
from a taxable investment to produce an after-tax yield equal to the Fund's
tax-exempt effective yield of 3.03%. See below for information on how the
Fund's tax-exempt yield and tax-exempt effective yield are calculated.

Based on the seven-day period ended July 31, 1997, Cash Resource
California Tax-Exempt Money Market Fund's tax-exempt yield was 2.77%, and its
tax-exempt effective yield was 2.81%. A shareholder in a 31.00% federal tax
bracket would have to earn

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<PAGE>

4.01% from a taxable investment to produce an after-tax yield equal to the
Fund's tax-exempt yield of 2.77% and an effective yield of 4.07% from a taxable
investment to produce an after-tax yield equal to the Fund's tax-exempt
effective yield of 2.81%. See below for information on how the Fund's tax-exempt
yield and tax-exempt effective yield are calculated.

Based on the seven-day period ended July 31, 1997, Cash Resource New
York Tax-Exempt Money Market Fund's tax-exempt yield was 2.86% and its
tax-exempt effective yield was 2.90% A shareholder in a 31.00% federal tax
bracket would have to earn 4.14% from a taxable investment to produce an
after-tax yield equal to the Fund's tax-exempt yield of 2.86% and an effective
yield of 4.20% from a taxable investment to produce an after-tax yield equal to
the Fund's tax-exempt effective yield of 2.90%. See below for information on how
the Fund's tax-exempt yield and tax-exempt effective yield are calculated.

The yield of each class of shares of a Fund is computed by determining
the percentage net change, excluding capital changes, in the value of an
investment in one share of that class over the base period, and multiplying the
net change by 365/7 (or approximately 52 weeks). The effective yield of a class
of shares of a Fund represents a compounding of the yield by adding 1 to the
number representing the percentage change in value of the investment during the
base period, raising that sum to a power equal to 365/7, and subtracting 1 from
the result.

In the case of Cash Resource Tax-Exempt Money Market Fund, the Cash
Resource California Tax-Exempt Money Market Fund and the Cash Resource New York
Tax- Exempt Money Market Fund, the tax-equivalent yield of a class of shares of
a Fund during the base period may be presented for shareholders in one or more
stated tax brackets. Tax-equivalent yield is calculated by adjusting the
tax-exempt yield by a factor designed to show the approximate yield that a
taxable investment would have to earn to produce an after-tax yield equal, for
that shareholder, to the tax-exempt yield. Tax-equivalent yield will differ
for shareholders in other tax brackets.

-26-

<PAGE>

-27-

<PAGE>

EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES FOR THE CASH RESOURCE
TAX-EXEMPT MONEY MARKET FUND

The table below shows the effect of the tax status of Tax-Exempt Securities on
the effective yield received by their individual holders under the federal
income tax laws in effect for 1997. It gives the approximate yield a taxable
security must earn at various income levels to produce after-tax yields
equivalent to those of Tax-Exempt Securities yielding from 2.0% to 10.0%.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1997
Marginal
Taxable Income* federal Tax-exempt yield
______________ income -----------------------------------------------------------------------------
tax**
Single Joint Rate 2% 3% 4% 5% 6% 7% 8% 9% 10%
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Equivalent taxable yield
$0 - 24,650 $0 - 41,200 15.00% 2.35% 3.53% 4.71% 5.88% 7.06% 8.24% 9.41% 10.59% 11.76%
24,651 - 59,750 41,201 - 99,600 28.00% 2.78% 4.17% 5.56% 6.94% 8.33% 9.72% 11.11% 12.50% 13.89%
59,751 - 124,650 99,601 - 151,750 31.00% 2.90% 4.35% 5.80% 7.25% 8.70% 10.15% 11.59% 13.04% 14.49%
124,651 - 271,050 151,751 - 271,050 36.00% 3.13% 4.69% 6.25% 7.81% 9.38% 10.94% 12.50% 14.06% 15.63%
over 271,051 over 271,051 39.60% 3.31% 4.97% 6.62% 8.28% 9.93% 11.59% 13.25% 14.90% 16.56%
</TABLE>

- ------------------
* This amount represents taxable income as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), after any deduction for
personal exemptions and the greater of the standard deduction or
itemized deductions.

** These rates are the marginal federal income tax rates on taxable income
in effect for 1997 under the Code.

Of course, there is no assurance that the Tax-Exempt Money Market Fund
will achieve any specific tax-exempt yield. While it is expected that the
Tax-Exempt Money Market Fund will invest principally in obligations which pay
interest exempt from federal income tax, other income received by the Tax-Exempt
Money Market Fund may be taxable. The table does not take into account any state
or local taxes payable on Tax-Exempt Money Market Fund distributions.

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<PAGE>

EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES

California Tax-Exempt Money Market Fund

The table below shows the effect of the tax status of California Tax-Exempt
Securities on the effective yield received by their individual holders under the
federal income tax and California personal income tax laws currently in effect
for 1997. It gives the approximate yield a taxable security must earn at various
income levels to produce after-tax yields equivalent to those of California
Tax-Exempt Securities yielding from 2.0% to 9.0%.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1997
Combined
Taxable Income* California Tax-exempt yield
______________ and ----------------------------------------------------------------
Federal
Single*** Joint*** Rate** 2% 3% 4% 5% 6% 7% 8% 9%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Equivalent taxable yield
$0 - 5,016 $0 - 10,032 15.85% 2.38% 3.57% 4.75% 5.94% 7.13% 8.32% 9.51% 10.70%
5,017 - 11,888 10,033 - 23,776 16.70% 2.40% 3.60% 4.80% 6.00% 7.20% 8.40% 9.60% 10.80%
11,889 - 18,761 23,777 - 37,522 18.40% 2.45% 3.68% 4.90% 6.13% 7.35% 8.58% 9.80% 11.03%
18,762 - 24,650 37,523 - 41,200 20.10% 2.50% 3.75% 5.01% 6.26% 7.51% 8.76% 10.01% 11.26%
24,651 - 26,045 41,201 - 52,090 32.32% 2.96% 4.43% 5.91% 7.39% 8.87% 10.34% 11.82% 13.30%
26,046 - 32,916 52,091 - 65,832 33.76% 3.02% 4.53% 6.04% 7.55% 9.06% 10.57% 12.08% 13.59%
32,917 - 59,750 65,833 - 99,600 34.70% 3.06% 4.59% 6.13% 7.66% 9.19% 10.72% 12.25% 13.78%
59,751 - 124,650 99,601 - 151,750 37.42% 3.20% 4.79% 6.39% 7.99% 9.59% 11.19% 12.78% 14.38%
124,651 - 271,050 151,751 - 271,050 41.95% 3.45% 5.17% 6.89% 8.61% 10.34% 12.06% 13.78% 15.50%
over - 271,051 over - 271,051 45.22% 3.65% 5.48% 7.30% 9.13% 10.95% 12.78% 14.60% 16.43%
</TABLE>
- ------------------

* This amount represents taxable income as defined in the Internal
Revenue Code of 1986, as amended (the "Code"). It assumes that taxable
income as defined in the Code is the same as under the California
Revenue and Taxation Code; however, California taxable income may
differ due to differences in exemptions, itemized deductions, and other
items.

** For federal income tax and California personal income tax purposes,
these combined rates reflect the marginal rates on taxable income
currently in effect for 1997. The maximum marginal California personal
income tax rate for 1997 is currently 9.3%, and that is the maximum
marginal California personal income tax rate used in the above Table.
(These combined rates include the effect of deducting state income
taxes on your federal return).

*** The amount of taxable income in certain brackets may be affected by the
phase-out of personal exemptions and the limitation on itemized
deductions based upon adjusted gross income under the Code, and under
the California Revenue and Taxation Code.

Of course, there is no assurance that the Fund will achieve any specific
tax-exempt yield. While it is expected that the Fund will invest principally in
obligations which pay interest exempt from federal income tax and California
personal income tax, other income received by the Fund may be taxable. The table
does not take into account any state or local taxes payable on Fund
distributions except for California personal income tax.

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<PAGE>

New York Tax-Exempt Money Market Fund

The tables below show the effect of the tax status of New York Tax-Exempt
Securities on the effective yield received by their individual holders, in the
case of table 1, under the federal income tax and New York State personal income
tax laws currently in effect for 1997, and in the case of table 2, under the
federal, New York State and New York City personal income tax laws currently in
effect for 1997. The tables give the approximate yield a taxable security must
earn at various income levels to produce after-tax yields equivalent to those of
New York Tax-Exempt Securities yielding from 3.0% to 8.0%.

TABLE 1

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
1997 Combined
Taxable Income* New York State New York Tax-Exempt Security Yield of
__________________________ and Federal --------------------------------------------------
Single Joint Tax Rate** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Equivalent taxable yield if double tax-exempt
$0 - 8,000 $0 - 16,000 18.40% 3.68% 4.90% 6.13% 7.35% 8.58% 9.80%
8,001 - 11,000 16,001 - 22,000 18.83% 3.70% 4.93% 6.18% 7.39% 8.62% 9.86%
11,001 - 13,000 22,001 - 26,000 19.46% 3.73% 4.97% 6.21% 7.45% 8.69% 9.93%
13,001 - 20,000 26,001 - 40,000 20.02% 3.75% 5.00% 6.25% 7.50% 8.75% 10.00%
20,001 - 24,650 40,001 - 41,200 20.82% 3.79% 5.05% 6.32% 7.58% 8.84% 10.10%
24,651 - 59,750 41,201 - 99,600 32.93% 4.47% 5.96% 7.46% 8.85% 10.44% 11.93%
59,751 - 124,650*** 99,601 - 151,750*** 35.73% 4.69% 6.22% 7.78% 9.34% 10.89% 12.45%
124,651 - 271,050*** 151,751 - 271,050*** 40.38% 5.03% 6.71% 8.39% 10.06% 11.74% 13.42%
over - 271,051*** over - 271,051*** 43.74% 5.33% 7.11% 8.89% 10.69% 12.44% 14.22%
</TABLE>

-30-

<PAGE>

TABLE 2

- ------------------------------------------------------------------------------------------------------------------
1997 Combined
New York State,
Taxable Income* New York City New York Tax-Exempt Security Yield of
________________________ and Federal ---------------------------------------------------
Single Joint Tax Rate** 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Equivalent taxable yield if double tax-exempt
$0 - 8,000 $0 - 16,000 21.02% 3.80% 5.07% 6.33% 7.60% 8.86% 10.13%
8,001 - 11,000 16,001 - 21,600 21.44% 3.82% 5.09% 6.37% 7.64% 8.91% 10.18%
11,001 - 12,000 22.08% 3.85% 5.13% 6.42% 7.70% 8.98% 10.27%
21,601 - 22,000 22.51% 3.87% 5.16% 6.45% 7.74% 9.03% 10.32%
12,001 - 13,000 22,001 - 26,000 23.15% 3.90% 5.21% 6.51% 7.81% 9.11% 10.41%
13,001 - 20,000 26,001 - 40,000 23.70% 3.93% 5.24% 6.55% 7.86% 9.17% 10.49%
20,001 - 24,650 40,001 - 41,200 24.51% 3.97% 5.30% 6.62% 7.95% 9.27% 10.60%
24,651 - 25,000 41,201 - 45,000 36.06% 4.69% 6.26% 7.82% 9.38% 10.95% 12.51%
25,001 - 50,000 45,001 - 90,000 36.13% 4.70% 6.26% 7.83% 9.39% 10.96% 12.53%
50,001 - 59,750 90,001 - 99,600 36.14% 4.70% 6.26% 7.83% 9.40% 10.96% 12.53%
59,751 - 124,650*** 99,601 - 151,750*** 38.80% 4.90% 6.54% 8.17% 9.80% 11.44% 13.07%
124,651 - 271,050*** 151,751 - 271,050*** 43.24% 5.29% 7.05% 8.81% 10.57% 12.33% 14.09%
over - 271,051*** over - 271,051*** 46.43% 5.60% 7.47% 9.33% 11.20% 13.07% 14.93%
</TABLE>

- ------------------
* This amount represents taxable income as defined in the Code. For
purposes of the foregoing tables, it is assumed that the definition of
taxable income in the Code is the same as under the New York State and
City Personal Income Tax law. However, New York State and City taxable
income may differ due to differences in exemptions, itemized
deductions, and other items.

** For federal tax purposes, these combined rates reflect the marginal
rates on taxable income currently in effect for 1997. These rates
include the effect of deducting state and, for the second table, state
and city taxes on your federal return. For New York purposes, these
combined rates reflect the expected New York State and New York City
income tax rates and the New York City surcharge rates for 1997.

*** The amount of taxable income in this bracket may be affected by the
phase-out of personal exemptions and the limitation on itemized
deductions, based upon adjusted gross income, under the Code. A
supplemental New York State tax is also phased in for New York adjusted
gross income between $100,000 and $150,000 and fully eliminates the
benefit of the lower marginal brackets for taxpayers with New York
adjusted gross income of $150,000 or more. This adjustment is not
reflected in the tables above.

Of course, there is no assurance that the Fund will achieve any specific
tax-exempt yield. While it is expected that the Fund will invest principally in
obligations which pay interest exempt from federal income tax and New York State
and City personal income taxes, other income received by the Fund may be
taxable. The tables do not take into account any state or local taxes payable on
Fund distributions except for the New York State and for table 2, New York City
personal income taxes.

-31-

<PAGE>

From time to time, the Adviser may reduce its compensation or assume
expenses of a Fund in order to reduce a Fund's expenses, as described in the
Trust's current prospectus. Any such waiver or assumption would increase that
Fund's yield during the period of the waiver or assumption.

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

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 Fund'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 a Fund's performance.
Certain of those publications are listed below, at the request of Mentor
Distributors, which bears full responsibility for their use and the descriptions
appearing below. From time to time any or all of the Funds 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.

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<PAGE>

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. Funds 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 Funds, Growth Funds, U.S.
Government Funds, Equity Income Funds, Global Funds, 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 Fund 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.

Fortune magazine periodically publishes mutual fund rankings that have
been compiled for the magazine by Morningstar, Inc. Funds 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.

-33-

<PAGE>

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
Funds, a survey of approximately 1000 mutual funds. Funds 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. Funds 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 capital gains and not reflecting deduction of any
sales charges. Funds 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%. Funds 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. Funds 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.

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<PAGE>

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. Funds 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 Funds 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.

INVESTMENT PROFESSIONALS OF MENTOR INVESTMENT ADVISORS, LLC

R. Preston Nuttall, CFA
Mr. Nuttall has more than thirty years of investment management experience.
Prior to his involvement with the Mentor organization, 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

Mr. White has thirteen years of investment management experience. Prior to
joining the Mentor organization, 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

Ms. Allen has sixteen years of investment management experience and specializes
in tax- free trades. Prior to joining the Mentor organization, 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.

-35-

<PAGE>

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

FINANCIAL STATEMENTS

[To be filed by amendment]

-36-

<PAGE>
PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

(1) Statements of Assets and Liabilities - July 31, 1997
- Incorporated by Reference in Part B. Statements of
Operations - Year Ended July 31, 1997 Incorporated
by Reference in Part B. Statements of Changes in Net
Assets -- Years or Period Ended July 31, 1997 and
1996 -Incorporated by Reference in Part B. Financial
Highlights - Included in Part A. Notes to Financial
Statements - Incorporated by Reference in Part B.
Independent Auditors Report - Incorporated by
Reference in Part B.

Included in Part C: None.

(b) Exhibits

(1) (A) Agreement and Declaration of Trust(1)
(B) Amendments to Agreement and Declaration of
Trust(2)(3)
(2) Bylaws(1)
(3) Inapplicable
(4) (A) Forms of certificate representing shares of
beneficial interest(1)

(B) Portions of Agreement and Declaration of Trust
Relating to
Shareholders' Rights(1)
(C) Portions of Bylaws Relating to Shareholders'
Rights(1)

(5) (A) Management Contract dated December 17, 1993(4)
(B) Form of Letter of Transfer dated November 1, 1996(7)

(6) Distribution Agreement dated December 17, 1993(4)
(7) Inapplicable
(8) Custody Agreement dated December 20, 1993(4)
(9) (A) Agency Agreement dated December 20, 1993(4)
(B) Draft Processing Agency Agreement dated December 20,
1993(4)
(C) Form of Shareholder Servicing Plan (8)
(10) Opinion and Consent of Ropes & Gray(2)
(11) Consent of Independent Auditors (7)

(12) Inapplicable
(13) Initial Capital Agreement dated December 17, 1993(4)
(14) Inapplicable

(15) Plan of Distribution (8)

-1-

<PAGE>

(16) Schedule of Computation of Performance(5)
(17) Financial Data Schedules(7)
(A) Cash Resource Money Market Fund
(B) Cash Resource U.S. Government Money Market Fund
(C) Cash Resource Tax-Exempt Money Market Fund

(D) Cash Resource California Tax-Exempt Money Market
Fund
(E) Cash Resource New York Tax-Exempt Money Market Fund

(18) Form of Rule 18f-3 Plan(8)

(1) Incorporated by reference from the Registrant's Registration Statement
on Form N-1A under the Securities Act of 1993, as amended, filed on
July 7, 1993.
(2) Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1993, as amended, filed on October 15, 1993 (File No. 33-65818).
(3) Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on November 5, 1993 (File No. 33-
65818).
(4) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on October 3, 1994 (File No. 33- 65818).
(5) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on September 29, 1995 (File No. 33-
65818).
(6) Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended, filed on August 12, 1996 (File No. 33- 65818).

(7) Incorporated by reference to Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form N-1A under the Securities
Act of 1933, as amended filed on September 30, 1997 (File No.
33-65818).

(8) Filed herewith.

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

None.

-2-

<PAGE>

Item 26. Number of Record Holders of Securities

The following table shows the number of holders of record of shares of
beneficial interest of the Funds as of December 31, 1997. There was no Class B
Shares of any Fund outstanding as of that date.

Number of Record
Series Holders
------ ----------------
Cash Resource Money Market Fund 349,102
Cash Resource U.S. Government
Money Market Fund 309,176
Cash Resource Tax-Exempt Money
Market Fund 28,082
Cash Resource California Tax-Exempt
Money Market Fund 3,606
Cash Resource New York Tax-Exempt
Money Market Fund 286

Item 27. Indemnification

The information required by this item is incorporated herein by
reference from the Registrant's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (File No. 33-65818).

Item 28. Business and Other Connections of Investment Adviser

Mentor Investment Advisors, LLC ("Mentor Advisors"), located at 901
East Byrd Street, Richmond, Virginia 23219, serves as the Registrant's
investment adviser.

The business and other connections of each director, officer, or partner
of Mentor Advisors 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 table.

-3-

<PAGE>

Other Substantial
Position with the Business, Profession,
Name Investment Adviser Vocation or Employment*
- ---- ------------------ -----------------------
Daniel J. Ludeman Chairman Chairman and Chief
Executive Officer, Mentor
Investment Group, LLC;
Director, Wheat, First
Securities, Inc.; Managing
Director, Wheat First
Butcher Singer, Inc.

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, Wheat
Butcher Singer, Inc. and
Mentor Investment Group,
LLC; President, Mentor
Institutional Trust,
Mentor Income Fund, Inc.,
and America's Utility
Fund, Inc.

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;
Trustee, Mentor Funds and
Mentor Institution Trust

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

Thomas Lee 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

-4-

<PAGE>

Other Substantial
Position with the Business, Profession,
Name Investment Adviser Vocation or Employment*
- ---- ------------------ -----------------------
Securities, Inc.;
Assistant Treasurer,
Mentor Distributors, LLC

John M. Ivan Secretary Managing Director,
Assistant General Counsel,
and Director of
Compliance, Wheat, First
Securities, Inc.; Clerk,
Mentor Institutional
Trust; Secretary, Mentor
Funds, Mentor
Distributors, LLC, and
America's Utility Fund,
Inc.

* The address of Mentor Investment Group, Inc., Wheat, First Securities, Inc.,
Wheat First Butcher Singer, Inc., Mentor Funds, and Mentor Income Fund, Inc.,
is 901 East Byrd Street, Richmond, VA 23219.

Item 29. Principal Underwriters

(a) Mentor Distributors, Inc. acts as the principal underwriter for the Trust.

(b)

Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter 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

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

-5-

<PAGE>

Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ --------------------- ---------------------

Howard T. Macrae, Jr. Assistant Secretary None
901 East Byrd Street
Richmond, VA 23219

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

Robert P. Wilson Assistant Treasurer None
901 East Byrd Street
Richmond, VA 23219

Item 30. Location of Accounts and Records

Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder are Registrant's Clerk, John M.
Ivan; Registrant's investment adviser, Mentor Advisors', and Registrant's
transfer agent and custodian, Investors Fiduciary Trust Company. The address of
the Clerk and Mentor Advisors is 901 East Byrd Street, Richmond, Virginia 23219.
The address of the transfer agent and custodian is 127 West 10th Street, Kansas
City, Missouri 64105-1716.

Item 31. Management Services

None.

Item 32. Undertakings

(a) The Registrant undertakes, if requested to do so by the holders
of at least 10% of the Registrant's outstanding shares of
beneficial interest, to call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or
Trustees and to assist in communications with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940.

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

-6-

<PAGE>

NOTICE

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
Registrant by an officer of the Registrant as an officer and not individually
and that the obligations of or arising out of this instrument are not binding
upon any of the Trustees, officers, or shareholders individually but are binding
only upon the assets and property of the Registrant.

-7-

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of Richmond, and the Commonwealth of Virginia on this 30th day of January, 1998.

CASH RESOURCE TRUST

By:/s/ Paul F. Costello
---------------------
Name: Paul F. Costello
Title: President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 30th day of January, 1998.

Signature Title
--------- -----

* Chairman; Trustee
- -----------------
Daniel J. Ludeman

* Trustee
- ------------------
Arnold H. Dreyfuss

* Trustee
- ----------------
Thomas F. Keller

* Trustee
- -----------------------
Louis W. Moelchert, Jr.

* Trustee
- ------------------
Troy A. Peery, Jr.

<PAGE>

Signature Title
--------- -----

/s/ Peter J. Quinn Trustee
- --------------------
Peter J. Quinn, Jr.

Trustee
- --------------------
Arch T. Allen, III

Trustee
- --------------------
Weston E. Edwards

Trustee
- --------------------
Jerry R. Barrentine

Trustee
- --------------------
J. Garnett Nelson

/s/ Paul F. Costello President; Principal Executive
- -------------------- Officer
Paul F. Costello

/s/ Terry L. Perkins Treasurer; Principal Financial
- -------------------- Officer; Principal Accounting Officer
Terry L. Perkins

*By:/s/ Paul F. Costello
--------------------
Paul F. Costello
Attorney-in-Fact

<PAGE>

EXHIBIT INDEX

Exhibit No. Exhibit Page No.
- ----------- ------- --------

9 (C) Form of Shareholder Servicing Plan

(15) Plan of Distribution

(18) Form of Rule 18f-3 Plan

CASH RESOURCE TRUST
SHAREHOLDER SERVICING PLAN

This Shareholder Servicing Plan ("Plan") is adopted as of this ___ day
of _____, 1998, by the Board of Trustees of Cash Resource Trust, a Massachusetts
business trust (the "Trust"), with respect to certain classes of shares
("Classes") of the Funds set forth in exhibits hereto.

1. This Plan is adopted to allow the Trust to make payments as
contemplated herein to obtain certain administrative services for shareholders
of Classes of the Funds ("Shares").

2. This Plan is designed to compensate broker/dealers and other
participating financial institutions and other persons ("Administrators") for
providing administrative support services to the Funds and their shareholders.
These administrative 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
Funds; assisting clients in changing dividend options, account designations and
addresses; and providing such other services as the Funds reasonably request.
The Plan will be administered by such entity as may be designated by the Board
of Trustees to do so (the "Plan Administrator").

3. Any payment to the Plan Administrator shall be limited to the
reimbursement of payments made by the Plan Administrator to the Administrators
or for such other purposes as the Board of Trustees may approve from time to
time. The fees paid under this Plan are intended to qualify as a "service fees"
as defined in Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc. (or any successor provision) as in effect from time to
time.

4. The Plan Administrator has the right (i) to select, in its sole
discretion, the Administrators to participate in the Plan and (ii) to terminate
without cause and in its sole discretion any agreement with any Administrator.

5. Quarterly in each year that this Plan remains in effect, the Plan
Administrator shall prepare and furnish to the Board of Trustees of the Trust,
and the Board of Trustees shall review, a written report of the amounts expended
under the Plan and the purpose for which such expenditures were made.

6. This Plan shall become effective with respect to any Class (i) after
approval by a majority votes of: (a) the Trust's Board of Trustees; and (b)
those Trustees who are not

-1-

<PAGE>

"interested persons" of the Trust (as defined in Investment Company Act of 1940)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it ("Disinterested Trustees"); and (ii) upon
adoption in the same manner of an exhibit this Plan with respect to such Class.

7. This Plan shall remain in effect with respect to each Class set
forth on an exhibit and any subsequent Classes added pursuant to an exhibit.

8. All material amendments to this Plan must be approved by a majority
vote of the Board of Trustees of the Trust and of the Disinterested Trustees.

9. This Plan may be terminated with respect to a particular Class at
any time by: (a) a majority vote of the Disinterested Trustees; or (b) a vote of
a majority of the outstanding voting securities of the particular Class as
defined in Section 2(a)(42) of the Act; or (c) by the Plan Administrator on 60
days notice to the Trust.

10. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the discretion of the
Disinterested Trustees then in office.

11. All agreements with any person relating to the implementation of
this Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of Paragraph
9 herein.

12. This Plan shall be construed in accordance with and governed by the
laws of the Commonwealth of Virginia.

-2-

<PAGE>

EXHIBIT A
to the
Shareholder Servicing Plan

CASH RESOURCE TRUST

Cash Resource Money Market Fund -- Class B shares
Cash Resource U.S. Government Money Market Fund -- Class B shares
Cash Resource Tax-Exempt Money Market Fund -- Class B shares
Cash Resource California Tax-Exempt Money Market Fund -- Class B shares
Cash Resource New York Tax-Exempt Money Market Fund -- Class B shares

This Plan is adopted by Cash Resource Trust with respect to the Classes
of Shares of the Funds set forth above.

In compensation for the services provided pursuant to this Plan, the
Plan Administrator will be paid a monthly fee by each Fund computed at an annual
rate not to exceed 0.25 of 1% of the average daily net asset value of the shares
of such classes.

-3-

Exhibit 15

PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1

CASH RESOURCE TRUST

This constitutes the PLAN OF DISTRIBUTION of Cash Resource Trust (the
"Trust") on behalf of the series of shares of beneficial interest of the Trust
identified on Exhibit A attached hereto and made a part hereof (each, a
"Portfolio").
1. Each Portfolio shall pay to the principal underwriter of the
Portfolio's shares (the "Distributor") a fee for services performed and expenses
incurred in respect of the distribution of shares of the Portfolio, or, where
applicable, of a class of shares of the Portfolio specified in Exhibit A, at the
annual rate set forth opposite the Portfolio's name on Exhibit A of such
Portfolio's average daily net assets attributable to its shares, or to such
class of shares, such fee to be calculated and accrued daily and paid monthly.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
the Distributor's services as distributor of the shares of each Portfolio (or of
the applicable class of shares of any such Portfolio, as the case may be) 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 shares of the Portfolio (or any such
class of shares, as the case may be), 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;

-1-

<PAGE>

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, 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 Investment Company Act of 1940, as amended) 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.
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 a 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 in respect of any or all of
the Portfolios by vote of a majority of the Rule 12b-1 Trustees or, in respect
of a Portfolio, by vote of that Portfolio's shares constituting a majority of
the outstanding voting securities of such Portfolio (or the class of shares in
question, as the case may be).
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

-2-

<PAGE>

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 Investment Company
Act of 1940, as amended) 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.
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 or officers of the
Trust or shareholders of any Portfolio of the Trust but are binding only upon
the assets and property of the relevant Portfolio of the Trust.

-3-

<PAGE>

EXHIBIT A
12b-1 Fee
Class A Class B
<S> <C>
Cash Resource Money Market Fund 0.38% 0.75%
Cash Resource U.S. Government Money Market Fund 0.38% 0.75%
Cash Resource Tax-Exempt Money Market Fund 0.33% 0.75%
Cash Resource California Tax-Exempt Money Market Fund 0.33% 0.75%
Cash Resource New York Tax-Exempt Money Market Fund 0.33% 0.75%
</TABLE>

-4-

Exhibit 18
CASH RESOURCE TRUST

Plan pursuant to Rule 18f-3(d) under the Investment Company Act of 1940

Effective , 1998

Each series of shares of beneficial interest in Cash Resource Trust
(the "Trust") (each a "Fund" and, together, the "Funds") may from time to time
issue one or more of the following classes of shares: Class A shares and Class B
shares. Each class is subject to such investment minimums and other conditions
of eligibility as are set forth in the prospectus in respect of any such Fund as
from time to time in effect (each, the "Prospectus"). The differences in
expenses among these classes of shares, and the conversion and exchange features
of each class of shares, are set forth below in this Plan. Except as noted
below, expenses are allocated among the classes of shares of each Fund based
upon the expenses incurred by each class or as otherwise determined to be fair
and equitable by the Trustees. This Plan is subject to change, to the extent
permitted by law and by the Agreement and Declaration of Trust and By-laws of
the Trust, by action of the Trustees of the Trust.

CLASS A SHARES

Distribution and Service Fees

Class A shares pay distribution fees pursuant to plans adopted pursuant
to Rule 12b-1 under the 1940 Act (the "Class A Plans"). Class A shares also bear
any costs associated with obtaining shareholder approval of the Class A Plans
(or an amendment to a Class A Plan). Pursuant to the Class A Plans, the Funds
may make payments at rates up to the annual rates specified below of the
relevant Fund's average daily net assets attributable to Class A shares:

Cash Resource Money Market Fund 0.38%
Cash Resource U.S. Government Money Market Fund 0.38%
Cash Resource Tax-Exempt Money Market Fund 0.33%
Cash Resource California Tax-Exempt Money Market Fund 0.33%
Cash Resource New York Tax-Exempt Money Market Fund 0.33%

Amounts payable under the Class A Plans are subject to such further limitations
as the Trustees may from time to time determine and as set forth in the
Prospectus.

-1-

<PAGE>

Exchange Features

Class A shares of any Fund may be exchanged, at the holder's option,
for Class A shares of any other Fund that offers Class A shares without the
payment of a sales charge beginning 15 days after purchase, provided that Class
A shares of such other Fund are available to residents of the relevant state.

Conversion Features

Class A shares do not convert into any other class of shares.

Initial Sales Charge

Class A shares are offered at a public offering price that is equal to
their net asset value ("NAV").

Contingent Deferred Sales Charge

Class A shares are not subject to a contingent deferred sales charge
("CDSC").

CLASS B SHARES

Distribution and Service Fees

Class B shares pay distribution fees pursuant to plans adopted pursuant
to Rule 12b-1 under the 1940 Act (the "Class B Plans"). Class B shares also bear
any costs associated with obtaining shareholder approval of the Class B Plans
(or an amendment to a Class B Plan). Pursuant to the Class B Plans, a Fund may
pay fees at an annual rate of up to .75% of its average daily net assets
attributable to its Class B shares (which percentage may be less for certain
Funds, as described in the Prospectus). Amounts payable under the Class B Plans
are subject to such further limitations as the Trustees may from time to time
determine and as set forth in the Prospectus. Class B shares are also subject to
payments at an annual rate of up to 0.25% of a Fund's average daily net assets
attributable to such shares, pursuant to a Shareholder Servicing Plan.

Exchange Features

Class B shares of any Fund may be exchanged, at the holder's option,
for Class B shares of any other mutual fund in the Mentor Family of Funds that
offers Class B shares without the payment of a sales charge beginning 15 days
after purchase, provided that Class B shares of such other Fund are available to
residents of the relevant state. The holding period for determining any CDSC
will include the holding period of the shares exchanged, and will be calculated
using the schedule of the Fund from which shares have been exchanged.

-2-

<PAGE>

Conversion Features

Class B shares do not convert into any other class of shares.

Initial Sales Charge

Class B shares are offered at their NAV, without an initial sales
charge.

Contingent Deferred Sales Charge

Class B shares that are redeemed within 6 years of purchase are subject
to a CDSC of up to 4.00% of either the purchase price or the NAV of the shares
redeemed, whichever is less (which period may be shorter and which percentage
may be less for certain Funds, as described in the Prospectus); such percentage
declines the longer the shares are held, as described in the Prospectus. Class B
shares purchased with reinvested dividends or capital gains are not subject to a
CDSC.

The CDSC on Class B shares is subject to reduction or waiver in certain
circumstances, as permitted by Rule 6c-10 under the 1940 Act and as described in
the Prospectus.

-3-