ADVISORS SERIES TRUST
497, 1999-06-29
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                               The American Trust
                                Allegiance Fund

                                One Court Street
                          Lebanon, New Hampshire 03766
                             www.allegiancefund.com
                             Trading Symbol: ATAFX


                                   PROSPECTUS


         The AMERICAN TRUST  ALLEGIANCE  FUND (the "Fund") is a mutual fund with
the investment objective of capital  appreciation.  The Fund attempts to achieve
its objective by investing in equity securities.

         This  Prospectus  sets  forth  basic  information  about  the Fund that
prospective  investors should know before investing.  It should be read and kept
for future reference.





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







                                  June 29, 1999

<PAGE>
                               TABLE OF CONTENTS


     Fund Overview.................................   2
     Fund Performance..............................   3
     Fund Expenses.................................   3
     Investment Objectives, Strategies
        and Related Risks..........................   4
     Investment Advisor............................   7
     How to Purchase Shares of the Fund............   8
     Services Available to Shareholders............  10
     How to Redeem Your Shares.....................  11
     Distributions and Taxes.......................  14
     Financial Highlights..........................  15


                                 FUND OVERVIEW

The Fund seeks capital appreciation by investing in stocks that the Advisor,
American Trust Company, expects will appreciate in value over the long term. The
Advisor purchases stock with the intention of holding them for a minimum of
three years.

The Advisor expects that the Fund's portfolio will usually consist predominantly
of large and mid-capitalization stocks.

The Fund avoids investments in companies that have significant involvement in
the tobacco, pharmaceuticals, biotechnology, medical diagnostic services and
products, gambling and liquor industries.

PRINCIPAL RISKS OF INVESTING IN THE FUND

The risk exists that you could lose money on your investment in the Fund. This
could happen if any of the following events happen:

     *    The stock market goes down

     *    Large or mid-capitalization stocks fall out of favor with the stock
          market

     *    Companies in which the Fund invests do not grow, grow more slowly than
          anticipated, or fall in value

                                       2
<PAGE>
                                FUND PERFORMANCE

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

      CALENDAR YEAR TOTAL RETURNS

      1998          During the period of time displayed in the bar chart,
     ------         the Fund's best  quarter  was Q4 1998,  up 27.68% and
     36.87%         its worst quarter was Q3 1998, down 8.80%. The Fund's
                    calendar  year-to-date total return through March 31,
                    1999 was 6.83%.

      AVERAGE ANNUAL TOTAL RETURNS
      as of December 31, 1998
                                                        Since
                                          1 Year      Inception
                                          ------      ---------
      American Trust
       Allegiance Fund                    36.87%        34.40%
      S&P 500 Composite
       Stock Price Index                  28.59%        27.88%

      The inception date of the Fund was March 11, 1997.

      The   S&P   500   Composite    Stock   Price   Index   is   an   unmanaged
      capitalization-weighted  index of 500 stocks  designed  to  represent  the
      broad domestic economy.

                                 FUND EXPENSES

The following table shows the fees and expenses you may pay if you buy and hold
shares of the Fund. The Fund does not charge you for buying or selling shares of
the Fund.

                                       3
<PAGE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)


      Investment Advisory Fees                        0.95%
      Other Expenses                                  1.35%
                                                      ----
      Total Annual Fund Operating Expenses            2.30%
      Expense reimbursements (1)                     (0.85)%
                                                      ----
      Actual operating expenses                       1.45%
                                                      ====

(1) 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 1.45%. 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 if waives and for Fund expenses it
pays.

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, for each period, it assumes that you redeem all of your shares at the
end of that period. Again, this Example is hypothetical, and your actual
expenses may be higher or lower.

        1 Year      3 Years      5 Year     10 Year
        ------      -------      ------     -------
         $147         $458        $790       $1,729


                       INVESTMENT OBJECTIVES, STRATEGIES
                               AND RELATED RISKS

WHAT IS THE FUNDS INVESTMENT OBJECTIVE?

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

HOW DOES THE FUND SEEK TO ACHIEVE ITS OBJECTIVE?

The Advisor selects stocks for the Fund's portfolio that it expects will
appreciate in value over the long term. The Advisor uses a "bottom up" approach
to stock investing and does not attempt to forecast the U.S. economy, interest
rates,

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<PAGE>
inflation or the U.S. stock market. It focuses on finding companies which
meet its financial criteria, which include a history of consistent earnings and
revenue growth, or strong prospects of earnings and revenue growth, and a strong
balance sheet. The Advisor purchases the securities of a company with the
intention of holding them for a minimum of three years, subject to changes in
fundamentals, such as marked deceleration in earnings growth, decline in
revenues or deterioration of the balance sheet, or a change in a company's
valuation or competitive position. Companies should demonstrate leadership,
operating momentum and strong prospects for annual growth rates of 15% or
better. Normally, the companies in which the Fund invests represent the eight
major economic or market sectors.

The Fund avoids investments in companies that have significant involvement in
the tobacco, pharmaceuticals, biotechnology, medical diagnostic services and
products, gambling and liquor industries. While a company may conduct operations
in one of these areas, the Fund will not invest in such a company unless current
revenues from these industries represent less than 5% of the total revenues of
the company. The majority of companies in which the Fund invests will have no
operations in these industries.

The Advisor expects that the Fund's portfolio will generally consist
predominantly of large and mid-capitalization stocks, but in some market
environments small capitalization stocks may constitute a large portion of the
Fund's portfolio. A small capitalization stock is considered to be one which has
a market capitalization of less than $500 million at the time of investment. To
the extent that the Fund does invest in small capitalization stocks, there is
the risk that its portfolio will be less marketable and may be subject to
greater fluctuations in price than a portfolio holding stocks of larger issuers.
Small capitalization stocks often pay no dividends, but income is not a primary
goal of the Fund. The Advisor does not expect the Fund's annual turnover rate to
exceed 50%.

                                       5
<PAGE>
There is, of course, no assurance that the Fund's objective will be achieved.
Because 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.

OTHER SECURITIES THE FUND MIGHT PURCHASE.

Under normal market conditions, the Fund will invest at least 85% of its total
assets in common stocks. If the Advisor believes that market conditions warrant
a temporary defensive posture, the Fund may invest without limit in high
quality, short-term debt securities and money market instruments. These
short-term debt securities and money market instruments include commercial
paper, certificates of deposit, bankers' acceptances, shares of money market
mutual funds, U.S. Government securities and repurchase agreements.

If the Fund takes a defensive posture, the Fund may not reach its investment
objectives. For example, should the market advance during this period, the Fund
may not participate as much as it would have if it had been more fully invested.

Discussed below are the principal risks of investing in the Fund that may
adversely affect the Fund's net asset value or total return.

MARKET RISK.

The risk that the market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations may cause a security to be worth
less than the price originally paid for it, or less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy or the market as a whole.

In addition, the stocks of large and mid-capitalization companies could fall out
of favor with investors.

MANAGEMENT RISK.

The risk that a strategy used by the Advisor may fail to produce the intended
result.

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

                                       6
<PAGE>
and other service providers do not properly process and calculate information
related to dates beginning January 1, 2000. This is commonly known as the "Year
2000 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 Year 2000 Project Plan that they believe is reasonably designed to
address the Year 2000 Problem with respect to the Advisor's and other service
providers' computer systems. Included in the Year 2000 Project Plan is a
provision for a contingency plan for the retention of other service providers to
replace those service providers whose performance in converting to Year 2000
compliant data processing equipment has been determined to be less than
satisfactory. There can be no assurance that these actions will be sufficient to
avoid any adverse impact on the Fund. The extent of that risk cannot be
ascertained at this time.

                               INVESTMENT ADVISOR

The Fund's Advisor, American Trust Company, One Court Street, Lebanon, New
Hampshire 03766 is dedicated primarily to providing investment management
services to individuals, charitable organizations, foundations and corporations.
The Advisor provides investment management services to individual and
institutional accounts with an aggregate value in excess of $200 million. Paul
H. Collins and Jeffrey M. Harris, CFA, are principally responsible for the
management of the Fund's portfolio. Mr. Collins (who controls the Advisor) has
been active in the investment field professionally for 24

                                       7
<PAGE>
years. Mr. Collins has been President of the Advisor and has been managing
portfolios of clients of the Advisor since its founding in 1991. Mr. Harris,
Senior Vice President of the Advisor, has been active in the investment field
professionally for 22 years, managing portfolios for more than the last five
years, and managing portfolios of clients of the Advisor since he became
associated with the Advisor in 1995. Prior to that, he was a Vice President of
Fleet Investment Advisors, since 1990, where he also managed client portfolios.

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 0.95%.
During the last fiscal year, the Advisor earned $88,383 in advisory fees. In
order to limit Fund operating expenses, the Advisor waived $79,291 of its fee.
These fees are subject to recapture by the Advisor, from the Fund, in future
years.

                       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 wire. If you have questions about how to invest, or about how to
complete the Application Form, please call an account representative at (800)
385-7003.

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 American Trust Allegiance Fund) to the Fund's
Shareholder Servicing Agent:

American Trust Allegiance Fund
P.O. Box 640947
Cincinnati, OH 45264-0947

YOU MAY WIRE MONEY TO THE FUND.

Before sending a wire, you should call the Fund

                                       8
<PAGE>
at (800) 385-7003 between 9:00 a.m. and 5:00 p.m., Eastern time, on a day when
the New York Stock Exchange (the "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 American Trust Allegiance Fund
DDA #486444854
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 BROKER.

You may buy and sell shares of the Fund through certain brokers (and their
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 $2,500. The minimum subsequent
investment is $250. 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 $1,000 and $100,
respectively.

SUBSEQUENT INVESTMENTS.

You may purchase additional shares of the Fund by sending a check, with the stub
from an

                                       9
<PAGE>
account statement, to the Fund at the address above. 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 invest additional
money by wire, it is important for you to call the Fund at (800) 385-7003.

WHEN IS MONEY INVESTED IN THE FUND?

Any money received for investment in the Fund, 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). The net asset value is calculated at the close of regular trading
on the NYSE, normally 4:00 p.m., Eastern time. A check or wire received after
the NYSE closes is invested as of the next calculation of the Fund's net asset
value.

WHAT IS THE PRICE THE FUND?

The Fund's net asset value per share, or price per share, is calculated by
dividing the value of the Fund's total assets, less its liabilities, by the
number of its shares outstanding. The Fund's assets are the market value of
securities held in its portfolio, plus any cash and other assets. The Fund's
liabilities are fees and expenses it owes. The number of Fund shares outstanding
is the amount of shares which have been issued to shareholders. The price you
will pay to buy Fund shares or the amount you will receive when you sell your
Fund shares is based on the net asset value next calculated after your order is
received and accepted.

                       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 INVESTMENT PLAN.

You may make regular monthly investments in the Fund using the Automatic
Investment Plan.

                                       10
<PAGE>
An Automatic Clearing House (ACH) debit is drawn electronically against your
account at a Financial Institution of your choice. Upon receipt of the withdrawn
funds, the Fund automatically invests the money in additional shares of the Fund
at the next calculated net asset value. There is no charge by the Fund for this
service. The Fund may terminate or modify this privilege at any time, and you
may terminate your participation by notifying American Data Services in writing,
sufficiently in advance of the next withdrawal. The minimum monthly investment
amount is $100.

AUTOMATIC WITHDRAWALS.

The Fund offers an Automatic Withdrawal Plan whereby you may request that a
check drawn in a predetermined amount be sent to you each month or calendar
quarter. To start this Plan, 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. The Plan may be terminated or modified by you or the Fund at any
time without charge or penalty. A withdrawal under the Automatic Withdrawal Plan
involves a redemption of shares of the Fund, and may result in a gain or loss
for federal income tax purposes. In addition, if the amount withdrawn exceeds
the dividends credited to your account, the account ultimately may be depleted.


                           HOW TO REDEEM YOUR SHARES

You have the right to redeem all or any portion of your shares of the Fund at
their next calculated net asset value on each day the NYSE is open for trading.

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:

                                       11
<PAGE>
American Trust Allegiance Fund
c/o America Data Services, Inc.
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 (800) 385-7003 the close of trading.
Redemption proceeds will be mailed or wired, at your direction, on the next
business day to the Financial Institution 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 IRAs.

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


                                       12
<PAGE>
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.

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.

WHEN ARE REDEMPTION PAYMENTS MADE?

Redemption payments for telephone redemptions are sent on the day after the
telephone call is received. Payments for redemptions requested in writing are
normally made promptly, but no later than seven days after the receipt of a
valid request. 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 can be avoided by investing by wire or by using a certified or official
bank check to make the purchase.

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

                                       13
<PAGE>
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 Funds in December. Capital gains distributions, if any, are also normally
made in December, but the Funds may make an additional payment of dividends or
distributions if it deems it desirable at another time during any year.

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 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 capital gains regardless of the length of time shares
of the Fund have been held. You should consult your own advisors concerning
federal, state and local taxation of distributions from the Fund.

                                       14
<PAGE>
                              FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance during its prior fiscal periods. 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 EACH PERIOD
- --------------------------------------------------------------------------------
                                                   Year        3/11/97*
                                                   Ended       through
                                                  2/28/99      2/28/98
                                                  -------      -------

Net asset value, beginning of period              $ 13.48       $10.00
                                                  -------       ------

Income from investment operations:
  Net investment loss                               (0.07)       (0.03)
  Net realized and unrealized gain
   on investments                                    3.74         3.51
                                                  -------       ------
Total from investment operations                     3.67         3.48
                                                  -------       ------

Less distributions:
  From net realized gain                            (0.22)          --
                                                  -------       ------
Net asset value, end of period                    $ 16.93       $13.48
                                                  =======       ======

Total return                                        27.47%       34.80%**

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)             $13,329       $6,360

Ratio of expenses to average net assets:
  Before expense reimbursement                       2.30%        4.04%++
  After expense reimbursement                        1.45%        1.45%++

Ratio of net investment loss
  to average net assets:                            (0.57%)      (0.42%)++

Portfolio turnover rate                             40.99%       27.65%

*Commencement of operations.
**Not annualized.
++Annualized.

                                       15
<PAGE>
                       THE AMERICAN TRUST ALLEGIANCE FUND,
                        A SERIES OF ADVISORS SERIES TRUST

                              FOR MORE INFORMATION

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

The Fund's annual and semi-annual reports to shareholders contains 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:

                                 1-800-385-7003

                       The American Trust Allegiance Fund
                        c/o American Data Services, Inc.
                          150 Motor Parkway, Suite 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 the Room's 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, for 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>
                         AMERICAN TRUST ALLEGIANCE FUND

                       Statement of Additional Information

                               Dated June 29, 1999

This Statement of Additional  Information is not a prospectus,  and it should be
read in conjunction  with the prospectus  dated June 29, 1999, as may be revised
from time to time, of the American Trust Allegiance Fund (the "Fund"),  a series
of Advisors  Series Trust (the "Trust").  American Trust Company (the "Advisor")
is the Advisor to the Fund. A copy of the  prospectus  may be obtained  from the
Fund at One Court Street, Lebanon, NH 03766 or by calling
(800) 385-7003.

                                TABLE OF CONTENTS

                                                    Cross-reference to sections
                                           Page          in the prospectus
                                           ----     ---------------------------

Investment Objective and Policies......... B-2     Investment Objectives,
                                                   Strategies and Related Risks

Management................................ B-5     Investment Advisor

Portfolio Transactions and Brokerage...... B-8     Not applicable

Net Asset Value........................... B-9     How to Purchase Shares of the
                                                   Fund

Taxation  ................................ B-10    Distributions and Taxes

Dividends and Distributions............... B-12    Distributions and Taxes

Performance Information................... B-13    Fund Performance

General Information....................... B-14    Not applicable

Appendix.................................. B-15    Not applicable

                                      B-1
<PAGE>
                       INVESTMENT OBJECTIVES AND POLICIES

     The investment objective of the Fund is to seek capital appreciation. There
is no assurance that the Fund will achieve its objective.  The discussion  below
supplements information contained in the prospectus as to investment policies of
the Fund.

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
funds 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.

     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-1" or higher by  Standard & Poor's  ("S&P"),  "Prime-1"  by
Moody's  Investors  Service,  Inc.  ("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 Appendix A.

                                       B-2
<PAGE>
MONEY MARKET FUNDS

     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.

FOREIGN INVESTMENTS AND CURRENCIES

     The Fund may invest in  securities  of foreign  issuers  that are  publicly
traded  in the  United  States.  The Fund may also  invest up to 5% of its total
assets in depositary receipts.

     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.

     LEGAL AND  REGULATORY  MATTERS.  Certain  foreign  countries  may have less
supervision of securities markets,  brokers and issuers of securities,  and less
financial  information  available  to issuers,  than is  available in the United
States.

     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.

     In considering  whether to invest in the  securities of a foreign  company,
the Advisor  considers  such factors as the  characteristics  of the  particular
company,  differences  between economic trends and the performance of securities
markets  within the U.S.  and those  within  other  countries,  and also factors
relating to the general  economic,  governmental  and social  conditions  of the
country or countries where the company is located.  The extent to which the Fund
will be invested in foreign companies and countries and depository receipts will
fluctuate from time to time

                                       B-3
<PAGE>
within the limitations  described in the prospectus,  depending on the Advisor's
assessment of prevailing market, economic and other conditions.

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.

BORROWING

     The Fund is  authorized  to borrow  money from time to time for  temporary,
extraordinary or emergency  purposes or for clearance of transactions in amounts
up to 5% of the value of its total assets at the time of such borrowings.

RISKS OF INVESTING IN SMALL COMPANIES

     As stated in the  prospectus,  the Fund may invest in  securities  of small
companies.  Additional  risks of such  investments  include the markets on which
such  securities  are  frequently  traded.  In many  instances the securities of
smaller companies are traded only  over-the-counter  or on a regional securities
exchange,  and the frequency and volume of their trading is  substantially  less
than is  typical  of larger  companies.  Therefore,  the  securities  of smaller
companies  may be subject to greater and more abrupt  price  fluctuations.  When
making large sales,  the Fund may have to sell  portfolio  holdings at discounts
from quoted  prices or may have to make a series of small sales over an extended
period  of  time  due to the  trading  volume  of  smaller  company  securities.
Investors should be aware that, based on the foregoing factors, an investment in
the Fund may be subject to greater  price  fluctuations  than an investment in a
fund that  invests  exclusively  in  larger,  more  established  companies.  The
Advisor's research efforts may also play a greater role in selecting  securities
for the Fund than in a fund that invests in larger, more established companies.


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; I.E., as to 75%
of the  value of a its  total  assets:  (i) no more  than 5% of the value of its
total  assets may be invested in the  securities  of any one issuer  (other than
U.S. Government  securities);  and (ii) the Fund's position in any single issuer
may not represent more than 10% of such issuer's voting  securities.  The Fund's
investment objective is also fundamental.

     In addition, the Fund may not:

     1. Issue senior securities,  borrow money or pledge its assets, except that
(i) the Fund may  borrow on an  unsecured  basis  from  banks for  temporary  or
emergency purposes or for the clearance of transactions in amounts not exceeding
5% of its total assets  (including the amount  borrowed),  provided that it will
not make investments  while borrowings in excess of 5% of the value of its total
assets are outstanding;

                                       B-4
<PAGE>
     2. Purchase securities on margin,  except such short-term credits as may be
necessary for the clearance of transactions;

     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;

     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; or

     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).

                                   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 birth dates and  positions
with the Trust,  their business  addresses and principal  occupations during the
past five years are:

WALTER E. AUCH, SR.  (born 1921) Trustee

6001 N. 62nd Place, Paradise Valley, AZ 85153. Business Consultant and Director,
Nicholas-Applegate  Institutional  Mutual Funds, Salomon Smith Barney Trak Funds
and Concert Series,  Pimco Advisors L.P., Banyan Strategic Realty Trust,  Legend
Properties and Senele Group.

ERIC M. BANHAZL* (born 1957) Trustee, President and Treasurer

2020 E. Financial Way, Glendora, CA 91741. Executive Vice President,  Investment
Company  Administration,  LLC; Vice President,  First Fund  Distributors,  Inc.;
Treasurer, Guinness Flight Investment Funds, Inc.

DONALD E. O'CONNOR (born 1936) Trustee

1700 Taylor Avenue, Fort Washington,  MD 20744. Retired; formerly Executive Vice
President and Chief  Operating  Officer of ICI Mutual  Insurance  Company (until
January, 1997); Vice President, Operations,  Investment Company Institute (until
June,  1993);  Independent  Director,  The Parnassus Fund, The Parnassus  Income
Fund, and Allegiance Investment Trust.

                                       B-5
<PAGE>
GEORGE T. WOFFORD III (born 1939) Trustee

305 Glendora  Circle,  Danville,  CA 94526.  Senior Vice President,  Information
Services, Federal Home Loan Bank of San Francisco.

STEVEN J. PAGGIOLI (born 1950) Vice President

915  Broadway,  Suite  1605,  New York,  NY  10010.  Executive  Vice  President,
Investment Company Administration, LLC; Vice President, First Fund Distributors,
Inc.;  President  and  Trustee,   Professionally  Managed  Portfolios;  Trustee,
Managers Funds Trust.

ROBERT H. WADSWORTH (born 1940) Vice President

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

CHRIS O. MOSER (born 1949) Secretary

4455 E.  Camelback Rd. Suite 261-E,  Phoenix,  AZ 85018.  Employed by Investment
Company  Administration,  LLC (since July 1996);  Formerly employed by Bank One,
N.A.  (From  August  1995  until  July  1996;  O'Connor,   Cavanagh,   Anderson,
Killingsworth and Beshears (law firm) (until August 1995).

* 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

Compensation  indicated is for the  calendar-year  ended  December 31, 1998. 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").

     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  Internal  Revenue Code of 1986 (the  "Code"),  and other
applicable law.

     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

                                       B-6
<PAGE>
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 Trust 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,  but 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 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.

     During the period  beginning  March 11, 1997 and ending  February 28, 1998,
the Advisor earned $34,946 in advisory fees. The Advisor  voluntarily  agreed to
limit total Fund operating expenses to 1.45% of average net assets annually.  As
a result of that  limitation,  the Advisor waived the full amount to its fee and
paid Fund  operating  expenses in the amount of $60,728.  During the fiscal year
ended  February 28,  1999,  the Advisor  earned  $88,383 in advisory  fees.  The
Advisor  voluntarily  agreed to limit total Fund operating  expenses to 1.45% of
average net assets annually. As a result of that limitation,  the Advisor waived
$79,291 of its fee.

     The Advisor is controlled by Paul H. Collins, its President.

     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

                                       B-7
<PAGE>
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 Securities and Exchange  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 sale of shares of the Trust in  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

                      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.

                                       B-8
<PAGE>
     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.

     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 on  portfolio  transactions  during the period
beginning  March  11,  1997 and  ending  February  28,  1998,  totaled  $43,559.
Brokerage  commissions  paid  during the fiscal year  ending  February  28, 1999
totaled $28,351.

                                 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  ("NYSE")  (generally
4:00 p.m.  Eastern time) each  business day on which the NYSE is open.  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 traded in the over-the-counter  market are valued at
the mean  between  the last  available  bid and asked price prior to the time of
valuation.  Securities  and assets for which market  quotations  are not readily
available  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.

                                       B-9
<PAGE>
     All other assets of the Fund are valued in such manner as the Board in good
faith deems appropriate to reflect their fair value.

                                    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 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% or 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.

                                      B-10
<PAGE>
     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  prospectus.  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 of 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.

     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.

                                      B-11
<PAGE>
     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 and 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.

     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  with  respect to such  shares  during  such
six-month  period.  All or a portion of a loss realized  upon the  redemption of
shares  of the Fund  may be  disallowed  to the  extent  shares  of the Fund 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 Prospectus 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.

                                      B-12
<PAGE>
     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 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.  The  maximum  capital  gains  rate  for
individuals is 28% with respect to assets held for more than 12 months,  but not
more than 18 months,  and 20% with  respect to assets  held more than 18 months.
The maximum  capital  gains rate for corporate  shareholders  is the same as the
maximum tax rate for ordinary income.

     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 of  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 tot he  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 $1,000;  "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 March 11, 1997  (commencement  of  operations)  through
February 28, 1999,  the Fund had an average  annual total return of 31.58%.  For
the one year period ended February 28, 1999, the Fund's total return was 27.47%.

YIELD

     Annualized yield quotations used in the Fund's  advertising and promotional
materials  are  calculated  by  dividing  the  Fund's  investment  income  for a
specified  thirty-day period,  net of expenses,  by the average number of shares
outstanding  during the  period,  and  expressing  the  result as an  annualized
percentage (assuming  semi-annual  compounding) of the net asset value per share
at the end of the period.  Yield  quotations  are  calculated  according  to the
following formula:

                                      B-13
<PAGE>
                             6
         YIELD = 2 [(a-b + 1) - 1]
                     ---
                      cd

where "a" equals  dividends and interest  earned  during the period;  "b" equals
expenses accrued for the period, net of  reimbursements;  "c" equals the average
daily  number of shares  outstanding  during the  period  that are  entitled  to
receive  dividends  and "d" equals the maximum  offering  price per share on the
last day of the period.

     Except as noted below, in determining  net investment  income earned during
the period ("a" in the above formula),  the Fund  calculates  interest earned on
each  debt  obligation  held  by it  during  the  period  by (1)  computing  the
obligation's  yield to  maturity,  based on the market  value of the  obligation
(including  actual accrued  interest) on the last business day of the period or,
if the  obligation  was  purchased  during the period,  the purchase  price plus
accrued interest;  (2) dividing the yield to maturity by 360 and multiplying the
resulting  quotient  by the market  value of the  obligation  (including  actual
accrued  interest).  Once interest earned is calculated in this fashion for each
debt  obligation  held by the Fund, net investment  income is then determined by
totaling all such interest earned.

     For purposes of these calculations,  the maturity of an obligation with one
or more call  provisions is assumed to be the next date on which the  obligation
reasonably can be expected to be called or, if none, the maturity date.

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 Trust's
liquidation, all shareholders would share pro rata in the net assets of the Fund
available for  distribution to  shareholders.  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 one series of
shares,  and may create  additional  series in the future,  which have  separate
assets and liabilities.  In the event more than one series were created,  income
and operating expenses not specifically  attributable to a particular Fund would
be allocated  fairly among the Funds by the Trustees,  generally on the basis of
the relative net assets of each Fund.

     The Fund intends to pay cash (U.S.  dollars) for all shares redeemed,  but,
under abnormal  conditions  that make payment in cash unwise,  the Fund may make
payment  partly in its portfolio  securities  with a current  amortized  cost or
market value, as appropriate,  equal to the redemption price.  Although the Fund
does  not  anticipate  that it will  make any part of a  redemption  payment  in
securities,  if such payment were made, an investor may incur brokerage costs in
converting  such securities to cash. The Trust has elected to be governed by the
provisions of Rule 18f-1 under the  Investment  Company Act,  which require that
the Fund pay in cash all requests for  redemption by any  shareholder  of record
limited in amount,  however,  during any 90-day period to the lesser of $250,000
or 1% of the value of the Fund's net assets at the beginning of such period.

                                      B-14
<PAGE>
     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 Rd., Suite 261-E, Phoenix, AZ 85018.

     The Trust's custodian,  Firstar Bank, 425 Walnut Street,  Cincinnati,  Ohio
45202, is responsible for holding the Funds' assets.  American Data Services, 24
W. Carver Street,  Huntington,  NY 11743 acts as the Fund's accounting  services
agent. The Trust'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.

     Shares of the Fund owned by the  Trustees and officers as a group were less
than 1% at April 12, 1999.

     On  April  12,  1999,   the  following   persons  owned  of  record  and/or
beneficially more than 5% of the Fund's outstanding voting securities:

     Corestates Bank, N.A. William N. Lane Trust, American Trust Co-Trustee,  FC
1-9-81-22, 530 Walnut Street, Philadelphia, PA 19106; 23.43% record.

     Mackenzie-Childs  401K Plan & Trust, Dennis R. Edson TTEE, 3260 State Route
90, Aurora, NY 13026; 7.65% record.

     The  validity of the Fund's  shares has been  passed on by Paul,  Hastings,
Janofsky & Walker LLP, 345 California Street, San Francisco, CA 94104.

                                    APPENDIX

                             DESCRIPTION OF RATINGS

MOODY'S INVESTORS SERVICE, INC.: CORPORATE BOND RATINGS

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

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

     Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa and Aa
rating  classifications.  The modifier "1" indicates  that the security ranks in
the higher end of its generic  rating  category;  the modifier  "2"  indicates a
mid-range  ranking;  and the modifier "3" indicates  that the issue ranks in the
lower end of its generic rating category.

     A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations.  Factors giving security
to principal  and interest are  considered  adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

     Baa--Bonds which are rated Baa are considered as medium grade  obligations,
i.e., they are neither highly  protected nor poorly secured.  Interest  payments
and principal security appear adequate for the present but certain

                                      B-15
<PAGE>
protective elements may be lacking or may be characteristically  unreliable over
any great period of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.

STANDARD & POOR'S CORPORATION: CORPORATE BOND RATINGS

     AAA--This  is the  highest  rating  assigned by Standard & Poor's to a debt
obligation  and  indicates an extremely  strong  capacity to pay  principal  and
interest.

     AA--Bonds rated AA also qualify as high-quality debt obligations.  Capacity
to pay principal  and interest is very strong,  and in the majority of instances
they differ from AAA issues only in small degree.

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

     BBB--Bonds  rated BBB are  regarded as having an  adequate  capacity to pay
principal  and  interest.  Whereas they  normally  exhibit  adequate  protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.

COMMERCIAL PAPER RATINGS

     Moody's commercial paper ratings are assessments of the issuer's ability to
repay  punctually  promissory  obligations.  Moody's employs the following three
designations,  all judged to be  investment  grade,  to  indicate  the  relative
repayment capacity of rated issuers:  Prime 1--highest quality;  Prime 2--higher
quality; Prime 3--high quality.

     A Standard & Poor's commercial paper rating is a current  assessment of the
likelihood of timely payment.  Ratings are graded into four categories,  ranging
from "A" for the highest quality obligations to "D" for the lowest.

     Issues assigned the highest rating,  A, are regarded as having the greatest
capacity for timely  payment.  Issues in this category are  delineated  with the
numbers  "1",  "2" and "3" to  indicate  the  relative  degree  of  safety.  The
designation A-1 indicates that the degree of safety  regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics.  Capacity for
timely  payment on issues with the  designation  "A-2" is strong.  However,  the
relative  degree of safety is not as high as for issues  designated  A-1. Issues
carrying the designation "A-3" have a satisfactory  capacity for timely payment.
They are, however,  somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.

                                      B-16


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