ADVISORS SERIES TRUST, 497, 2000-11-08

ADVISORS SERIES TRUST
497, 2000-11-08

Previous: BAY VIEW SECURITIZATION CORP, 8-K, EX-99.1, 2000-11-08

Next: DELAWARE CAPITAL MANAGEMENT INC, 13F-HR, 2000-11-08

[UNITY FUND LOGO]

CLASS A SHARES

PROSPECTUS
SEPTEMBER 29, 2000

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

AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF THE BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE COMPANY OR ANY OTHER GOVERNMENT
AGENCY.
<PAGE>
UNITY FUND, CLASS A

6600 Plaza Drive, Suite 310
New Orleans, LA 70127
Fund Literature (toll free): (877) LIBFUND (542-3863)
alternate: (800) 645-1704
Shareholder Services (toll-free): (888) 229-2105

TABLE OF CONTENTS

Fund Overview........................................................ 3

Understanding Expenses............................................... 5

Management of the Fund............................................... 6

Account Information.................................................. 8

How to Invest........................................................ 10

Earnings and Taxes................................................... 13

Financial Highlights................................................. 14

For More Information................................................. Back Cover

More detailed information on all subjects covered in this prospectus is
contained in the Fund's STATEMENT OF ADDITIONAL INFORMATION ("SAI"). Investors
seeking more in-depth explanations of the contents of this prospectus should
request the SAI and review it before purchasing shares.

2
<PAGE>
FUND OVERVIEW

The Unity Fund was formerly known as the Liberty Freedom Fund.

INVESTMENT OBJECTIVES

The Fund's primary investment objective is the growth of capital. Its secondary
objective is to provide current income. The objectives of the Fund may be
changed only with shareholder approval.

PRINCIPAL INVESTMENT STRATEGIES

The Fund uses a disciplined approach to select securities for the Fund's
portfolio that it believes are undervalued, reasonably priced and have prospects
for continued consistent growth. The Fund uses fundamental analysis of financial
statements to select stocks of issuers which have low price/earnings and
price/book ratios as well as strong balance sheet ratios and high and/or stable
dividend yields.

The Fund will invest primarily in the stocks of large, well-recognized
companies. The Fund will usually invest at least 20% of its assets in the stocks
that comprise the S&P 100 Index. The S&P 100 Index is a capitalization-weighted
index of 100 stocks from a broad range of industries.

Under normal market conditions, the Fund will invest at least 85% of its total
assets in stocks and other equity securities.

The Fund's annual portfolio turnover rate will usually not exceed 50%.

TYPES OF SECURITIES

The Fund invests primarily in the following securities:

* Common Stock;
* Preferred Stock;
* Convertible Securities and Warrants; and
* Standard & Poor's Depositary Receipts ("SPDRs")

Please review the SAI for further descriptions of these securities.

PRINCIPAL RISKS OF INVESTING

You may lose money by investing in the Fund. Other principal risks you should
consider include:

MARKET DECLINE - A company's stock price or the overall stock market may
experience a sudden decline.

THE EFFECT OF INTEREST RATES - The Fund may invest in bonds and other debt
instruments which may be affected by interest rate changes and changes in the
creditworthiness of the bond or debt instrument issuer.

DEFENSIVE INVESTMENTS - At the discretion of the Sub-Advisor, the Fund may
invest up to 100% of its assets in cash, cash equivalents, and high quality,
short-term debt securities and money market instruments for temporary defensive
purposes. During such a period, 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.

3
<PAGE>
WHO MAY WANT TO INVEST

The Fund is intended for investors who:

* Are willing to hold their shares for a long period of time (e.g., in
preparation for retirement);
* Are diversifying their investment portfolio by investing in a mutual fund
that concentrates in large-cap companies; and/or
* Are willing to accept higher short-term risk in exchange for a higher
potential for a long-term total return.

PAST PERFORMANCE OF THE FUND

The following performance information illustrates some of the risk of investing
in the Fund. The bar chart shows the Fund's total return for the last calendar
year. The bar chart does not reflect sales charges that you may pay to purchase
Fund shares. If they were included, the return would be less than that shown.
The table shows the Fund's average annual total return over time compared with
broad-based market indices. Unlike the bar chart, the table assumes that the
maximum sales charge was paid. Remember, past performance does not predict
future performance.

Calendar Year Total Return (%)*

1999 4.19%

During the period shown in the bar chart, the Fund's highest quarterly return
was 15.69% for the quarter-ended 6/30/99 and the lowest quarterly return was
-8.67% for the quarter-ended 9/30/99.

* The Fund's year-to-date return as of June 30, 2000 was -13.14%

Average Annual Total Returns Since
as of December 31, 1999 Inception
One Year on 6/29/98
-------- ----------
The Fund+ 0.054% 2.18%
S&P/Barra Value Index 12.72% 9.91%
S&P 500 Index 21.04% 20.40%
Lipper Growth and Income Fund Index

+ The return for the Fund reflects the maximum sales load of 3.50%.

4
<PAGE>
UNDERSTANDING EXPENSES

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES
(fees paid directly from your investment)

Maximum Sales Load on Fund Purchases
(as a percentage of offering price).................................. 3.50%

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Investment Advisory Fees............................................. 0.85%
Distribution (12b-1) Fees............................................ 0.50%
Shareholder Service Fees............................................... 0.25%
Other Expenses......................................................... 3.76%

Total Annual Fund Operating Expenses................................... 5.36%
Advisory Fee Waiver and/or Fund Expense Absorption # .................. (3.26)%
-----
Net Expenses........................................................... 2.10%
=====

# The Advisor has contractually agreed to waive its fees and/or absorb expenses
of the Fund to ensure that Total Annual Operating Expenses do not exceed
2.10%. This contract's term is indefinite and may be terminated only by the
Board of Trustees of the Fund. If the Advisor waives any of its fees or pays
Fund expenses, the Fund may reimburse the Advisor in future years.

EXAMPLE

This Example is intended to help you compare the costs of investing in the Fund
with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

1 year 3 years 5 years 10 years
------ ------- ------- --------
$555 $983 $1,436 $2,685

5
<PAGE>
MANAGEMENT OF THE FUND

THE ADVISOR

The Fund's Advisor, Liberty Bank and Trust Company ("Liberty"), 6600 Plaza
Drive, Suite 310, New Orleans, Louisiana 70127, (a subsidiary of Liberty
Financial Services, Inc.) has provided banking services to the greater New
Orleans community since 1972. Liberty's assets have grown to over $180 million
and has risen to become one of the top ten African American owned banks in the
United States. Liberty has overall responsibility for the assets under
management and will be responsible for monitoring the day-to-day activity of the
Sub-Advisor. Liberty, together with the Sub-Advisor, is responsible for
formulating and implementing the Fund's investment strategies. Liberty furnishes
the Fund with office space and certain administrative services. As compensation
for the services it receives, the Fund pays Liberty a monthly advisory fee based
upon the average daily net assets of the Fund at the annual rate of 0.25%. For
the fiscal year of the Fund ended May 31, 2000, the Advisor waived its full fee
of $7,748 and paid Fund expenses in the amount of $92,856.

THE SUB-ADVISOR

The Fund's Sub-Advisor, The Edgar Lomax Company, 6564 Loisdale Court, Suite 310,
Springfield, Virginia 22150, has provided asset management services to
individuals and institutional investors since 1986. Currently, the Sub-Advisor
has $1.2 billion in assets under management. Mr. Randall R. Eley, President and
Chief Investment Officer of the Sub-Advisor, controls the Sub-Advisor.

The Sub-Advisor provides the Fund with advice on buying and selling securities
and manages the investments of the Fund. As compensation, the Fund pays the
Sub-Advisor a monthly management fee based upon the average daily net assets of
the Fund at the annual rate of 0.60%. For the fiscal year of the Fund ended May
31, 2000, the Sub-Advisor received $18,594 in fees.

PRIOR PERFORMANCE OF THE SUB-ADVISOR

The following table sets forth composite performance data relating to the
historical performance of private accounts of The Edgar Lomax Company,
Sub-Advisor to the Fund. Each of these private accounts exceeds, as of January
1, 1994, $1 million in market value and have investment objectives, policies,
strategies and risks substantially similar to those of the Fund. The data is
provided to illustrate the past performance of the Sub-Advisor in managing
substantially similar accounts as measured against a market index and does not
represent the performance of the Fund. You should not consider this performance
data as an indication of future performance of the Fund or of the Sub-Advisor. A
complete list and description of the Sub-advisor's composites is available by
request to the Sub-Advisor.

The composite performance data shown below was calculated in accordance with
recommended standards of the Association for Investment Management and Research
(AIMR*), retroactively applied to all time periods. All returns presented were
calculated on a total return basis and include all dividends and interest,
accrued income and realized and unrealized gains and losses. All returns reflect
the deduction of investment advisory fees, brokerage commissions and execution
costs paid by private accounts of the Sub-Advisor without provision for federal
or state income taxes. Custodial fees, if any, were generally not included in
the calculation. The Sub-Advisor's composite includes all actual, fee-paying,
discretionary private accounts with assets in excess of $1 million (minimum
account size required as of January 1, 1994) managed by the Sub-Advisor that
have investment objectives, policies, strategies and risks substantially similar
to those of the Fund. Securities transactions are accounted for on the trade
date and accrual accounting is used. Cash and equivalents are included in
performance returns. The monthly returns of the Sub-Advisor's composite combine

6
<PAGE>
the individual accounts' returns (calculated on a time-weighted rate of return
that is revalued whenever cash flows exceed 10% of an account's current value)
by asset-weighting each individual account's asset value as of the beginning of
the month. Quarterly and yearly returns are calculated by geometrically linking
the monthly and quarterly returns, respectively.

The private accounts that are included in the Sub-Advisor's composite are not
subject to the same types of expenses to which the Fund is subject nor to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Fund by the Investment Company Act or the Internal
Revenue Code. Consequently, the performance results for the Sub-Advisor's
composite could have been adversely affected if the private accounts included in
the composite had been regulated as a mutual fund. In addition, the operating
expenses incurred by the private accounts were lower than the anticipated
operating expenses of the Fund, and, accordingly, the performance results of the
composite are greater than what Fund performance would have been.

The investment results of the Sub-Advisor's composite presented below have been
reviewed and verified (for an AIMR Level II examination) by an independent
auditing firm, to be computed in accordance with Performance Presentation
Standards of AIMR, but these results are not intended to predict or suggest the
returns that might be experienced by the Fund or an individual investing in the
Fund. The methodology used to calculate performance conforming to AIMR standards
is different from that used by mutual funds. Investors should also be aware that
the use of a methodology different from that used below to calculate performance
could result in different performance data.

* AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisors. These AIMR standards
are intended to promote full and fair presentations by investment advisors of
their performance results and ensure uniformity in reporting so that performance
results of investment advisors are directly comparable.

ANNUALIZED TOTAL RETURN:

FOR YEAR ENDED ADVISOR'S COMPOSITE S&P 500*
-------------- ------------------- --------
December 31, 1994 3.38% 1.30%
December 31, 1995 45.74% 37.53%
December 31, 1996 22.04% 22.99%
December 31, 1997 24.18% 33.34%
December 31, 1998 12.36% 28.57%
December 31, 1999 7.10% 21.03%

FOR THE PERIOD
--------------
January 1 - June 30, 2000** -12.43% -0.47%
January 1, 1994 - June 30, 2000
Annualized Return 14.86% 21.46%
Cumulative 146.05% 253.86%

* The Standard & Poor's 500 Composite Stock Price Index, known as the S&P 500,
is an unmanaged market value-weighted index consisting of representative samples
of stocks within important industry groups within the U.S. economy. It includes
dividends and distributions, but does not reflect fees, brokerage commissions or
other expenses of investing. It has been taken from published sources and has
not been audited by Deloitte & Touche LLP.

** Unaudited.

7
<PAGE>
THE PORTFOLIO MANAGER

Mr. Randall R. Eley of the Sub-Advisor is principally responsible for the
day-to-day management on the Fund's portfolio. Mr Eley has been active in the
investment field professionally since the founding of the Sub-advisor in 1986.

SHAREHOLDING SERVICING AGENT

American Data Services, Inc., P.O. Box 5536, Hauppauge, NY 11788 serves as the
Fund's Shareholder Servicing Agent and Transfer Agent.

CUSTODIAN

Firstar Bank, N.A, 525 Walnut Street, Cincinnati, Ohio 45202, serves as the
Fund's Custodian.

DISTRIBUTOR

First Fund Distributors, Inc., 4455 East Camelback Road, Suite 261E, Phoenix,
Arizona 85018, serves as the Fund's Distributor.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers, LLP, 1177 Avenue of the Americas, New York, 10036,
serves as the Fund's Independent Accountants.

LEGAL COUNSEL

Paul, Hastings, Janofsky & Walker LLP, 345 California Street, San Francisco,
California 94104, serves as the Fund's legal counsel.

ACCOUNT INFORMATION

The Fund offers for sale two classes of shares, Class A and Class I. This
prospectus sets out information about Class A shares, available to investors who
do not have the minimum investment requirements to purchase the Fund's Class I
shares. Class I shares are available to institutional investors who are willing
to make an initial investment of $250,000. Class I shares charge no sales load
and have a different operating expense structure which may result in performance
for that Class which is different from that of Class A shares. Class I shares
are discussed more fully in a separate prospectus available from the Fund.

WHEN THE FUND'S SHARES ARE PRICED

The Net Asset Value or "NAV" is calculated after the close of trading on the New
York Stock Exchange (the "NYSE"), every day that the NYSE is open. The NAV is
not calculated on days that the NYSE is closed for trading. The NYSE usually
closes at 4 p.m., Eastern time, on weekdays, except for holidays.

HOW THE FUND'S SHARES ARE PRICED

Class A shares are offered at the public offering price. Shares of the Fund are
offered continuously for purchase at the public offering price next determined
after a purchase order is received. The public offering price per share is equal
to the NAV, plus a sales charge, which is reduced on purchases involving amounts
of $50,000 or more, as set forth in the table below. The public offering price

8
<PAGE>
is effective for orders received by the Fund or investment brokers and their
agents prior to the time of the next determination of the Fund's NAV and, in the
case of orders placed with brokers, transmitted promptly to the Transfer Agent.
Orders received after 4:00 p.m. Eastern time will be entered at the following
day's calculated NAV.

The reduced sales charges apply to quantity purchases. In addition, purchases of
shares made during a thirteen month period pursuant to a written LETTER OF
INTENT are eligible for a reduced sales charge. Reduced sales charges are also
applicable to subsequent purchases based on the aggregate of the amount being
purchased and the value, at NAV, of shares owned at the time of investment.

SALES CHARGE AS PERCENT OF:

Offering
Amount of Purchase price NAV
------------------ ----- ----
Less than $50,000 3.50% 3.63%
$50,000 but less than $100,000 3.00% 3.09%
$100,000 but less than $250,000 2.50% 2.56%
$250,000 but less than $500,000 2.00% 2.04%
$500,000 but less than $750,000 1.50% 1.52%
$750,000 but less than $1,000,000 1.00% 1.01%
$1,000,000 or more None None

LETTER OF INTENT

You may qualify for an immediate reduced sales charge on purchases by completing
the Letter of Intent section on the Application Form. You must state an
intention to purchase, during the next 13 months, a specified amount of shares
which, if made at one time, would qualify you for a reduced sales charge as
specified in the above table.

RIGHTS OF ACCUMULATION

The reduced sales charges applicable to purchases apply on a cumulative basis
over any period of time. Thus the value of all shares of the Fund owned by you
(including your regular account, IRA account, or any other account), taken at
current net asset value, can be combined with a current purchase of shares to
determine the rate of sales charge applicable to the current purchase in order
to receive the cumulative quantity reduction. When opening a new account, the
fact that you currently hold shares of the Fund must be indicated on the
Application Form in order to receive the cumulative quantity discount. For
subsequent purchases, the Fund's Shareholder Servicing Agent ((888) 229-2105)
should be notified of current fund holdings prior to the purchase of additional
shares.

DISTRIBUTION PLAN

The Fund has adopted a Distribution Plan for Class A Shares of the Fund,
pursuant to Rule 12b-1 under the Investment Company Act of 1940. The
Distribution Plan permits the Fund to pay the Advisor, as Distribution
Coordinator, for the sale and distribution of Class A shares at an annual rate
of 0.50% of the Fund's Class A shares' average annual net assets. Payments made
by the Fund pursuant to the Distribution Plan will represent compensation for
distribution and service activities, not reimbursement for specific expenses
incurred.

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

9
<PAGE>
SHAREHOLDER SERVICE PLAN

The Fund has adopted a Shareholder Service Plan. Under the Shareholder Service
Plan, the Advisor will provide, or arrange for others to provide, certain
services to Class A shareholders of the Fund. As compensation for its services,
the Fund will pay the Advisor, at an annual rate, of 0.25% of the Fund's Class A
shares' average annual net assets.

In addition to compensation paid by the Fund under the Distribution and
Shareholder Servicing Plans, the Advisor may, out of its own resources,
compensate third parties for distribution, marketing and other services provided
to the Fund. The Advisor may use its own resources to sponsor seminars and
educational programs on the Fund for financial intermediaries and shareholders.

CONVERSION FEATURE

On the first business day of the month next following the fourth anniversary of
their purchase, Class A shares will automatically convert to Class I shares and
will no longer be subject to the fees associated with the Distribution and
Shareholder Service Plans. This conversion will be on the basis of the relative
NAVs of the two Classes, without the imposition of any sales charge, fee or
other expense. The purpose of the conversion feature is to eliminate the
distribution and shareholder service fees paid by the holders of Class A shares
that have been outstanding for an extended period of time.

HOW TO INVEST

OPENING A NEW ACCOUNT

You may purchase shares of the Fund by mail, by wire or through your investment
broker. An Application Form accompanies this Prospectus. Please use the
Application Form when purchasing by mail or wire. If you have any questions or
need further information about how to purchase shares, you may call an account
representative of the Fund at (toll-free) (888) 229-2105.

PURCHASING SHARES BY MAIL

Please complete the attached Application Form and mail it with a personal check,
payable to UNITY FUND, CLASS A to the Fund at the following address:

Unity Fund, Class A
c/o Firstar Bank, N.A.
P.O. Box 641265
Cincinnati, OH 45264-1265

You may not send Application Forms via overnight delivery to a United States
Postal Services post office box. If you wish to use an overnight delivery
service, send your Application Form and check to the Fund's custodian at the
following address:

Unity Fund, Class A
c/o Firstar Bank, N.A.
Mutual Fund Custody Department
425 Walnut Street, M.L. 6118, Sixth Floor
Cincinnati, Ohio 45202

10
<PAGE>
PURCHASING SHARES BY WIRE

To order by wire, you must have a wire account number. In order to receive this
account number, please call the Fund at (toll-free) (888) 229-2105 between 9:00
a.m. and 5:00 p.m. Eastern time, on a day when the New York Stock Exchange
("NYSE") is open for trading. If you send your purchase by wire without the
account number, your order will be delayed. You will be asked to fax your
Application Form.

Once you have the account number, your bank or other financial institution may
send the wire to the Fund's Custodian with the following instructions:

Firstar Bank, N.A. Cinti/Trust
ABA # 0420-0001-3
For credit to: Unity Fund, Class A
DDA # 488-920-679
For further credit to [your name and account number]

Your bank or financial institution may charge a fee for sending the wire to the
Fund.

PURCHASING THROUGH AN INVESTMENT BROKER

Your may buy and sell shares through the Fund's approved brokers and their
agents (together "Brokers"). An order placed with 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 Broker will hold your shares in a pooled account in
the Broker's name. The Fund may pay the Broker to maintain your individual
ownership information, for maintaining other required records, and for providing
other shareholder services. The Broker may charge you a fee to handle your
order. The Broker is responsible for processing your order correctly and
promptly, keeping you advised of the status of your account, confirming your
transactions and ensuring that you receive copies of the Fund's prospectus.

Please contact your broker to see if it is an approved broker of the Fund and
for additional information.

MINIMUM INVESTMENTS

Your initial purchase must be at least $1,000. However, if you are purchasing
shares through an Individual Retirement Account ("IRA"), or you are starting an
Automatic Investing Plan, as described below, your initial purchase must be at
least $250. Exceptions may be made at the Fund's discretion.

ADDITIONAL INVESTMENTS

Additional purchases may be made for $100 or more. Exceptions may be made at the
Fund's discretion. You may purchase additional shares of the Fund by sending a
check, with the stub from your account statement, to the Fund at the addresses
listed previously. Please ensure that you include your account number on the
check. If you do not have the stub from your account statement, include your
name, address and account number on a separate statement.

You may also make additional purchases by wire or through a Broker. Please
follow the procedures described above for purchasing shares through an
investment broker.

MINIMUM ACCOUNT BALANCE

Due to the relatively high cost of managing small accounts, if the value of your
account falls below $250 (except for IRA accounts), the Fund may redeem your
shares. However, the Fund will give you 30 days written notice to give you time

11
<PAGE>
to add to your account and avoid involuntary redemption of your shares. The
Board of Trustees of the Fund believes this policy to be in the best interest of
all shareholders.

SELLING YOUR SHARES

You may sell some or all of your Fund shares on days that the NYSE is open for
trading. Your redemption may result in a realized gain or loss for tax purposes.
Your shares will be sold at the next NAV calculated for the Fund after receiving
your order. You may sell your shares by mail, wire or through a Broker.

SELLING YOUR SHARES BY MAIL

You may redeem your shares by sending a written request to the Fund. You must
give your account number and state the number of shares you wish to sell. You
must sign the written request. If the account is in the name of more than one
person, each shareholder must sign the written request. Send your written
request to the Fund at:

Unity Fund, Class A
c/o American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788

If the dollar amount of your redemption exceeds $100,000, you must obtain a
signature guarantee (NOT A NOTARIZATION), available from many commercial banks,
savings associations, stock brokers and other NASD member firms. In unusual
circumstances, the Fund may temporarily suspend the processing of sell requests,
or postpone payments of proceeds for up to seven days as permitted by federal
securities laws.

SELLING YOUR SHARES BY TELEPHONE

If you completed the "Redemption by Telephone" section of the Fund's Application
Form, you may sell your shares by calling the Shareholder Servicing Agent
(toll-free) at (888) 229-2105. Your redemption will be mailed or wired according
to your instructions, on the next business day to the bank account you
designated on your Application Form. The minimum wire amount is $1,000. Your
bank or financial institution may charge a fee for receiving the wire from the
Fund. Telephone redemptions may not be made for IRA accounts.

The Fund will take steps to confirm that a telephone redemption is authentic.
This may include tape recording the telephone instructions, or requiring a form
of personal identification before acting on those instructions. The Fund
reserves the right to refuse telephone instructions if it cannot reasonably
confirm the telephone instructions. The Fund may be liable for losses from
unauthorized or fraudulent telephone transactions only if these reasonable
procedures are not followed.

You may request telephone redemption privileges after your account is opened.
However, the authorization form requires a separate signature guarantee (NOT A
NOTARIZATION). The Fund may modify or terminate your telephone privileges after
giving you 60 days notice. Please be aware that you may experience delays in
redeeming your shares by telephone during periods of abnormal market activity.
In addition, the Fund may postpone payment of proceeds for up to seven days, as
permitted by federal securities laws.

AUTOMATIC INVESTMENT PLAN

You may make regular monthly investments in the Fund using the Automatic
Investment Plan. Through the plan, it is arranged for your bank or financial
institution to transfer a predetermined amount (but not less than $100),
monthly, to purchase shares of the Fund. When the Fund receives the transfer,
the Fund will invest the amount in additional shares of the Fund at the next

12
<PAGE>
calculated applicable public offering price. You may request an Application for
the Automatic Investment Plan by calling the Fund (toll-free) at (888) 229-2105.
The Fund may modify or terminate this Plan at any time. You may terminate your
participation in this Plan by calling the Fund.

AUTOMATIC WITHDRAWAL PLAN

You may request that a predetermined amount be sent to you each month or
quarter. Your account value must have a value of at least $10,000 for you to be
eligible to participate in the Automatic Withdrawal Plan. The minimum withdrawal
amount is $50. You may request an Application for the Automatic Withdrawal Plan
by calling the Fund (toll-free) at (877) 829-8413. The Fund may modify or
terminate this Plan at any time. You may terminate your participation in this
Plan by calling the Fund.

OTHER POLICIES

The Fund may waive the minimum investment requirements for purchases by certain
groups or retirement plans. All investments must be made in U.S. funds, and
checks must be drawn on U.S. banks. Third party checks are not accepted. The
Fund may charge you if your check is returned for insufficient funds. The Fund
reserves the right to reject any investment, in whole or in part. The IRS
requires that you provide the Fund or your Broker with a taxpayer identification
number and other information upon opening an account. You must specify whether
you are subject to backup withholding. Otherwise, you may be subject to backup
withholding at a rate of 31%.

EARNINGS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

Income dividends and capital gain distributions are normally declared and paid
by the Fund to its shareholders in December of each year. The Fund may also make
periodic dividend payments and distributions at other times in its discretion.

Unless you invest through a tax-advantaged account, you will owe taxes on the
dividends and distributions. Dividends and distributions are automatically
reinvested in additional shares of the Fund unless you make a written request to
the Fund that you would like to receive dividends and distributions made in
cash.

TAXES

The Fund is required by Internal Revenue Service rules to distribute
substantially all of its net investment income, and capital gains, if any, to
shareholders. Capital gains may be taxable at different rates depending upon the
length of time a Fund holds its assets. You will be notified at least annually
about the tax consequences of distributions made each year. The Fund's dividends
and distributions, whether received in cash or reinvested, may be taxable. Any
redemption of a Fund's shares will be treated as a sale and any gain on the
transaction may be taxable. Additional information about tax issues relating to
the Fund may be found in the SAI. Please consult your tax advisor about the
potential tax consequences of investing in the Fund.

13
<PAGE>
FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance during its past 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). The
information for the year ended May 31, 2000 has been audited by
PricewaterhouseCoopers LLP, and by other independent accountants for the period
ended prior to May 31, 2000. PricewaterhouseCoopers LLP's report and the Fund's
financial statements are included in the Fund's annual report which is available
upon request by calling (888) 229-2105.

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

<TABLE>
<CAPTION>
Year June 29, 1998*
Ended Through
May 31, 2000 May 31, 1999
------------ ------------
<S> <C> <C>
Net asset value, beginning of period ...................... $ 11.43 $ 10.00
--------- ---------
Income from investment operations:
Investment income ....................................... 0.07 0.05
Net realized and unrealized gain/(loss) on investments .. (1.25) 1.40
--------- ---------
Total from investment operations .......................... (1.18) 1.45
--------- ---------
Less distributions:
From net investment income .............................. (0.07) (0.01)
From net realized gain from security transactions ....... (0.40) (0.01)
--------- ---------
Total distributions ............................... (0.47) (0.02)
--------- ---------

Net asset value, end of period ............................ $ 9.78 $ 11.43
========= =========

Total return^ ............................................. (10.41)% 14.55%++

Ratios/supplemental data:
Net assets, end of period (thousands) ................... $ 1,881 $ 4,056

Ratio of expenses to average net assets:
Before expense reimbursement ............................ 5.36% 6.24%+
After expense reimbursement ............................. 2.10% 2.10%+

Ratio of net investment income to average net assets:
After expense reimbursement ............................. 0.43% 0.64%+

Portfolio turnover rate ................................... 43.05% 54.69%
</TABLE>

* Commencement of operations
+ Annualized
++ Not annualized
^ Does not include sales load.

14
<PAGE>
Unity Fund, Class A
A Series of Advisors Series Trust

For More Information

You can find more information about the Fund in the Statement of Additional
Information ("SAI"), incorporated by reference in this prospectus, that is
available free of charge.

To request your free copy of the SAI, or to request other information, please
call (toll-free) (888) 229-2105 or write to the Fund:

Unity Fund, Class A
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788

You may review and copy further information about the Fund, including the SAI,
at the Securities and Exchange Commission's ("SEC's") Public Reference Room in
Washington, D.C. Call 1-202-942-8090 for information about the operation of the
Public Reference Room.

Reports and other Fund information are also available on the SEC's Internet site
at www.sec.gov. Copies of this information may be obtained, upon payment of a
duplicating fee, by writing to the SEC's Public Reference Section, Washington,
D.C. 20549-0102 or by electronic request at: [email protected]

SEC File Number: 811-07959
<PAGE>

[LOGO]

Unity Fund, Class A
c/o American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
(toll-free) (888) 229-2105
<PAGE>
UNITY FUND

CLASS I SHARES

PROSPECTUS
SEPTEMBER 29, 2000

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

SHARES OF THE FUND OFFERED THROUGH DELTA EQUITY SERVICES CORP., JACKSON,
SHANKLIN & SONIA INVESTMENTS, L.L.C. OR ANY OTHER INVESTMENT BROKER ARE NOT BANK
DEPOSITS. SHARES OF THE FUND ARE NOT GUARANTEED OR ENDORSED BY ANY BANK. SHARES
OF THE FUND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC"), FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ALL INVESTMENTS ARE SUBJECT
TO RISKS, INCLUDING THE POSSIBLE LOSS OF MONEY INVESTED.
<PAGE>
UNITY FUND, CLASS I

6600 PLAZA DRIVE, SUITE 310
NEW ORLEANS, LA 70127
FUND LITERATURE (TOLL FREE): (877) LIBFUND (542-3863)
ALTERNATE: (800) 645-1704
SHAREHOLDER SERVICES (TOLL-FREE): (888) 229-2105

TABLE OF CONTENTS

FUND OVERVIEW..................................................................3
UNDERSTANDING EXPENSES.........................................................4
MANAGEMENT OF THE FUND.........................................................5
ACCOUNT INFORMATION............................................................7
HOW TO INVEST..................................................................8
EARNINGS AND TAXES............................................................10
FOR MORE INFORMATION..........................................................11

2
<PAGE>
FUND OVERVIEW

The Unity Fund was formerly known as the Liberty Freedom Fund.

INVESTMENT OBJECTIVES

The Fund's primary investment objective is the growth of capital. Its secondary
objective is to provide current income. The objectives of the Fund may be
changed only with shareholder approval.

PRINCIPAL INVESTMENT STRATEGIES

Under normal market conditions, the Fund will invest at least 85% of its total
assets in stocks and other equity securities.

The Fund's annual portfolio turnover rate will usually not exceed 50%.

TYPES OF SECURITIES

The Fund invests primarily in the following securities:

* Common Stock;
* Preferred Stock;
* Convertible Securities and Warrants; and
* Standard & Poor's Depositary Receipts ("SPDRs")

Please review the SAI for further descriptions of these securities.

PRINCIPAL RISKS OF INVESTING

You may lose money by investing in the Fund. Other principal risks you should
consider include:

MARKET DECLINE - A company's stock price or the overall stock market may
experience a sudden decline.

3
<PAGE>
WHO MAY WANT TO INVEST

The Fund is intended for investors who:

PAST PERFORMANCE OF THE FUND

As of May 31, 2000, no Class I shares had been issued.

UNDERSTANDING EXPENSES

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

SHAREHOLDER FEES
(fees paid directly from your investment)

Maximum Sales Load on Fund Purchases
(as a percentage of offering price) None

ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Investment Advisory Fees 0.85%
Distribution (12b-1) Fees None
Shareholder Service Fees None
Other Expenses 3.00%

Total Annual Fund Operating Expenses 3.85%
Advisory Fee Waiver and/or Fund Expense Absorption # (2.55%)
-----
Net Expenses 1.30%
=====

# Other expenses have been estimated. The Advisor has contractually agreed to
waive its fees and/or absorb expenses of the Fund to ensure that Total Annual
Operating Expenses do not exceed 1.30%. This contract's term is indefinite
and may be terminated only by the Board of Trustees of the Fund. If the
Advisor waives any of its fees or pays Fund expenses, the Fund may reimburse
the Advisor in future years.

EXAMPLE

This Example is intended to help you compare the costs of investing in the Fund
with the cost of investing in other mutual funds.

1 year 3 years 5 years 10 years
------ ------- ------- --------
$132 $411 $711 $1,563

4
<PAGE>
MANAGEMENT OF THE FUND

THE ADVISOR

The Fund's Advisor, Liberty Bank and Trust Company ("Liberty"), 6600 Plaza
Drive, Suite 310, New Orleans, Louisiana 70127, (a subsidiary of Liberty
Financial Services, Inc.) has provided banking services to the greater New
Orleans community since 1972. Liberty's assets have grown to over $180 million
and has risen to become one of the top ten African American owned banks in the
United States. Liberty has overall responsibility for the assets under
management and will be responsible for monitoring the day-to-day activity of the
Sub-Advisor. Liberty, together with the Sub-Advisor, is responsible for
formulating and implementing the Fund's investments. Liberty furnishes the Fund
with office space and certain administrative services. As compensation for the
services it receives, the Fund pays Liberty a monthly advisory fee based upon
the average daily net assets of the Fund at the annual rate of 0.25%.

THE SUB-ADVISOR

PRIOR PERFORMANCE OF THE SUB-ADVISOR

The composite performance data shown below were calculated in accordance with
recommended standards of the Association for Investment Management and Research
(AIMR*), retroactively applied to all time periods. All returns presented were
calculated on a total return basis and include all dividends and interest,
accrued income and realized and unrealized gains and losses. All returns reflect
the deduction of investment advisory fees, brokerage commissions and execution
costs paid by private accounts of the Sub-Advisor without provision for federal
or state income taxes. Custodial fees, if any, were generally not included in
the calculation. The Sub-Advisor's composite includes all actual, fee-paying,
discretionary private accounts with assets in excess of $1 million (minimum
account size required as of January 1, 1994) managed by the Sub-Advisor that
have investment objectives, policies, strategies and risks substantially similar
to those of the Fund. Securities transactions are accounted for on the trade
date and accrual accounting is used. Cash and equivalents are included in
performance returns. The monthly returns of the Sub-Advisor's composite combine

5
<PAGE>
the individual accounts' returns (calculated on a time-weighted rate of return
that is revalued whenever cash flows exceed 10% of an account's current value)
by asset-weighting each individual account's asset value as of the beginning of
the month. Quarterly and yearly returns are calculated by geometrically linking
the monthly and quarterly returns, respectively.

ANNUALIZED TOTAL RETURN:

FOR THE PERIOD
January 1 - June 30, 2000** -12.43% -0.47%
January 1, 1994 - June 30, 2000
Annualized Return 14.86% 21.46%
Cumulative 146.05% 253.86%

* The Standard & Poor's 500 Composite Stock Price Index, known as the S&P 500,
is an unmanaged market value-weighted index consisting of representative
samples of stocks within important industry groups within the U.S. economy.
It includes dividends and distributions, but does not reflect fees, brokerage
commissions or other expenses of investing. It has been taken from published
sources and has not been audited by Deloitte & Touche LLP.

** Unaudited.

6
<PAGE>
THE PORTFOLIO MANAGER

SHAREHOLDING SERVICING AGENT

American Data Services, Inc., P.O. Box 5536, Hauppauge, NY 11788 serves as the
Fund's Shareholder Servicing Agent and Transfer Agent.

CUSTODIAN

Firstar Bank, N.A, 525 Walnut Street, Cincinnati, Ohio 45202, serves as the
Fund's Custodian.

DISTRIBUTOR

First Fund Distributors, Inc., 4455 East Camelback Road, Suite 261E, Phoenix,
Arizona 85018, serves as the Fund's Distributor.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers, LLP, 1177 Avenue of the Americas, New York, New York,
10036, serves as the Fund's Independent Accountants.

LEGAL COUNSEL

Paul, Hastings, Janofsky & Walker LLP, 345 California Street, San Francisco,
California 94104, serves as the Fund's legal counsel.

ACCOUNT INFORMATION

The Fund offers for sale two classes of shares, Class A and Class I. This
prospectus sets out information about Class I shares. Class A shares are
available to smaller investors who do not have the initial minimum investment of
$250,000. Class A shares charge an up-front sales load and have a different
operating expense structure which may result in performance for that Class which
is different from that of Class I shares. Class A shares are discussed more
fully in a separate prospectus available from the Fund.

WHEN THE FUND'S SHARES ARE PRICED

HOW THE FUND'S SHARES ARE PRICED

Class I shares are offered continuously for purchase at the NAV next determined
after a purchase order is received. The NAV price is effective for orders
received by the Fund or investment brokers and their agents prior to the time of
the next determination of the Fund's NAV and, in the case of orders placed with
brokers, transmitted promptly to the Transfer Agent. Orders received after 4:00
p.m., Eastern time will be entered at the following day's calculated NAV.

7
<PAGE>
HOW TO INVEST

OPENING A NEW ACCOUNT

PURCHASING SHARES BY MAIL

Please complete the attached Application Form and mail it with a personal check,
payable to the UNITY FUND, CLASS I to the Fund at the following address:

Unity Fund, Class I
c/o Firstar Bank, N.A.
P.O. Box 641265
Cincinnati, OH 45264-1265

Unity Fund, Class I
c/o Firstar Bank, N.A.
Mutual Fund Custody Department
425 Walnut Street, M.L. 6118, Sixth Floor
Cincinnati, Ohio 45202

PURCHASING SHARES BY WIRE

To order by wire, you must have a wire account number. Please call the Fund at
(toll-free) (888) 229-2105 between 9:00 a.m. and 5:00 p.m. Eastern time, on a
day when the New York Stock Exchange ("NYSE") is open for trading, in order to
receive this account number. If you send your purchase by wire without the
account number, your order will be delayed. You will be asked to fax your
Application Form.

Once you have the account number, your bank or other financial institution may
send the wire to the Fund's Custodian with the following instructions:

Firstar Bank, N.A. Cinti/Trust
ABA # 0420-0001-3 For credit to: Unity Fund, Class I
DDA # 488-920-679 For further credit to [your name
and account number]

Your bank or financial institution may charge a fee for sending the wire to the
Fund.

PURCHASING THROUGH AN INVESTMENT BROKER

Your may buy and sell shares through the Fund's approved brokers and their
agents (together "Brokers"). An order placed with a Broker is treated as if it
were placed directly with the Fund, and will be executed at the NAV next
calculated by the Fund. Your Broker will hold your shares in a pooled account in
the Broker's name. The Fund may pay the Broker to maintain your individual
ownership information, for maintaining other required records, and for providing
other shareholder services. The Broker may charge you a fee to handle your
order. The Broker is responsible for processing your order correctly and
promptly, keeping you advised of the status of your account, confirming your
transactions and ensuring that you receive copies of the Fund's prospectus.

8
<PAGE>
Please contact your broker to see if it is an approved broker of the Fund and
for additional information.

MINIMUM AND SUBSEQUENT INVESTMENTS

The minimum initial investment in the Fund is $250,000. Generally, subsequent
investments must be at least $25,000. Exceptions may be made at the Fund's
discretion.

You may purchase additional shares of the Fund by sending a check, with the stub
from your account statement, to the Fund at the addresses listed above. Please
ensure that you include your account number on the check. If you do not have the
stub from your account statement, include your name, address and account number
on a separate statement.

You may also make additional purchases by wire or through a Broker. Please
follow the procedures described above for purchasing shares through an
investment broker.

SELLING YOUR SHARES

You may sell some or all of your Fund shares on days that the NYSE is open for
trading. Your redemption may result in a realized gain or loss for tax purposes.
Your shares will be sold at the next net asset value calculated for the Fund
after receiving your order. You may sell your shares by mail, wire or through a
Broker.

SELLING YOUR SHARES BY MAIL

Unity Fund, Class I
c/o American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788

SELLING YOUR SHARES BY TELEPHONE

9
<PAGE>
unauthorized or fraudulent telephone transactions only if these reasonable
procedures are not followed.

AUTOMATIC INVESTMENT PLAN

You may make regular monthly investments in the Fund using the Automatic
Investment Plan. Through this plan, it is arranged for your bank or financial
institution to transfer a predetermined amount, monthly, to purchase shares of
the Fund. When the Fund receives the transfer, the Fund will invest the amount
in additional shares of the Fund at the next calculated NAV. You may request an
Application for the Automatic Investment Plan by calling the Fund (toll-free) at
(888) 229-2105. The Fund may modify or terminate this Plan at any time. You may
terminate your participation in this Plan by calling the Fund.

AUTOMATIC WITHDRAWAL PLAN

You may request that a predetermined amount be sent to you each month or
quarter. The minimum withdrawal amount is $100. You may request an Application
for the Automatic Withdrawal Plan by calling the Fund (toll-free) at (877)
829-8413. The Fund may modify or terminate this Plan at any time. You may
terminate your participation in this Plan by calling the Fund.

OTHER POLICIES

EARNINGS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

TAXES

10
<PAGE>
UNITY FUND, CLASS I
A SERIES OF ADVISORS SERIES TRUST

FOR MORE INFORMATION

You can find more information about the Fund in the Statement of Additional
Information ("SAI"), incorporated by reference in this prospectus, that is
available free of charge.

To request your free copy of the SAI, or to request other information, please
call (toll-free) (888) 229-2105 or write to the Fund:

Unity Fund, Class I
c/o American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788

Fund information is also available on the SEC's Internet site at . Copies of
this information may be obtained, upon payment of a duplicating fee, by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102 or by
electronic request at: [email protected].

SEC File Number: 811-07959
<PAGE>
UNITY FUND
(formerly, the Liberty Freedom Fund)

Statement of Additional Information

Dated September 29, 2000

This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the prospectuses dated September 29, 2000, for Class A
and Class I shares, as may be amended from time to time, of The Unity Fund (the
"Fund"), a series of Advisors Series Trust (the "Trust"). Liberty Bank and Trust
Company (the "Advisor"), 6600 Plaza Drive, Suite 310, New Orleans, Louisiana
70122, is the Advisor of the Fund. The Edgar Lomax Company (the "Sub-Advisor"),
6564 Loisdale Court, Suite 310, Springfield, VA 22150, is the Sub-Advisor to the
Fund. A copy of the prospectus may be obtained from the Fund c/o American Data
Services, Inc., 150 Motor Parkway, Suite 109, Hauppauge, NY 11788; or by calling
the Fund's shareholder servicing agent at (888) 229-2105.

TABLE OF CONTENTS

The Trust....................................................................B-2
Investment Objectives And Policies...........................................B-2
Management Of The Fund.......................................................B-8
Distribution Arrangements...................................................B-13
Shareholder Servicing Arrangements..........................................B-13
Portfolio Transactions And Brokerage........................................B-14
Net Asset Value.............................................................B-15
Taxation....................................................................B-16
Dividends And Distributions.................................................B-19
Performance Information.....................................................B-19
General Information.........................................................B-21

B-1
<PAGE>
THE TRUST

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 18 series of shares of
beneficial interest, par value $0.01 per share. This SAI relates only to the
Fund.

The Trust is registered with the SEC as a management investment company.
Such a registration does not involve supervision of the management or policies
of the Fund. The Prospectus of the Fund and this SAI omit certain of the
information contained in the Registration Statement filed with the SEC. Copies
of such information may be obtained from the SEC upon payment of the prescribed
fee.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of the Fund is growth of capital, with a secondary
objective of providing income. There is no assurance that the Fund will achieve
its investment objective. The discussion below supplements information contained
in the prospectus as to the investment objective, investment strategies and
associated risks of the Fund.

The following are non-principal investment strategies and risks.

CONVERTIBLE SECURITIES, EQUITY-LINKED DERIVATIVES AND WARRANTS

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

Standard & Poor's ("S&P") Depository Receipts ("SPDRs") and S&P's MidCap
400 Depository Receipts ("MidCap SPDRs") are considered Equity-Linked
Derivatives. Each of these instruments are derivative securities whose value
follows a well-known securities index or basket of securities.

SPDRs and MidCap SPDRs are designed to follow the performance of S&P 500
Index and the S&P MidCap 400 Index, respectively. Because the prices of SPDRs
and MidCap SPDRs are correlated to diversified portfolios, they are subject to
the risk that the general level of stock prices may decline or that the
underlying indices decline. In addition, because SPDRs, MidCap SPDRs will
continue to be traded even when trading is halted in component stocks of the
underlying indices, price quotations for these securities may, at times, be
based upon non-current price information with respect to some or even all of the
stocks in the underlying indices.

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

B-2
<PAGE>
SHORT-TERM INVESTMENTS

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

BANK CERTIFICATES OF 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-2" or higher by S&P, "Prime-1" or "Prime-2" by Moody's, or
similarly rated by another nationally recognized statistical rating organization
or, if unrated, will be determined by the Advisor to be of comparable quality.
These rating symbols are described in the Appendix.

B-3
<PAGE>
Corporate obligations include bonds and notes issued by corporations to
finance longer-term credit needs than supported by commercial paper. While such
obligations generally have maturities of ten years or more, the Fund may
purchase corporate obligations which have remaining maturities of one year or
less from the date of purchase and which are rated "AA" or higher by S&P or "Aa"
or higher by Moody's.

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

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

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

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

FOREIGN INVESTMENTS AND CURRENCIES

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

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

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

B-4
<PAGE>
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. The internal politics of certain foreign countries may not be as
stable as those of the United States. Governments in certain foreign countries
also continue to participate to a significant degree, through ownership interest
or regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are accordingly
affected by the trade policies and economic conditions of their trading
partners. Enactment by these trading partners of protectionist trade legislation
could have a significant adverse effect upon the securities markets of such
countries.

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

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

REPURCHASE AGREEMENTS

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

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS

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

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

B-5
<PAGE>
The Fund will purchase securities on a when-issued, forward commitment or
delayed settlement basis only with the intention of completing the transaction.
If deemed advisable as a matter of investment strategy, however, the Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In these cases the Fund may realize a taxable
capital gain or loss. When the Fund engages in when-issued, forward commitment
and delayed settlement transactions, it relies on the other party to consummate
the trade. Failure of such party to do so may result in the Fund's incurring a
loss or missing an opportunity to obtain a price credited to be advantageous.

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

ILLIQUID SECURITIES

The Fund may not invest more than 15% of the value of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise illiquid. The Advisor will monitor the amount of
illiquid securities in the Fund's portfolio, under the supervision of the
Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Commission under the Securities
Act, the Trust's Board of Trustees may determine that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid.

FUND POLICIES

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.

B-6
<PAGE>
As a matter of fundamental policy, the Fund is diversified. 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 from banks in amounts not exceeding one-third of its
total assets (not including the amount borrowed); and (ii) this restriction
shall not prohibit the Fund from engaging in options transactions;

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

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

4. With respect to 75% of its total assets, invest more than 5% of its
total assets in securities of a single issuer or hold more than 10% of the
voting securities of such issuer, except that this restriction does not apply to
investment in the securities of the U.S. Government, its agencies or
instrumentalities.

5. 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);

6. 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);

7. Purchase or sell commodities or commodity futures contracts;

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

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

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

The Fund may not:

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

2. Invest more than 15% of its net assets 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);

3. Sell securities short;

4. Make loans of securities; or

5. Notwithstanding fundamental restriction 1 above, borrow money, except
from banks for temporary or emergency purposes, and in amounts not to exceed 5%
of total net assets, and subject to the further restriction that no additional
investment in securities will be made while any such loan is outstanding.

B-7
<PAGE>
MANAGEMENT OF THE FUND

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 Manager, 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:

<TABLE>
<CAPTION>
Position with Principal Occupation
Name and Address The Trust During Past Five Years
---------------- --------- ----------------------
<S> <C> <C>
WALTER E. AUCH, SR. (born 1921) Trustee Business Consultant and Director,
6001 N. 62nd Place Nicholas-Applegate Institutional Mutual Funds,
Paradise Valley, AZ 85153 Salomon Smith Barney Trak Funds and Concert
Series, Pimco Advisors L.P., Banyan Strategic
Realty Trust, Legend Properties and Senele Grou

ERIC M. BANHAZL* (born 1957) Trustee, President Executive Vice President, Investment Company
2020 E. Financial Way and Treasurer Administration, LLC; Vice President, First Fund
Glendora, CA 91741 Distributors, Inc.; Treasurer, Guinness Flight
Investment Funds, Inc.

DONALD E. O'CONNOR (born 1936) Trustee Retired; formerly Executive Vice President and
1700 Taylor Avenue Chief Operating Officer of ICI Mutual Insurance
Fort Washington, MD 20744 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.

GEORGE T. WOFFORD III (born 1939) Trustee Senior Vice President, Information Services,
305 Glendora Circle Federal Home Loan Bank of San Francisco.
Danville, CA 94526

STEVEN J. PAGGIOLI (born 1950) Vice President Executive Vice President, Investment Company
915 Broadway, Suite 1605 Administration, LLC; Vice President, First Fund
New York, NY 10010 Distributors, Inc.; President and Trustee,
Professionally Managed Portfolios; Trustee,
Managers Funds Trust.

ROBERT H. WADSWORTH (born 1940) Vice President President, Robert H. Wadsworth & Associates,
4455 E. Camelback Rd. Suite 261-E Inc., Investment Company Administration, LLC and
Phoenix, AZ 85018 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.
</TABLE>

B-8
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Name and Address The Trust During Past Five Years
---------------- --------- ----------------------
<S> <C> <C>
THOMAS W. MARSCHEL (born 1970) Vice President Vice President, Investment Company
4455 E. Camelback Rd. Suite 261-E Administration, LLC; Assistant Vice President,
Phoenix, AZ 85018 Investment Company Administration, LLC from
October 1995 to January 2000; Fund Accounting
Supervisor with SEI Fund Resources from January
1994 to October 1995.

CHRIS O. MOSER (born 1949) Secretary Employed by Investment Company Administration,
4455 E. Camelback Rd. Suite 261-E LLC (since July 1996); Formerly employed by Bank
Phoenix, AZ 85018 One, N.A. (From August 1995 until July 1996;
O'Connor, Cavanagh, Anderson, Killingsworth and
Beshears (law firm) (until August 1995)
</TABLE>

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

Name and Position Aggregate Compensation from The Trust
----------------- -------------------------------------
Walter E. Auch, Sr., Trustee $12,000
Donald E. O'Connor, Trustee $12,000
George T. Wofford III, Trustee $12,000

The Trust has no pension or retirement plan. No other entity affiliated
with the Trust pays any compensation to the Trustees.

PRINCIPAL SHAREHOLDERS

Shares of the Fund owned by the Trustees and officers as a group were less
than 1% at August 31, 2000.

As of August 31, 2000, the following persons owned of record and/or
beneficially more than 5% of the Fund's outstanding voting securities:

UNO Foundation, 2000 Lakeshore Drive, New Orleans, LA 70148; 13.62% record.

Liberty Bank 401(K) Investment Plan, Greg St. Etienne TTEE, 4101 Pauger
Street, New Orleans, LA 70122-3173; 13.55% record.

Menu Direct Corporation, c/o Mr. Scott A. Morgan, 865 Centennial Avenue,
Piscataway, NJ 08854; 12.44% record.

THE ADVISOR

The Fund's Advisor is Liberty Bank and Trust Company. Subject to the
supervision of the Board of Trustees, investment advisory and related services
are provided by the Advisor, pursuant to an Advisory Agreement (the "Advisory
Agreement"). The Advisor is a majority-owned subsidiary of Liberty Financial
Services, Inc.

The Advisor is exempt from registering as an investment adviser under the
Investment Advisers Act of 1940, because of its status as a bank. The Advisor,
founded in 1972, is a state chartered commercial bank and a Louisiana
Corporation.

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

B-9
<PAGE>
Without limiting the generality of the foregoing, the Advisor has agreed to
(i) furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets, (ii) manage and oversee the investments of the
Fund, subject to the ultimate supervision and direction of the Trust's Board of
Trustees; (iii) monitor the day-to-day activity of the Sub-Advisor; (iv) furnish
such reports, statements and other data on securities, economic conditions and
other matters related to the investment of the Fund's assets as the Trustees or
the officers of the Trust may reasonably request; and (v) render to the Trust's
Board of Trustees such periodic and special reports as the Board may reasonably
request. The Advisor has also agreed, at its own expense, to maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary to the performance of its
obligations under the Advisory Agreement. Personnel of the Advisor may serve as
officers of the Trust provided they do so without compensation from the Trust.
Without limiting the generality of the foregoing, the staff and personnel of the
Advisor shall be deemed to include persons employed or retained by the Advisor
to furnish statistical information, research, and other factual information,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance as the Advisor or the Trust's Board of Trustees may desire and
reasonably request. With respect to the operation of the Fund, the Advisor has
agreed to be responsible for the expenses of printing and distributing extra
copies of the Fund's prospectus, statement of additional information, and sales
and advertising materials (but not the legal, auditing or accounting fees
attendant thereto) to prospective investors (but not to existing shareholders);
and the costs of any special Board of Trustees meetings or shareholder meetings
convened for the primary benefit of the Advisor.

As compensation for the Advisor's services, the Fund pays it an Advisory
fee at the rate specified in the prospectus. In addition to the fees payable to
the Advisor, 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, 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

B-10
<PAGE>
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.

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

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

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

During the year ended May 31, 2000 and the period June 29, 1998 to May 31,
1999, the Advisor waived its entire advisory fee of $7,748 and $6,597,
respectively and paid Fund expenses in the amount of $92,856, and $99,800,
respectively.

THE SUB-ADVISOR

The Fund's Sub-Advisor is The Edgar Lomax Company. Subject to the
supervision of the Board of Trustees, investment Advisory and related services
are also provided by the Sub-Advisor, pursuant to a Sub-Advisory Agreement (the
"Sub-Advisory Agreement").

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

Without limiting the generality of the foregoing, the Sub-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 Advisor and 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 such
reports, statements and other data on securities, economic conditions and other
matters related to the investment of the Fund's assets as the Trustees or the
officers of the Trust may reasonably request; and (vii) render to the Trust's
Board of Trustees such periodic and special reports as the Board may reasonably
request. The Sub-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

B-11
<PAGE>
obligations under the Sub-Advisory Agreement. Personnel of the Sub-Advisor may
serve as officers of the Trust provided they do so without compensation from the
Trust. Without limiting the generality of the foregoing, the staff and personnel
of the Sub-Advisor shall be deemed to include persons employed or retained by
the Sub-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 Sub-Advisor's services, the Fund pays it a fee at
the rate specified in the prospectus. The Sub-Advisor may agree to waive certain
of its fees or reimburse the Fund for certain expenses, in order to limit the
expense ratio of the Fund. In that event, subject to approval by the Trust's
Board of Trustees, the Fund may reimburse the Sub-Advisor in subsequent years
for fees waived and expenses reimbursed, provided the expense ratio before
reimbursement is less than the expense limitation in effect at that time.

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

The Sub-Advisory Agreement will remain in effect for a period not to exceed
two years. Thereafter, if not terminated, the Sub-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 Sub-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 Sub-Advisor. The
Sub-Advisory Agreement also may be terminated by the Advisor on 60 days written
notice to the Trust. The Sub-Advisory Agreement terminates automatically upon
its assignment (as defined in the 1940 Act).

During the year ended May 31, 2000 and the period June 29, 1998 to May 31,
1999, the Sub-Advisor received compensation from the Fund in the amount of
$18,594 and $15,131, respectively.

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

B-12
<PAGE>
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

During the year ended May 31, 2000 and the period June 29, 1998 to May 31, 1999,
the Administrator received compensation from the Fund in the amount of $30,082
and $27,534, respectively.

CODE OF ETHICS. The Board of the Trust, the Advisor and the Distributor have
each adopted a Code of Ethics under Rule 17j-1 of the 1940 Act. These Codes
permit, subject to certain conditions, personnel of the Advisor and Distributor
to invest in securities that may be purchased by the Fund.

DISTRIBUTION ARRANGEMENTS

Pursuant to a plan of distribution adopted by the Trust, on behalf of the
Fund, pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), the Fund may pay
distribution and related expenses up to 0.50% of its average annual net assets,
as compensation, to the Advisor as Distribution Coordinator. Expenses permitted
to compensate the Advisor for include preparation, printing and mailing of
prospectuses, shareholder reports such as semi-annual and annual reports,
performance reports and newsletters, sales literature and other promotional
material to prospective investors, direct mail solicitations, advertising,
public relations, compensation of sales personnel, advisors or other third
parties for their assistance with respect to the distribution of the Fund's
shares, payments to financial intermediaries for shareholder support,
administrative and accounting services with respect to shareholders of the Fund
and such other expenses as may be approved from time to time by the Board of
Trustees of the Trust.

Under the Plan, the Trustees will be furnished quarterly with information
detailing the amount of expenses paid under the Plan and the purposes for which
payments were made. The Plan may be terminated at any time by vote of a majority
of the Trustees of the Trust who are not interested persons. Continuation of the
Plan is considered by such Trustees no less frequently than annually. During the
year end/ed May 31, 2000 and the period ending May 31, 1999, the Fund paid the
Distribution Coordinator distribution fees totaling $15,195 and $12,782,
respectively. These fees were used to compensate the Advisor for Fund
advertising expenses, presentation and road show expenses incurred by the
Advisor and distribution-related printing and postage.

SHAREHOLDER SERVICING ARRANGEMENTS

The Trust has also adopted a Shareholder Service Plan with respect to Class
A Shares of the Fund, pursuant to which the Fund pays the Advisor for expenses
incurred in connection with non-distribution related shareholder servicing
provided by the Advisor to securities broker-dealers and other securities
professionals ("Service Organizations") and/or beneficial owners of the shares
of the Fund.

Under the Plan, the Fund will pay the Advisor for providing or for
arranging for the provision of non-distribution personal shareholder services
provided by the Advisor or by securities broker-dealers and other securities
professionals ("Service Organizations") to beneficial owners of the shares of
Class A, including but not limited to shareholder servicing provided by the
Advisor at facilities dedicated to the Class A, ("Clients"), provided that such
shareholder servicing is not duplicative of the servicing otherwise provided on
behalf of Class A.

B-13
<PAGE>
Such services may include, but are not limited to, (a) establishing and
maintaining accounts and records relating to Clients who invest in the Class;
(b) aggregating and processing orders involving the shares of the Class; (c)
processing dividend and other distribution payments from the Trust on behalf of
Clients; (d) providing information to Clients as to their ownership of shares of
the Class or about other aspects of the operations of the Class; (e) preparing
tax reports or forms on behalf of Clients; (f) forwarding communications from
the Class to Clients; (g) assisting Clients in changing the Class' records as to
their addresses, dividend options, account registrations or other data; and (h)
providing such other similar services as the Advisor may reasonable request to
the extent the Service Organization is permitted to do so under applicable
statutes, rules or regulations.

The Fund shall pay the Advisor, for its services, at an annual rate of
0.25% of the average daily net assets of Class A shares. The Fund may make such
payments monthly, and payments to Liberty may exceed the amount expended by
Liberty during the month or the year to date. In the event that payments to
Liberty during a fiscal year exceed the amounts expended (or accrued, in the
case of payments to Service Organizations) during a fiscal year, the Advisor
will promptly refund to the Class any such excess.

The Advisor may make final and binding decisions as to all matters relating
to payments to Service Organizations, including but not limited to (i) the
identity of Service Organizations; and (ii) what shares of the Class, if any,
are to be attributed to a particular Service Organization, to a different
Service Organization or to no Service Organization.

While this Plan is in effect, the Advisor shall report in writing at least
quarterly to the Trust's Board of Trustees, and the Board shall review, the
amounts expended under this Plan and the purposes for which such expenditures
were made.

This Plan will continue from year to year so long as such continuance is
specifically approved at least annually by the Trust's Board of Trustees
including the Disinterested Trustees cast in person at a meeting called for the
purpose of voting on such continuance. This Plan may be terminated at any time
by a vote of a majority of the Qualified Trustees or by the vote of the holders
of a "majority" (as defined in the Act) of the outstanding voting securities of
the Class.

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

Subject to such policies as the Advisor, 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

B-14
<PAGE>
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 year ended
May 31, 2000 and the period June 29, 1998 to May 31, 1999, were $6,007 and
$16,495, respectively.

NET ASSET VALUE

The net asset value of each class of the Fund's shares will fluctuate and
is determined as of the close of trading on the New York Stock Exchange (the
"NYSE") (generally 4:00 p.m. Eastern time) each business day the NYSE is open
for trading. The NYSE annually announces the days on which it will not be open
for trading. The NYSE generally closes for holidays such as: 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 this list.

Please see the Prospectus for a full description about how to invest in the
Fund.

The Distributor pays a portion of the sales charges imposed on purchases of
Class A shares to retail dealers, as follows:

Portion of Sales
Charge retained
Your investment by Dealers
--------------- ----------
Less than $50,000 3.00%
$50,000 but less than $100,000 2.60
$100,000 but less than $250,000 2.20
$250,000 but less than $500,000 1.80
$500,000 but less than $750,000 1.30
$750,000 but less than $1,000,000 0.80
$1,000,000 or more None

The net asset value per share of a class of the Fund 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
that class's proportional interest in the Fund's liabilities (including accrued
expenses) by the total number of shares of that class 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

B-15
<PAGE>
securities are being valued or, lacking any reported sales, at the mean between
the last available bid and asked price. Securities that are traded on more than
one exchange are valued on the exchange determined by the Advisor to be the
primary market. Securities primarily traded in the NASDAQ National Market System
for which market quotations are readily available shall be valued at the last
sale price on the day of valuation, or if there has been no sale on such day, at
the mean between the bid and asked prices. Over-the-counter ("OTC") securities
which are not traded in the NASDAQ National Market System shall be valued at the
most recent trade price. Securities and assets for which market quotations are
not readily available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith by or under the direction of the Board.

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

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

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

B-16
<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 prospectuses. In order to avoid the payment of any federal excise
tax based on net income, the Fund must declare on or before December 31 of each
year, and pay on or before January 31 of the following year, distributions at
least equal to 98% of its ordinary income for that calendar year and at least
98% of the excess of any capital gains over any capital losses realized in the
one-year period ending October 31 of that year, together with any undistributed
amounts of ordinary income and capital gains (in excess of capital losses) from
the previous calendar year.

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

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

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

B-17
<PAGE>
disposition of one position of a straddle be deferred until gain is realized on
disposition of the offsetting position; that the Fund's holding period in
certain straddle positions not begin until the straddle is terminated (possibly
resulting in the gain being treated as short-term capital gain rather than
long-term capital gain); and that losses recognized with respect to certain
straddle positions, which would otherwise constitute short-term capital losses,
be treated as long-term capital losses. Different elections are available to the
Fund that may mitigate the effects of the straddle rules.

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

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

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

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

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

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

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

B-18
<PAGE>
DIVIDENDS AND DISTRIBUTIONS

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

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

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

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

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

PERFORMANCE INFORMATION

The Fund may, from time to time, quote various performance figures in
advertisements and other communications to illustrate its past performance.
Performance figures will be calculated separately for each class of shares.

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.

B-19
<PAGE>
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.

The Fund's average annual return for the year ended May 31, 2000 was
-13.55%. The Fund's total return for the period June 29, 1998 (inception date)
to May 31, 2000 was -0.49%.

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:

YIELD = 2 [(a-b + 1)6 - 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"), Morningstar, Inc. 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.

B-20
<PAGE>
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 18 series of shares of
beneficial interest, par value of $0.01 per share. The Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares
of beneficial interest and to divide or combine the shares into a greater or
lesser number of shares without thereby changing the proportionate beneficial
interest in the Fund. Each share represents an interest in the Fund
proportionately equal to the interest of each other share. Upon the Fund's
liquidation, all shareholders would share pro rata in the net assets of the Fund
available for distribution to shareholders.

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 several series of
shares, and may create additional series in the future, each of which have
separate assets and liabilities. Income and operating expenses not specifically
attributable to a particular Fund are be allocated fairly among the Funds by the
Trustees, generally on the basis of the relative net assets of each Fund.

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.

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

The Fund's principal underwriter is First Fund Distributors, Inc., 4455 E.
Camelback Road, Suite 261E, Phoenix, AZ 85018. The Fund's custodian, Firstar
Bank, 425 Walnut Street, Cincinnati, Ohio 45202 is responsible for holding the
Funds' assets. American Data Services, P.O. Box 5536, Hauppauge NY 11788 acts as
the Fund's transfer agent and accounting services agent. The Fund's independent
accountants, PricewaterhouseCoopers, LLP, 1177 Avenue of the Americas, New York,
NY 10036, assist in the preparation of certain reports to the Securities and
Exchange Commission and the Fund's tax returns.

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

B-21