ADVISORS SERIES TRUST, 497, 1999-07-16

ADVISORS SERIES TRUST
497, 1999-07-16

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THE AL FRANK FUND

[PHOTO OF AL FRANK]

PROSPECTUS
JULY 12, 1999

THE AL FRANK FUND
465 FOREST AVENUE, SUITE I
LAGUNA BEACH, CA 92651
SHAREHOLDER SERVICES: (888) 263-6443
DAILY NAV: (877) 654-1325
WWW.ALFRANK.COM
<PAGE>
THE AL FRANK FUND

PROSPECTUS

JULY 12, 1999

THE AL FRANK FUND invests in value stocks for growth of capital.

This Prospectus contains basic information that you should know before you
invest. Please read it and keep it for future reference.

TABLE OF CONTENTS

Goal and Strategy................ 1

Fund Performance................. 2

Expense Table.................... 2

Investment Objectives,
Principal Strategies
and Related Risks............. 3

Management of the Fund........... 5

Investor Guide................... 5

Services Available to Shareholders 7

How to Redeem Your Shares........ 8

Distributions and Taxes.......... 9

Financial Highlights............. 11

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. GOAL AND STRATEGY

GOAL AND STRATEGY

WHAT IS THE FUND'S GOAL?
The Fund seeks growth of capital.

HOW WILL THE FUND TRY TO REACH ITS GOAL?

Al Frank Asset Management, Inc. (the Advisor) selects equity securities that it
believes are out of favor and undervalued. The Advisor then purchases the
securities and holds them until it believes that the securities have reached a
fair value or sells them when it believes a strong market sell signal has been
generated. The Advisor does not expect the Fund's annual turnover rate to exceed
25%.

For leverage purposes, the Fund may borrow money from banks, up to one-third of
its total assets, and may also sell securities short. If the Advisor believes
that market conditions warrant a temporary defensive position, the Fund may
invest without limit in high-quality, short-term debt securities and money
market instruments. In this scenario, the Fund will not be pursuing its stated
investment objective.

WHAT ARE THE PRINCIPLE RISKS OF INVESTING IN THE FUND?

The value of your investment in the Fund will go up and down as the stocks in
the Fund's portfolio change in price. The prices of the stocks the Advisor
selects may fall. Also, the stock market may decline suddenly and for extended
periods adversely affecting the prices of the stocks held by the Fund.

Additional risks are associated with borrowing money and selling stocks short.
Please see a description of these risks in the "Investment Objectives, Principal
Strategies
1 PROSPECTUS
<PAGE>
and Related Risks" section of this prospectus.

By itself, the Fund is not a complete, balanced investment plan. And no fund can
guarantee that it will achieve its goal. When you sell your shares, you may lose
money.

FUND PERFORMANCE

The following performance information indicates some of the risks of investing
in the Fund. The bar chart shows the Fund's total return for calendar year 1998,
its first year of operations. The table shows the Fund's average return over
time compared with a broad-based market index. This past performance is no
guarantee of future results.

CALENDAR YEAR TOTAL RETURNS

1998
----
-9.30%

During the period of time displayed in the bar chart, the Fund's best quarter
was Q4 1998, up 19.03%, and its worst quarter was Q3 1998, down 22.48%.

ADDITIONAL TOTAL RETURN INFORMATION

1 year Six months
ended ended
12/31/98* 6/30/99
--------- -------
The Al Frank Fund -9.30% 25.14%
Russell 2000 Index -3.45% 8.47%

*The Fund commenced operations on January 2, 1998.

The Russell 2000 Index is a widely regarded small cap index of the 2,000
smallest stocks of the Russell 3000 index which comprises the 3,000 largest U.S.
stocks as determined by total market capitalization.

EXPENSE TABLE

There are two types of expenses involved: shareholder transaction expenses, such
as sales loads and redemption fees, and annual operating expenses, such as
investment advisory fees. THE FUND IS A NO-LOAD MUTUAL FUND.

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fee (a) (on shares held less than 6 months) 2.00%

ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Investment Advisory Fees 1.00%
Rule 12b-1 Distribution Fee 0.25%
Other Expenses 2.49%
----
Total Annual Fund Operating Expenses 3.74%
Expense Reimbursements (b) (1.49)%
----
Annual Operating Expenses 2.25%
====

(a) A 2.00% redemption fee, payable to the Fund, will be assessed on shares
purchased and held for less than 6 months.

(b) The Advisor has contractually agreed to waive its fees and/or pay Fund
expenses in order to limit the Fund's total annual operating expenses (excluding
interest and tax expenses) to 2.25%. This contract's term is indefinite and may
be terminated only by the Board of Trustees. The advisor is permitted to be
reimbursed, subject to limitations, for fees it waives and for Fund expenses it
pays.

PROSPECTUS 2
<PAGE>
EXPENSE EXAMPLE

This Example will help you compare the cost of investing in the Fund with the
cost of investing in other mutual funds. It is based on the annual operating
expenses shown above, and it assumes that these expenses will remain the same
over the time periods shown. It also assumes that you make a single $10,000
investment in the Fund to start with and that you earn a 5% return each year.
Finally, it assumes that you redeem all of your shares at the end of each of the
time periods. Again, this Example is hypothetical, and your actual expenses may
be higher or lower.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$227 $701 $1,205 $2,588

INVESTMENT OBJECTIVES, PRINCIPAL STRATEGIES AND RELATED RISKS

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The investment objective of the Fund is to seek growth of capital.

HOW DOES THE FUND SEEK TO ACHIEVE ITS OBJECTIVE?

The Advisor selects equity securities for the Fund's portfolio that it believes
are out of favor and undervalued -- i.e., those trading for low fundamental
valuations relative to what the Advisor thinks their businesses will be worth
over the next five years. The Advisor then attempts to purchase the securities
and hold them until it believes that the securities have reached a fair value.

There is no assurance that the Fund's objective will be achieved. As prices of
common stocks and other securities fluctuate, the value of an investment in the
Fund will vary as the market value of its investment portfolio changes.

HOW DOES THE ADVISOR SELECT EQUITY SECURITIES FOR THE FUND'S PORTFOLIO?

The Advisor selects equity securities, consisting of common stocks and
securities having the characteristics of common stocks, such as convertible
securities, rights and warrants, on the basis of fundamental corporate analysis.
It screens a universe of more than 6,000 stocks in order to identify those with
low price-to-earnings, price-to-book value, price-to-cash flow and
price-to-revenues. The Advisor also uses technical analysis to anticipate
periods when the securities markets are either extremely undervalued and
oversold, or overvalued and overbought. When the Advisor believes the market is
undervalued, it may borrow money to leverage the Fund's portfolio, as described
below. When it believes the market is overvalued, it may take a temporary
defensive position or use options, as described below. The Fund's portfolio is
expected to be highly diversified, generally with more than 100 separate
securities.

The Advisor sells a stock when its analysis indicates that it is fairly valued
or when it believes a strong market sell signal has been generated.

WHAT DOES THE FUND USE FOR CASH RESERVES?

For temporary defensive purposes, the Advisor may invest up to 100% of the
Fund's total assets in high-quality, short-term debt securities and money-market
instruments. These short-term debt securities and money-market instruments
include shares of other mutual funds, commercial paper, certificates of deposit,

3 PROSPECTUS
<PAGE>
bankers' acceptances, U.S. Government securities and repurchase agreements.

BORROWING MONEY.

The Fund may borrow money from banks for leverage, up to one-third of its total
assets. The use of borrowing by the Fund involves special risks that may not be
associated with other funds having similar objectives and policies. Leverage
magnifies the effect of fluctuating stock prices on the value of the Fund's
shares that you own. The asset value per share of the Fund will tend to increase
more when its portfolio securities increase in value and to decrease more when
its portfolio securities decrease in value than would otherwise be the case if
the Fund did not borrow funds. In addition, interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market conditions, the
Fund might have to sell portfolio securities to meet interest or principal
payments at a time when the principal strategy does not favor such sales. The
Fund is required to designate assets with its custodian equal to the amount it
has borrowed.

SELLING SHORT.

The Fund may sell securities short by borrowing securities it does not own and
selling them. The Fund is then obligated to replace the borrowed securities by
purchasing them at the market price at a later time. If the securities sold
short increase in value between the time of sale and the time the Fund purchases
them, the Fund will incur a loss. On the other hand, if the securities decline
in value, the Fund may repurchase them at a lower price and realize a profit.
There are limits on the extent to which the Fund may engage in short sales, as
described in the Fund's Statement of Additional Information (SAI). Please see
the back cover of this prospectus for information on how to obtain the SAI.

YEAR 2000 RISK.

Like other business organizations around the world, the Fund could be adversely
affected if the computer systems used by its investment advisor and other
service providers do not properly process and calculate information related to
dates beginning January 1, 2000. This is commonly known as the "Y2K Problem."
Failure of computer systems used for securities trading could result in
settlement and liquidity problems for the Fund and investors. That failure could
have a negative impact on handling securities trades and pricing and accounting
services. Additionally, the services provided to the Fund depend on the
interaction of computer systems with those of brokers, information vendors and
other parties; therefore, any failure of the computer systems of those parties
may cause service problems for the Fund. In addition, this situation may
negatively affect the companies in which the Fund invests and consequently, the
value of the Fund's shares. The Board of Trustees of the Fund has adopted a Y2K
Project Plan that is reasonably designed to address the Y2K Problem with respect
to the Advisor's and other service providers' computer systems. Included in the
Y2K Project Plan is a provision for a contingency plan to convert to Y2K
compliant data processing equipment in the event that the Fund determines its
suppliers Y2K efforts have been less than satisfactory. There can be no
assurance that these actions will be sufficient to avoid any adverse impact on

PROSPECTUS 4
<PAGE>
the Fund. The extent of that risk cannot be ascertained at this time.

MANAGEMENT OF THE FUND

THE ADVISOR.

The Fund's Advisor, Al Frank Asset Management, Inc., 465 Forest Avenue, Suite I,
Laguna Beach, California 92651, has provided asset management services to
individuals and institutional investors since 1977. The Advisor was established
and is controlled by its President, Al Frank. Mr. Frank and John Buckingham,
another member of the firm, are principally responsible for the management of
the Fund's portfolio. Mr. Buckingham has been Executive Vice President and
Director of Research of the Advisor since 1990, having joined the firm in 1987.
The Advisor also publishes a newsletter under the name THE PRUDENT SPECTULATOR.
This publication has been in circulation for over 22 years.

The Advisor provides the Fund with advice on buying and selling securities,
manages the investments of the Fund, furnishes the Fund with office space and
certain administrative services, and provides most of the personnel needed by
the Fund. As compensation, the Fund pays the Advisor a monthly management fee
based upon the average daily net assets of the Fund at the annual rate of 1.00%.
During the last fiscal year the Advisor waived its entire management fee.

INVESTOR GUIDE

PRICING THE FUND'S SHARES.

The Fund's price, or net asset value per share, is calculated by dividing the
value of a Fund's total assets, less its liabilities, by the number of its
shares outstanding. In calculating the net asset value, portfolio securities are
valued using current market values, if available. Securities for which market
quotations are not readily available are valued at fair values determined in
good faith by or under the supervision of the Board of Trustees of the Trust.
The net asset value is calculated at the close of regular trading of the New
York Stock Exchange ("NYSE"), normally 4:00 pm, Eastern time.

HOW TO PURCHASE SHARES OF THE FUND.

There are several ways to purchase shares of the Fund. An Application Form,
which accompanies this Prospectus, is used if you send money directly to the
Fund by mail or by wire. If you have questions about how to invest, or about how
to complete the Application Form, please call an account representative at (888)
263-6443.

YOU MAY SEND MONEY TO THE FUND BY MAIL.

If you wish to invest by mail, simply complete the Application Form and mail it
with a check (made payable to The Al Frank Fund) to the Fund's Shareholder
Servicing Agent, American Data Services, Inc., at the following address:

The Al Frank Fund
P.O. Box 641265
Cincinnati, OH 45264-1265

If you wish to send your Application Form and check via an overnight delivery
service (such as Federal Express) you should use the following address:

The Al Frank Fund
c/o Firstar Bank, N.A.
Mutual Fund Custody Department
425 Walnut Street, M/L 6118, Sixth Floor
Cincinnati, OH 45202

YOU MAY WIRE MONEY TO THE FUND.

Before sending a wire, you should call the

5 PROSPECTUS
<PAGE>
Fund at (888) 263-6443 between 9:00 a.m. and 5:00 p.m., Eastern time, on a day
when the New York Stock Exchange ("NYSE") is open for trading, in order to
receive an account number. It is important to call and receive this account
number, because if your wire is sent without it or without the name of the Fund,
there may be a delay in investing the money you wire. You should then ask your
bank to wire money to:

Firstar Bank, N.A.
ABA # 0420-0001-3
for credit to The Al Frank Fund
DDA # 488877309
for further credit to [your name and account number]

Your bank may charge you a fee for sending a wire to the Fund.

YOU MAY PURCHASE SHARES THROUGH AN INVESTMENT DEALER.

You may buy and sell Fund shares through certain brokers (and their authorized
agents, together "brokers") that have made arrangements with the Fund. An order
placed with such a broker is treated as if it were placed directly with the
Fund, and will be executed at the next share price calculated by the Fund. Your
shares will be held in a pooled account in the broker's name, and the broker
will maintain your individual ownership information. The Fund may pay the broker
for maintaining these records as well as providing other shareholder services.
In addition, the broker may charge you a fee for handling your order. The broker
is responsible for processing your order correctly and promptly, keeping you
advised of the status of your individual account, confirming your transactions
and ensuring that you receive copies of the Fund's prospectus.

MINIMUM INVESTMENTS.

The minimum initial investment in the Fund is $5,000. The minimum subsequent
investment is $500. However, if you are investing in an Individual Retirement
Account ("IRA"), or you are starting an Automatic Investment Plan (see below),
the minimum initial and subsequent investments are $2,000 and $250,
respectively.

SUBSEQUENT INVESTMENTS.

You may purchase additional shares of the Fund by sending a check, with the stub
from an account statement, to the Fund at the previously noted address. Please
also write your account number on the check. If you do not have a stub from an
account statement, you can write your name, address and account number on a
separate piece of paper and enclose it with your check. If you want to send
additional money for investment by wire, it is important for you to call the
Fund at (888) 263-6443. You may also make additional purchases through an
investment broker or dealer, as described above.

WHEN IS MONEY INVESTED IN THE FUND?

Any money received for investment in the Fund from an investor, whether sent by
check or by wire, is invested at the net asset value of the Fund which is next
calculated after the money is received (assuming the check or wire correctly
identifies the Fund and account). Orders received from dealers are invested at
the net asset value next calculated after the order is received. A check or wire
received after the NYSE closes is invested as of the next calculation of the
Fund's net asset value.

OTHER INFORMATION.

The Fund's Distributor may waive the

PROSPECTUS 6
<PAGE>
minimum investment requirements for purchases by certain group or retirement
plans. All investments must be made in U.S. dollars, and checks must be drawn on
U.S. banks. Third-party checks will not be accepted. A charge may be imposed if
a check used to make an investment does not clear. The Fund and its Distributor
reserve the right to reject any investment, in whole or in part. Federal tax law
requires that investors provide a certified taxpayer identification number and
other certifications on opening an account in order to avoid backup withholding
of taxes. See the Application Form for more information about backup
withholding. The Fund is not required to issue share certificates. All shares
are held in non-certificated form on the books of the Fund, for the account of
the shareholder. The Fund, under certain circumstances, may accept investments
of securities appropriate for the Fund's portfolio, in lieu of cash. Prior to
making such a purchase, you should call the Advisor to determine if such an
investment may be made. The Advisor may, at its own expense, pay third parties
for assistance in gathering assets for the Fund.

The daily Net Asset Value (NAV) can be obtained from The Al Frank fund website
(www.alfrank.com) or by calling toll-free 877-654-1325.

SERVICES AVAILABLE TO SHAREHOLDERS

RETIREMENT PLANS.

You may obtain prototype IRA plans from the Fund. Shares of the Fund are also
eligible investments for other types of retirement plans.

AUTOMATIC INVESTING BY CHECK.

You may make regular monthly investments in the Fund using the Automatic
Investment Plan. A check is automatically drawn on your personal checking
account each month for a predetermined amount (but not less than $250), as if
you had written it directly. Upon receipt of the withdrawn funds, the Fund
automatically invests the money in additional shares of the Fund at the current
net asset value. Applications for this service are available from the Fund.
There is no charge by the Fund for this service. The Fund may terminate or
modify this privilege at any time, and shareholders may terminate their
participation by notifying the Shareholder Servicing Agent in writing,
sufficiently in advance of the next withdrawal.

AUTOMATIC WITHDRAWALS.

The Fund offers a Systematic Withdrawal Program whereby shareholders may request
that a check drawn in a predetermined amount be sent to them each month or
calendar quarter. To start this Program, your account must have Fund shares with
a value of at least $10,000, and the minimum amount that may be withdrawn each
month or quarter is $50. This Program may be terminated or modified by a
shareholder or the Fund at any time without charge or penalty. A withdrawal
under the Systematic Withdrawal Program involves a redemption of shares of the
Fund, and may result in a gain or loss for federal income tax purposes. No
redemption fee will apply to redemptions made under the Automatic Withdrawal
Program. In addition, if the amount withdrawn exceeds the dividends credited to
your account, the account ultimately may be depleted.

7 PROSPECTUS
<PAGE>
HOW TO REDEEM YOUR SHARES

You have the right to redeem all or any portion of your shares of the Fund at
their net asset value on each day the NYSE is open for trading. You will be
charged a 2.00% redemption fee, payable to the Fund, on shares redeemed within 6
months of the purchase date. The fee will be applied on a first-in, first-out
basis.

REDEMPTION IN WRITING.

You may redeem your shares by simply sending a written request to the Fund. You
should give your account number and state whether you want all or part of your
shares redeemed. The letter should be signed by all of the shareholders whose
names appear in the account registration. You should send your redemption
request to:

The Al Frank Fund
150 Motor Parkway, Suite 109
Hauppauge, NY 11788

SIGNATURE GUARANTEE.

If the value of the shares you wish to redeem exceeds $100,000, the signatures
on the redemption request must be guaranteed by an "eligible guarantor
institution." These institutions include banks, broker-dealers, credit unions
and savings institutions. A broker-dealer guaranteeing a signature must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. A notary public is not an
acceptable guarantor.

REDEMPTION BY TELEPHONE.

If you complete the Redemption by Telephone portion of the Fund's Application
Form, you may redeem shares on any business day the NYSE is open by calling the
Fund's Shareholder Servicing Agent at (888) 263-6443 before 4:00 p.m. Eastern
time. Redemption proceeds will be mailed or wired, at your direction, on the
next business day to the bank account you designated on the Application Form.
The minimum amount that may be wired is $1,000 (wire charges, if any, will be
deducted from redemption proceeds). Telephone redemptions cannot be made for IRA
accounts.

By establishing telephone redemption privileges, you authorize the Fund and its
Shareholder Servicing Agent to act upon the instruction of any person who makes
the telephone call to redeem shares from your account and transfer the proceeds
to the bank account designated in the Application Form. The Fund and the
Shareholder Servicing Agent will use procedures to confirm that redemption
instructions received by telephone are genuine, including recording of telephone
instructions and requiring a form of personal identification before acting on
these instructions. If these normal identification procedures are followed,
neither the Fund nor the Shareholder Servicing Agent will be liable for any
loss, liability, or cost which results from acting upon instructions of a person
believed to be a shareholder with respect to the telephone redemption privilege.
The Fund may change, modify, or terminate these privileges at any time upon at
least 60 days notice to shareholders.

PROSPECTUS 8
<PAGE>
You may request telephone redemption privileges after your account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity.

WHAT PRICE IS USED FOR A REDEMPTION?

The redemption price is the net asset value of the Fund's shares less the
redemption fee (if applicable), next determined after shares are validly
tendered for redemption. All signatures of account holders must be included in
the request, and a signature guarantee, if required, must also be included for
the request to be valid.

WHEN ARE REDEMPTION PAYMENTS MADE?

As noted above, redemption payments for telephone redemptions are sent on the
day after the telephone call is received. Payments for redemptions sent in
writing are normally made promptly, but no later than seven days after the
receipt of a request that meets requirements described above. However, the Fund
may suspend the right of redemption under certain extraordinary circumstances in
accordance with rules of the Securities and Exchange Commission. If shares were
purchased by wire, they cannot be redeemed until the day after the Application
Form is received. If shares were purchased by check and then redeemed shortly
after the check is received, the Fund may delay sending the redemption proceeds
until it has been notified that the check used to purchase the shares has been
collected, a process which may take up to 15 days. This delay may be avoided by
investing by wire or by using a certified or official bank check to make the
purchase.

REPURCHASES FROM DEALERS.

The Fund may accept orders to repurchase shares from an investment dealer on
behalf of a dealer's customers. The net asset value for a repurchase is that
next calculated after receipt of the order from the dealer. The dealer is
responsible for forwarding any documents required in connection with a
redemption, including a signature guarantee, and the Fund may cancel the order
if these documents are not received promptly.

OTHER INFORMATION ABOUT REDEMPTIONS.

A redemption may result in recognition of a gain or loss for federal income tax
purposes. Due to the relatively high cost of maintaining smaller accounts, the
shares in your account (unless it is a retirement plan or Uniform Gifts or
Transfers to Minors Act account) may be redeemed by the Fund if, due to
redemptions you have made, the total value of your account is reduced to less
than $500. If the Fund determines to make such an involuntary redemption, you
will first be notified that the value of your account is less than $500, and you
will be allowed 30 days to make an additional investment to bring the value of
your account to at least $500 before the Fund takes any action.

DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS.

Dividends from net investment income, if any, are normally declared and paid by
the Fund in December. Capital gains distributions, if any, are also normally
made in December, but the Fund may make an additional payment of dividends or
distributions if it deems it desirable at another time during any year.

9 PROSPECTUS
<PAGE>
Dividends and capital gain distributions (net of any required tax withholding)
are automatically reinvested in additional shares of the Fund at the net asset
value per share on the reinvestment date unless you have previously requested in
writing to the Shareholder Servicing Agent or on the new account application
form that payment be made in cash.

Any dividend or distribution paid by the Fund has the effect of reducing the net
asset value per share on the record date by the amount of the dividend or
distribution. You should note that a dividend or distribution paid on shares
purchased shortly before that dividend or distribution was declared will be
subject to income taxes even though the dividend or distribution represents, in
substance, a partial return of capital to you.

TAXES.

Distributions made by the Fund will be taxable to shareholders whether received
in shares (through dividend reinvestment) or in cash. Distributions derived from
net investment income, including net short-term capital gains, are taxable to
shareholders as ordinary income. Distributions designated as capital gains
dividends are taxable as long-term capital gains regardless of the length of
time you have owned your Fund shares. The maximum capital gains rate for
corporate shareholders is the same as the maximum tax rate for ordinary income.
Although distributions are generally taxable when received, certain
distributions made in January are taxable as if received the prior December. You
will be informed annually of the amount and nature of the Fund's distributions.
You should consult your own tax advisors concerning federal, state and local
taxation of distributions from the Fund.

DISTRIBUTION ARRANGEMENTS.

Pursuant to a plan of distribution adopted by the Trust, on behalf of the Fund,
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), the Fund may reimburse
the Advisor for sales distribution and related expenses incurred by the Advisor
up to 0.25% of the Fund's average annual net assets. Expenses permitted to be
paid include preparation, printing and mailing of prospectuses, shareholder
reports such as semi-annual and annual reports, performance reports and
newsletters, sales literature and other promotional material to prospective
investors, direct mail solicitations, advertising, public relations,
compensation of sales personnel, advisors or other third parties for their
assistance with respect to the distribution of the Fund's shares, payments to
financial intermediaries for shareholder support, administrative and accounting
services with respect to shareholders of the Fund and such other expenses as may
be approved from time to time by the Board of Trustees of the Trust.

Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment in the Fund and may
cost you more than paying other types of sales charges.

PROSPECTUS 10
<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance during its past fiscal period. Certain information
reflects financial results for a single fund share. The total returns in the
table represent the rate that an investor would have earned on an investment in
the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by McGladrey & Pullen, LLP. Their report and the
Fund's financial statements are included in the Fund's annual report which is
available upon request.

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------

January 2, 1998*
through
December 31, 1998

Net asset value, beginning period................................. $10.00
------

Income from investment operations:
Net investment loss.......................................... ( 0.08)
Net realized and unrealized loss on securities............... (0.85)
------
Total from investment operations.................................. (0.93)
------

Net asset value, end of period.................................... $ 9.07
======

Total return...................................................... (9.30%)+

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)............................. $7,042

Ratio of expenses to average net assets........................... 2.25%++
Ratio of net investment loss to average net assets................ (1.28%)++

Portfolio turnover rate........................................... 5.82%

* Commencement of operations.

++ Annualized. These figures reflect the effect of the Advisor's agreement to
waive its fees and/or reimburse Fund expenses.

+ Not annualized.

11 PROSPECTUS
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THE AL FRANK FUND

STATEMENT OF ADDITIONAL INFORMATION

Dated July 12, 1999

This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the prospectus dated July 12, 1999, as may be amended
from time to time, of The Al Frank Fund (the "Fund"), a series of Advisors
Series Trust (the "Trust"). Al Frank Asset Management, Inc. (the "Advisor") is
the Advisor to the Fund. A copy of the prospectus may be obtained by writing to
the Fund at 465 Forest Avenue, Suite I, Laguna Beach, CA 92651; or by calling
888-263-6443.

THE AL FRANK FUND,
A SERIES OF ADVISORS SERIES TRUST

FOR MORE INFORMATION

The Statement of Additional Information (SAI) includes additional information
about the Fund.

The Fund's annual and semi-annual reports to shareholders contain additional
information about the Fund's investments. The annual report includes a
discussion of the market conditions and investment strategies which
significantly affected the Fund's performance during its last fiscal year.

The SAI and shareholder reports are available free upon request. To request them
or other information, or to ask any questions, please call or write:

888-263-6443 (Shareholder Services)
877-654-1325 (Daily NAV)

The Al Frank Fund
c/o American Data Services
150 Motor Parkway, Ste. 109
Hauppauge, NY 11788

The SAI and other Fund information may also be reviewed and copied at the SEC's
Public Reference Room in Washington, DC. Call 1-800-SEC-0330 for information
about its operations.

Reports and other Fund information are also available on the SEC's Internet site
at www.sec.gov. Copies of this information may be obtained, upon payment of the
proper duplicating fees, by writing to the SEC's Public Reference Section,
Washington, DC 20549-6009.

The Fund's SEC File Number is 811-07959.
<PAGE>
THE AL FRANK FUND

STATEMENT OF ADDITIONAL INFORMATION

Dated July 12, 1999

TABLE OF CONTENTS

Investment Policies ................................................... B-2

Management ............................................................ B-9

Portfolio Transactions and Brokerage .................................. B-13

Net Asset Value ....................................................... B-14

Taxation .............................................................. B-15

Dividends and Distributions ........................................... B-17

Performance Information ............................................... B-18

General Information ................................................... B-18

B-1
<PAGE>
INVESTMENT POLICIES

This discussion below supplements information contained in the
prospectus as to investment policies of the Fund.

CONVERTIBLE SECURITIES AND WARRANTS

The Fund may invest in convertible securities and warrants. A
convertible security is a fixed-income security (a debt instrument or a
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in an
issuer's capital structure, but are usually subordinated to similar
non-convertible securities. While providing a fixed-income stream (generally
higher in yield than the income derivable from common stock but lower than that
afforded by a similar nonconvertible security), a convertible security also
gives an investor the opportunity, through its conversion feature, to
participate in the capital appreciation of the issuing company depending upon a
market price advance in the convertible security's underlying common stock.

A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price. Unlike convertible debt securities or preferred stock, warrants do not
pay a fixed dividend. Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which event
the warrant may expire without being exercised, resulting in a loss of the
Fund's entire investment therein).

SHORT-TERM INVESTMENTS

The Fund may invest in any of the following securities and instruments:

BANK CERTIFICATES OR DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS.
The Fund may acquire certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
monies deposited in a commercial bank for a definite period of time and earning
a specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar-denominated obligations of domestic or foreign banks or financial
institutions which at the time of purchase have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and foreign
branches), based on latest published reports, or less than $100 million if the
principal amount of such bank obligations are fully insured by the U.S.
Government. If the Fund holds instruments of foreign banks or financial
institutions, it may be subject to additional investment risks that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. See "Foreign Investments" below. Such
risks include future political and economic developments, the possible
imposition of withholding taxes by the particular country in which the issuer is
located on interest income payable on the securities, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities.

Domestic banks and foreign banks are subject to different governmental
regulations with respect to the amount and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
banking industry depends largely upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of the banking industry.

As a result of federal and state laws and regulations, domestic banks
are, among other things, required to maintain specified levels of reserves,
limited in the amount which they can loan to a single borrower, and subject to
other regulations designed to promote financial soundness. However, such laws
and regulations do not necessarily apply to foreign bank obligations that the
Fund may acquire.

In addition to purchasing certificates of deposit and bankers'
acceptances, to the extent permitted under its investment objectives and
policies stated above and in its prospectus, the Fund may make interest-bearing
time or other interest-bearing deposits in commercial or savings banks. Time
deposits are non-negotiable deposits maintained at a banking institution for a
specified period of time at a specified interest rate.

B-2
<PAGE>
SAVINGS ASSOCIATION OBLIGATIONS. The Fund may invest in certificates of
deposit (interest-bearing time deposits) issued by savings banks or savings and
loan associations that have capital, surplus and undivided profits in excess of
$100 million, based on latest published reports, or less than $100 million if
the principal amount of such obligations is fully insured by the U.S.
Government.

COMMERCIAL PAPER, SHORT-TERM NOTES AND OTHER CORPORATE OBLIGATIONS. The
Fund may invest a portion of its assets in commercial paper and short-term
notes. Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper and short-term notes will normally have
maturities of less than nine months and fixed rates of return, although such
instruments may have maturities of up to one year.

Commercial paper and short-term notes will consist of issues rated at
the time of purchase "A-2" or higher by S&P, "Prime-1" or "Prime-2" by Moody's,
or similarly rated by another nationally recognized statistical rating
organization or, if unrated, will be determined by the Advisor to be of
comparable quality. These rating symbols are described in the Appendix.

Corporate obligations include bonds and notes issued by corporations to
finance longer-term credit needs than supported by commercial paper. While such
obligations generally have maturities of ten years or more, the Fund may
purchase corporate obligations which have remaining maturities of one year or
less from the date of purchase and which are rated "AA" or higher by S&P or "Aa"
or higher by Moody's.

INVESTMENT COMPANY SECURITIES

The Fund may invest in shares of other investment companies. The Fund
may invest in money market mutual funds in connection with its management of
daily cash positions. In addition to the advisory and operational fees a Fund
bears directly in connection with its own operation, the Fund would also bear
its pro rata portions of each other investment company's advisory and
operational expenses.

GOVERNMENT OBLIGATIONS

The Fund may make short-term investments in U.S. Government
obligations. Such obligations include Treasury bills, certificates of
indebtedness, notes and bonds, and issues of such entities as the Government
National Mortgage Association ("GNMA"), Export-Import Bank of the United States,
Tennessee Valley Authority, Resolution Funding Corporation, Farmers Home
Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Farm Credit Banks, Federal Land Banks, Federal Housing Administration,
Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage
Corporation, and the Student Loan Marketing Association.

Some of these obligations, such as those of the GNMA, are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of United States, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the FNMA, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law.

The Fund may invest in sovereign debt obligations of foreign countries.
A sovereign debtor's willingness or ability to repay principal and interest in a
timely manner may be affected by a number of factors, including its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which it may be
subject. Emerging market governments could default on their sovereign debt. Such
sovereign debtors also may be dependent on expected disbursements from foreign
governments, multilateral agencies and other entities abroad to reduce principal
and interest arrearages on their debt. The commitments on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a sovereign debtor's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to meet
such conditions could result in the cancellation of such third parties'
commitments to lend funds to the sovereign debtor, which may further impair such
debtor's ability or willingness to service its debt in a timely manner.

B-3
<PAGE>
FOREIGN INVESTMENTS AND CURRENCIES

The Fund may invest in securities of foreign issuers, provided that
they are publicly traded in the United States.

DEPOSITARY RECEIPTS. Depositary Receipts ("DRs") include American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") or other forms of depositary receipts. DRs are
receipts typically issued in connection with a U.S. or foreign bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation.

RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign
securities involve certain inherent risks, including the following:

POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. The internal politics of certain foreign countries may not be as
stable as those of the United States. Governments in certain foreign countries
also continue to participate to a significant degree, through ownership interest
or regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are accordingly
affected by the trade policies and economic conditions of their trading
partners. Enactment by these trading partners of protectionist trade legislation
could have a significant adverse effect upon the securities markets of such
countries.

CURRENCY FLUCTUATIONS. The Fund may invest in securities denominated in
foreign currencies. Accordingly, a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of the Fund's assets denominated in that currency. Such changes will also
affect the Fund's income. The value of the Fund's assets may also be affected
significantly by currency restrictions and exchange control regulations enacted
from time to time.

TAXES. The interest and dividends payable on certain of the Fund's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Fund's
shareholders.

OPTIONS ON SECURITIES

PURCHASING PUT AND CALL OPTIONS. The Fund may purchase covered "put"
and "call" options with respect to securities which are otherwise eligible for
purchase by the Fund and with respect to various stock indices subject to
certain restrictions, not in excess of 5% of the Fund's total net assets. The
Fund will engage in trading of such derivative securities exclusively for
hedging purposes.

If the Fund purchases a put option, the Fund acquires the right to sell
the underlying security at a specified price at any time during the term of the
option (for "American-style" options) or on the option expiration date (for
"European-style" options). Purchasing put options may be used as a portfolio
investment strategy when the Advisor perceives significant short-term risk but
substantial long-term appreciation for the underlying security. The put option
acts as an insurance policy, as it protects against significant downward price
movement while it allows full participation in any upward movement. If the Fund
is holding a security which it feels has strong fundamentals, but for some
reason may be weak in the near term, the Fund may purchase a put option on such
security, thereby giving itself the right to sell such security at a certain
strike price throughout the term of the option. Consequently, the Fund will
exercise the put only if the price of such security falls below the strike price
of the put. The difference between the put's strike price and the market price
of the underlying security on the date the Fund exercises the put, less
transaction costs, will be the amount by which the Fund will be able to hedge
against a decline in the underlying security. If during the period of the option
the market price for the underlying security remains at or above the put's
strike price, the put will expire worthless, representing a loss of the price
the Fund paid for the put, plus transaction costs. If the price of the
underlying security increases, the profit the Fund realizes on the sale of the
security will be reduced by the premium paid for the put option less any amount
for which the put may be sold.

B-4
<PAGE>
If the Fund purchases a call option, it acquires the right to purchase
the underlying security at a specified price at any time during the term of the
option. The purchase of a call option is a type of insurance policy to hedge
against losses that could occur if the Fund has a short position in the
underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the call option has been
purchased to hedge a short position of the Fund in the underlying security and
the price of the underlying security thereafter falls, the profit the Fund
realizes on the cover of the short position in the security will be reduced by
the premium paid for the call option less any amount for which such option may
be sold.

Prior to exercise or expiration, an option may be sold when it has
remaining value by a purchaser through a "closing sale transaction," which is
accomplished by selling an option of the same series as the option previously
purchased. The Fund generally will purchase only those options for which the
Advisor believes there is an active secondary market to facilitate closing
transactions.

WRITING CALL OPTIONS. The Fund may write covered call options. A call
option is "covered" if the Fund owns the security underlying the call or has an
absolute right to acquire the security without additional cash consideration
(or, if additional cash consideration is required, cash or cash equivalents in
such amount as are held in a segregated account by the Custodian). The writer of
a call option receives a premium and gives the purchaser the right to buy the
security underlying the option at the exercise price. The writer has the
obligation upon exercise of the option to deliver the underlying security
against payment of the exercise price during the option period. If the writer of
an exchange-traded option wishes to terminate his obligation, he may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same series as the option previously written. A writer may not effect a closing
purchase transaction after it has been notified of the exercise of an option.

Effecting a closing transaction in the case of a written call option
will permit the Fund to write another call option on the underlying security
with either a different exercise price, expiration date or both. Also, effecting
a closing transaction will permit the cash or proceeds from the concurrent sale
of any securities subject to the option to be used for other investments of the
Fund. If the Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will effect a closing transaction prior
to or concurrent with the sale of the security.

The Fund will realize a gain from a closing transaction if the cost of
the closing transaction is less than the premium received from writing the
option or if the proceeds from the closing transaction are more than the premium
paid to purchase the option. The Fund will realize a loss from a closing
transaction if the cost of the closing transaction is more than the premium
received from writing the option or if the proceeds from the closing transaction
are less than the premium paid to purchase the option. However, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss to the Fund resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security owned by the Fund.

STOCK INDEX OPTIONS. The Fund may also purchase put and call options
with respect to the S&P 500 and other stock indices. Such options may be
purchased as a hedge against changes resulting from market conditions in the
values of securities which are held in the Fund's portfolio or which it intends
to purchase or sell, or when they are economically appropriate for the reduction
of risks inherent in the ongoing management of the Fund.

The distinctive characteristics of options on stock indices create
certain risks that are not present with stock options generally. Because the
value of an index option depends upon movements in the level of the index rather
than the price of a particular stock, whether the Fund will realize a gain or
loss on the purchase or sale of an option on an index depends upon movements in
the level of stock prices in the stock market generally rather than movements in
the price of a particular stock. Accordingly, successful use by the Fund of
options on a stock index would be subject to the Advisor's ability to predict
correctly movements in the direction of the stock market generally. This
requires different skills and techniques than predicting changes in the price of
individual stocks.

B-5
<PAGE>
Index prices may be distorted if trading of certain stocks included in
the index is interrupted. Trading of index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this were to occur, the Fund would not be able
to close out options which it had purchased, and if restrictions on exercise
were imposed, the Fund might be unable to exercise an option it holds, which
could result in substantial losses to the Fund. It is the policy of the Fund to
purchase put or call options only with respect to an index which the Advisor
believes includes a sufficient number of stocks to minimize the likelihood of a
trading halt in the index.

RISKS OF INVESTING IN OPTIONS. There are several risks associated with
transactions in options on securities and indices. Options may be more volatile
than the underlying securities and, therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying securities themselves. There are also significant differences
between the securities and options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objective. In addition, a liquid secondary market for particular options may
be absent for reasons which include the following: there may be insufficient
trading interest in certain options; restrictions may be imposed by an exchange
on opening transactions or closing transactions or both; trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options of underlying securities; unusual or unforeseen
circumstances may interrupt normal operations on an exchange; the facilities of
an exchange or clearing corporation may not at all times be adequate to handle
current trading volume; or one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.

A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events. The
extent to which the Fund may enter into options transactions may be limited by
the Internal Revenue Code of 1986 (the "Code") requirements for qualification of
the Fund as a regulated investment company. See "Dividends and Distributions"
and "Taxation."

DEALER OPTIONS. The Fund may engage in transactions involving dealer
options as well as exchange-traded options. Certain additional risks are
specific to dealer options. While the Fund might look to a clearing corporation
to exercise exchange-traded options, if the Fund were to purchase a dealer
option it would need to rely on the dealer from which it purchased the option to
perform if the option were exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as loss of the
expected benefit of the transaction.

Exchange-traded options generally have a continuous liquid market while
dealer options may not. Consequently, the Fund may generally be able to realize
the value of a dealer option it has purchased only by exercising or reselling
the option to the dealer who issued it. Similarly, when the Fund writes a dealer
option, the Fund may generally be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to whom the Fund originally wrote the option. While the Fund will seek to enter
into dealer options only with dealers who will agree to and which are expected
to be capable of entering into closing transactions with the Fund, there can be
no assurance that the Fund will at any time be able to liquidate a dealer option
at a favorable price at any time prior to expiration. Unless the Fund, as a
covered dealer call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) used
as cover until the option expires or is exercised. In the event of insolvency of
the other party, the Fund may be unable to liquidate a dealer option. With
respect to options written by the Fund, the inability to enter into a closing
transaction may result in material losses to the Fund. For example, because the
Fund must maintain a secured position with respect to any call option on a
security it writes, the Fund may not sell the assets which it has segregated to
secure the position while it is obligated under the option. This requirement may
impair the Fund's ability to sell portfolio securities at a time when such sale
might be advantageous.

The Staff of the Securities and Exchange Commission (the "Commission")
has taken the position that purchased dealer options are illiquid securities.
The Fund may treat the cover used for written dealer options as liquid if the
dealer agrees that the Fund may repurchase the dealer option it has written for
a maximum price to be calculated by a predetermined formula. In such cases, the
dealer option would be considered illiquid only to the extent the maximum
purchase price under the formula exceeds the intrinsic value of the option.
Accordingly, the Fund will treat dealer options as subject to the Fund's
limitation on illiquid securities. If the Commission changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instruments accordingly.

B-6
<PAGE>
SPREAD TRANSACTIONS. The Fund may purchase covered spread options from
securities dealers. These covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put securities that it owns at a fixed dollar spread or fixed
yield spread in relationship to another security that the Fund does not own, but
which is used as a benchmark. The risk to the Fund, in addition to the risks of
dealer options described above, is the cost of the premium paid as well as any
transaction costs. The purchase of spread options will be used to protect the
Fund against adverse changes in prevailing credit quality spreads, I.E., the
yield spread between high quality and lower quality securities. This protection
is provided only during the life of the spread options.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements with respect to its
portfolio securities. Pursuant to such agreements, the Fund acquires securities
from financial institutions such as banks and broker-dealers as are deemed to be
creditworthy by the Advisor, subject to the seller's agreement to repurchase and
the Fund's agreement to resell such securities at a mutually agreed upon date
and price. The repurchase price generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the underlying portfolio security). Securities subject
to repurchase agreements will be held by the Custodian or in the Federal
Reserve/Treasury Book-Entry System or an equivalent foreign system. The seller
under a repurchase agreement will be required to maintain the value of the
underlying securities at not less than 102% of the repurchase price under the
agreement. If the seller defaults on its repurchase obligation, the Fund will
suffer a loss to the extent that the proceeds from a sale of the underlying
securities are less than the repurchase price under the agreement. Bankruptcy or
insolvency of such a defaulting seller may cause the Fund's rights with respect
to such securities to be delayed or limited. Repurchase agreements are
considered to be loans under the 1940 Act.

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS

The Fund may purchase securities on a "when-issued," forward commitment
or delayed settlement basis. In this event, the Custodian will segregate liquid
assets equal to the amount of the commitment in a separate account. Normally,
the Custodian will set aside portfolio securities to satisfy a purchase
commitment. In such a case, the Fund may be required subsequently to segregate
additional assets in order to assure that the value of the account remains equal
to the amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.

The Fund does not intend to engage in these transactions for
speculative purposes but only in furtherance of its investment objectives.
Because the Fund will segregate liquid assets to satisfy its purchase
commitments in the manner described, the Fund's liquidity and the ability of the
Advisor to manage it may be affected in the event the Fund's forward
commitments, commitments to purchase when-issued securities and delayed
settlements ever exceeded 15% of the value of its net assets.

The Fund will purchase securities on a when-issued, forward commitment
or delayed settlement basis only with the intention of completing the
transaction. If deemed advisable as a matter of investment strategy, however,
the Fund may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a taxable capital gain or loss. When the Fund engages in when-issued,
forward commitment and delayed settlement transactions, it relies on the other
party to consummate the trade. Failure of such party to do so may result in the
Fund's incurring a loss or missing an opportunity to obtain a price credited to
be advantageous.

The market value of the securities underlying a when-issued purchase,
forward commitment to purchase securities, or a delayed settlement and any
subsequent fluctuations in their market value is taken into account when
determining the market value of the Fund starting on the day the Fund agrees to
purchase the securities. The Fund does not earn interest on the securities it
has committed to purchase until they are paid for and delivered on the
settlement date.

B-7
<PAGE>
LENDING PORTFOLIO SECURITIES

The Fund may lend its portfolio securities in an amount not exceeding
one-third of its total assets to financial institutions such as banks and
brokers if the loan is collateralized in accordance with applicable regulations.
Under the present regulatory requirements which govern loans of portfolio
securities, the loan collateral must, on each business day, at least equal the
value of the loaned securities and must consist of cash, letters of credit of
domestic banks or domestic branches of foreign banks, or securities of the U.S.
Government or its agencies. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms and the issuing bank would have to be
satisfactory to the Fund. Any loan might be secured by any one or more of the
three types of collateral. The terms of the Fund's loans must permit the Fund to
reacquire loaned securities on five days' notice or in time to vote on any
serious matter and must meet certain tests under the Code.

SHORT SALES

The Fund is authorized to make short sales of securities. In a short
sale, the Fund sells a security which it does not own, in anticipation of a
decline in the market value of the security. To complete the sale, the Fund must
borrow the security (generally from the broker through which the short sale is
made) in order to make delivery to the buyer. The Fund is then obligated to
replace the security borrowed by purchasing it at the market price at the time
of replacement. The Fund is said to have a "short position" in the securities
sold until it delivers them to the broker. The period during which the Fund has
a short position can range from one day to more than a year. Until the security
is replaced, the proceeds of the short sale are retained by the broker, and the
Fund is required to pay to the broker a negotiated portion of any dividends or
interest which accrue during the period of the loan. To meet current margin
requirements, the Fund is also required to deposit with the broker additional
cash or securities so that the total deposit with the broker is maintained daily
at 150% of the current market value of the securities sold short (100% of the
current market value if a security is held in the account that is convertible or
exchangeable into the security sold short within 90 days without restriction
other than the payment of money).

Short sales by the Fund create opportunities to increase the Fund's
return but, at the same time, involve specific risk considerations and may be
considered a speculative technique. Since the Fund in effect profits from a
decline in the price of the securities sold short without the need to invest the
full purchase price of the securities on the date of the short sale, the Fund's
net asset value per share will tend to increase more when the securities it has
sold short decrease in value, and to decrease more when the securities it has
sold short increase in value, than would otherwise be the case if it had not
engaged in such short sales. The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of any premium, dividends or
interest the Fund may be required to pay in connection with the short sale.
Furthermore, under adverse market conditions the Fund might have difficulty
purchasing securities to meet its short sale delivery obligations, and might
have to sell portfolio securities to raise the capital necessary to meet its
short sale obligations at a time when fundamental investment considerations
would not favor such sales.

INVESTMENT RESTRICTIONS

The Trust (on behalf of the Fund) has adopted the following
restrictions as fundamental policies, which may not be changed without the
favorable vote of the holders of a "majority," as defined in the 1940 Act, of
the outstanding voting securities of the Fund. Under the 1940 Act, the "vote of
the holders of a majority of the outstanding voting securities" means the vote
of the holders of the lesser of (i) 67% of the shares of the Fund represented at
a meeting at which the holders of more than 50% of its outstanding shares are
represented or (ii) more than 50% of the outstanding shares of the Fund.

As a matter of fundamental policy, the Fund is diversified. The Fund's
investment objective is also fundamental.

In addition, the Fund may not:

B-8
<PAGE>
1. Issue senior securities, borrow money or pledge its assets, except
that (i) the Fund may borrow from banks in amounts not exceeding one-third of
its total assets (not including the amount borrowed); and (ii) this restriction
shall not prohibit the Fund from engaging in options transactions or short
sales;

2. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of transactions and except that the Fund may
borrow money from banks to purchase securities;

3. Act as underwriter (except to the extent the Fund may be deemed to
be an underwriter in connection with the sale of securities in its investment
portfolio);

4. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities);

5. Purchase or sell real estate or interests in real estate or real
estate limited partnerships (although the Fund may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);

6. Purchase or sell commodities or commodity futures contracts, except
that the Fund may purchase and sell foreign currency contracts in accordance
with any rules of the Commodity Futures Trading Commission;

7. Make loans of money (except for purchases of debt securities
consistent with the investment policies of the Fund and except for repurchase
agreements); or

8. Make investments for the purpose of exercising control or
management.

The Fund observes the following restrictions as a matter of operating
but not fundamental policy, pursuant to positions taken by federal regulatory
authorities:

The Fund may not:

1. Invest in the securities of other investment companies or purchase
any other investment company's voting securities or make any other investment in
other investment companies except to the extent permitted by federal law;

2. Invest in securities which are restricted as to disposition or
otherwise are illiquid or have no readily available market (except for
securities which are determined by the Board of Trustees to be liquid); or

3. Purchase or sell future contracts.

MANAGEMENT

The overall management of the business and affairs of the Trust is
vested with its Board of Trustees. The Board approves all significant agreements
between the Trust and persons or companies furnishing services to it, including
the agreements with the Advisor, Administrator, Custodian and Transfer Agent.
The day-to-day operations of the Trust are delegated to its officers, subject to
the Fund's investment objectives and policies and to general supervision by the
Board of Trustees.

The Trustees and officers of the Trust, their ages and positions with
the Trust, their business addresses and principal occupations during the past
five years are:

<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- --------------------- -------- -------------------------------------------
<S> <C> <C>
Walter Auch, Sr.(Born 1921) Trustee Director, Nicholas-Applegate Mutual Funds, Brinson Funds
6001 N. 62d Place (since 1994), Smith Barney Trak Fund, Pimco Advisors L.P.,
Paradise Valley, AZ 85253 Banyan Realty Trust, Banyan Land Fund II and Legend Properties.

Eric Banhazl (Born 1957)* Trustee, Senior Vice President, Investment Company Administration LLC;
2025 E. Financial Way President and Vice President, First Fund Distributors, Inc.; Assistant Treasurer,
Glendora, CA 91740 Treasurer RNC Mutual Fund Group; Treasurer, Guinness Flight Investment
Funds, Inc. and Professionally Managed Portfolios.

Donald O'Connor (Born 1936) Trustee Retired; formerly Executive Vice President and Chief Operating
1700 Taylor Avenue Officer of ICI Mutual Insurance Company (until January, 1997),
Fort Washington MD, 20744 Vice President, Operations, Investment Company Institute (until
June, 1993).
</TABLE>

B-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
George Wofford III Trustee Vice President, Information Services, Federal Home Loan Bank of
(Born 1939) San Francisco (since March, 1993); formerly Director of
305 Glendora Circle Management Information Services, Morrison & Foerster (law
Danville, CA 94526 firm).

Steven J. Paggioli Vice Executive Vice President, Robert H. Wadsworth & Associates, Inc.
(Born 1950) President and Investment Company Administration LLC; Vice President,
479 W. 22nd Street First Fund Distributors, Inc.; President and Trustee,
New York, NY 10011 Professionally Managed Portfolios; Director, Managers Funds, Inc.

Robert H. Wadsworth Vice President, Robert H. Wadsworth & Associates, Inc., Investment
(Born 1940) President Company Administration, LLC and First Fund Distributors, Inc.;
4455 E. Camelback Road Vice President, Professionally Managed Portfolios; President,
Suite 261E Guinness Flight Investment Funds, Inc.; Director, Germany Fund,
Phoenix, AZ 85018 Inc., New Germany Fund, Inc. and Central European Equity Fund,
Inc. and Deutsche Funds, Inc.

Chris Moser (Born 1949) Secretary Employed by Investment Company Administration Corporation
4455 E. Camelback Road (since July, 1996); formerly employed by Bank One, N.A. (from
Suite 261E August until July, 1996); O'Connor, Cavanagh, Anderson,
Phoenix, AZ 85018 Killingsworth and Beshears (law firm) (until August, 1995).
</TABLE>

* denotes Trustee who is an "interested person" of the Trust under the 1940 Act.

NAME AND POSITION AGGREGATE COMPENSATION FROM THE TRUST*
- ----------------- --------------------------------------
Walter E. Auch, Sr., Trustee $12,000

Donald E. O'Connor, Trustee $12,000

George T. Wofford III, Trustee $12,000

For the fiscal year ended December 31, 1998, Trustees' fees and expenses in the
amount of $12,000 per independent Trustee were paid by the Trust. The Trust has
no pension or retirement plan. No other entity affiliated with the Trust pays
any compensation to the Trustees.

THE ADVISOR

Subject to the supervision of the Board of Trustees, investment
management and related services are provided by the Advisor, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement"). The Advisor is
controlled by Alfred Frank.

Under the Advisory Agreement, the Advisor agrees to invest the assets
of the Fund in accordance with the investment objectives, policies and
restrictions of the Fund as set forth in the Fund's and Trust's governing
documents, including, without limitation, the Trust's Agreement and Declaration
of Trust and By-Laws; the Fund's prospectus, Statement of Additional
Information, and undertakings; and such other limitations, policies and
procedures as the Trustees of the Trust may impose from time to time in writing
to the Advisor. In providing such services, the Advisor shall at all times
adhere to the provisions and restrictions contained in the federal securities
laws, applicable state securities laws, the Code, and other applicable law.

B-10
<PAGE>
Without limiting the generality of the foregoing, the Advisor has
agreed to (i) furnish the Fund with advice and recommendations with respect to
the investment of the Fund's assets, (ii) effect the purchase and sale of
portfolio securities; (iii) manage and oversee the investments of the Fund,
subject to the ultimate supervision and direction of the Trust's Board of
Trustees; (iv) vote proxies and take other actions with respect to the Fund's
securities; (v) maintain the books and records required to be maintained with
respect to the securities in the Fund's portfolio; (vi) furnish reports,
statements and other data on securities, economic conditions and other matters
related to the investment of the Fund's assets which the Trustees or the
officers of the Trust may reasonably request; and (vi) render to the Trust's
Board of Trustees such periodic and special reports as the Board may reasonably
request. The Advisor has also agreed, at its own expense, to maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary to the performance of its
obligations under the Advisory Agreement. Personnel of the Advisor may serve as
officers of the Trust provided they do so without compensation from the Trust.
Without limiting the generality of the foregoing, the staff and personnel of the
Advisor shall be deemed to include persons employed or retained by the Advisor
to furnish statistical information, research, and other factual information,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance as the Advisor or the Trust's Board of Trustees may desire and
reasonably request. With respect to the operation of the Fund, the Advisor has
agreed to be responsible for the expenses of printing and distributing extra
copies of the Fund's prospectus, statement of additional information, and sales
and advertising materials (but not the legal, auditing or accounting fees
attendant thereto) to prospective investors (but not to existing shareholders);
and the costs of any special Board of Trustees meetings or shareholder meetings
convened for the primary benefit of the Advisor.

As compensation for the Advisor's services, the Fund pays it an
advisory fee at the rate specified in the prospectus. In addition to the fees
payable to the Advisor and the Administrator, the Fund is responsible for its
operating expenses, including: fees and expenses incurred in connection with the
issuance, registration and transfer of its shares; brokerage and commission
expenses; all expenses of transfer, receipt, safekeeping, servicing and
accounting for the cash, securities and other property of the Trust for the
benefit of the Fund including all fees and expenses of its custodian,
shareholder services agent and accounting services agent; interest charges on
any borrowings; costs and expenses of pricing and calculating its daily net
asset value and of maintaining its books of account required under the 1940 Act;
taxes, if any; a pro rata portion of expenditures in connection with meetings of
the Fund's shareholders and the Trust's Board of Trustees that are properly
payable by the Fund; salaries and expenses of officers and fees and expenses of
members of the Trust's Board of Trustees or members of any advisory board or
committee who are not members of, affiliated with or interested persons of the
Advisor or Administrator; insurance premiums on property or personnel of the
Fund which inure to its benefit, including liability and fidelity bond
insurance; the cost of preparing and printing reports, proxy statements,
prospectuses and statements of additional information of the Fund or other
communications for distribution to existing shareholders; legal, auditing and
accounting fees; trade association dues; fees and expenses (including legal
fees) of registering and maintaining registration of its shares for sale under
federal and applicable state and foreign securities laws; all expenses of
maintaining and servicing shareholder accounts, including all charges for
transfer, shareholder recordkeeping, dividend disbursing, redemption, and other
agents for the benefit of the Fund, if any; and all other charges and costs of
its operation plus any extraordinary and non-recurring expenses, except as
otherwise prescribed in the Advisory Agreement.

The Fund is responsible for its own operating expenses. The Advisor has
contractually agreed to reduce fees payable to it by the Fund and to pay Fund
operating expenses to the extent necessary to limit the Fund's aggregate annual
operating expenses (excluding interest and tax expenses) to the limit set forth
in the Expense Table (the "expense cap"). Any such reductions made by the
Advisor in its fees or payment of expenses which are the Fund's obligation are
subject to reimbursement by the Fund to the Advisor, if so requested by the
Advisor, in subsequent fiscal years if the aggregate amount actually paid by the
Fund toward the operating expenses for such fiscal year (taking into account the
reimbursement) does not exceed the applicable limitation on Fund expenses. The
Advisor is permitted to be reimbursed only for fee reductions and expense
payments made in the previous three fiscal years, except that it is permitted to
look back five years and four years, respectively, during the initial six years
and seventh year of the Fund's operations. Any such reimbursement is also
contingent upon the Board of Trustees' subsequent review and ratification of the
reimbursed amounts. Such reimbursement may not be paid prior to the Fund's
payment of current ordinary operating expenses.

B-11
<PAGE>
During the year ended December 31, 1998, the Advisor earned $50,113 in
advisory fees. The Advisor has contractually agreed to limit total fund
operating expenses to 2.25% of average net assets annually. As a result of that
limitation, during the year ended December 31, 1998, the Advisor waived the full
amount of its fee and paid Fund operating expenses in the amount of $25,133.

Under the Advisory Agreement, the Advisor will not be liable to the
Trust or the Fund or any shareholder for any act or omission in the course of,
or connected with, rendering services or for any loss sustained by the Trust
except in the case of a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages will be limited as
provided in the 1940 Act) or of willful misfeasance, bad faith or gross
negligence, or reckless disregard of its obligations and duties under the
Agreement.

The Advisory Agreement will remain in effect for a period not to exceed
two years. Thereafter, if not terminated, the Advisory Agreement will continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by a majority vote of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund.

The Advisory Agreement is terminable by vote of the Board of Trustees
or by the holders of a majority of the outstanding voting securities of the Fund
at any time without penalty, on 60 days written notice to the Advisor. The
Advisory Agreement also may be terminated by the Advisor on 60 days written
notice to the Trust. The Advisory Agreement terminates automatically upon its
assignment (as defined in the 1940 Act).

THE ADMINISTRATOR. The Administrator has agreed to be responsible for
providing such services as the Trustees may reasonably request, including but
not limited to (i) maintaining the Trust's books and records (other than
financial or accounting books and records maintained by any custodian, transfer
agent or accounting services agent); (ii) overseeing the Trust's insurance
relationships; (iii) preparing for the Trust (or assisting counsel and/or
auditors in the preparation of) all required tax returns, proxy statements and
reports to the Trust's shareholders and Trustees and reports to and other
filings with the Commission and any other governmental agency (the Trust
agreeing to supply or cause to be supplied to the Administrator all necessary
financial and other information in connection with the foregoing); (iv)
preparing such applications and reports as may be necessary to permit the offer
and sale of the shares of the Trust under the securities or "blue sky" laws of
the various states selected by the Trust (the Trust agreeing to pay all filing
fees or other similar fees in connection therewith); (v) responding to all
inquiries or other communications of shareholders, if any, which are directed to
the Administrator, or if any such inquiry or communication is more properly to
be responded to by the Trust's custodian, transfer agent or accounting services
agent, overseeing their response thereto; (vi) overseeing all relationships
between the Trust and any custodian(s), transfer agent(s) and accounting
services agent(s), including the negotiation of agreements and the supervision
of the performance of such agreements; and (vii) authorizing and directing any
of the Administrator's directors, officers and employees who may be elected as
Trustees or officers of the Trust to serve in the capacities in which they are
elected. All services to be furnished by the Administrator under this Agreement
may be furnished through the medium of any such directors, officers or employees
of the Administrator.

For its services, the Administrator receives a fee monthly at the
following annual rate, subject to a $30,000 minimum:

Fund asset level Fee rate
- ---------------- --------
First $50 million 0.20% of average daily net assets
Next $50 million 0.15% of average daily net assets
Next $50 million 0.10% of average daily net assets
Next $50 million, and thereafter 0.05% of average daily net assets

B-12
<PAGE>
DISTRIBUTION ARRANGEMENTS

Pursuant to a plan of distribution adopted by the Trust, on behalf of
the Fund, pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), the Fund may
pay distribution and related expenses up to 0.25% of its average net assets to
the Advisor as distribution coordinator. Expenses permitted to be paid include
preparation, printing and mailing of prospectuses, shareholder reports such as
semi-annual and annual reports, performance reports and newsletters, sales
literature and other promotional material to prospective investors, direct mail
solicitations, advertising, public relations, compensation of sales personnel,
advisors or other third parties for their assistance with respect to the
distribution of the Fund's shares, payments to financial intermediaries for
shareholder support, administrative and accounting services with respect to
shareholders of the Fund and such other expenses as may be approved from time to
time by the Board of Trustees of the Trust.

The Plan allows excess distribution expenses to be carried forward by
the Advisor, as distribution coordinator, and resubmitted in a subsequent fiscal
year, provided that (i) distribution expenses cannot be carried forward for more
than three years following initial submission; (ii) the Trustees have made a
determination at the time of initial submission that the distribution expenses
are appropriate to be carried forward and (iii) the Trustees make a further
determination, at the time any distribution expenses which have been carried
forward are submitted for payment, that payment at the time is appropriate,
consistent with the objectives of the Plan and in the current best interests of
shareholders.

Under the Plan, the Trustees will be furnished quarterly with
information detailing the amount of expenses paid under the Plan and the
purposes for which payments were made. The Plan may be terminated at any time by
vote of a majority of the Trustees of the Trust who are not interested persons.
Continuation of the Plan is considered by such Trustees no less frequently than
annually.

During the year ended December 31, 1998, the Fund paid the Distribution
Coordinator distribution fees totaling $12,529. These fees were used to
reimburse the Advisor for Fund advertising expenses, presentation and road show
expenses incurred, marketing-related printing and postage, trail commissions and
dealer fees paid to brokers who sold shares of the Fund and compensation to
employees involved in distribution of Fund shares.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Advisory Agreement states that the Advisor shall be responsible for
broker-dealer selection and for negotiation of brokerage commission rates,
provided that the Advisor shall not direct orders to an affiliated person of the
Advisor without general prior authorization to use such affiliated broker or
dealer by the Trust's Board of Trustees. The Advisor's primary consideration in
effecting a securities transaction will be execution at the most favorable
price. In selecting a broker-dealer to execute each particular transaction, the
Advisor may take the following into consideration: the best net price available;
the reliability, integrity and financial condition of the broker-dealer; the
size of and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. The price to the Fund in any transaction may be less favorable
than that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.

Subject to such policies as the Advisor and the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides (directly or indirectly) brokerage or research services to the Advisor
an amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Fund. The Advisor is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers or dealers who also provide research or
statistical material, or other services, to the Trust, the Advisor, or any
affiliate of either. Such allocation shall be in such amounts and proportions as
the Advisor shall determine, and the Advisor shall report on such allocations
regularly to the Advisor and the Trust, indicating the broker-dealers to whom
such allocations have been made and the basis therefor. The Advisor is also
authorized to consider sales of shares of the Fund as a factor in the selection
of brokers or dealers to execute portfolio transactions, subject to the
requirements of best execution, I.E., that such brokers or dealers are able to
execute the order promptly and at the best obtainable securities price.

B-13
<PAGE>
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients of the Advisor,
the Advisor, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and the most efficient execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.

Brokerage commissions paid by the Fund during the year ended December
31, 1998, totaled $35,541.

Portfolio turnover for the Fund during the year ended December 31,
1998, was 5.82%.

NET ASSET VALUE

The net asset value of the Fund's shares will fluctuate and is
determined as of the close of trading on the New York Stock Exchange (the
"NYSE") (generally 4:00 p.m. Eastern time) each business day. The NYSE annually
announces the days on which it will not be open for trading. The most recent
announcement indicates that it will not be open on the following days: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However,
the NYSE may close on days not included in that announcement.

The net asset value per share is computed by dividing the value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of shares in the Fund outstanding at such
time.

Generally, the Fund's investments are valued at market value or, in the
absence of a market value, at fair value as determined in good faith by the
Advisor and the Trust's Valuation Committee pursuant to procedures approved by
or under the direction of the Board.

The Fund's securities, including ADRs, EDRs and GDRs, which are traded
on securities exchanges are valued at the last sale price on the exchange on
which such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any reported sales, at the mean between
the last available bid and asked price. Securities that are traded on more than
one exchange are valued on the exchange determined by the Advisor to be the
primary market. Securities primarily traded in the NASDAQ National Market System
for which market quotations are readily available shall be valued at the last
sale price on the day of valuation, or if there has been no sale on such day, at
the mean between the bid and asked prices. Over-the-counter ("OTC") securities
which are not traded in the NASDAQ National Market System shall be valued at the
most recent trade price. Securities and assets for which market quotations are
not readily available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith by or under the direction of the Board.

Short-term debt obligations with remaining maturities in excess of 60
days are valued at current market prices, as discussed above. Short-term
securities with 60 days or less remaining to maturity are, unless conditions
indicate otherwise, amortized to maturity based on their cost to the Fund if
acquired within 60 days of maturity or, if already held by the Fund on the 60th
day, based on the value determined on the 61st day.

An option that is written by the Fund is generally valued at the last
sale price or, in the absence of the last sale price, the last offer price. An
option that is purchased by the Fund is generally valued at the last sale price
or, in the absence of the last sale price, the last bid price. If an options
exchange closes after the time at which the Fund's net asset value is
calculated, the last sale or last bid and asked prices as of that time will be
used to calculate the net asset value.

All other assets of the Fund are valued in such manner as the Board in
good faith deems appropriate to reflect their fair value.

B-14
<PAGE>
TAXATION

The Fund intends to continue to qualify and elect to be treated as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986 as amended, (the "Code"), for each taxable year by complying with all
applicable requirements regarding the source of its income, the diversification
of its assets, and the timing of its distributions. The Fund's policy is to
distribute to its shareholders all of its investment company taxable income and
any net realized capital gains for each fiscal year in a manner that complies
with the distribution requirements of the Code, so that the Fund will not be
subject to any federal income or excise taxes based on net income. However, the
Board may elect to pay such excise taxes if it determines that payment is, under
the circumstances, in the best interests of the Fund.

In order to qualify as a regulated investment company, the Fund must,
among other things, (a) derive at least 90% of its gross income each year from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock or securities or foreign
currency gains related to investments in stock or securities, or other income
(generally including gains from options, futures or forward contracts) derived
with respect to the business of investing in stock, securities or currency, and
(b) diversify its holdings so that, at the end of each fiscal quarter, (i) at
least 50% of the market value of its assets is represented by cash, cash items,
U.S. Government securities, securities of other regulated investment companies
and other securities limited, for purposes of this calculation, in the case of
other securities of any one issuer to an amount not greater than 5% of the
Fund's assets or 10% of the voting securities of the issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities or securities of other regulated
investment companies). As such, and by complying with the applicable provisions
of the Code, the Fund will not be subject to federal income tax on taxable
income (including realized capital gains) that is distributed to shareholders in
accordance with the timing requirements of the Code. If the Fund is unable to
meet certain requirements of the Code, it may be subject to taxation as a
corporation.

Distributions of net investment income and net realized capital gains
by the Fund will be taxable to shareholders whether made in cash or reinvested
by the Fund in shares. In determining amounts of net realized capital gains to
be distributed, any capital loss carry-overs from the eight prior taxable years
will be applied against capital gains. Shareholders receiving a distribution
from the Fund in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share of the Fund on the reinvestment date. Fund distributions also
will be included in individual and corporate shareholders' income on which the
alternative minimum tax may be imposed.

The Fund or the securities dealer effecting a redemption of the Fund's
shares by a shareholder will be required to file information reports with the
Internal Revenue Service ("IRS") with respect to distributions and payments made
to the shareholder. In addition, the Fund will be required to withhold federal
income tax at the rate of 31% on taxable dividends, redemptions and other
payments made to accounts of individual or other non-exempt shareholders who
have not furnished their correct taxpayer identification numbers and certain
required certifications on the New Account application or with respect to which
the Fund or the securities dealer has been notified by the IRS that the number
furnished is incorrect or that the account is otherwise subject to withholding.

The Fund intends to declare and pay dividends and other distributions,
as stated in the prospectuses. In order to avoid the payment of any federal
excise tax based on net income, the Fund must declare on or before December 31
of each year, and pay on or before January 31 of the following year,
distributions at least equal to 98% of its ordinary income for that calendar
year and at least 98% of the excess of any capital gains over any capital losses
realized in the one-year period ending October 31 of that year, together with
any undistributed amounts of ordinary income and capital gains (in excess of
capital losses) from the previous calendar year.

The Fund may receive dividend distributions from U.S. corporations. To
the extent that the Fund receives such dividends and distributes them to its
shareholders, and meets certain other requirements of the Code, corporate
shareholders of the Fund may be entitled to the "dividends received" deduction.
Availability of the deduction is subject to certain holding period and
debt-financing limitations.

If more than 50% in value of the total assets of the Fund at the end of
its fiscal year is invested in stock or securities of foreign corporations, the
Fund may elect to pass through to its shareholders the pro rata share of all
foreign income taxes paid by the Fund. If this election is made, shareholders
will be (i) required to include in their gross income their pro rata share of
the Fund's foreign source income (including any foreign income taxes paid by the
Fund), and (ii) entitled either to deduct their share of such foreign taxes in
computing their taxable income or to claim a credit for such taxes against their
U.S. income tax, subject to certain limitations under the Code, including
certain holding period requirements. In this case, shareholders will be informed
in writing by the Fund at the end of each calendar year regarding the
availability of any credits on and the amount of foreign source income
(including or excluding foreign income taxes paid by the Fund) to be included in
their income tax returns. If not more than 50% in value of the Fund's total
assets at the end of its fiscal year is invested in stock or securities of
foreign corporations, the Fund will not be entitled under the Code to pass
through to its shareholders their pro rata share of the foreign taxes paid by
the Fund. In this case, these taxes will be taken as a deduction by the Fund.

B-15
<PAGE>
The Fund may be subject to foreign withholding taxes on dividends and
interest earned with respect to securities of foreign corporations.

The use of hedging strategies, such as entering into futures contracts
and forward contracts and purchasing options, involves complex rules that will
determine the character and timing of recognition of the income received in
connection therewith by the Fund. Income from foreign currencies (except certain
gains therefrom that may be excluded by future regulations) and income from
transactions in options, futures contracts and forward contracts derived by the
Fund with respect to its business of investing in securities or foreign
currencies will qualify as permissible income under Subchapter M of the Code.

For accounting purposes, when the Fund purchases an option, the premium
paid by the Fund is recorded as an asset and is subsequently adjusted to the
current market value of the option. Any gain or loss realized by the Fund upon
the expiration or sale of such options held by the Fund generally will be
capital gain or loss.

Any security, option, or other position entered into or held by the
Fund that substantially diminishes the Fund's risk of loss from any other
position held by the Fund may constitute a "straddle" for federal income tax
purposes. In general, straddles are subject to certain rules that may affect the
amount, character and timing of the Fund's gains and losses with respect to
straddle positions by requiring, among other things, that the loss realized on
disposition of one position of a straddle be deferred until gain is realized on
disposition of the offsetting position; that the Fund's holding period in
certain straddle positions not begin until the straddle is terminated (possibly
resulting in the gain being treated as short-term capital gain rather than
long-term capital gain); and that losses recognized with respect to certain
straddle positions, which would otherwise constitute short-term capital losses,
be treated as long-term capital losses. Different elections are available to the
Fund that may mitigate the effects of the straddle rules.

Certain options, futures contracts and forward contracts that are
subject to Section 1256 of the Code ("Section 1256 Contracts") and that are held
by the Fund at the end of its taxable year generally will be required to be
"marked to market" for federal income tax purposes, that is, deemed to have been
sold at market value. Sixty percent of any net gain or loss recognized on these
deemed sales and 60% of any net gain or loss realized from any actual sales of
Section 1256 Contracts will be treated as long-term capital gain or loss, and
the balance will be treated as short-term capital gain or loss.

Section 988 of the Code contains special tax rules applicable to
certain foreign currency transactions that may affect the amount, timing and
character of income, gain or loss recognized by the Fund. Under these rules,
foreign exchange gain or loss realized with respect to foreign
currency-denominated debt instruments, foreign currency forward contracts,
foreign currency denominated payables and receivables and foreign currency
options and futures contracts (other than options and futures contracts that are
governed by the mark-to-market and 60/40 rules of Section 1256 of the Code and
for which no election is made) is treated as ordinary income or loss. Some part
of the Fund's gain or loss on the sale or other disposition of shares of a
foreign corporation may, because of changes in foreign currency exchange rates,
be treated as ordinary income or loss under Section 988 of the Code rather than
as capital gain or loss.

A shareholder who purchases shares of the Fund by tendering payment for
the shares in the form of other securities may be required to recognize gain or
loss for income tax purposes on the difference, if any, between the adjusted
basis of the securities tendered to the fund and the purchase price of the
Fund's shares acquired by the shareholder.

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Section 475 of the Code requires that a "dealer" in securities must
generally "mark to market" at the end of its taxable year all securities which
it owns. The resulting gain or loss is treated as ordinary (and not capital)
gain or loss, except to the extent allocable to periods during which the dealer
held the security for investment. The "mark to market" rules do not apply,
however, to a security held for investment which is clearly identified in the
dealer's records as being held for investment before the end of the day in which
the security was acquired. The IRS has issued guidance under Section 475 that
provides that, for example, a bank that regularly originates and sells loans is
a dealer in securities, and subject to the "mark to market" rules. Shares of the
Fund held by a dealer in securities will be subject to the "mark to market"
rules unless they are held by the dealer for investment and the dealer property
identifies the shares as held for investment.

Redemptions and exchanges of shares of the Fund will result in gains or
losses for tax purposes to the extent of the difference between the proceeds and
the shareholder's adjusted tax basis for the shares. Any loss realized upon the
redemption or exchange of shares within six months from their date of purchase
will be treated as a long-term capital loss to the extent of distributions of
long-term capital gain dividends during such six-month period. All or a portion
of a loss realized upon the redemption of shares may be disallowed to the extent
shares are purchased (including shares acquired by means of reinvested
dividends) within 30 days before or after such redemption.

Distributions and redemptions may be subject to state and local income
taxes, and the treatment thereof may differ from the federal income tax
treatment. Foreign taxes may apply to non-U.S. investors.

The above discussion and the related discussion in the prospectuses are
not intended to be complete discussions of all applicable federal tax
consequences of an investment in the Fund. The law firm of Paul, Hastings,
Janofsky & Walker LLP has expressed no opinion in respect thereof. Nonresident
aliens and foreign persons are subject to different tax rules, and may be
subject to withholding of up to 30% on certain payments received from the Fund.
Shareholders are advised to consult with their own tax advisers concerning the
application of foreign, federal, state and local taxes to an investment in the
Fund.

DIVIDENDS AND DISTRIBUTIONS

The Fund will receive income in the form of dividends and interest
earned on its investments in securities. This income, less the expenses incurred
in its operations, is the Fund's net investment income, substantially all of
which will be declared as dividends to the Fund's shareholders.

The amount of income dividend payments by the Fund is dependent upon
the amount of net investment income received by the Fund from its portfolio
holdings, is not guaranteed and is subject to the discretion of the Board. The
Fund does not pay "interest" or guarantee any fixed rate of return on an
investment in its shares.

The Fund also may derive capital gains or losses in connection with
sales or other dispositions of its portfolio securities. Any net gain the Fund
may realize from transactions involving investments held less than the period
required for long-term capital gain or loss recognition or otherwise producing
short-term capital gains and losses (taking into account any carryover of
capital losses from the eight previous taxable years), although a distribution
from capital gains, will be distributed to shareholders with and as a part of
dividends giving rise to ordinary income. If during any year the Fund realizes a
net gain on transactions involving investments held more than the period
required for long-term capital gain or loss recognition or otherwise producing
long-term capital gains and losses, the Fund will have a net long-term capital
gain. After deduction of the amount of any net short-term capital loss, the
balance (to the extent not offset by any capital losses carried over from the
eight previous taxable years) will be distributed and treated as long-term
capital gains in the hands of the shareholders regardless of the length of time
the Fund's shares may have been held by the shareholders. For more information
concerning applicable capital gains tax rates, see your tax advisor.

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Any dividend or distribution paid by the Fund reduces the Fund's net
asset value per share on the date paid by the amount of the dividend or
distribution per share. Accordingly, a dividend or distribution paid shortly
after a purchase of shares by a shareholder would represent, in substance, a
partial return of capital (to the extent it is paid on the shares so purchased),
even though it would be subject to income taxes.

Dividends and other distributions will be made in the form of
additional shares of the Fund unless the shareholder has otherwise indicated.
Investors have the right to change their elections with respect to the
reinvestment of dividends and distributions by notifying the Transfer Agent in
writing, but any such change will be effective only as to dividends and other
distributions for which the record date is seven or more business days after the
Transfer Agent has received the written request.

PERFORMANCE INFORMATION

TOTAL RETURN

Average annual total return quotations used in the Fund's advertising
and promotional materials are calculated according to the following formula:

n
P(1 + T) = ERV

where "P" equals a hypothetical initial payment of $1000; "T" equals average
annual total return; "n" equals the number of years; and "ERV" equals the ending
redeemable value at the end of the period of a hypothetical $1000 payment made
at the beginning of the period.

Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication. Average
annual total return, or "T" in the above formula, is computed by finding the
average annual compounded rates of return over the period that would equate the
initial amount invested to the ending redeemable value. Average annual total
return assumes the reinvestment of all dividends and distributions.

For the period from January 2, 1998(commencement of operations) through
December 31, 1998, the Fund had a total return of -9.30%.

OTHER INFORMATION

Performance data of the Fund quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or guarantee future results. The return and principal value of an investment in
the Fund will fluctuate, and an investor's redemption proceeds may be more or
less than the original investment amount. In advertising and promotional
materials the Fund may compare its performance with data published by Lipper
Analytical Services, Inc. ("Lipper") or CDA Investment Technologies, Inc.
("CDA"). The Fund also may refer in such materials to mutual fund performance
rankings and other data, such as comparative asset, expense and fee levels,
published by Lipper or CDA. Advertising and promotional materials also may refer
to discussions of the Fund and comparative mutual fund data and ratings reported
in independent periodicals including, but not limited to, THE WALL STREET
JOURNAL, MONEY MAGAZINE, FORBES, BUSINESS WEEK, FINANCIAL WORLD and BARRON'S.

GENERAL INFORMATION

Advisors Series Trust is an open-end management investment company
organized as a Delaware business trust under the laws of the State of Delaware
on October 3, 1996. The Trust currently consists of 16 effective series of
shares of beneficial interest, par value of 0.01 per share. The Declaration of
Trust permits the Trustees to issue an unlimited number of full and fractional
shares of beneficial interest and to divide or combine the shares into a greater
or lesser number of shares without thereby changing the proportionate beneficial
interest in the Fund. Each share represents an interest in the Fund
proportionately equal to the interest of each other share. Upon the Fund's
liquidation, all shareholders would share pro rata in the net assets of the Fund
available for distribution to shareholders.

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<PAGE>
The Declaration of Trust does not require the issuance of stock
certificates. If stock certificates are issued, they must be returned by the
registered owners prior to the transfer or redemption of shares represented by
such certificates.

If they deem it advisable and in the best interest of shareholders, the
Board of Trustees may create additional series of shares which differ from each
other only as to dividends. The Board of Trustees has created two series of
shares, and may create additional series in the future, which have separate
assets and liabilities. Income and operating expenses not specifically
attributable to a particular Fund are be allocated fairly among the Funds by the
Trustees, generally on the basis of the relative net assets of each Fund.

Rule 18f-2 under the 1940 Act provides that as to any investment
company which has two or more series outstanding and as to any matter required
to be submitted to shareholder vote, such matter is not deemed to have been
effectively acted upon unless approved by the holders of a "majority" (as
defined in the Rule) of the voting securities of each series affected by the
matter. Such separate voting requirements do not apply to the election of
Trustees or the ratification of the selection of accountants. The Rule contains
special provisions for cases in which an advisory contract is approved by one or
more, but not all, series. A change in investment policy may go into effect as
to one or more series whose holders so approve the change even though the
required vote is not obtained as to the holders of other affected series.

The Fund's principal underwriter is First Fund Distributors, Inc., 4455
E. Camelback Road, Suite 261E, Phoenix, AZ 85018.

The Fund's custodian, Firstar Bank, 425 Walnut Street, Cincinnati, Ohio
45202 is responsible for holding the Funds' assets. American Data Services, P.O.
Box 5536, Hauppauge, NY 11788 acts as the Fund's transfer agent and accounting
services agent. The Fund's independent accountants, McGladrey & Pullen, LLP, 555
Fifth Avenue, New York, NY 10017, assist in the preparation of certain reports
to the Securities and Exchange Commission and the Fund's tax returns.

The Fund is a diversified series of the Trust.

Shares of the Fund owned by the Trustees and officers as a group were
less than 1% at January 22, 1999.

On February 23, 1999, the following additional persons owned of record
and/or beneficially more than 5% of The Al Frank Fund's outstanding voting
securities:

Robert & Linda Green, JT TEN, 6076 Maiden Lane, Memphis, Tennessee
38120; 6.78% record.

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