AMERICAN PENSION INVESTORS TRUST, 485BPOS, 1997-10-08

AMERICAN PENSION INVESTORS TRUST
485BPOS, 1997-10-08

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As filed with the Securities and Exchange Commission on September 30, 1997.
Registration No. 2-96538

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __X__
Pre-Effective Amendment No.____
Post-Effective Amendment No.__27__ __X__

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__
Amendment No:__29__

AMERICAN PENSION INVESTORS TRUST
--------------------------------
(Exact Name of Registrant as Specified in Charter)
2303 Yorktown Avenue, Lynchburg, Virginia 24501
------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number: (804) 846-1361

DAVID D. BASTEN, President
American Pension Investors Trust
2303 Yorktown Avenue
Lynchburg, Virginia 24501
-------------------------
(Name and Address of Agent for Service)

Copies To:
Arthur J. Brown, Esq.
R. Darrell Mounts, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Telephone: (202) 778-9000

It is proposed that this filing will become effective:

___ immediately upon filing pursuant to Rule 485(b)
_X_ on October 1, 1997 pursuant to Rule 485(b)
___ 60 days after filing pursuant to Rule 485(a)(i)
___ on (date) pursuant to Rule 485(a)(i)
___ 75 days after filing pursuant to Rule 485(a)(ii)
___ on (date) pursuant to Rule 485(a)(ii)

Registrant has elected to register an indefinite number of securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940. The Notice required by
Rule 24f-2 for the fiscal year ended May 31, 1997, was filed on July 29, 1997.

<PAGE>

American Pension Investors Trust
Contents of Registration Statement

This registration statement consists of the following papers and documents.

Cover Sheet

Contents of Registration Statement

Cross Reference Sheets

American Pension Investors Trust: Growth Fund, Capital Income Fund And T-1
Treasury Trust
- -----------------------------------------------------------------------------

Part A - Prospectuses

Part B - Statement of Additional Information

American Pension Investors Trust: Yorktown Classic Value Trust And Yorktown
Value Income Trust
- -----------------------------------------------------------------------------

Part A - Prospectuses

Part B - Statement of Additional Information

Part C - Other Information

Signature Page

Exhibits

This Post-Effective Amendment does not make changes to the currently effective
Prospectus and Statement of Additional Information of the other series of
American Pension Investors Trust.

<PAGE>

AMERICAN PENSION INVESTORS TRUST:
GROWTH FUND
CAPITAL INCOME FUND
FORM N-1A
CROSS REFERENCE SHEET

PART A ITEM NO.
AND CAPTION PROSPECTUS CAPTION
--------------- ------------------
<S> <C> <C>

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

2. Synopsis............................... Table of Fund Expenses

3. Condensed Financial Information........ Financial Highlights;
Performance Information

4. General Description of Registrant...... Investment Objectives and
Policies; Other Investment
Policies; Risks and Other
Considerations; Fund Shares;
Appendix

5. Management of the Fund................. Management of the Fund;
Custodian, Transfer and
Dividend Disbursing Agent

5A. Management's Discussion of Fund (See Annual Report)
Performance............................

6. Capital Stock and Other Securities..... Fund Shares; Dividend, Other
Distribution and Taxes; General
Information

7. Purchase of Securities Being Offered... Purchase of Fund Shares

8. Redemption or Repurchase............... Redemption of Fund Shares

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

<PAGE>

PART B ITEM NO. STATEMENT OF ADDITIONAL
AND CAPTION INFORMATION CAPTION
------------ -----------------------
10. Cover Page............................. Cover Page

11. Table of Contents...................... Table of Contents

12. General Information and................ Not Applicable
History

13. Investment Objectives and Policies..... Investment Restrictions and
Policies; Portfolio
Transactions; Appendix

14. Management of Registrant............... Management of the Trust

15. Control Persons and Principal Holders of
Securities............................ Management of the Trust

16. Investment Advisory and Other Services. Management of the Trust;
Distribution of Fund Shares;
Custodian, Transfer and
Dividend Disbursing Agent;
Independent Accountants

17. Brokerage Allocations and Other practices Portfolio Transactions

18. Capital Stock and Other Securities..... Fund Shares
(in Prospectus)
19. Purchase, Redemption and Pricing
Securities Being Offered............... Pricing and Redemption of Shares

20. Tax Status............................. Taxation

21. Underwriters........................... Distribution of Fund Shares

22. Calculation of Performance Data........ Performance Information

23. Financial Statements................... Financial Statements

</TABLE>

<PAGE>

AMERICAN PENSION INVESTORS TRUST:
T-1 TREASURY TRUST
FORM N-1A
CROSS REFERENCE SHEET

PART A ITEM NO.
AND CAPTION PROSPECTUS CAPTION
-------------- ------------------
<S> <C> <C>

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

2. Synopsis.................................... Table of Fund Expenses

3. Condensed Financial Information............. Financial Highlights;
Performance Information

4. General Description of Registrant........... Investment Objective and
Policies; Other

Information; Fund Shares
5. Management of the Fund...................... Management of the Fund;
Custodian, Transfer and
Dividend Disbursing Agent

5A. Management's Discussion of Fund Performance. (See Annual Report)

6. Capital Stock and Other Securities.......... Fund Shares; Dividends,
Other Distributions and
Taxes

7. Purchase of Securities Being Offered........ Purchase of Fund Shares

8. Redemption or Repurchase.................... Redemption of Fund Shares

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

<PAGE>

PART B ITEM NO. STATEMENT OF ADDITIONAL
AND CAPTION INFORMATION CAPTION
--------------- -----------------------

10. Cover Page............................ Cover Page

11. Table of Contents..................... Table of Contents

12. General Information and History....... Not Applicable

13. Investment Objectives and Policies.... Investment Restrictions and
Policies; Portfolio Transactions;
Appendix

14. Management of the Registrant.......... Management of the Trust

15. Control Persons and Principal Holders
of Securities......................... Management of the Trust

16. Investment Advisory and Other Services Management of the Trust;
Distribution of Fund Shares;
Custodian, Transfer and Dividend
Disbursing Agent; Independent
Accountants

17. Brokerage Allocation and Other Portfolio Transactions
Practices.............................

18. Capital Stock and Other Securities.... Fund Shares (in Prospectus)

19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Pricing and Redemption of Shares

20. Tax Status............................ Taxation

21. Underwriters.......................... Distribution of Fund Shares

22. Calculation of Performance Data....... Performance Information

23. Financial Statements.................. Financial Statements

</TABLE>

<PAGE>

AMERICAN PENSION INVESTORS TRUST:
YORKTOWN CLASSIC VALUE TRUST
FORM N-1A
CROSS REFERENCE SHEET

PART A ITEM NO. AND CAPTION PROSPECTUS CAPTION
--------------------------- ------------------
<S> <C> <C>

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

2. Synopsis............................... Prospectus Summary; Table of Fund
Expenses

3. Condensed Financial Information........ Financial Highlights; Performance
Information

4. General Description of Registrant...... Investment Objectives and
Policies; Other Investment
Practices and Risks Factors; Fund
Shares

5. Management of the Fund................. Management of the Fund;
Custodian, Transfer and Dividend
Disbursing Agent

5A. Management's Discussion of Fund
Performance............................ (See Annual Report)

6. Capital Stock and Other Securities..... Fund Shares; Dividend, Other
Distributions and Taxes; General
Information

7. Purchase of Securities Being Offered... Purchase of Fund Shares

8. Redemption or Repurchase............... Redemption of Fund Shares

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

<PAGE>

PART B ITEM NO. STATEMENT OF ADDITIONAL
AND CAPTION INFORMATION CAPTION
--------------- -----------------------

10. Cover Page............................ Cover Page

11. Table of Contents..................... Table of Contents

12. General Information and History....... Not Applicable

13. Investment Objectives and Policies.... Investment Restrictions;
Investment Policies; Portfolio
Transactions

14. Management of the Registrant.......... Management of the Funds

15. Control Persons and Principal......... Management of the Funds
Holders of Securities

16. Investment Advisory and Other Services. Management of the Funds;
Distribution of Fund Shares;
Custodian, Transfer and Dividend
Disbursing Agent; Independent
Accountants

17. Brokerage Allocation and Other Portfolio Transactions
Practices.............................

18. Capital Stock and Other Securities.... Fund Shares (in Prospectus)

19. Purchase, Redemption and Pricing of
Securities Being Offered............... Pricing and Redemption of Shares

20. Tax Status............................ Taxation

21. Underwriters.......................... Distribution of Fund Shares

22. Calculation of Performance Data....... Performance Information

23. Financial Statements.................. Financial Statements

</TABLE>

<PAGE>

AMERICAN PENSION INVESTORS TRUST:
YORKTOWN VALUE INCOME TRUST
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>

PART A ITEM NO.
AND CAPTION PROSPECTUS CAPTION
--------------- ------------------
<S> <C> <C>

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

2. Synopsis.............................. Prospectus Summary; Table of Fund
Expenses

3. Condensed Financial Information....... Not Applicable

4. General Description of Registrant..... General; Investment Objectives
and Policies; Other Investment
Practices and Risks Factors; Fund
Shares

5. Management of the Fund................ Management of the Fund;
Custodian, Transfer and Dividend
Disbursing Agent
5A. Management's Discussion of Fund
Performance........................... Not Applicable

6. Capital Stock and Other Securities.... Fund Shares; Dividends, Other
Distributions and Taxes; General
Information

7. Purchase of Securities Being Offered.. Purchase of Fund Shares

8. Redemption or Repurchase.............. Redemption of Fund Shares

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

<PAGE>

PART B ITEM NO. STATEMENT OF ADDITIONAL
AND CAPTION INFORMATION CAPTION
--------------- -----------------------

10. Cover Page............................ Cover Page

11. Table of Contents..................... Table of Contents

12. General Information and History....... Not Applicable

13. Investment Objectives and Policies.... Investment Restrictions;
Investment Policies; Portfolio
Transactions

14. Management of the Registrant.......... Management of the Funds

15. Control Persons and Principal Holders
of Securities.......................... Management of the Funds

16. Investment Advisory and Other Services Management of the Funds;
Distribution of Fund Shares;
Custodian, Transfer and Dividend
Disbursing Agent; Independent
Accountants

17. Brokerage Allocation and Other Portfolio Transactions
Practices.............................

18. Capital Stock and Other Services...... Other Information; Fund Shares
(in Prospectus)

19. Purchase, Redemption and Pricing of
Securities Being Offered............... Pricing and Redemption of Shares

20. Tax Status............................ Taxation

21. Underwriters.......................... Distribution of Fund Shares

22. Calculation of Performance Data........ Performance Information

23. Financial Statements.................. Financial Statements

</TABLE>

<PAGE>

PART C

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

<PAGE>

API TRUST GROWTH FUND
P. O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060

API Trust ("Trust") is an open-end, management investment company that currently
consists of seven separate series ("Series"). This Prospectus relates only to
shares of the Growth Fund ("Fund"), a diversified series of the Trust. The
Fund's investment objective is growth of capital. The Fund seeks to achieve its
objective by investing in shares of open-end and closed-end investment
companies. No assurance can be given that the Fund will achieve its investment
objective.

Shares of the Fund are offered through Yorktown Distributors, Inc.
("Distributors"). The Fund's minimum initial investment is $500; subsequent
investments must be at least $100. The Fund pays expenses related to the
distribution of its shares. In addition, the Fund may invest in shares of funds
that charge sales loads and/or pay their own distribution expenses.

This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor should know before investing. It should be read
and retained for future reference. A Statement of Additional Information, dated
October 1, 1997, has been filed with the Securities and Exchange Commission and,
as amended from time to time, is incorporated by reference herein. It is
available, at no charge, by contacting the Trust at the address or telephone
numbers provided above.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED
BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.

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

This Prospectus is dated October 1, 1997.

<PAGE>

TABLE OF CONTENTS

Topic Page
- ----- ----

TABLE OF FUND EXPENSES..........................................3
FINANCIAL HIGHLIGHTS............................................4
GENERAL.........................................................5
INVESTMENT OBJECTIVE AND POLICIES...............................5
OTHER INVESTMENT POLICIES.......................................5
Selection of Underlying Funds................................5
Temporary Investments........................................6
Borrowing and Other Policies.................................6
Portfolio Turnover...........................................6
RISKS AND OTHER CONSIDERATIONS..................................6
General......................................................6
Open-End Funds...............................................7
Closed-End Funds.............................................7
MANAGEMENT OF THE FUND..........................................8
PURCHASE OF FUND SHARES.........................................9
Distribution Arrangements....................................9
How Shares May Be Purchased.................................10
Systematic Investment Plan..................................10
Exchange Privileges.........................................10
Determining Net Asset Value.................................11
REDEMPTION OF FUND SHARES......................................11
How Shares May Be Redeemed..................................11
Systematic Withdrawal Plan..................................12
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.......................12
Dividends and Other Distributions...........................12
Taxation of the Fund........................................12
Taxation of Underlying Funds................................12
Taxation of Shareholders....................................13
Qualified Retirement Plans..................................13
PERFORMANCE INFORMATION........................................14
FUND SHARES....................................................14
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT..............14
GENERAL INFORMATION............................................15
APPENDIX.......................................................16

FOREIGN SECURITIES AND FOREIGN CURRENCY TRANSACTIONS...........16
Foreign Securities..........................................16
Foreign Currency Transactions...............................16

2
<PAGE>

TABLE OF FUND EXPENSES

The following tables are intended to assist investors in understanding the
expenses associated with investing in the Fund.

SHAREHOLDER TRANSACTION EXPENSES

Sales load imposed on purchases. . . . . . . . . . . . . . . None
Redemption fees . . . . . . . . . . . . . . . . . . . . . . .None
Sales load imposed on reinvested dividends. . . . . . . . . .None
Exchange fees . . . . . . . . . . . . . . . . . . . . . . . .None

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets) (1)
Management Fees (after waivers)(2). . . . . . . . . . . . . 0.63%
12b-1 Fees. . . . . . . . . . . . . . . . . . . . .. . . . 1.00%
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . 0.55%
-----

Total Fund Operating Expenses (after waivers)(2). . . . . . 2.18%

(1) "Annual Fund Operating Expenses" are based on operating expenses
incurred by the Fund for the fiscal year ended May 31, 1997. Long-term
shareholders may pay more in 12b-1 fees over time as a percentage of their
initial investment than the amount of the maximum front-end sales charge
permitted under the rules of the National Association of Securities Dealers,
Inc. ("NASD").

(2) The Fund's investment adviser, Yorktown Management & Research
Company, Inc., (the "Adviser") waives its advisory fees in an amount equal to
the amount Distributors (an affiliate of the Adviser) retains with respect to
dealer reallowances resulting from the Fund's purchase of load fund shares and
Rule 12b-1 fees received from open-end investment companies. If a portion of the
Fund's investment advisory fees had not been waived during the fiscal year ended
May 31, 1997, the Fund's Management Fees and Total Fund Operating Expenses would
have been 1.00% and 2.55%, respectively. See "Management of the Fund " for
additional information. An investor in the Fund will bear not only his
proportionate share of the expenses of the Fund but also indirectly similar
expenses of the underlying funds.

EXAMPLE -- A shareholder would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end of each period.

After 1 year. . . . . . . . . . . . . . . . . . . . . . $ 22
After 3 years. . . . . . . .. . . . . . . . . . . . . . 69
After 5 years. . . . . . . .. . . . . . . . . . . . . . 118
After 10 years. . . . . . . . . . . . . . . . . . . . 253

The Example assumes that all dividends and other distributions are reinvested
and that the percentage amounts listed under Annual Fund Operating Expenses
remain the same in the years shown. The 5% annual return assumed in the Example
is required by regulations of the Securities and Exchange Commission ("SEC") and
is not a predication of, and does not represent, the projected or actual
performance of Fund shares. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES OF THE FUND MAY BE
GREATER OR LESS THAN THOSE SHOWN.

3
<PAGE>

FINANCIAL HIGHLIGHTS

The table below provides financial highlights for one share of the Fund for the
periods shown. A table follows that provides condensed information concerning
debt outstanding with respect to the Fund for the periods shown. This
information is supplemented by the financial statements and accompanying notes
appearing in the Statement of Additional Information. The financial statements
and notes have been audited by Coopers & Lybrand L.L.P., independent certified
public accountants, whose report thereon is also included in the Statement of
Additional Information. The financial highlights appearing below were derived
from financial statements audited by Coopers & Lybrand L.L.P. On February 22,
1991, the Fund adopted a strategy of using multiple investment styles by
investing primarily in shares of other registered investment companies.

FOR THE YEAR/PERIOD ENDED MAY 31,
----------------------------------------------------------------------------------------

1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For A Share Outstanding Throughout
Each Year/period:
Net asset value, beginning of year $14.00 $12.48 $12.32 $11.86 $10.84 $11.19 $9.85 $11.58 $9.48 $11.05
------ ------ ------ ------ ------ ------ ----- ------ ----- ------
Income from investment operations:
Net investment income (loss).. (0.17) (0.14) (0.10) (0.21) (0.18) (0.11) 0.05 0.08 0.05
Net realized and unrealized
gain (loss) on investments.. 1.25 2.67 1.37 1.25 1.57 0.71 1.34 0.36 2.17 (0.51)
---- ---- ---- ---- ---- ---- ---- ---- ---- ------
Total income (loss) from
investment operations....... 1.08 2.53 1.27 1.04 1.39 0.60 1.34 0.41 2.25 (0.46)
---- ---- ---- ---- ---- ---- ---- ---- ---- ------
Distributions:
From net investment income.... (0.05) (0.06) (0.05)
In excess of net investment (0.03) (0.09)
income......................
From net realized gain on
security transactions....... (1.66) (1.01) (1.11) (0.58) (0.37) (0.95) (1.10) (1.01)
In excess of net realized gain
on security transactions.... _____ _____ _____ _____ _____ _____ (0.96) _____ (0.05)
------ ------
Total distributions......... (1.66) (1.01) (1.11) (0.58) (0.37) (0.95) (2.14) (0.15) (1.11)
Net asset value, end of year $13.42 $14.00 $12.48 $12.32 $11.86 $10.84 $11.19 $9.85 $11.58 $9.48
====== ====== ====== ====== ====== ====== ====== ===== ======= ======
Total return 8.32% 21.03% 11.28% 8.60% 13.03% 4.91% 13.56% 3.38% 23.97% (4.00)%
Ratios/Sulemental Data:
Net assets, end of year
(000's omitted)........... $68,717 $68,306 $55,191 $46,958 $44,364 $40,302 $29,925 $31,876 $31,651 $27,003
Ratio of expenses to average
net assets(1)............. 2.18% 2.24% 2.06% 2.24% 2.05% 1.97% 2.38% 2.60% 2.66% 2.74%
Ratio of net investment
income (loss) to average (1.31)% (1.08)% (1.50)% (1.75)% (1.56)% (1.24)% 0.02% 0.36% 0.78% 0.82%
net assets................
Portfolio turnover rate..... 84% 63% 91% 90% 157% 99% 206% 118% 163% 165%
</TABLE>

- ---------------
(1) Without fees recouped or waived by the investment adviser, the ratio of
expenses of average net assets would have been 2.57%, 2.60%, 2.56%, 2.52%,
2.50%, 2.67%, 2.54%, 2.95%, 3.01% and 2.83%, respectively.

<PAGE>

DEBT OUTSTANDING

Average Daily Average Daily
Amount of Amount of Debt No. of Shares Average Amount
Debt Outstanding Outstanding Outstanding of Debt Per Share
Fiscal Year Ended at End of Period During the Period During the Period During the Period
----------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
May 31, 1997......... -0- -0- -0- -0-
May 31, 1996......... -0- -0- -0- -0-
May 31, 1995......... -0- -0- -0- -0-
May 31, 1994......... -0- -0- -0- -0-
May 31, 1993......... -0- -0- -0- -0-
May 31, 1992......... -0- -0- -0- -0-
May 31, 1991......... -0- -0- -0- -0-
May 31, 1990......... -0- -0- -0- -0-
May 31, 1989......... -0- -0- -0- -0-
May 31, 1988......... -0- $380,874 2,571,379 $0.15

</TABLE>

GENERAL

The Fund seeks to achieve its investment objective by investing in shares of
open-end and closed-end investment companies (the "underlying funds"). Normally,
the Fund will invest in approximately ten to seventy-five underlying funds,
although it may invest up to 25% of its total assets in any one underlying fund.
All of the Trust's Series that invest in underlying funds may invest in shares
of the same underlying fund; however, the percentage of each Series' assets so
invested may vary and the Series and their affiliates may not hold more than 3%
of an underlying fund's shares. If the Fund holds more than 1% of the shares of
an open-end fund, that fund will be obligated to redeem only 1% of those shares
during any period of less than 30 days. Any shares of an open-end fund held by
the Fund in excess of 1% of the open-end fund's outstanding shares, therefore,
will be considered not readily marketable securities that, together with other
such securities, may not exceed 10% of the Fund's net assets. The Fund may not
purchase shares of investment companies that are not registered with the SEC.

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is growth of capital. The Fund seeks to achieve
its objective by investing primarily in shares of underlying funds that seek
long-term capital growth or appreciation by investing primarily in common stock
or securities convertible into or exchangeable for common stock (such as
convertible preferred stock, convertible debentures or warrants ("convertible
securities")). The Fund also may invest in funds that invest primarily in long-
or short-term bonds and other fixed-income securities (such as securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government securities"), commercial paper and preferred stock) whenever the
Adviser believes that these funds offer a potential for capital appreciation,
such as during periods of declining interest rates. Under normal conditions, the
Fund invests between 25% and 75% of its total assets in funds that are
authorized to invest a substantial portion of their assets in foreign
securities. Such funds may be subject to risks due to their investment in
foreign securities. See the Appendix. All investments involve risks, and there
is no assurance that the investment objective of the Fund will be achieved.

The investment objective of the Fund may not be changed without the affirmative
vote of a majority of the Fund's outstanding voting securities as defined in the
Investment Company Act of 1940 ("1940 Act"). Certain other investment
limitations that apply to the Fund also may not be changed without shareholder
approval, as described in the Statement of Additional Information. All other
investment policies, unless otherwise indicated, may be changed by the Trust's
Board of Trustees without shareholder approval.

OTHER INVESTMENT POLICIES

SELECTION OF UNDERLYING FUNDS

The Adviser selects underlying funds in which to invest based, in part, upon an
analysis of their past performance and their investment objectives, policies and
the investment style of their investment advisers. In selecting open-end funds
in which to invest, the Adviser also considers, among other factors, the funds'
size, cost structure, shareholder services and the reputation and stability of
their investment advisers. In selecting closed-end funds in which to invest, the
Adviser considers, among other factors, the factors considered for open-end
funds, the funds' historical market discounts, portfolio characteristics,
repurchase, tender offer, and dividend reinvestment programs, provisions for
converting into an open-end fund, and quality of management. The Fund may invest
in the securities of closed-end funds that, at the time of investment by the
Fund, are either trading at a discount to net asset value or at a premium to net
asset value.

6
<PAGE>

although the Fund will not borrow money for investment purposes, it may invest
all of its assets in underlying funds that borrow money for investment purposes
(i.e., engage in the speculative activity of leveraging) or invest up to 25% of
its total assets in any one such underlying fund.

TEMPORARY INVESTMENTS

Pending investment, for liquidity or when the Adviser believes market conditions
warrant a defensive position, the Fund may temporarily hold cash or invest all
or any portion of its assets in money market mutual funds or directly in money
market instruments such as (1) U.S. Government securities; (2) instruments (such
as certificates of deposit, demand and time deposits and bankers' acceptances)
of banks and savings associations that are insured by the Federal Deposit
Insurance Corporation; (3) repurchase agreements secured by U.S. Government
securities; and (4) commercial paper, including master demand notes, rated A-1
by Standard & Poor's Ratings Services or P-1 by Moody's Investors Service, Inc.
To the extent the Fund invests more than $100,000 in a single bank or savings
association, the investment is not protected by federal insurance. The
underlying funds also may invest under similar circumstances in similar
instruments.

BORROWING AND OTHER POLICIES

The Fund may temporarily borrow money from banks for extraordinary or emergency
purposes, but not in excess of the lesser of 10% of its total assets (valued at
cost) or 5% of its total assets (valued at market). The Fund also may invest up
to 10% of its net assets in securities for which no readily available market
exists and may lend securities constituting up to 5% of its net assets.

PORTFOLIO TURNOVER

The Fund's portfolio turnover rate may vary greatly from year to year and will
not be a limiting factor when the Adviser deems portfolio changes appropriate.
For the fiscal years ended May 31, 1997 and 1996, the Fund's portfolio turnover
rates were 84% and 63%, respectively. A high portfolio turnover rate (100% or
more), whether incurred by the Fund or an underlying fund, involves
correspondingly greater transaction costs, which will be borne directly by the
Fund or the underlying fund, and increases the potential for short-term capital
gains and taxes.

RISKS AND OTHER CONSIDERATIONS

GENERAL

Any investment in an open-end or closed-end investment company involves risk,
and, although the Fund invests in a number of underlying funds, this practice
does not eliminate investment risk. Investment decisions by the investment
advisers of the underlying funds are made independently of the Fund and its
Adviser. Therefore, the investment adviser of one underlying fund may be
purchasing securities of the same issuer whose securities are being sold by the
investment adviser of another underlying fund. The result of this would be an
indirect expense to the Fund without accomplishing any investment purpose.

Some of the underlying funds also could incur more risks than others. For
example, they may trade their portfolios more actively (which results in higher
brokerage costs), may engage in investment practices, including leverage, that
entail greater risks or invest in companies whose securities and other
investments are more volatile. In addition, the underlying funds in which the
Fund invests may or may not have the same investment limitations as those of the
Fund itself. Moreover, while the Fund has a policy of investing no more than 25%
of its total assets in the securities of underlying funds that invest 25% or
more of their total assets in any one industry, the Fund, through its
investments in underlying funds, indirectly may invest more than 25% of its
assets in any one industry. In addition, the underlying funds in which the Fund
invests may have policies themselves that, among other things, permit them to
invest up to 100% of their assets in securities of foreign issuers and to engage
in foreign currency transactions with respect to their investments; invest in
illiquid securities; invest in warrants; lend their portfolio securities; sell
securities short; borrow money for investment purposes; invest 25% or more of
their total assets in one industry; and enter into options, futures and forward
currency contracts. The risks associated with investments in foreign securities
are described in the Appendix to this Prospectus and the risks associated with
these other investment policies are described in the Statement of Additional
Information.

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<PAGE>

Investing in the Fund also involves certain additional expenses and certain tax
consequences that would not be present in a direct investment in the underlying
funds. An investor in the Fund should recognize that he may invest directly in
the underlying funds and that, by investing in the underlying funds indirectly
through the Fund, he will bear not only his proportionate share of the expenses
of the Fund (including operating costs and investment advisory and
administrative fees) but also indirectly similar expenses of the underlying
funds.

OPEN-END FUNDS

The Fund may purchase shares of open-end funds that impose a front-end sales
load ("Load Fund Shares ") and shares of open-end funds that do not impose a
front-end sales load. However, the Fund may not invest in shares of open-end
funds that are sold subject to a redemption fee of more than 1%. An open-end
fund is currently permitted under the rules of the NASD to impose front-end
sales loads as high as 8.5% of the public offering price (9.29% of the net
amount invested); provided that it does not also impose an asset-based sales
charge. The Adviser anticipates, however, investing substantially all of the
Fund's assets in funds that impose no front-end sales load or impose a front-end
sales load of no more than 3% of the public offering price of the shares. Fund
purchases may often qualify for so-called quantity discounts whereby a lower
front-end sales load is applied to purchases of, for example, $50,000 or more.
Additionally, where possible, the Adviser will seek to reduce the front-end
sales load imposed by purchasing shares pursuant to (i) letters of intent,
permitting it to obtain reduced front-end sales loads by aggregating its
intended purchases over time; (ii) rights of accumulation, permitting it to
obtain reduced front-end sales loads as it purchases additional shares of an
underlying fund; and (iii) rights to obtain reduced front-end sales loads by
aggregating its purchases of several funds within a family of mutual funds. In
addition to any front-end sales load imposed by an open-end fund, the open-end
fund may be subject to annual distribution and service fees of up to 1.00% of
the fund's average daily net assets.

Front-end sales loads generally are split into the dealer reallowance (which
typically comprises at least 80% of the amount of the charge) and the
underwriter's retention. Yorktown Distributors, Inc., the distributor of the
Fund shares, generally will be designated as the dealer entitled to receive the
dealer reallowance portion of the sales charge on purchases of Load Fund Shares
by the Fund. However, Distributors will not retain any dealer reallowance in
excess of 1% of the public offering price on any transaction, nor will it be
designated as the dealer entitled to receive the dealer reallowance portion of
the sales charge where such reallowance would exceed 1% of the public offering
price. The Adviser has agreed to waive its advisory fees in an amount equal to
amounts Distributors retains as (i) dealer reallowances resulting from the
Fund's purchase of Load Fund Shares and (ii) Rule 12b-1 fees received from
underlying open-end funds.

Although open-end fund shares are redeemable by the Fund upon demand to the
issuer, under certain circumstances, an open-end fund may determine to make a
payment for redemption of its shares to the Fund wholly or partly by a
distribution in kind of securities from its portfolio, in lieu of cash, in
conformity with the rules of the SEC. In such cases, the Fund may hold
securities distributed by an open-end fund until the Adviser determines that it
is appropriate to dispose of such securities. Such disposition generally will
entail additional costs to the Fund.

CLOSED-END FUNDS

Shares of closed-end funds are typically offered to the public in a one-time
initial public offering by a group of underwriters who retain a spread or
underwriting commission of between 4% and 6% of the initial public offering
price. Such securities are then listed for trading on the New York Stock
Exchange ("NYSE"), the American Stock Exchange or the Nasdaq Stock Market
("Nasdaq") or, in some cases, may be traded in other over-the-counter ("OTC")
markets. Because the shares of closed-end funds cannot be redeemed upon demand
to the issuer like the shares of an open-end investment company (such as the
Fund), shares of closed-end funds trade in the secondary market.

The Fund generally will purchase shares of closed-end funds only in the
secondary market. The Fund will incur normal brokerage costs on such purchases
similar to the expenses the Fund would incur for the purchase of equity
securities in the secondary market. The Fund may, however, also purchase
securities of a closed-end fund in an initial public offering when, in the
opinion of the Adviser, based on a consideration of the nature of the closed-end
fund's proposed investments, the prevailing market conditions and the level of
demand for such securities, they represent an attractive opportunity for growth
of capital. The initial offering price typically will include a dealer spread,

8
<PAGE>

which may be higher than the applicable brokerage cost if the Fund purchased
such securities in the secondary market.

The shares of many closed-end funds, after their initial public offering,
frequently trade at a price per share which is less than the net asset value per
share, the difference representing the "market discount" of such shares. This
market discount may be due in part to the investment objective of long-term
appreciation, which is sought by many closed-end funds, as well as to the fact
that the shares of closed-end funds are not redeemable by the holder upon demand
to the issuer at the next determined net asset value but rather are subject to
the principles of supply and demand in the secondary market. A relative lack of
secondary market purchasers of closed-end fund shares also may contribute to
such shares trading at a discount to their net asset value.

The Fund may invest in shares of closed-end funds that are trading at a discount
to net asset value or at a premium to net asset value. There can be no assurance
that the market discount on shares of any closed-end fund purchased by the Fund
will ever decrease. In fact, it is possible that this market discount may
increase and the Fund may suffer realized or unrealized capital losses due to
further decline in the market price of the securities of such closed-end funds,
thereby adversely affecting the net asset value of the Fund's shares. Similarly,
there can be no assurance that any shares of a closed-end fund purchased by the
Fund at a premium will continue to trade at a premium or that the premium will
not decrease subsequent to a purchase of such shares by the Fund.

Closed-end funds may issue senior securities (including preferred stock and debt
obligations) or borrow money for the purpose, and with the effect of, leveraging
the closed-end fund's common shares in an attempt to enhance the current return
to such closed-end fund's common shareholders. The Fund's investment in the
common shares of closed-end funds that are financially leveraged may create an
opportunity for greater total return on its investment, but at the same time may
be expected to exhibit more volatility in market price and net asset value than
an investment in shares of investment companies without a leveraged capital
structure. The Fund will only invest in common shares of closed-end funds and
will not invest in any senior securities issued by closed-end funds.

MANAGEMENT OF THE FUND

The Trust's Board of Trustees has overall responsibility for the operation of
the Trust. Pursuant to that responsibility, the Board has selected the Adviser
to act as investment adviser and administrator for the Fund. Services provided
by the Adviser include the provision of a continuous investment program for the
Fund and supervision of all matters relating to the operation of the Fund. Among
other things, the Adviser is responsible for making investment decisions and
placing orders to buy, sell or hold particular securities, furnishing corporate
officers and clerical staff and providing office space, office equipment and
office services.

The Adviser has acted as the investment adviser to the Fund since it commenced
operations on June 14, 1985. The Adviser, whose address is 2303 Yorktown Avenue,
Lynchburg, Virginia 24501, was incorporated under the laws of the State of
Maryland in 1984 and is controlled by David D. Basten. In addition, Mr. Basten
currently serves as the Fund's portfolio manager and has served in that capacity
since commencement of the Fund's operations. He is also the portfolio manager of
the Trust's other Series.

For its services, the Adviser receives a monthly fee, calculated daily, payable
at an annual rate of 1.00% of the first $100 million of average daily net assets
of the Fund, and 0.75% of average daily net assets exceeding that amount. The
advisory fee is higher than fees paid by most other investment companies to
their investment advisers. The Adviser reduces its advisory fees on a dollar for
dollar basis to the extent Distributors receives (i) dealer reallowances on
purchases by the Fund of shares of open-end funds that are sold with a sales
load and (ii) Rule 12b-1 fees received from underlying open-end funds.

The Adviser places orders for the purchase and sale of portfolio investments for
the Fund's account with brokers or dealers, selected by it in its discretion,
including Distributors. With respect to purchases of Load Fund Shares, the
Adviser will direct, to the extent possible, substantially all of the Fund's
orders to Distributors. Where Distributors acts as the dealer with respect to
the purchases of Load Fund Shares, it will retain dealer reallowances on those
purchases up to a maximum of 1% of the public offering price of the shares.
Distributors may not be designated as the dealer on any sales where such
reallowance exceeds 1% of the public offering price. If Distributors is unable
to act as dealer with respect to a particular transaction, the Adviser will
direct such order to another broker-dealer. Factors in the selection of such a
broker-dealer include the receipt of research, analysis and advice and similar
services and the sale of Fund shares by such broker-dealer.

9
<PAGE>

Distributors also may assist in the execution of the Fund's portfolio
transactions to purchase open-end fund shares for which it may receive
distribution payments from the funds or their underwriters in accordance with
the distribution plans of those funds. In providing execution assistance,
Distributors receives orders from the Adviser, places them with the fund's
distributor, transfer agent or other person as appropriate, confirms the trade,
price and number of shares purchased, assures prompt payment by the Fund and
proper completion of the order.

PURCHASE OF FUND SHARES

DISTRIBUTION ARRANGEMENTS

Yorktown Distributors, Inc., whose address is 2303 Yorktown Avenue, Lynchburg,
Virginia 24501, is the distributor of shares of the Fund. Distributors is an
affiliate of the Adviser and is controlled by David D. Basten.

Under a plan of distribution ("Plan") adopted by the Trust's Board of Trustees
and approved by the Fund's shareholders pursuant to Rule 12b-1 under the 1940
Act, the Fund pays Distributors, as compensation for Distributors' distribution
activities with respect to the Fund, a monthly fee at the annual rate of 0.75%
of the average daily net assets of the Fund. In addition, the Fund pays
Distributors, as compensation for Distributors' service activities with respect
to the Fund and its shareholders, a monthly fee at the annual rate of 0.25% of
the average daily net assets of the Fund. Distributors may also receive dealer
reallowances (up to a maximum of 1% of the public offering price) on purchases
by the Fund of shares of underlying funds that are sold with a front-end sales
load.

As distributor of Fund shares, Distributors may spend such amounts as it deems
appropriate on any activities or expenses primarily intended to result in the
sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including compensation to employees of Distributors; compensation to
and expenses, including overhead and telephone and other communication expenses,
of Distributors and selected dealers who engage in or support the distribution
of shares or who service shareholder accounts; the costs of printing and
distributing prospectuses, statements of additional information, and reports for
other than existing shareholders; the costs of preparing, printing and
distributing sales literature and advertising materials; and internal costs
incurred by Distributors and allocated by Distributors to its efforts to
distribute shares of the Fund such as office rent, employee salaries, employee
bonuses and other overhead expenses.

During the period it is in effect, the Plan obligates the Fund to pay fees to
Distributors as compensation for its distribution and service activities, not as
reimbursement for specific expenses incurred. Thus, even if Distributors'
expenses exceed its fees, the Fund will not be obligated to pay more than those
fees and, if Distributors' expenses are less than such fees, it will retain the
full fee and realize a profit.

Distributors may also pay certain banks, fiduciaries, custodians for public
funds, investment advisers and broker-dealers a fee for administrative services
in connection with the distribution of Fund shares. Such fees would be based on
the average net asset value represented by shares of the administrators'
customers invested in the Fund. This fee is in addition to any commissions these
entities may receive from Distributors out of the fees it receives pursuant to
the Plan, and, if paid, will be reimbursed by the Adviser and not the Fund.

Distributors also may provide additional incentives to brokers that sell shares
of the Fund. In some instances, these incentives may be offered only to certain
brokers that have sold or may sell significant amounts of shares. Such
incentives may include permitting brokers to be named the dealer of record on
underlying fund shares purchased by the Fund, with the result that those brokers
could receive trail commissions from the underwriters of those underlying funds.
These commissions could be paid as long as the Fund held the underlying fund
shares in its portfolio and the underwriters continued to pay the trail
commissions. If these commissions were not paid to those brokers, then the
commissions could be paid to Distributors and could thereby reduce the fees paid
by the Fund to the Adviser for advisory services. See "Management of the Fund".

10
<PAGE>

Applicable banking laws prohibit certain deposit-taking institutions from
underwriting or distributing securities. There is currently no precedent
prohibiting banks from performing administrative services in connection with the
distribution of Fund shares. If a bank were prohibited from performing such
administrative services, its shareholder clients would be permitted to remain
shareholders of the Fund and alternate means of servicing such shareholder would
be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.

HOW SHARES MAY BE PURCHASED

Application forms for the purchase of Fund shares can be obtained from
Distributors or from a broker-dealer that has entered into an agreement with
Distributors. The Fund's minimum initial investment is $500, and the minimum for
additional investments is $100. An exception to these minimums is granted for
investments made pursuant to special plans or if approved by Distributors. All
orders are executed at the net asset value per share next computed after receipt
and acceptance of the order by Fund Services, Inc., the Fund's transfer agent.
The Fund does not impose a front-end sales load when Fund shares are purchased;
however, a broker-dealer may charge its client a fee for selling Fund shares.
The Trust and Distributors reserve the right to reject any purchase order.

When shares of the Fund are initially purchased, an account is automatically
established for the shareholder. Any shares of the Fund subsequently purchased
or received as a distribution are credited directly to the shareholder account.
No share certificates are issued unless specifically requested in writing to the
Trust. Certificates are issued in full shares only. In addition, no certificates
are issued for shares purchased by check until 15 business days have elapsed,
unless the Trust is reasonably assured that payment for the shares has been
collected. There is no charge for certificate issuance.

SYSTEMATIC INVESTMENT PLAN

Shareholders may purchase Fund shares through a Systematic Investment Plan.
Under the Plan, Fund Services, Inc., at regular intervals, will automatically
debit a shareholder's bank checking account monthly or quarterly in an amount of
$100 or more (subject to the $500 minimum initial investment), as specified by
the shareholder. The purchase of Fund shares will be effected at their offering
price at the close of normal trading on the NYSE on or about the 15th day of the
month. To obtain an application for the Systematic Investment Plan, write to
Distributors at the address shown on the back cover of this Prospectus.

EXCHANGE PRIVILEGES

Shares of the Fund may be exchanged for shares of the Trust's Series listed
below without an exchange fee. The Trust's Series with which exchanges may be
made are:

Capital Income Fund, which seeks primarily high current income and
secondarily growth of capital and income. Like the Fund, the Capital
Income Fund seeks to achieve its investment objectives by investing in
shares of underlying funds.

T-1 Treasury Trust, which seeks current income while limiting credit
risk. The T-1 Treasury Trust seeks to achieve its objective by
investing in U.S. Treasury securities with remaining maturities of one
year or less.

Shareholders must place exchange orders in writing with the transfer agent, Fund
Services, Inc., at P.O. Box 26305, Richmond, Virginia 23260. Telephone exchanges
are not available. All permitted exchanges will be effected based on the net
asset value per share of each Fund that is next computed after receipt by the
transfer agent of the exchange request in "good order".

An exchange request is considered in "good order" only if:

1. The dollar amount or number of shares to be purchased is
indicated.

2. The written request is signed by the registered owner and by any
co-owner of the account in exactly the same name or names used in
establishing the account.

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<PAGE>

3. Where share certificates have been issued, the written request is
accompanied by the certificates for shares to be redeemed,
properly endorsed in form for transfer, and either the share
certificates or separate instructions of assignment (stock
powers) signed by each registered owner and co-owner exactly as
the shares are registered.

4. The signatures on any share certificates (or on accompanying
stock powers) are guaranteed by a member of the Securities
Transfer Agents Medallion Program ("STAMP"), the Stock Exchange
Medallion Program ("SEMP") or the New York Stock Exchange,
Inc.'s. Medallion Signature Program ("MSP"). Signature guarantees
from a notary public are not acceptable.

Other supporting legal documents may be required from corporations or other
organizations, fiduciaries or persons other than the stockholder of record
making the exchange request. In addition, exchanges are only available in states
where they may legally be made.

The exchange privilege may be modified or terminated at any time upon 60 days'
written notice to shareholders. Before making any exchange, shareholders should
contact Distributors or their broker to obtain more information about exchanges
and prospectuses of the Trust's Series to be acquired through the exchange. For
tax purposes, an exchange is treated as a redemption and a subsequent purchase.
Any capital gains or losses on the shares exchanged should be reported for tax
purposes. The price of the acquired shares is the new cost basis for income tax
purposes.

DETERMINING NET ASSET VALUE

The net asset value of the Fund's shares is determined as of the close of normal
trading (currently 4:00 p.m. eastern time) on the NYSE each day that the NYSE is
open for business. The net asset value per share is computed by dividing the
value of the Fund's securities plus any cash and other assets (including
dividends accrued but not yet collected) minus all liabilities (including
accrued expenses) by the total number of Fund shares outstanding.

The Fund's assets consist primarily of shares of open-end and closed-end funds.
Shares of open-end funds are valued at their respective net asset values under
the 1940 Act. An open-end fund values securities in its portfolio for which
market quotations are readily available at their current market value (generally
the last reported sales price) and all other securities and assets at fair value
pursuant to methods established in good faith by the board of directors/trustees
of the underlying fund. Money market funds with portfolio securities that mature
in 397 days or less may use the amortized cost or penny-rounding methods to
value their securities. Shares of closed-end funds that are listed on U.S.
exchanges are valued at the last sales price on the day the securities are
valued or, lacking any sales on such day, at the last available bid price.
Shares of closed-end funds listed on Nasdaq are valued at the last trade price
on Nasdaq at 4:00 p.m., eastern time; shares traded in the OTC market are valued
at the last bid price available prior to valuation.

Other Fund assets are valued at current market value or, where unavailable, at
fair value as determined in good faith by or under the direction of the Board of
Trustees. Securities having 60 days or less remaining to maturity are valued at
their amortized cost.

REDEMPTION OF FUND SHARES

HOW SHARES MAY BE REDEEMED

Fund shares may be redeemed by mailing redemption requests to the Fund's
transfer agent, Fund Services, Inc., at P.O. Box 26305, Richmond, Virginia
23260. Upon receipt at the offices of Fund Services, Inc. of a redemption
request in "good order", as described in "Exchange Privileges" above, the shares
will be redeemed at the net asset value per share computed at the close of
normal trading on the NYSE on that day. Redemption requests received after the
close of normal trading will be executed at the net asset value per share next
computed. The signature(s) on all redemption requests of $10,000 or more must be
guaranteed as described above.

<PAGE>

Redemption proceeds will be forwarded by check within five days of the receipt
of a redemption request. If the shares to be redeemed were paid for by check,
then to allow clearance the redemption proceeds may be delayed for up to 15 days
after the purchase date. The redemption proceeds may be more or less than the
original cost.

Other supporting legal documents may be required from corporations or other
organizations, fiduciaries or persons other than the stockholder of record
making the redemption request. If there is a question concerning the redemption
of Fund shares, contact Distributors, your broker or Fund Services, Inc.

Because of the high cost of maintaining small accounts, the Trust reserves the
right to redeem shareholder accounts of less than $100 net asset value resulting
from redemptions or exchanges. If the Trust elects to redeem such shares, it
will notify the shareholder of its intention to do so and provide the
shareholder with the opportunity to increase the amount invested to $100 or more
within 30 days of notice.

SYSTEMATIC WITHDRAWAL PLAN

An investor who has made an initial investment of at least $10,000 in the Fund
or otherwise has accumulated shares valued at no less than $10,000 is eligible
for a Systematic Withdrawal Plan. If so eligible, the investor may arrange for
fixed withdrawal payments (minimum payment -- $100; maximum payment -- 1% per
month or 3% per quarter of the total net asset value of the Fund shares in the
shareholder account at inception of the Systematic Withdrawal Plan) at regular
monthly or quarterly intervals. Withdrawal payments are made to the investor or
to the beneficiaries designated by him. An investor is not eligible for a
Systematic Withdrawal Plan if he is making regular purchase payments pursuant to
the Systematic Investment Plan described above.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

DIVIDENDS AND OTHER DISTRIBUTIONS

Dividends from the Fund's net investment income, if any, are distributed at
least annually. Any net capital gain (the excess of net long-term capital gain
over net short-term capital loss) realized from the sale of shares of underlying
funds and other portfolio securities also is distributed at least annually.
Unless the Trust receives instructions to the contrary from a shareholder before
the record date, it will be assumed that the shareholder wishes to receive both
dividends and capital gain distributions in additional Fund shares. Instructions
continue in effect until the Trust is notified in writing that a change is
desired. All reinvested dividends and capital gain distributions are reinvested
in additional Fund shares on the payment date at those shares' net asset value
on that day. Account statements are mailed to shareholders evidencing each
reinvestment. If the Trust has received instructions that a shareholder wishes
to receive dividends and capital gain distributions in cash, and the U.S. Postal
Service cannot deliver a check representing the payment thereof, or if any such
check remains uncashed for six months, the check(s) will be reinvested in Fund
shares at the then current net asset value per share of the Fund and the
shareholder's election will be changed so that future distributions will be
received in additional Fund shares.

TAXATION OF THE FUND

The Fund is treated as a separate corporation for federal income tax purposes
and intends to continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), so
that it will be relieved of federal income tax on that part of its investment
company taxable income (consisting generally of net investment income and net
short-term capital gain) and net capital gain that is distributed to its
shareholders. To the extent, however, that the Fund does not distribute to its
shareholders by the end of any calendar year substantially all of its ordinary
income for that year and substantially all of its capital gain net income for
the one-year period ending on October 31 of that year, plus certain other
amounts, a 4% excise tax will imposed on the Fund.

TAXATION OF UNDERLYING FUNDS

The Fund intends only to invest in underlying funds that intend to quality for
treatment as RICs under the Code. If an underlying fund fails to qualify as a
RIC it may be subject to federal income tax. No assurance can be given, however,
that an underlying fund will qualify as a RIC.

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<PAGE>

TAXATION OF SHAREHOLDERS

Dividends from the Fund's investment company taxable income are taxable to its
shareholders, other than tax-exempt entities (including individual retirement
accounts and qualified retirement plans), as ordinary income, whether received
in cash or reinvested in additional Fund shares, to the extent of the Fund's
earnings and profits. Distributions of the Fund's net capital gain, when
designated as such, are taxable to those shareholders as long-term capital
gains, whether received in cash or reinvested in additional Fund shares and
regardless of the length of time the shares have been held. Under the Taxpayer
Relief Act of 1997 ("Act"), different maximum tax rates apply to net capital
gain depending on the taxpayer's holding period and marginal rate of federal
income tax -- generally, 28% for gain on capital assets held for more than one
year but not more than 18 months and 20% (10% for taxpayers in the 15% marginal
tax bracket) on capital assets held for more than 18 months. The Act, however,
does not address the application of these rules to distributions by RICs,
including whether a RIC's holding period can be "passed through" to its
shareholders. Instead, the Act authorizes the issuance of regulations to do so.
Accordingly, shareholders should consult their tax advisers as to the effect of
the Act on distributions by the Fund to them of net capital gain.

If the Fund realizes gain from the disposition of shares of any underlying fund
held by the Fund as capital assets for more than one year, or if the Fund
receives a distribution from any underlying fund that is designated as a capital
gain distribution, the amount of that gain or distribution, respectively, is
included in any capital gain distribution made by the Fund to its shareholders.
Any other gain on disposition of shares of an underlying fund and any other
distribution received therefrom is included in the Fund's investment company
taxable income.

The Fund advises its shareholders of the tax status of distributions following
the end of each calendar year. The Fund is required to withhold 31% of all
dividends, capital gain distributions and redemption proceeds payable to any
individuals and certain other noncorporate shareholders who do not provide the
Fund with a correct taxpayer identification number. Withholding at that rate
also is required from dividends and capital gain distributions payable to such
shareholders who otherwise are subject to backup withholding.

A redemption of Fund shares will result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares. Similar tax
consequences will result upon an exchange of shares of the Fund for shares of
another Series. Capital gain on the redemption or exchange of Fund shares held
for more than one year will be long-term capital gain, in which event it will be
subject to federal income tax at the rates indicated above. If a shareholder
purchases Fund shares within thirty days after redeeming other Fund shares at a
loss, all or a part of that loss will not be deductible and instead will
increase the basis of the newly purchased shares.

The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Because other
federal, state or local tax considerations may apply, investors are urged to
consult their tax advisers.

QUALIFIED RETIREMENT PLANS

An investment in shares of the Fund may be appropriate for individual retirement
accounts (including "education individual retirement accounts" and "Roth IRAs,"
both available to certain taxpayers beginning in 1998), tax deferred annuity
plans under section 403(b) of the Code, self-employed individual retirement
plans (commonly referred to as "Keogh plans"), simplified employee pension plans
and other qualified retirement plans (including section 401(k) plans). Capital
gain distributions and dividends received on Fund shares held by any of these
accounts or plans are automatically reinvested in additional Fund shares, and
taxation thereof is deferred until distributed by the account or plan. Investors
who are considering establishing such an account or plan may wish to consult
their attorneys or other tax advisers with respect to individual tax questions.
The option of investing in these accounts or plans through regular payroll
deductions may be arranged with Distributors and the employer.

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<PAGE>

PERFORMANCE INFORMATION

From time to time, quotations of the Fund's average annual total return
("Standardized Return") may be included in advertisements, sales literature or
shareholder reports. Standardized Return shows percentage rates reflecting the
average annual change in the value of an assumed initial investment of $1,000,
assuming the investment has been held for periods of one year, five years and
ten years as of a stated ending date. If a five and/or ten-year period has not
yet elapsed, data will be provided as of the end of a period corresponding to
the life of the Fund. Standardized Return assumes that all dividends and capital
gain distributions were reinvested in shares of the Fund.

In addition, other total return performance data ("Non-Standardized Return")
regarding the Fund may be included in advertisements, sales literature or
shareholder reports. Non-Standardized Return shows a percentage rate of return
encompassing all elements of return (i.e., income and capital appreciation or
depreciation); and it assumes reinvestment of all dividends and capital gain
distributions. Non-Standardized Return may be quoted for the same or different
periods as those for which Standardized Return is quoted. Non-Standardized
Return may consist of cumulative total returns, average annual total returns,
year-by-year rates or any combination thereof. Cumulative total return
represents the cumulative change in value of an investment in the Fund for
various periods. Average annual total return refers to the annual compound rate
of return of an investment in the Fund. The total return of the Fund is
increased to the extent that the Adviser has waived all or a portion of its
advisory fee or reimbursed all or a portion of the Fund's expenses. Total return
figures are based on historical performance of the Fund, show the performance of
a hypothetical investment and are not intended to indicate future performance.
Additional information about the Fund's performance is contained in the
Statement of Additional Information and the Fund's annual report to
shareholders, each of which may be obtained the Fund's annual report to
shareholders, each of which may be obtained without charge by contacting the
Trust at the address or telephone numbers on the cover of this Prospectus.

FUND SHARES

The Trust was organized as a Massachusetts business trust in January 1985 under
the name American Pension Investors Trust and is registered with the SEC under
the 1940 Act as an open-end management investment company. The Trust currently
consists of seven separate Series: the Growth Fund, the T-1 Treasury Trust, the
Capital Income Fund, the Yorktown Classic Value Trust, the Yorktown Value Income
Trust, the Treasuries Trust and the Multiple Index Trust. The Board of Trustees
may elect to add additional Series in the future, although it has no present
plan to do so. This Prospectus relates only to shares of the Growth Fund.

The Trust is authorized to issue an unlimited number of shares of beneficial
interest without par value of separate Series. Shares of beneficial interest of
the Fund, when issued, are fully paid, nonassessable, fully transferable,
redeemable at the option of the shareholder and have equal dividend and
liquidation rights and noncumulative voting rights. The shares of each Series of
the Trust will be voted separately except when an aggregate vote of all Series
is required by the 1940 Act.

The Trust does not hold annual meetings of shareholders. There will normally be
no meetings of shareholders for the purpose of electing trustees unless and
until such time as less than a majority of the trustees holding office have been
elected by shareholders, at which time the trustees then in office will call a
shareholders' meeting for the election of trustees. Under the 1940 Act,
shareholders of record of no less than two-thirds of the outstanding shares of
the Trust may remove a trustee by vote cast in person or by proxy at a meeting
called for that purpose. The trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee when requested in writing to do so by the shareholders of record of not
less than 10% of the Trust's outstanding shares.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

MainStreet Trust Company, 1 Ellsworth Street, Martinsville, Virginia 24112,
serves as the Fund's custodian. Fund Services, Inc., 1500 Forest Avenue, Suite
111, Richmond, Virginia 23229, is the Fund's transfer and dividend disbursing
agent.

15
<PAGE>

GENERAL INFORMATION

Fund shareholders are kept informed through semi-annual and annual reports. Any
inquiries should be directed in writing to the Trust at P.O. Box 2529, 2303
Yorktown Avenue, Lynchburg, Virginia 24501. Shareholders may direct general
telephone inquiries to the Trust at the numbers listed on the back cover of this
Prospectus. Telephone inquiries regarding shareholder account information should
be directed to the Fund's transfer agent at the number listed on the back cover
of this Prospectus.

16
<PAGE>

APPENDIX

FOREIGN SECURITIES AND FOREIGN CURRENCY TRANSACTIONS

FOREIGN SECURITIES

An underlying fund may invest up to 100% of its assets in securities of foreign
issuers. Investments in foreign securities involve risks relating to political
and economic developments abroad as well as those that may result from the
differences between the regulation to which U.S. issuers are subject and that
applicable to foreign issuers. These risks may include expropriation,
confiscatory taxation, withholding taxes on dividends and interest, limitations
on the use or transfer of an underlying fund's assets and political or social
instability or diplomatic developments. These risks often are heightened to the
extent an underlying fund invests in issuers located in emerging markets or a
limited number of countries.

Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. Securities of many foreign companies may be less liquid and their
prices more volatile than securities of comparable U.S. companies. Moreover, the
underlying funds generally calculate their net asset values and complete orders
to purchase, exchange or redeem shares only on days when the NYSE is open.
However, foreign securities in which the underlying funds may invest may be
listed primarily on foreign stock exchanges that may trade on other days (such
as U.S. holidays and weekends). As a result, the net asset value of an
underlying fund's portfolio may be significantly affected by such trading on
days when the Adviser does not have access to the underlying funds and
shareholders do not have access to the Fund.

Additionally, because foreign securities ordinarily are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect an underlying fund's net asset value, the value of dividends
and interest earned, gains and losses realized on the sale of securities and net
investment income and capital gain, if any, to be distributed to shareholders by
the underlying fund. If the value of a foreign currency rises against the U.S.
dollar, the value of the underlying fund's assets denominated in that currency
will increase; correspondingly, if the value of a foreign currency declines
against the U.S. dollar, the value of the underlying fund's assets denominated
in that currency will decrease. The exchange rates between the U.S. dollar and
other currencies are determined by supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. The costs attributable
to foreign investing that an underlying fund must bear frequently are higher
than those attributable to domestic investing. For example, the costs of
maintaining custody of foreign securities exceed custodian costs related to
domestic securities.

FOREIGN CURRENCY TRANSACTIONS

In connection with its portfolio transactions in securities traded in a foreign
currency, an underlying fund may enter into forward contracts to purchase or
sell an agreed upon amount of a specific currency at a future date that may be
any fixed number of days from the date of the contract agreed upon by the
parties at a price set at the time of the contract. Under such an arrangement,
concurrently with the entry into a contract to acquire a foreign security for a
specified amount of currency, the fund would purchase with U.S. dollars the
required amount of foreign currency for delivery at the settlement date of the
purchase; the fund would enter into similar forward currency transactions in
connection with the sale of foreign securities. The effect of such transactions
would be to fix a U.S. dollar price for the security to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the date
the security is purchased or sold and the date on which payment is made or
received, the normal range of which is three to fourteen days. These contracts
are traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. Although such contracts tend to minimize the risk of loss due
to a decline in the value of the subject currency, they tend to limit
commensurately any potential gain that might result should the value of such
currency increase during the contract period.

17
<PAGE>

EXECUTIVE OFFICES
American Pension Investors Trust
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

INVESTMENT ADVISER
Yorktown Management & Research Company, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

DISTRIBUTOR
Yorktown Distributors, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

TRANSFER AND DIVIDEND DISBURSING AGENT
Fund Services, Inc.
P.O. Box 26305
Richmond, Virginia 23260
(800) 628-4077

CUSTODIAN
MainStreet Trust Company
P.O. Box 4751
Martinsville, Virginia 24115

INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
250 West Pratt Street
Baltimore, Maryland 21201

No person has been authorized to give any information or to make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information and
representations must not be relied upon as having been authorized by the Trust
or its distributor. This Prospectus does not constitute an offering by the Trust
or its distributor in any jurisdiction to any person to whom such offering may
not lawfully be made.

<PAGE>

API TRUST CAPITAL INCOME FUND
P. O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060

API Trust ("Trust") is an open-end, management investment company that currently
consists of seven separate series ("Series"). This Prospectus relates only to
shares of the Capital Income Fund ("Fund"), a diversified series of the Trust.
The Fund's primary investment objective is to seek to achieve high current
income. The Fund's secondary objective is growth of capital and income. The Fund
seeks to achieve its objectives by investing in shares of open-end and
closed-end investment companies. No assurance can be given that the Fund will
achieve its investment objectives.

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

This Prospectus is dated October 1, 1997.

<PAGE>

TABLE OF CONTENTS

TOPIC PAGE
----- ----

TABLE OF FUND EXPENSES..............................................4

FINANCIAL HIGHLIGHTS................................................5

GENERAL.............................................................6

INVESTMENT OBJECTIVES AND POLICIES..................................6

OTHER INVESTMENT POLICIES...........................................8
Selection of Underlying Funds.....................................8
Temporary Investments.............................................8
Borrowing and Other Policies......................................8
Portfolio Turnover................................................8

RISKS AND OTHER CONSIDERATIONS......................................9
General...........................................................9
Open-End Funds....................................................9
Closed-End Funds.................................................10

MANAGEMENT OF THE FUND.............................................11

PURCHASE OF FUND SHARES............................................12
Distribution Arrangements........................................12
How Shares May Be Purchased......................................13
Systematic Investment Plan.......................................13
Exchange Privileges..............................................13
Determining Net Asset Value......................................14

REDEMPTION OF FUND SHARES..........................................14
How Shares May Be Redeemed.......................................14
Systematic Withdrawal Plan.......................................15

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES...........................15
Dividends and Other Distributions................................15
Taxation of the Fund.............................................15
Taxation of Underlying Funds.....................................16
Taxation of Shareholders.........................................16
Qualified Retirement Plans.......................................17

PERFORMANCE INFORMATION............................................17

FUND SHARES........................................................17

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT..................18

GENERAL INFORMATION................................................18

APPENDIX...........................................................19

<PAGE>

TABLE OF FUND EXPENSES

The following tables are intended to assist investors in understanding the
expenses associated with investing in the Fund.

SHAREHOLDER TRANSACTION EXPENSES
Sales load imposed on purchases........................... None
Redemption fees........................................... None
Sales load imposed on reinvested dividends................ None
Exchange fees............................................. None

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)(1)
Management Fees (after waivers)(2)........................ 0.00%
12b-1 Fees................................................ 0.50%
Other Expenses............................................ 1.27%
-----

Total Fund Operating Expenses (after waivers)(2).......... 1.77%

(2) The Fund's investment adviser, Yorktown Management & Research Company,
Inc. (the "Adviser") waives its advisory fees in an amount equal to the amount
Distributors (an affiliate of the Adviser) retains with respect to dealer
reallowances resulting from the Fund's purchase of load fund shares and Rule
12b-1 fees received from open-end investment companies. If the Fund's investment
advisory fees had not been waived during the fiscal year ended May 31, 1997, the
Fund's Management Fees and Total Fund Operating Expenses would have been 0.60%
and 2.38%, respectively. See "Management of the Fund" for additional
information. An investor in the Fund will bear not only his proportionate share
of the expenses of the Fund but also indirectly similar expenses of the
underlying funds.

EXAMPLE -- A shareholder would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end of each period.

After 1 year...... $18
After 3 years..... 56
After 5 years..... 97
After 10 years.... 210

4
<PAGE>

FINANCIAL HIGHLIGHTS

The table below provides financial highlights for one share of the Fund for the
periods shown. This information is supplemented by the financial statements and
accompanying notes appearing on the Statement of Additional Information. The
financial statements and notes have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants, whose report thereon is also included
in the Statement of Additional Information. The financial highlights appearing
below were derived from financial statements audited by Coopers & Lybrand L.L.P.
On February 22, 1991, the Fund adopted a strategy of using multiple investment
styles by investing primarily in the shares of other registered investment
companies.

FOR THE YEAR/PERIOD ENDED MAY 31,
---------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

FOR A SHARE OUTSTANDING
THROUGHOUT EACH YEAR/PERIOD:
Net asset value, beginning of
year/period....... $17.57 $17.21 $16.34 $16.06 $14.69 $13.66 $12.78 $13.40 $13.19 $13.64
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss).... 0.32 0.34 0.35 (0.01) (0.06) (0.13) 0.19 0.52 0.55 (0.02)

Net realized and unrealized gain
(loss) on investments......... 3.49 2.57 1.64 0.78 1.43 1.16 0.99 (0.57) 0.06 (0.43)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations....... 3.81 2.91 1.99 0.77 1.37 1.03 1.18 (0.05) 0.61 (0.45)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Distributions:
From net investment income...... (0.48) (0.28) (0.36) (0.27) (0.57) (0.40)

In excess of net investment
income...................... (0.03)

From net realized gain on
security transactions....... (0.98) (2.27) (0.76) (0.49)
------ ------ ------ ------ ------ ------ ------
Total distributions......... (1.46) (2.55) (1.12) (0.49) (0.30) (0.57) (0.40)
------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year/period............. $19.92 $17.57 $17.21 $16.34 $16.06 $14.69 $13.66 $12.78 $13.40 $13.19
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return....................... 22.43% 17.65% 13.08% 4.79% 9.33% 7.51% 9.63% (0.41)% 4.65% (24.58)%(2)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year/period
(000's omitted)............. $8,098 $4,417 $3,031 $2,964 $2,603 $1,828 $1,670 $2,584 $1,822 $ 251
Ratio of expenses to average
net assets(3)............... 1.77% 2.22% 2.05% 2.12% 2.77% 3.47% 3.83% 2.92% 3.73% 11.34%(2)
Ratio of net investment
income (loss) to average
net assets ................. 1.84% 1.43% 0.75% (0.06)% (0.82) (0.98)% 1.54% 4.46% 4.69% (2.14)%(2)
Portfolio turnover rate......... 67% 40% 65% 17% 29% 55% 120% 110% 68% ----

- ------------------------
(1) Commencement of operations was April 13, 1988.
(2) Annualized.

(3) Without fees waived/reimbursed by the investment adviser and distributor, the ratio of expenses to average net assets would
have been 2.38%, 2.82%, 2.65%, 2.72%, 3.37%, 4.07%, 4.43%, 3.53%, 4.38% and 14.77%, respectively.

</TABLE>

<PAGE>

GENERAL

The Fund seeks to achieve its investment objectives by investing in shares of
open-end and closed-end investment companies (the "underlying funds"). Normally,
the Fund will invest in approximately ten to fifty underlying funds, although it
may invest up to 25% of its total assets in any one underlying fund. All of the
Trust's Series that invest in underlying funds may invest in shares of the same
underlying fund; however, the percentage of each Series' assets so invested may
vary and the Series and their affiliates may not hold more than 3% of an
underlying fund's shares. If the Fund holds more than 1% of the shares of an
open-end fund, that fund will be obligated to redeem only 1% of those shares
during any period of less than 30 days. Any shares of an open-end fund held by
the Fund in excess of 1% of the open-end fund's outstanding shares, therefore,
will be considered not readily marketable securities that, together with other
such securities, may not exceed 10% of the Fund's net assets. The Fund may not
purchase shares of investment companies that are not registered with the SEC.

INVESTMENT OBJECTIVES AND POLICIES

The Fund's primary investment objective is to seek to achieve high current
income. The Fund's secondary objective is growth of capital and income. The Fund
seeks to achieve its objectives by investing at least 65% of its total assets in
shares of underlying funds that seek to achieve an objective of high current
income by investing in income-producing equity securities, including
dividend-paying common stocks and convertible securities, long- or short-term
bonds and other fixed-income securities (such as U.S. Government securities,
commercial paper and preferred stock). Under normal conditions, the Fund invests
between 25% and 75% of its total assets in global funds (which invest in foreign
and U.S. securities) and international funds (which invest in foreign
securities). Such funds may be subject to risks due to their investment in
foreign securities. See the Appendix. All investments involve risks, and there
is no assurance that the investment objectives of the Fund will be achieved.

Unlike most fixed-income securities, the amount of dividends, if any, paid on
common stock is not fixed and the holders of equity securities are not entitled
to be paid a fixed amount of principal. Equity securities may have greater
potential for capital appreciation than fixed-income securities, but carry a
correspondingly greater risk of capital loss. Additionally, convertible
securities may offer higher income than the common stocks into which they are
convertible. Prior to their conversion, convertible securities have the same
general characteristics as non-convertible debt securities. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they may reflect changes in
value of the underlying common stock. Convertible securities entail less credit
risk than the issuer's common stock because they rank senior to common stock.

The market value of fixed-income securities is affected by changes in interest
rates. If interest rates fall, the market value of fixed-income securities tends
to rise; if interest rates rise, the value of fixed-income securities tends to
fall. Moreover, the longer the remaining maturity of a fixed-income security,
the greater the effect of interest rate changes on the market value of the
security. This market risk affects all fixed-income securities, but U.S.
Government securities are generally subject to less market risk.

The Fund may invest in underlying funds that invest only in debt securities
rated at least investment grade (BBB and above/Baa and above) by Standard &
Poor's Ratings Services ("S&P") or Moody's Investors Service, Inc. ("Moody's"),
or in underlying funds that invest in debt securities that are rated below
investment grade by S&P or Moody's. Investment grade debt securities are those
that at the time of purchase have been assigned one of the four highest ratings
by S&P or Moody's or, if unrated, are determined by the underlying fund's
investment adviser to be of comparable quality. This includes debt securities
rated BBB by S&P or Baa by Moody's. Moody's considers securities rated Baa to
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity for such securities
to make principal and interest payments than is the case for higher grade debt
securities. Debt securities rated below investment grade (commonly referred to
as "junk bonds"), which include debt securities rated BB, B, CCC and CC by S&P

<PAGE>

and Ba, B, Caa, Ca and C by Moody's, are deemed by these agencies to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
Debt securities rated lower than B may include securities that are in default or
face the risk of default with respect to principal or interest.

Ratings of debt securities represent the rating agencies' opinion regarding
their quality and are not a guarantee of quality. Subsequent to its purchase by
an underlying fund, the rating of an issue of debt securities may be reduced
below the minimum rating required for purchase by that fund. Credit ratings
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings in response to subsequent events,
so that an issuer's current financial condition may be better or worse than the
rating indicates. See the Statement of Additional Information for more
information about S&P and Moody's ratings.

Lower rated debt securities generally offer a higher current yield than that
available from higher grade issues. However, lower rated securities involve
higher risks, in that they are especially subject to adverse changes in general
economic conditions and in the industries in which the issuers are engaged, to
changes in the financial condition of the issuers and to price fluctuation in
response to changes in interest rates.

Accordingly, the yield on lower rated debt securities will fluctuate over time.
During periods of economic downturn or rising interest rates, highly leveraged
issuers may experience financial stress that could adversely affect their
ability to make payments of principal and interest and increase the possibility
of default. In addition, the market for lower rated securities has expanded
rapidly in recent years, and its growth paralleled a long economic expansion. In
the past, the prices of many lower rated debt securities declined substantially,
reflecting an expectation that many issuers of such securities might experience
financial difficulties. As a result, the yields on lower rated debt securities
rose dramatically, but such higher yields did not reflect the value of the
income stream that holder of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their value as a
result of the issuers' financial restructuring or default. The market for lower
rated debt securities may be thinner and less active than that for higher
quality securities, which may limit an underlying fund's ability to sell such
securities at their fair value in response to changes in the economy or the
financial markets. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may also decrease the values and liquidity of
lower rated securities, especially in a thinly traded market.

An underlying fund may invest in zero coupon securities and payment-in-kind
securities. Zero coupon securities pay no interest to holders prior to maturity
and payment-in-kind securities pay interest in the form of additional
securities. However, a portion of the original issue discount on the zero coupon
securities, and the "interest" on payment-in-kind securities must be included in
the underlying fund's income. Accordingly, to continue to qualify for tax
treatment as a regulated investment company and to avoid certain excise taxes,
these funds may be required to distribute as a dividend an amount that is
greater than the total amount of cash they actually receive. These distributions
must be made from a fund's cash assets or, if necessary, from the proceeds of
sales of portfolio securities. A fund will not be able to purchase additional
income-producing securities with cash used to make such distributions, and its
current income ultimately may be reduced as a result. Zero coupon and
payment-in-kind securities usually trade at a deep discount from their face or
par value and will be subject to greater fluctuations of market value in
response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.

The investment objectives of the Fund may not be changed without the affirmative
vote of a majority of the Fund's outstanding voting securities as defined in the
Investment Company Act of 1940 ("1940 Act"). Certain other investment
limitations that apply to the Fund also may not be changed without shareholder
approval, as described in the Statement of Additional Information. All other
investment policies, unless otherwise indicated, may be changed by the Trust's
Board of Trustees without shareholder approval.

<PAGE>

OTHER INVESTMENT POLICIES

SELECTION OF UNDERLYING FUNDS

The Adviser selects underlying funds in which to invest based, in part, upon an
analysis of their past performance and their investment objectives, policies and
the investment style of their investment advisers. In selecting open-end funds
in which to invest, the Adviser also considers, among other factors, the funds'
size, cost structure, shareholder services and the reputation and stability of
their investment advisers. In selecting closed-end funds in which to invest, the
Adviser considers, among other factors, the factors considered for open-end
companies and the funds' historical market discounts, portfolio characteristics,
repurchase, tender offer, and dividend reinvestment programs, provisions for
converting into an open-end fund, and quality of management. The Fund may invest
in the securities of closed-end funds that, at the time of investment by the
Fund, are either trading at a discount to net asset value or at a premium to net
asset value.

The underlying funds in which the Fund invests may include new funds and funds
with limited operating history. Underlying funds may, but need not, have the
same investment objectives, policies and limitations as the Fund. For example,
although the Fund will not borrow money for investment purposes, it may invest
all of its assets in underlying funds that borrow money for investment purposes
(i.e., engage in the speculative activity of leveraging) or invest up to 25% of
its total assets in any one such underlying fund.

TEMPORARY INVESTMENTS

Pending investment, for liquidity or when the Adviser believes market conditions
warrant a defensive position, the Fund may temporarily hold cash or invest all
or any portion of its assets in money market mutual funds or directly in money
market instruments such as (1) U.S. Government securities; (2) instruments (such
as certificates of deposit, demand and time deposits and bankers' acceptances)
of banks and savings associations that are insured by the Federal Deposit
Insurance Corporation; (3) repurchase agreements secured by U.S. Government
securities; and (4) commercial paper, including master demand notes, rated A-1
by S&P or P-1 by Moody's. To the extent the Fund invests more than $100,000 in a
single bank or savings association, the investment is not protected by federal
insurance. The underlying funds also may invest under similar circumstances in
similar instruments.

BORROWING AND OTHER POLICIES

PORTFOLIO TURNOVER

The Fund's portfolio turnover rate may vary greatly from year to year and will
not be a limiting factor when the Adviser deems portfolio changes appropriate.
For the fiscal years ended May 31, 1997 and 1996, the Fund's portfolio turnover
rates were 67% and 40%, respectively. A high portfolio turnover rate (100% or
more), whether incurred by the Fund or an underlying fund, involves
correspondingly greater transaction costs, which will be borne directly by the
Fund or the underlying fund, and increases the potential for short-term capital
gains and taxes.

<PAGE>

RISKS AND OTHER CONSIDERATIONS

GENERAL

Fund (including operating costs and investment advisory and administrative fees)
but also indirectly similar expenses of the underlying funds.

OPEN-END FUNDS

The Fund may purchase shares of open-end funds that impose a front-end sales
load ("Load Fund Shares") and shares of open-end funds that do not impose a
front-end sales load. However, the Fund may not invest in shares of open-end
funds that are sold subject to a redemption fee of more than 1%. An open-end
fund is currently permitted under the rules of the NASD to impose front-end
sales loads as high as 8.5% of the public offering price (9.29% of the net
amount invested); provided that it does not also impose an asset-based sales
charge. The Adviser anticipates, however, investing substantially all of the
Fund's assets in funds that impose no front-end sales load or impose a front-end
sales load of no more than 3% of the public offering price of the shares. Fund
purchases may often qualify for so-called quantity discounts whereby a lower
front-end sales load is applied to purchases of, for example, $50,000 or more.
Additionally, where possible, the Adviser will seek to reduce the front-end
sales load imposed by purchasing shares pursuant to (i) letters of intent,
permitting it to obtain reduced front-end sales loads by aggregating its
intended purchases over time; (ii) rights of accumulation, permitting it to
obtain reduced front-end sales loads as it purchases additional shares of an
underlying fund; and (iii) rights to obtain reduced front-end sales loads by
aggregating its purchases of several funds within a family of mutual funds. In
addition to any front-end sales load imposed by an open-end fund, the open-end
fund may be subject to annual distribution and service fees of up to 1.00% of
the fund's average daily net assets.

<PAGE>

CLOSED-END FUNDS

Shares of closed-end funds are typically offered to the public in a one-time
initial public offering by a group of underwriters who retain a spread or
underwriting commission of between 4% and 6% of the initial public offering
price. Such securities are then listed for trading on the New York Stock
Exchange ("NYSE"), the American Stock Exchange or the Nasdaq Stock Market
("Nasdaq") or, in some cases, may be traded in other over-the-counter ("OTC")
markets. Because the shares of closed-end funds cannot be redeemed upon demand
to the issuer like the shares of an open-end investment company (such as the
Fund), investors seek to buy and sell shares of closed-end funds in the
secondary market.

<PAGE>

MANAGEMENT OF THE FUND

The Trust's Board of Trustees has overall responsibility for the operation of
the Trust. Pursuant to that responsibility, the Board has selected the Adviser
to act as investment adviser and administrator for the Fund. Services provided
by the Adviser include, but are not limited to, the provision of a continuous
investment program for the Fund and supervision of all matters relating to the
operation of the Fund. Among other things, the Adviser is responsible for making
investment decisions and placing orders to buy, sell or hold particular
securities, furnishing corporate officers and clerical staff and providing
office space, office equipment and office services.

The Adviser has acted as the investment adviser to the Fund since it commenced
operations on April 13, 1988. The Adviser, whose address is 2303 Yorktown
Avenue, Lynchburg, Virginia 24501, was incorporated under the laws of the State
of Maryland in 1984 and is controlled by David D. Basten. In addition, Mr.
Basten currently serves as the Fund's portfolio manager and has served in that
capacity since commencement of the Fund's operations. He is also the portfolio
manager of the Trust's other Series.

For its services, the Adviser receives a monthly fee, calculated daily, payable
at an annual rate of 0.60% of the average daily net assets of the Fund. The
Adviser reduces its advisory fees on a dollar for dollar basis to the extent
Distributors receives (i) dealer reallowances on purchases by the Fund of shares
of open-end funds that are sold with a sales load and (ii) Rule 12b-1 fees
received from underlying open-end funds.

Distributors also may assist in the execution of the Fund's portfolio
transactions to purchase open-end fund shares for which it may receive
distribution payments from the funds or their underwriter in accordance with the
distribution plans of those funds. In providing execution assistance,
Distributors receives orders from the Adviser, places them with the fund's
distributor, transfer agent or other person as appropriate, confirms the trade,
price and number of shares purchased, assures prompt payment by the Fund and
proper completion of the order.

<PAGE>

PURCHASE OF FUND SHARES

DISTRIBUTION ARRANGEMENTS

Under a plan of distribution ("Plan") adopted by the Trust's Board of Trustees
and approved by the Fund's shareholders pursuant to Rule 12b-1 under the 1940
Act, the Fund pays Distributors, as compensation for Distributors' distribution
activities with respect to the Fund, a monthly fee at the annual rate of 0.25%
of the average daily net assets of the Fund. In addition, the Fund pays
Distributors, as compensation for Distributors' service activities with respect
to the Fund and its shareholders, a monthly fee at the annual rate of 0.25% of
the average daily net assets of the Fund. Distributors may also receive dealer
reallowances (up to a maximum of 1% of the public offering price) on purchases
by the Fund of shares of underlying funds that are sold with a front-end sales
load.

<PAGE>

shareholders of the Fund and alternate means of servicing such shareholder would
be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.

HOW SHARES MAY BE PURCHASED

SYSTEMATIC INVESTMENT PLAN

EXCHANGE PRIVILEGES

Shares of the Fund may be exchanged for shares of any of the Trust's Series
listed below without an exchange fee. The Trust's Series with which exchanges
may be made are:

Growth Fund, which seeks growth of capital. Like the Fund, the Growth Fund
seeks to achieve its investment objective by investing in shares of
underlying funds.

T-1 Treasury Trust, which seeks current income while limiting credit risk.
The T-1 Treasury Trust seeks to achieve its objective by investing in U.S.
Treasury securities with remaining maturities of one year or less.

An exchange request is considered in "good order" only if:

1. The dollar amount or number of shares to be purchased is
indicated.

2. The written request is signed by the registered owner and by any
co-owner of the account in exactly the same name or names used in
establishing the account.

<PAGE>

3. Where share certificates have been issued, the written request is
accompanied by the certificates for shares to be redeemed, properly
endorsed in form for transfer, and either the share certificates or
separate instructions of assignment (stock powers) signed by each
registered owner and co-owner exactly as the shares are registered.

4. The signatures on any share certificates (or on accompanying stock
powers) are guaranteed by a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the Stock Exchanges Medallion Program
("SEMP") or the New York Stock Exchange, Inc.'s Medallion Signature
Program ("MSP"). Signature guarantees from a
notary public are not acceptable.

The exchange privilege may be modified or terminated at any time upon 60 days'
written notice to shareholders. Before making any exchange, shareholders should
contact Distributors or their broker to obtain more information about exchanges
and prospectuses of the Trust's series to be acquired through the exchange. For
tax purposes, an exchange is treated as a redemption and a subsequent purchase.
Any capital gains or losses on the shares exchanged should be reported for tax
purposes. The price of the acquired shares is the new cost basis for income tax
purposes.

DETERMINING NET ASSET VALUE

The Fund's assets consist primarily of shares of open-end and closed-end funds.
Shares of open-end funds are valued at their respective net asset values under
the 1940 Act. An open-end fund values securities in its portfolio for which
market quotations are readily available at their current market value (generally
the last reported sales price) and all other securities and assets at fair value
pursuant to methods established in good faith by the board of directors/trustees
of the underlying fund. Money market funds with portfolio securities that mature
in 397 days or less may use the amortized cost or penny-rounding methods to
value their securities. Shares of closed-end funds that are listed on U.S.
exchanges are valued at the last sales price on the day the securities are
valued or, lacking any sales on such day, at the last available bid price.
Shares of closed-end funds listed on Nasdaq are valued at the last trade price
on Nasdaq at 4:00 p.m., eastern time; other shares traded in the OTC market are
valued at the last bid price available prior to valuation.

REDEMPTION OF FUND SHARES

HOW SHARES MAY BE REDEEMED

<PAGE>

will be redeemed at the net asset value per share computed at the close of
normal trading on the NYSE on that day. Redemption requests received after the
close of normal trading will be executed at the net asset value per share next
computed. The signature(s) on all redemption request of $10,000 or more must be
guaranteed as described above.

SYSTEMATIC WITHDRAWAL PLAN

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

DIVIDENDS AND OTHER DISTRIBUTIONS

TAXATION OF THE FUND

<PAGE>

short-term capital gain) and net capital gain that is distributed to its
shareholders. To the extent, however, that the Fund does not distribute to its
shareholders by the end of any calendar year substantially all of its ordinary
income for that year and substantially all of its capital gain net income for
the one-year period ending on October 31 of that year, plus certain other
amounts, a 4% excise tax will imposed on the Fund.

TAXATION OF UNDERLYING FUNDS

The Fund intends only to invest in underlying funds that intend to qualify for
treatment as RICs under the Code. If an underlying fund fails to qualify as a
RIC it may be subject to federal income tax. No assurance can be given, however,
that an underlying fund will qualify as a RIC.

TAXATION OF SHAREHOLDERS

If the Fund realizes gain from the disposition of shares of any underlying fund
held by the Fund as capital assets for more than one year, or if the Fund
receives a distribution from any underlying fund that is designated as a capital
gain distribution, the amount of that gain or distribution, respectively, is
included in any capital gain distribution made by the Fund to its shareholders.
Any other gain on disposition of shares of an underlying fund and any other
distribution received there from is included in the Fund's investment company
taxable income.

The Fund advises its shareholders of the tax status of distributions following
the end of each calendar year. The Fund is required to withhold 31% of all
dividends, capital gain distributions and redemption proceeds payable to any
individuals and certain other noncorporate shareholders who do not provide the
Fund with a correct taxpayer identification number. Withholding also is required
from dividends and capital gain distributions payable to such shareholders who
otherwise are subject to backup withholding.

A redemption of Fund shares will result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares. Similar tax
consequences will result upon an exchange of shares of the Fund for shares of
another Series. Capital gain on the redemption or exchange of Fund shares held
for more than one year will be long-term capital gain, in which event it will be
subject to federal income tax at the rates indicated above. If a shareholder
purchases Fund shares within thirty days after redeeming other Fund shares at a
loss, all or part of that loss will not be deductible and instead will increase
the basis of the newly purchased shares.

<PAGE>

QUALIFIED RETIREMENT PLANS

PERFORMANCE INFORMATION

In addition, other total return performance data ("Non-Standardized Return")
regarding the Fund may be included in advertisements, sales literature or
shareholder reports. Non-Standardized Return shows a percentage rate of return
encompassing all elements of return (i.e., income and capital appreciation or
depreciation); and it assumes reinvestment of all dividends and capital gain
distributions. Non-Standardized Return may be quoted for the same or different
periods as those for which Standardized Return is quoted. Non-Standardized
Return may consist of cumulative total returns, average annual total returns,
year-by-year rates or any combination thereof. Cumulative total return
represents the cumulative change in value of an investment in the Fund for
various periods. Average annual total return refers to the annual compound rate
of return of an investment in the Fund. The total return of the Fund is
increased to the extent that the Adviser has waived all or a portion of its
advisory fee or reimbursed all or a portion of the Fund's expenses. Total return
figures are based on historical performance of the Fund, show the performance of
a hypothetical investment and are not intended to indicate future performance.
Additional information about the Fund's performance is contained in the
Statement of Additional Information and the Fund's annual report to
shareholders, each of which may be obtained without charge by contacting the
Trust at the address or telephone numbers on the cover of this Prospectus.

FUND SHARES

The Trust was organized as a Massachusetts business trust in January 1985 under
the name American Pension Investors Trust and is registered with the SEC under
the 1940 Act as an open-end management investment company. The Trust currently
consists of seven separate Series: the Capital Income Fund, the Growth Fund, the
T-1 Treasury Trust, the Yorktown Classic Value Trust, the Yorktown Value Income
Trust, the Treasuries Trust and the Multiple Index Trust. The Board of Trustees
may elect to add additional Series in the future, although it has no present
plan to do so. This Prospectus relates only to shares of the Capital Income
Fund.

<PAGE>

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

GENERAL INFORMATION

18
<PAGE>

APPENDIX

FOREIGN SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS

FOREIGN SECURITIES

An underlying fund may invest up to 100% of its assets in securities of foreign
issuers. Investments in foreign securities involve risks relating to political
and economic developments abroad as well as those that may result from the
differences between the regulation to which U.S. issuers are subject and that
applicable to foreign issuers. These risks may include expropriation,
confiscatory taxation, withholding taxes on dividends and interest, limitations
on the use or transfer of an underlying fund's assets and political or social
instability or diplomatic developments. These risks often are heightened to the
extent an underling fund invests in issuers located in emerging markets.

FOREIGN CURRENCY TRANSACTIONS

<PAGE>

to a decline in the value of the subject currency, they tend to limit
commensurately any potential gain that might result should the value of such
currency increase during the contract period.

<PAGE>

EXECUTIVE OFFICES
American Pension Investors Trust
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501 (800) 544-6060

INVESTMENT ADVISER
Yorktown Management & Research Company, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

DISTRIBUTOR
Yorktown Distributors, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

TRANSFER AND DIVIDEND DISBURSING AGENT
Fund Services, Inc.
P.O. Box 26305
Richmond, Virginia 23260
(800) 628-4077

CUSTODIAN
MainStreet Trust Company
P.O. Box 4751
Martinsville, Virginia 24115

INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
250 West Pratt Street
Baltimore, Maryland 21201

<PAGE>

T-1 TREASURY TRUST
P. O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060

API Trust ("Trust") is an open-end, management investment company that currently
consists of seven separate series ("Series"). This Prospectus relates only to
shares of the T-1 Treasury Trust ("Fund"), a diversified series of the Trust.
The Fund's investment objective is to seek current income while limiting credit
risk. It pursues this objective by investing in U.S. Treasury securities with
remaining maturities of one year or less. Although the Fund limits its
investments to securities with remaining maturities of one year or less, it is
not operated as a money market fund and accordingly does not seek to and will
not maintain a stable net asset value. No assurance can be given that the Fund
will achieve its investment objective.

This Prospectus sets forth concisely the information about the Trust and the
Fund that a prospective investor should know before investing. It should be read
and retained for future reference. A Statement of Additional Information, dated
October 1, 1997 has been filed with the Securities and Exchange Commission and,
as amended from time to time, is incorporated by reference herein. It is
available, at no charge, by contacting the Trust at the address or telephone
numbers provided above.

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

This Prospectus is dated October 1, 1997.

<PAGE>

TABLE OF CONTENTS

TOPIC PAGE
-----

TABLE OF FUND EXPENSES.......................................................3
FINANCIAL HIGHLIGHTS.........................................................4
INVESTMENT OBJECTIVE AND POLICIES............................................5
OTHER INFORMATION............................................................5
Temporary Investments.....................................................5
Borrowing and Other Policies..............................................5
Portfolio Turnover........................................................6
MANAGEMENT OF THE FUND.......................................................6
PURCHASE OF FUND SHARES......................................................6
Distribution Arrangements.................................................6
How Shares May Be Purchased...............................................7
Systematic Investment Plan................................................7
Exchange Privileges.......................................................7
Determining Net Asset Value...............................................8
REDEMPTION OF FUND SHARES....................................................8
How Shares May Be Redeemed................................................8
Systematic Withdrawal Plan................................................9
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES.....................................9
Dividends and Other Distributions.........................................9
Taxation of the Fund......................................................9
Taxation of Shareholders.................................................10
Qualified Retirement Plans...............................................10
PERFORMANCE INFORMATION.....................................................11
FUND SHARES.................................................................11
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT...........................12
GENERAL INFORMATION.........................................................13

2
<PAGE>

TABLE OF FUND EXPENSES

The following tables are intended to assist investors in understanding the
expenses associated with investing in the Fund.

SHAREHOLDER TRANSACTION EXPENSES
Sales load imposed on purchases.....................................None
Redemption fees.....................................................None
Sales load imposed on reinvested dividends..........................None
Exchange fees.......................................................None

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets) (1)(2)
Management Fees (after waivers)....................................0.10%
12b-1 Fees (after waivers).........................................0.25%
Other Expenses (3).................................................1.14%
-----

Total Fund Operating Expenses (after waivers)......................1.49%

(2) The Fund's distributor, Yorktown Distributors, Inc. ("Distributors")
has agreed to limit the Fund's Rule 12b-1 fees to an annual rate of 0.25% of the
Fund's average daily net assets. In addition, the Fund's investment adviser,
Yorktown Management & Research Company, Inc. (the "Adviser") waived a portion of
its advisory fees during the fiscal year ended May 31, 1997. Without such
waivers, Management Fees, 12b-1 Fees and Total Fund Operating Expenses would
have been 0.60%, 0.50%, and 2.24%, respectively.

(3) Other Expenses may vary significantly depending upon the size of the
Fund.

EXAMPLE - A shareholder would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end of each period.

After 1 year...................................................$15
After 3 years...................................................47
After 5 years...................................................82
After 10 years.................................................179

<PAGE>

FINANCIAL HIGHLIGHTS

The table below provides financial highlights for one share of the Fund for the
periods shown. This information is supplemented by the financial statements and
accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants, whose report thereon is also included
in the Statement of Additional Information. The financial highlights appearing
below were derived from financial statements audited by Coopers & Lybrand L.L.P.
Prior to November 23, 1994, the Fund followed a strategy of using multiple
investment styles by investing primarily in the shares of other registered
investment companies. Prior to February 22, 1991, the Fund invested directly in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.

FOR THE YEAR/PERIOD ENDED MAY 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

FOR A SHARE OUTSTANDING
THROUGHOUT EACH YEAR/PERIOD:
Net asset value, beginning of
year/period $4.69 $4.73 $4.75 $5.15 $5.16 $5.03 $5.05 $5.00 $4.91 $4.99
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.21 0.17 0.23 0.19 0.18 0.17 0.28 0.31 0.19 0.01

Net realized and unrealized
gain (loss) on investments 0.02 ----- ----- (0.35) 0.03 0.17 0.04 0.02 0.04 (0.09)

Total income (loss) from
investment operations. 0.19 0.17 0.23 (0.16) 0.21 0.34 0.32 0.33 0.23 (0.08)

Distributions:
From net investment income. (0.17) (0.21) (0.25) (0.14) (0.22) (0.13) (0.30) (0.28) (0.14)

From net realized gain on
security transactions. ----- ----- ----- (0.10) (0.08) (0.04) ----- -----

Total distributions (0.17) (0.21) (0.25) (0.24) (0.22) (0.21) (0.34) (0.28) (0.14)

Net asset value, end of
year/period $4.71 $4.69 $4.73 $4.75 $5.15 $5.16 $5.03 $5.05 $5.00 $4.91
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return. 4.13% 3.67% 4.99% (3.48)% 4.18% 6.78% 6.36% 6.67% 4.71% (11.68)%(2)

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
year/period
(000's omitted). $2,528 $6,652 $4,049 $4,234 $7,295 $5,614 $1,981 $2,976 $2,406 $ 375

Ratio of expenses to
average net assets(3). 1.49% 1.49% 1.76% 1.57% 1.44% 2.08% 3.21% 2.37% 3.40% 7.19%(2)

Ratio of net investment
income to average
net assets. 3.66% 3.77% 4.19% 3.71% 4.72% 5.01% 4.97% 6.27% 4.83% 1.39%(2)
Portfolio turnover rate 108% 278% 292% 127% 308% 391% 169% 54% 12% ---

- ---------------------------
(1) Commencement of operations was April 12, 1988.

(2) Annualized.

(3) Without fees waived/reimbursed by the investment adviser and distributor, the ratio of expenses to
average net assets would have been 2.24%, 2.46%, 2.56%, 2.16%, 2.04%, 2.70%, 3.81%, 2.88%, 4.03%
and 7.86%, respectively.

</TABLE>

4
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek current income while limiting credit
risk. The Fund seeks to achieve its objective by investing under normal
conditions in U.S. Treasury securities (bills, notes and bonds) and other direct
obligations of the U.S. Treasury that are guaranteed as to payment of principal
and interest by the full faith and credit of the U.S. government. Dividends paid
by the Fund that are attributable to interest on such obligations are generally
exempt from state and local income tax (see "Dividends, Other Distributions and
Taxes"). The Fund limits it investments to securities with remaining maturities
of one year or less. All investments involve risks, and there is no assurance
that the investment objective of the Fund will be achieved. Although the Fund
limits its investments to securities with remaining maturities of one year or
less, it is not operated as a money market fund and accordingly does not seek to
and will not maintain a stable net asset value.

U.S. Treasury securities historically have involved little risk of loss of
principal if held to maturity. Such securities, however, are subject to
variations in market value due to interest rate fluctuations. If interest rates
fall, the market value of fixed-income securities tend to rise; if interest
rates rise, the market value of fixed-income securities tends to fall. In
general, securities with remaining maturities of one year or less are less
vulnerable to price changes than securities with longer remaining maturities.

The Fund may invest in certain zero coupon securities that are U.S. Treasury
notes and bonds that have been stripped of their unmatured interest coupon
receipts or interest in such U.S. Treasury securities or coupons. The Fund may
purchase U.S. Treasury STRIPS ("Separate Trading of Registered Interest and
Principal of Securities") that are created when coupon payments and the
principal payment are stripped from an outstanding Treasury bond by a Federal
Reserve bank. These securities may be more sensitive to market interest rate
fluctuations than interest paying government securities of the same maturity.

OTHER INFORMATION

TEMPORARY INVESTMENTS

Pending investment, for liquidity or when Yorktown Management & Research
Company, Inc. (the "Adviser"), the Fund's investment adviser, believes market
conditions warrant a defensive position, the Fund may temporarily hold cash or
invest all or any portion of its assets in money market mutual funds or directly
in money market instruments such as (1) securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities; (2) instruments (such as
certificates of deposit, demand and time deposits and bankers' acceptances) of
banks and savings associations that are insured by the Federal Deposit Insurance
Corporation; (3) repurchase agreements secured by U.S. Government securities;
and (4) commercial paper, including master demand notes, rated A-1 by Standard &
Poor's Ratings Services or P-1 by Moody's Investors Service, Inc. To the extent
the Fund invests more than $100,000 in a single bank or savings association, the
investment is not protected by federal insurance. The Adviser will waive its
advisory fee to the extent Fund assets are invested in money market funds.

BORROWING AND OTHER POLICIES

<PAGE>

PORTFOLIO TURNOVER

The Fund's portfolio turnover rate may vary greatly from year to year and will
not be a limiting factor when the Adviser deems portfolio changes appropriate.
For the fiscal years ended May 31, 1997 and 1996, the Fund's portfolio turnover
rates were 108% and 278%, respectively. A high portfolio turnover rate (100% or
more) involves correspondingly greater transaction costs, which will be borne
directly by the Fund, and increases the potential for short-term capital gains
and taxes.

MANAGEMENT OF THE FUND

The Adviser has acted as the investment adviser to the Fund since it commenced
operations on April 12, 1988. The Adviser, whose address is 2303 Yorktown
Avenue, Lynchburg, Virginia 24501, was incorporated under the laws of the State
of Maryland in 1984 and is controlled by David D. Basten. In addition, Mr.
Basten currently serves as the Fund's portfolio manager and has served in that
capacity since commencement of the Fund's operations. He is also the portfolio
manager of the Trust's other Series.

The Adviser places orders for the purchase and sale of portfolio investments for
the Fund's account with brokers or dealers, selected by it in its discretion. A
factor in the selection of a broker-dealer includes the sale of Fund shares by
such broker-dealer.

PURCHASE OF FUND SHARES

DISTRIBUTION ARRANGEMENTS

The Trust's Board of Trustees has adopted and the Fund's shareholders have
approved a plan of distribution pursuant to Rule 12b-1 under the 1940 Act
("Plan"). The Plan provides that the Fund will pay Distributors, as compensation
for Distributors' distribution activities with respect to the Fund, a monthly
fee at the annual rate of 0.25% of the average daily net assets of the Fund and
will pay Distributors, as compensation for Distributors' service activities with
respect to the Fund and its shareholders, a monthly fee at the annual rate of
0.25% of the average daily net assets of the Fund. The Fund and Distributors
have agreed, however, to limit payments pursuant to the Plan for distribution
and service activities to an annual rate of 0.25% of the Fund's average daily
net assets.

<PAGE>

HOW SHARES MAY BE PURCHASED

SYSTEMATIC INVESTMENT PLAN

Shareholders may purchase Fund shares through a Systematic Investment Plan.
Under the Plan, Fund Services, Inc., at regular intervals, will automatically
debit a shareholder's bank checking account monthly or quarterly in an amount of
$100 or more (subject to the $500 minimum initial investment), as specified by
the shareholder. The purchase of Fund shares will be effected at their offering
price at the close of normal trading on the New York Stock Exchange, Inc.
("NYSE") on or about the 15th day of the month. To obtain an application for the
Systematic Investment Plan, write to Distributors at the address shown on the
back cover of this Prospectus.

EXCHANGE PRIVILEGES

Shares of the Fund may be exchanged for shares of the Trust's Series listed
below without an exchange fee. Each of these Series seeks to achieve its
investment objective by investing in shares of open-end and closed-end
investment companies ("underlying funds"). The Trust's Series with which
exchanges may be made are:

Growth Fund, which seeks growth of capital.

<PAGE>

Capital Income Fund, which seeks primarily high current income and
secondarily growth of capital and income.

An exchange request is considered in "good order" only if:

1. The dollar amount or number of shares to be purchased is indicated.

2. The written request is signed by the registered owner and by any
co-owner of the account in exactly the same name or names used in
establishing the account.

3. Where share certificates have been issued, the written request is
accompanied by the certificates for shares to be redeemed, properly
endorsed in form for transfer, and either the share certificates or
separate instructions of assignment (stock powers) signed by each
registered owner and co-owner exactly as the shares are registered.

4. The signatures on any share certificates (or on accompanying stock
powers) are guaranteed by a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the Stock Exchanges Medallion Program
("SEMP") or the New York Stock Exchange, Inc.'s Medallion Signature
Program ("MSP"). Signature guarantees from a
notary public are not acceptable.

The exchange privilege may be modified or terminated at any time upon 60 days'
written notice to shareholders. Before making any exchange, shareholders should
contact Distributors or their broker to obtain more information about exchanges
and prospectuses of the Trust's series to be acquired through the exchange. For
tax purposes, an exchange is treated as a redemption and a subsequent purchase.
Any capital gains or losses on the shares exchanged should be reported for tax
purposes. The price of the acquired shares is the new cost basis for income tax
purposes.

DETERMINING NET ASSET VALUE

The Fund values its assets based on their current market value when market
quotations are readily available. If such value cannot be established, assets
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees. Securities having 60 days or less remaining to
maturity are valued at their amortized cost.

REDEMPTION OF FUND SHARES

HOW SHARES MAY BE REDEEMED

<PAGE>

close of normal trading will be executed at the net asset value per share next
computed. The signature(s) on all redemption requests of $10,000 or more must be
guaranteed as described above.

SYSTEMATIC WITHDRAWAL PLAN

Withdrawal payments are made to the investor or to the beneficiaries designated
by him. An investor is not eligible for a Systematic Withdrawal Plan if he is
making regular purchase payments pursuant to the Systematic Investment Plan
described above.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

DIVIDENDS AND OTHER DISTRIBUTIONS

Dividends from the Fund's net investment income, if any, are distributed at
least quarterly. Any net capital gain (the excess of net long-term capital gain
over net short-term capital loss) realized from the sale of portfolio securities
is distributed at least annually. Unless the Trust receives instructions to the
contrary from a shareholder before the record date, it will be assumed that the
shareholder wishes to receive both dividends and capital gain distributions in
additional Fund shares. Instructions continue in effect until the Trust is
notified in writing that a change is desired. All reinvested dividends and
capital gain distributions are reinvested in additional Fund shares on the
payment date at those shares' net asset value on that day. Account statements
are mailed to shareholders evidencing each reinvestment. If the Trust has
received instructions that a shareholder wishes to receive dividends and capital
gain distributions from the Fund in cash, and the U.S. Postal Service cannot
deliver a check representing the payment thereof, or if any such check remains
uncashed for six months, the check(s) will be reinvested in Fund shares at the
then current net asset value per share of the Fund and the shareholder's
election will be changed so that future distributions will be received in
additional Fund shares.

TAXATION OF THE FUND

<PAGE>

shareholders. To the extent, however, that the Fund does not distribute to its
shareholders by the end of any calendar year substantially all of its ordinary
income for that year and substantially all of its capital gain net income for
the one-year period ending October 31 of that year, plus certain other amounts,
a 4% excise tax will be imposed on the Fund.

TAXATION OF SHAREHOLDERS

To the extent the Fund's dividends are attributable to interest on U.S. Treasury
securities or other "direct" obligations of the United States, they will be
exempt from state and local tax. The Fund advises its shareholders of the amount
and federal tax status of distributions paid (or deemed paid) during each
calendar year following the end of that year. The Fund is required to withhold
31% of all dividends, capital gain distributions, and redemption proceeds
payable to any individuals and certain other noncorporate shareholders who do
not provide the Fund with a correct taxpayer identification number. Withholding
at that rate also is required from dividends and capital gain distributions
payable to such shareholders who otherwise are subject to backup withholding.

A redemption of Fund shares will result in taxable gain or loss to the redeeming
shareholder, depending on whether the redemption proceeds are more or less than
the shareholder's adjusted basis for the redeemed shares. An exchange of Fund
shares for shares of any other Series of the Trust generally will have similar
tax consequences. Capital gain on the redemption or exchange of Fund shares held
for more than one year will be long-term capital gain, in which event it will be
subject to federal income tax at the rates indicated above. If a shareholder
purchases Fund shares within thirty days after redeeming other Fund shares at a
loss, all or a part of that loss will not be deductible and instead will
increase the basis of the newly purchased shares.

The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders; see the Statement of
Additional Information for a further discussion. There may be other federal,
state or local tax considerations applicable to a particular investor. Investors
therefore are urged to consult their own tax advisers.

QUALIFIED RETIREMENT PLANS

<PAGE>

PERFORMANCE INFORMATION

The Fund may also advertise its yield. Yield reflects investment income net of
expenses over a 30-day period on a Fund share, expressed as an annualized
percentage of the net asset value per share at the end of the period. Yield
computations differ from other accounting methods and therefore may differ from
dividends actually paid or reported net income.

The Fund's performance is increased to the extent that the Adviser or
Distributor has waived all or a portion of its fee or reimbursed all or a
portion of the Fund's expenses. Total return and yield figures are based on
historical performance of the Fund and are not intended to indicate future
performance. Additional information about the Fund's performance is contained in
the Statement of Additional Information and the Fund's annual report to
shareholders, each of which may be obtained without charge by contacting the
Trust at the address or telephone numbers on the cover of this Prospectus.

FUND SHARES

The Trust was organized as a Massachusetts business trust in January 1985 under
the name American Pension Investors Trust and is registered with the SEC under
the 1940 Act as an open-end management investment company. The Trust currently
consists of seven separate Series: the T-1 Treasury Trust, the Growth Fund, the
Capital Income Fund, the Yorktown Classic Value Trust, the Yorktown Value Income
Trust, the Treasuries Trust and Multiple Index Trust. The Board of Trustees may
elect to add additional Series in the future, although it has no present plan to
do so. This Prospectus relates only to shares of the T-1 Treasury Trust. Prior
to November 23, 1994, the Fund operated under the name Global Income Fund.

The Trust is authorized to issue an unlimited number of shares of beneficial
interest without par value of separates Series. Shares of beneficial interest of
the Fund, when issued, are fully paid, nonassessable, fully transferable,
redeemable at the option of the shareholder and have equal dividend and
liquidation rights and noncumulative voting rights. The shares of each Series of
the Trust will be voted separately except when an aggregate vote of all Series
is required by the 1940 Act.

<PAGE>

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

GENERAL INFORMATION

<PAGE>

EXECUTIVE OFFICES
American Pension Investors Trust
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

INVESTMENT ADVISER
Yorktown Management & Research Company, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

DISTRIBUTOR
Yorktown Distributors, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

TRANSFER AND DIVIDEND DISBURSING AGENT
Fund Services, Inc.
P.O. Box 26305
Richmond, Virginia 23260
(800) 628-4077

MainStreet Trust Company
P.O. Box 4751
Martinsville, Virginia 24115

INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
250 West Pratt Street
Baltimore, Maryland 21201

<PAGE>

YORKTOWN CLASSIC VALUE TRUST
P. O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060

API Trust ("Trust") is an open-end, management investment company that currently
consists of seven separate series. This Prospectus relates only to shares of the
Yorktown Classic Value Trust ("Fund"), a non-diversified series of the Trust.
Shares of the Fund are offered through Yorktown Distributors, Inc. The Fund's
minimum initial investment is $500; subsequent investments must be at least
$100.

The primary investment objective of the Fund is growth of capital; income is a
secondary objective. The Fund seeks to achieve these objectives by investing
primarily in equity securities that Yorktown Management & Research Company,
Inc., the Fund's investment adviser (the "Adviser"), believes are undervalued in
relation to the quality of the securities and the long-term earning power of
their issuers, regardless of short-term indicators. In following this strategy,
the Fund may invest in the securities of a fewer number of issuers and, as a
result, be subject to greater risks than many other investment companies. The
Fund is also permitted to borrow money in an amount up to one-third of the value
of its net assets for investment purposes. Such borrowing constitutes leverage,
a speculative technique that increases investment risk. No assurance can be
given that the Fund will achieve its investment objectives.

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

This Prospectus is dated October 1, 1997.

<PAGE>

TABLE OF CONTENTS

PROSPECTUS SUMMARY......................................................3
INVESTMENT POLICIES.....................................................3
INITIAL/SUBSEQUENT INVESTMENTS AND REDEMPTIONS..........................3
DIVIDENDS/OTHER DISTRIBUTIONS...........................................3
RISK FACTORS............................................................3
TABLE OF FUND EXPENSES..................................................4
FINANCIAL HIGHLIGHTS....................................................5
INVESTMENT OBJECTIVES AND POLICIES......................................6
RISK FACTORS AND OTHER INVESTMENT PRACTICES.............................6
Non-Diversified Status.............................................6
Leverage...........................................................7
Hedging Strategies.................................................7
Foreign Securities.................................................7
Foreign Currency Transactions......................................8
Portfolio Turnover.................................................8
Temporary Investments and Other Policies...........................8
MANAGEMENT OF THE FUND..................................................8
PURCHASE OF FUND SHARES.................................................9
Distribution Arrangements..........................................9
How Shares May Be Purchased........................................9
Systematic Investment Plan........................................10
Determining Net Asset Value.......................................10
REDEMPTION OF FUND SHARES..............................................10
How Shares May Be Redeemed........................................10
Contingent Deferred Sales Charge..................................11
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES...............................12
Dividends and Other Distributions.................................12
Taxation of the Fund..............................................12
Taxation of Shareholders..........................................12
Qualified Retirement Plans........................................13
PERFORMANCE INFORMATION................................................13
FUND SHARES............................................................13
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT......................14
GENERAL INFORMATION....................................................14
APPENDIX...............................................................15

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by more detailed information
in the body of this Prospectus.

INVESTMENT POLICIES

The Fund seeks to achieve its objectives by investing primarily in equity
securities which the Adviser believes are undervalued in relation to the quality
of the securities and the long-term earning power of their issuers, regardless
of short-term indicators. The Fund invests primarily in the common stock of
companies listed on a national securities exchange or whose securities are
traded in the over-the-counter market. See "Investment Objectives and Policies".

INITIAL/SUBSEQUENT INVESTMENTS AND REDEMPTIONS

Shares of beneficial interest in the Fund may be purchased at the net asset
value per share next computed after receipt and acceptance of the order by Fund
Services, Inc., the Fund's transfer agent. The minimum initial investment is
$500; subsequent investments must be at least $100. See "How Shares May Be
Purchased". Shares may also be redeemed through Fund Services, Inc. Redemptions
made within five years of purchase generally will be subject to a contingent
deferred sales charge. See "How Shares May Be Redeemed".

DIVIDENDS/OTHER DISTRIBUTIONS

Dividends and other distributions are paid annually from the Fund's net
investment income and net capital gain. See "Dividends, Other Distributions and
Taxes".

RISK FACTORS

There can be no assurance that the Fund will achieve its investment objectives.
The Fund may invest in the securities of a fewer number of issuers and, as a
result, be subject to greater risks than many other investment companies. The
Fund may invest in foreign securities, which are subject to risks relating to
adverse political and economic developments abroad, fluctuations in currency
exchange rates and differing characteristics of foreign economies and markets.
Prior to investment an investor should consider the various types of investments
the Fund can make and the risks related to such investments. The Fund may also
engage in leveraging, thereby increasing its sensitivity to changes in the value
of its portfolio holdings. See "Investment Objectives and Policies" and "Risk
Factors and Other Investment Practices".

3
<PAGE>

TABLE OF FUND EXPENSES

The following tables are intended to assist investors in understanding the
expenses associated with investing in the Fund.

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases............................None
Sales Load Imposed on Reinvested Dividends.................None
Maximum Contingent Deferred Sales Charge (as a
percentage of net asset value)(1).......................2%

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)(2)
Management Fees (after waivers)(3).........................0.75%
12b-1 Fees.................................................0.90%
Other Expenses.............................................1.00%

Total Fund Operating Expenses (after waivers)(3)...........2.65%

(1) The maximum 2% contingent deferred sales charge applies to
redemptions made within the first five years of purchase. No charge is imposed
on redemptions of shares held five years or longer. See "Redemption of Fund
Shares".

(2) "Annual Fund Operating Expenses" are based on operating expenses
incurred by the Fund for the fiscal year ended May 31, 1997. Long-term
shareholders may pay more in 12b-1 fees over time as a percentage of their
initial investment than the amount of the maximum front-end sales charge
permitted under the rules of the National Association of Securities Dealers,
Inc. ("NASD").

(3) The Adviser waived a portion of its advisory fees during the fiscal
year ended May 31, 1997. Without such waivers, Management Fees and Total Fund
Operating Expenses would have been 0.90% and 2.80, respectively.

EXAMPLE -- A shareholder would pay the following expenses on a $1,000
investment over various time periods assuming a 5% annual rate of
return.

One Three Five Ten
<S> <C> <C> <C> <C>
Year Years Years Years
Assuming a complete redemption at end of period (1) $47 $103 $142 $301
Assuming no redemption $27 $83 $142 $301

</TABLE>

(1) Assumes deduction at time of redemption of the maximum applicable contingent
deferred sales charge.

The Example assumes that all dividends and other distributions are reinvested
and that the percentage amounts listed under Annual Fund Operating Expenses
remain the same in the years shown. The 5% annual return assumed in the Example
is required by regulations of the Securities and Exchange Commission ("SEC") and
is not a predication of, and does not represent, the projected or actual
performance of Fund shares. The Example should not be considered a
representation of past or future expenses. Actual expenses of the Fund may be
greater or less than those shown.

4
<PAGE>

FINANCIAL HIGHLIGHTS

FOR THE YEAR/PERIOD
ENDED MAY 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993(1)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
For A Share Outstanding Throughout Each
Year/period:
$ 12.00 $ 12.98 $ 10.12 $ 10.34 $ 10.00
------- ------- ------- ------- -------
Net asset value, beginning of year/period..........

Income from investment operations:

Net investment income........................... (0.25) (0.28) (0.28) 0.06 0.02
Net realized and unrealized gain (loss) on 2.69 0.93 3.33 (0.27) 0.32
investments................................... -------- -------- ------- ------- -------
Total income (loss) from investment 2.44 0.65 3.05 (0.21) 0.34
operations................................ -------- -------- ------- ------- -------

Distributions:
From net investment income...................... (0.07) (0.01)
From net realized gain on security transactions (0.21) (1.63) (0.12)
-------- ------- ------- -------
Total distributions..................... (0.21) (1.63) (0.19) (0.01)
-------- ------- ------- -------
Net asset value, end of year/period $ 14.23 $ 12.00 $ 12.98 $ 10.12 $ 10.34
======== ======= ======= ======= =======
Total return(3)............................... 20.59% 6.36% 30.70% (2.04)% 5.88%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year/period (000's omitted) $13,060 $9,072 $6,490 $5,323 $3,353
Ratio of operating expenses to average net 2.65% 2.68% 2.39% 1.99% 1.80%(2)
assets(4).....................................
Ratio of total expenses to average net assets(5) 5.20% 6.22% 5.79% 4.49% 3.32%(2)
Ratio of net investment income (loss) to
average net (2.50)% (2.67)% (2.60)% 0.76% 0.42% (2)
assets.................................
Portfolio turnover rate.................... 115% 145% 220% 170% 25%(2)
Average Commission rate paid............... 0.1650 N/A N/A N/A N/A

</TABLE>

- ----------------------------------------------------
(1) Commencement of operations was November 2, 1992.

(2) Annualized.

(3) Does not reflect contingent deferred sales charge.

(4) Without fees waived by the Adviser and distributor, the annualized ratio of
operating expenses to average net assets would have been 2.80%, 2.87%,
2.95%, 2.69% and 2.76%, respectively.

(5) Without fees waived/reimbursed by the Adviser and distributor, the
annualized ratio of total expenses to average net assets would have been
5.35%, 6.41%, 6.34%, 5.19% and 4.29%, respectively.

5
<PAGE>

DEBT OUTSTANDING
<TABLE>
<CAPTION>

Average Daily Average Daily
Amount of Amount of Debt No. Of Shares Average Amount
Debt Outstanding Outstanding Outstanding of Debt Per Share
Fiscal Year Ended at End of Period During the Period During the Period During the Period
----------------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
May 31, 1997................. $5,017,490 $3,371,414 786,862 $4.28
May 31, 1996................. 4,497,303 3,370,113 619,171 5.44
May 31, 1995................. 2,638,565 2,346,536 499,195 4.70
May 31, 1994................. 2,357,355 2,001,443 442,797 4.52
May 31, 1993................. 897,354 550,057 203,424 2.70

</TABLE>

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of the Fund is growth of capital; income is a
secondary objective. The Fund seeks to achieve its objectives by investing
primarily in equity securities which the Adviser believes are undervalued in
relation to the quality of the securities and the long-term earning power of
their issuers, regardless of short-term indicators.

The Adviser believes that investing in temporarily depressed securities of
sound, well-managed companies provides a greater potential for overall
investment return than investing in securities selling at prices that reflect
anticipated favorable developments. Securities may be undervalued because of
many factors, including general market decline, earnings decline, poor economic
conditions, tax losses or actual or anticipated unfavorable developments
affecting the issuer. Any or all of these factors may provide buying
opportunities at prices that compare favorably to historical or current
price-earnings ratios, book value, return on equity, or the prospects for the
companies in question.

The Fund invests primarily in the common stock of companies listed on a national
securities exchange or whose securities are traded in the over-the-counter
market. The Fund may also invest in preferred stock, convertible preferred
stock, convertible debentures, rights, warrants and certain other instruments.
See the Appendix for more information on convertible securities, rights and
warrants.

The Fund's primary investment objective is fundamental and may not be changed
without the affirmative vote of a majority of the Fund's outstanding voting
securities as defined in the Investment Company Act of 1940 ("1940 Act"). As
described in the Statement of Additional Information, certain investment
limitations also may not be changed without shareholder approval. Unless
otherwise indicated, the Fund's secondary investment objective and all other
investment policies may be changed by the Trust's Board of Trustees without
shareholder approval.

All investments involve risks, and there can be no assurance that the Fund will
achieve its investment objectives. The Fund's net asset value per share will
fluctuate based upon changes in the value of its portfolio securities.

RISK FACTORS AND OTHER INVESTMENT PRACTICES

This section contains general information about certain securities the Fund may
invest in, the investment techniques the Fund may employ and the risks relating
to these practices.

NON-DIVERSIFIED STATUS

The Fund is "non-diversified," as that term is defined in the 1940 Act, but
intends to qualify as a "regulated investment company" for federal income tax
purposes. This means, in general, that more than 5% of the Fund's total assets
may be invested in securities of one issuer, but only if, at the close of each
quarter of the Fund's taxable year, the aggregate amount of such holdings does

<PAGE>

not exceed 50% of the value of its total assets and no more than 25% of the
value of its total assets is invested in the securities of a single issuer. To
the extent that the Fund's portfolio at times will consist of the securities of
a smaller number of issuers than if it were "diversified" (as defined in the
1940 Act), the Fund will at such times be subject to greater risk with respect
to its portfolio securities than an investment company that invests in a broader
range and number of securities, in that changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the Fund's
total return and the price of the Fund's shares.

LEVERAGE

The Fund may engage in leveraging by borrowing up to one-third of the value of
its net assets for investment purposes. The 1940 Act requires the maintenance of
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of 300% of the amount borrowed. If the 300%
asset coverage should decline as a result of market fluctuations or other
reasons, the Fund may be required to sell some of its portfolio holdings within
three days to reduce the debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time. Leveraging by the Fund may exaggerate the effect on net asset value
of any increase or decrease in the market value of the Fund's portfolio. Money
borrowed for leveraging will be subject to interest and related costs which may
or may not be recovered by appreciation of the securities purchased. The Fund
may also be required to maintain minimum average balances in connection with
such borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate. There can be no certainty that the Fund will be able to
borrow money when the Adviser seeks to do so or that it will be able to do so on
advantageous terms.

HEDGING STRATEGIES

The Fund may hedge its portfolio investments through the use of options, futures
contracts and options on futures contracts. The Fund may also hedge currency
risks associated with investments in foreign securities and in particular may
hedge its portfolio through the use of forward foreign currency contracts. The
objective of a hedging strategy is to protect a profit or offset a loss in a
portfolio security from future price erosion or to assure a definite price for a
security, stock index, futures contract, or currency. The Fund's ability to use
options, futures and forward foreign currency contracts may be limited by market
conditions, regulatory limits and tax considerations.

There are transactional costs connected with using hedging strategies. In
addition, the use of hedging strategies involves certain special risks,
including (1) imperfect correlation between the hedging instruments and the
securities or market sectors being hedged; (2) the possible lack of a liquid
secondary market for closing out a particular instrument; (3) the need for
additional skills and techniques beyond normal portfolio management; (4) the
possibility of losses resulting from market movements not anticipated by the
Adviser; and (5) possible impediments to effective portfolio management because
of the percentage of the Fund's assets segregated to cover its obligations.

The Statement of Additional Information contains a more complete description of
the characteristics, risks and possible benefits of hedging transactions. New
financial products and risk management techniques continue to be developed. The
Fund may use these investments and techniques consistent with its investment
objectives and regulatory and tax considerations.

FOREIGN SECURITIES

The Fund may invest in foreign securities including common stocks, preferred
stock and common stock equivalents issued by foreign companies. The Fund may
also invest in American Depository Receipts, European Depository Receipts and
other securities convertible into securities of corporations based in foreign
countries. These securities provide a means for investing indirectly in foreign
equity or debt securities. See the Statement of Additional Information for more
information.

7
<PAGE>

not determined, expropriation, withholding taxes on interest, confiscatory
taxation, limitations on the use or transfer of the Fund's assets and political
or social instability or diplomatic developments. These risks often are
heightened to the extent the Fund invests in issuers located in emerging markets
or a limited number of countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national products, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Securities of many foreign
companies may be less liquid and their prices more volatile than securities
issued by comparable U.S. companies.

Additionally, because foreign securities ordinarily are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Fund's net asset value, the value of interest earned,
gains and losses realized on the sale of securities and net investment income
and capital gain, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of the
Fund's assets denominated in that currency will increase; correspondingly, if
the value of a foreign currency declines against the U.S. dollar, the value of
the Fund's assets denominated in that currency will decrease. The exchange rates
between the U.S. dollar and other currencies are determined by supply and demand
in the currency exchange markets, international balances of payments,
governmental intervention, speculation and other economic and political
conditions. The costs attributable to foreign investing that the Fund must bear
frequently are higher than those attributable to domestic investing. For
example, the costs of maintaining custody of foreign securities exceed custodian
costs related to domestic securities.

FOREIGN CURRENCY TRANSACTIONS

When the Fund purchases or sells a security denominated in a foreign currency,
it may be required to settle the purchase transaction in the relevant foreign
currency or to receive the proceeds of the sale in the relevant foreign
currency. In either event, the Fund will be obligated to acquire or dispose of
the foreign currency by selling or buying an equivalent amount of U.S. dollars.
To effect the conversion of the amount of foreign currency involved in the
purchase or sale of a foreign security, the Fund may purchase or sell such
foreign currency on a "spot" (i.e. cash) basis.

PORTFOLIO TURNOVER

The Fund's portfolio turnover rate may vary from year to year and is not a
limiting factor when the Adviser considers portfolio changes appropriate. For
the fiscal years ended May 31, 1997 and 1996, the Fund's portfolio turnover
rates were 115% and 145%, respectively. A high portfolio turnover rate (100% or
more) involves correspondingly greater transaction costs, which will be borne
directly by the Fund, and increases the potential for short-term capital gains
and taxes.

TEMPORARY INVESTMENTS AND OTHER POLICIES

Pending investment, for liquidity or when the Adviser believes market conditions
warrant a defensive position, the Fund temporarily may commit all or any portion
of its assets to cash or money market instruments, including repurchase
agreements. The Fund may invest up to 15% of its net assets in illiquid
securities and up to 10% of its total assets in securities of other investment
companies.

MANAGEMENT OF THE FUND

<PAGE>

placing orders to buy, sell or hold particular securities, furnishing corporate
officers and clerical staff and providing office space, office equipment and
office services. In allocating portfolio transactions, the Adviser may take into
account the receipt of research, analysis and advice and similar services and
the sale of Fund shares and may utilize Yorktown Distributors, Inc., an
affiliate of the Adviser. For its services, the Adviser receives a monthly fee,
calculated daily, payable at an annual rate of 0.90% of the average daily net
assets of the Fund. The investment advisory fee paid by the Fund is higher than
that paid by most investment companies.

The Adviser has acted as the investment adviser to the Fund since it commenced
operations on November 2, 1992. The Adviser, whose address is 2303 Yorktown
Avenue, Lynchburg, Virginia 24501, was incorporated under the laws of the State
of Maryland in 1984, and is controlled by David D. Basten. In addition, Mr.
Basten currently serves as the Fund's portfolio manager and has served in that
capacity since commencement of the Fund's operations. He is also the portfolio
manager of the Trust's other series.

PURCHASE OF FUND SHARES

DISTRIBUTION ARRANGEMENTS

Yorktown Distributors, Inc. ("Distributors"), whose address is 2303 Yorktown
Avenue, Lynchburg, Virginia 24501, is the distributor of shares of the Fund.
Distributors is an affiliate of the Adviser and is controlled by David D.
Basten.

Under a plan of distribution ("Plan") adopted by the Trust's Board of Trustees
pursuant to Rule 12b-1 under the 1940 Act, the Fund pays Distributors, as
compensation for Distributors' distribution activities with respect to the Fund,
a monthly fee at the annual rate of 0.65% of the average daily net assets of the
Fund. In addition, the Fund pays Distributors, as compensation for Distributors'
service activities with respect to the Fund and its shareholders, a monthly fee
at the annual rate of 0.25% of the average daily net assets of the Fund.

<PAGE>

HOW SHARES MAY BE PURCHASED

Application forms for the purchase of Fund shares can be obtained from
Distributors or from a broker-dealer which has entered into an agreement with
Distributors. The Fund's minimum initial investment is $500, and the minimum for
additional investments is $100. An exception to these minimums is granted for
payments made pursuant to special plans or if approved by Distributors. All
orders will be executed at the net asset value per share next computed after
receipt and acceptance by Fund Services, Inc., the Fund's transfer agent, of a
completed and signed purchase application together with a check to cover the
purchase.

The Fund does not impose a front-end sales load when Fund shares are purchased;
however, a broker-dealer may charge a fee for selling Fund shares. In addition,
Fund shares are subject to a contingent deferred sales charge payable upon
certain redemptions. The Trust and Distributors reserve the right to reject any
purchase order.

When Fund shares are initially purchased, an account is automatically
established for the shareholder. Any shares subsequently purchased or received
as a distribution are credited directly to the shareholder account. No share
certificates are issued unless specifically requested in writing to the Trust.
Certificates are issued in full shares only. In addition, no certificates are
issued for shares purchased by check until 15 business days have elapsed, unless
the Trust is reasonably assured that payment for the shares has been collected.
There is no charge for certificate issuance.

SYSTEMATIC INVESTMENT PLAN

Shareholders may purchase Fund shares through a Systematic Investment Plan.
Under the Plan, Fund Services, Inc., at regular intervals, will automatically
debit a shareholder's bank checking account monthly or quarterly in an amount of
$100 or more (subject to the $500 minimum initial investment), as specified by
the shareholder. The purchase of Fund shares will be effected at their offering
price at the close of normal trading on the New York Stock Exchange, Inc.
("NYSE") on or about the 15th day of the month. To obtain an application for the
Systematic Investment Plan, write to Distributors at the address shown on the
back cover of this Prospectus.

DETERMINING NET ASSET VALUE

The net asset value of the Fund's shares is determined as of the close of normal
trading (currently 4:00 p.m., eastern time) on the NYSE each day that the NYSE
is open for business. The net asset value per share is computed by dividing the
value of the Fund's securities plus any cash and other assets (including
dividends accrued but not yet collected) minus all liabilities (including
accrued expenses) by the total number of Fund shares outstanding.

Fund assets are valued at current market value or, where unavailable, at fair
value as determined in good faith by or under the direction of the Board of
Trustees. All investments denominated in foreign currency are valued daily in
U.S. dollars on the basis of the then-prevailing exchange rate.

REDEMPTION OF FUND SHARES

HOW SHARES MAY BE REDEEMED

Fund shares may be redeemed by mailing redemption requests to the Fund's
transfer agent, Fund Services, Inc. at P.O. Box 26305, Richmond, Virginia 23260.
Upon receipt at the offices of Fund Services, Inc. of a redemption request in
"good order", the shares will be redeemed at the net asset value per share
computed at the close of normal trading on the NYSE on that day (subject to the
applicable contingent deferred sales charge described below).

<PAGE>

A redemption request is considered in "good order" only if:

1. The dollar amount or number of shares to be redeemed is indicated.

2. The written request is signed by the registered owner and by any
co-owner of the account in exactly the same name or names used in
establishing the account.

3. Where share certificates have been issued, the written request
must be accompanied by such certificates for shares to be
redeemed, properly endorsed in form for transfer, and either the
share certificates or separate instructions of assignment (stock
powers) are signed by each registered owner and co-owner exactly
as the shares are registered.

4. The signatures on any share certificates (or on accompanying stock
powers) are guaranteed by a member of the Securities Transfer
Agents Medallion Program ("STAMP"), the Stock Exchanges Medallion
Program ("SEMP") or the New York Stock Exchange, Inc.'s Medallion
Signature Program ("MSP"). Signature guarantees from a notary
public are not acceptable.

Redemption requests received after the close of normal trading on the NYSE will
be executed at the net asset value per share next computed. The signature(s) on
all redemption requests of $10,000 or more must be guaranteed as described in
item 4 above.

Other supporting legal documents may be required from corporations or other
organizations, fiduciaries or persons other than the stockholder of record
making the request for redemption. If there is a question concerning the
redemption of Fund shares, contact Distributors, your broker or Fund Services,
Inc.

<PAGE>

CONTINGENT DEFERRED SALES CHARGE

A contingent deferred sales charge generally is imposed on redemptions of all
shares (including any shares received as a purchase bonus ("Bonus Shares")) that
were purchased within five years of the redemption date. The contingent deferred
sales charge is 2% of the lesser of (1) the net asset value of the shares
redeemed or (2) the cost of such shares. No contingent deferred sales charge is
imposed on amounts derived from (a) increases in the value of shares redeemed
above the original purchases price of such shares due to increases in the net
asset value per share of the Fund, (b) reinvestment of dividends or capital gain
distributions, or (c) shares redeemed five years or more after their purchase.
For purposes of the foregoing, in the event the redemption involves any Bonus
Shares, the cost of each share or original purchase price shall be determined by
allocating the price paid among the shares paid for by the investor and the
Bonus Shares.

The contingent deferred sales charge will be determined as follows:

2% of amounts redeemed in the first five years after the date of purchase

0% of amounts redeemed thereafter

In determining whether a contingent deferred sales charge is payable and, if so,
the percentage charge applicable, it is assumed that shares held the longest are
the first to be redeemed.

With respect to purchases of Fund shares made prior to March 20, 1996, the
contingent deferred sales charge will not be imposed on redemptions by officers,
directors, full-time employees, and sales representatives of the Adviser or the
Distributors, to the extent permitted by law, regulations, and/or
interpretations. Fund shares also may be purchased by certain employee benefit
plans ("eligible benefit plans") without the imposition of a contingent deferred
sales charge. To be an eligible benefit plan, there must be at least 100 initial
participants with accounts investing or invested in shares of the Fund. The
initial purchase by the eligible benefit plan by or for the benefit of the
initial participants of the plan must aggregate not less than $25,000 and
subsequent purchases must be at least $100 per account and must aggregate at
least $10,000. Purchases by the eligible benefit plan must be made pursuant to a
single order and may not be made more often than monthly. A separate account
will be established for each participant in the plan. The requirements for
initiating or continuing purchases pursuant to an eligible benefit plan may be
modified and the offering to such plans may be terminated at any time without
prior notice.

For federal income tax purposes, the amount of the contingent deferred sales
charge will reduce the gain or increase the loss, as the case may be, on the
amount realized on redemption. The amount of any contingent deferred sales
charge will be paid to Distributors.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

DIVIDENDS AND OTHER DISTRIBUTIONS

Dividends from the Fund's net investment income, if any, are distributed at
least annually. Any net capital gain (the excess of net long-term capital gain
over net short-term capital loss) realized from the sale of portfolio securities
and net realized gains from foreign currency transactions also are distributed
at least annually. Unless the Trust receives instructions to the contrary from a
shareholder before the record date, it will be assumed that the shareholder
wishes to receive both dividends and capital gain distributions in additional
Fund shares. Instructions continue in effect until the Trust is notified in
writing that a change is desired. All reinvested dividends and capital gain
distributions are reinvested in additional shares of the Fund on the payment
date at their net asset value on that day. Account statements are mailed to
shareholders evidencing each reinvestment. If the Trust has received
instructions that a shareholder wishes to receive dividends and capital gain
distributions in cash, and the U.S. Postal Service cannot deliver a check
representing the payment thereof, or if any such check remains uncashed for six
months, the check(s) will be reinvested in Fund shares at the then current net
asset value per share of the Fund and the shareholder's election will be changed
so that future distributions will be received in additional Fund shares.

<PAGE>

TAXATION OF THE FUND

TAXATION OF SHAREHOLDERS

The Fund advises its shareholders of the tax status of distributions following
the end of each calendar year. The Fund is required to withhold 31% of all
dividends, capital gain distributions and redemption proceeds payable to any
individuals and certain other noncorporate shareholders who do not provide the
Fund with a correct taxpayer identification number. Withholding at that rate
also is required with respect to shareholders who otherwise are subject to
backup withholding.

A redemption of Fund shares will result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares. Capital gain on
the redemption of Fund shares held for more than one year will be long-term
capital gain, in which event it will be subject to federal income tax at the
rates indicated above. If a shareholder purchases Fund shares within thirty days
after redeeming other Fund shares at a loss, all or a part of that loss will not
be deductible and instead will increase the basis of the newly purchased shares.

QUALIFIED RETIREMENT PLANS

An investment in shares of the Fund may be appropriate for individual retirement
accounts (including "education individual retirement accounts" and "Roth IRAs,"
both available to certain taxpayers beginning in 1998), tax deferred annuity
plans under section 403(b) of the Code, self-employed individual retirement
plans (commonly referred to as "Keogh plans"), simplified employee pension plans
and other corporate retirement plans (including section 401(k) plans). Capital
gain distributions and dividends received on Fund shares held by any of these
accounts or plans are automatically reinvested in additional Fund shares, and
taxation thereof is deferred until distributed by the account or plan. Investors
who are considering establishing such an account or plan may wish to consult
their attorneys or tax advisers with respect to individual tax questions. The
option of investing in these accounts or plans through regular payroll
deductions may be arranged with Distributors and the employer.

<PAGE>

PERFORMANCE INFORMATION

From time to time, quotations of the Fund's average annual total return
("Standardized Return") may be included in advertisements, sales literature or
shareholder reports. Standardized Return will show percentage rates reflecting
the average annual change in the value of an assumed initial investment of
$1,000, assuming the investment has been held for periods of one year, five
years and ten years as of a stated ending date. If a five and/or ten-year period
has not yet elapsed, data will be provided as of the end of a period
corresponding to the life of the Fund. Standardized Return reflects deduction of
the applicable contingent deferred sales charge imposed on a redemption of
shares held for the period and assumes that all dividends and capital gain
distributions were reinvested in shares of the Fund.

In addition, the Fund may include in advertisements, sales literature or
shareholder reports other total return performance data ("Non-Standardized
Return"). Non-Standardized Return shows a percentage rate of return encompassing
all elements of return (i.e., income and capital appreciation or depreciation);
and it assumes reinvestment of all dividends and capital gain distributions.
Non-Standardized Return may be quoted for the same or different periods as those
for which Standardized Return is quoted. Non-Standardized Return may consist of
cumulative total returns, average annual total returns, year-by-year rates or
any combination thereof. Cumulative total return represents the cumulative
change in value of an investment in the Fund for various periods. Average annual
total return refers to the annual compound rate of return of an investment in
the Fund. Non-Standardized Return does not reflect contingent deferred sales
charges and would be lower if such charges were included.

The total return of the Fund is increased to the extent that the Adviser waives
all or a portion of its advisory fee, or reimbursed all or a portion of the
Fund's expenses. Total return figures are based on historical performance of the
Fund, show the performance of a hypothetical investment and are not intended to
indicate future performance. Additional information about the Fund's performance
is contained in the Statement of Additional Information and the Fund's annual
report to shareholders, each of which may be obtained without charge by
contacting the Trust at the address or telephone numbers on the cover of this
Prospectus.

FUND SHARES

The Trust was organized as a Massachusetts business trust in January 1985 under
the name American Pension Investors Trust and is registered with the SEC under
the 1940 Act as an open-end management investment company. The Trust currently
consists of seven separate series: the Growth Fund, the T-1 Treasury Trust, the
Capital Income Fund, the Yorktown Classic Value Trust, the Yorktown Value Income
Trust, the Treasuries Trust and the Multiple Index Trust. The Board of Trustees
may elect to add additional series in the future, although it has no present
plan to do so. This Prospectus relates only to shares of the Yorktown Classic
Value Trust.

The Trust is authorized to issue an unlimited number of shares of beneficial
interest without par value of separate series. Shares of beneficial interest of
the Fund, when issued, are fully paid, nonassessable, fully transferable,
redeemable at the option of the shareholder and have equal dividend and
liquidation rights and noncumulative voting rights. The shares of each series of
the Trust will be voted separately except when an aggregate vote of all series
is required by the 1940 Act.

<PAGE>

The Trust does not hold annual meetings of shareholders. There will normally be
no meetings of shareholders for the purpose of electing trustees unless and
until such time as less than a majority of the Trustees holding office have been
elected by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Under the 1940 Act,
shareholders of record of no less than two-thirds of the outstanding shares of
the Trust may remove a Trustee by vote cast in person or by proxy at a meeting
called for that purpose. The Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Trustee when requested in writing to do so by the shareholders of record of not
less than 10% of the Trust's outstanding shares.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey 08540-6231
is the Fund's custodian. Fund Services, Inc., 1500 Forest Avenue, Suite 111,
Richmond, Virginia 23229, is the Fund's transfer and dividend disbursing agent.

GENERAL INFORMATION

15
<PAGE>

APPENDIX
DESCRIPTION OF SECURITIES

WARRANTS

Warrants are instruments that provide the owner with the right to purchase a
specified security, usually an equity security such as common stock, at a
specified price (usually representing a premium over the applicable market value
of the underlying equity security at the time of the warrant's issuance) and
usually during a specified period of time. Moreover, they are usually issued by
the issuer of the security to which they relate. While warrants may be traded,
there is often no secondary market for them. The Fund invests in publicly traded
warrants only. To the extent that the market value of the security that may be
purchased upon exercise of the warrant rises above the exercise price, the value
of the warrant will tend to rise. To the extent that the exercise price equals
or exceeds the market value of such security, the warrants will have little or
no market value. If warrants remain unexercised at the end of the specified
exercise period, they lapse and the Fund's investment in them will be lost. The
Fund may not invest more that 5% of its net assets in warrants.

CONVERTIBLE SECURITIES

The Fund may invest in a convertible security which is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividends paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities in that they
ordinarily provide a stable stream of income with generally higher yields than
those of common stocks of the same or similar issuers. Convertible securities
rank senior to common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. While no securities
investment is without some risk, investments in convertible securities generally
entail less risk than the issuer's common stock, although the extent to which
such risk is reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income security.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable nonconvertible securities, (2) are less subject to fluctuation in
value than the underlying stock since they have fixed income characteristics and
(3) provide the potential for capital appreciation if the market price of the
underlying common stock increases.

The value of a convertible security is a function of its "investment value"
(determined by its yield comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
conversion value decreases as the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds
the conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.

A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by the fund is called for redemption, the fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.

15
<PAGE>

EXECUTIVE OFFICES
American Pension Investors Trust
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501 (800) 544-6060

INVESTMENT ADVISER
Yorktown Management & Research Company, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

DISTRIBUTOR
Yorktown Distributors, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(800) 544-6060

TRANSFER AND DIVIDEND DISBURSING AGENT
Fund Services, Inc.
P.O. Box 26305
Richmond, Virginia 23260
(800) 628-4077

CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540-6231

INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
250 West Pratt Street
Baltimore, Maryland 21201

<PAGE>

YORKTOWN VALUE INCOME TRUST
P. O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060

API Trust ("Trust") is an open-end, management investment company that
currently consists of seven separate series. This Prospectus relates only to
shares of the Yorktown Value Income Trust ("Fund"), a diversified series of the
Trust. Shares of the Fund are offered through Yorktown Distributors, Inc. The
Fund's minimum initial investment is $500; subsequent investments must be at
least $100.

The primary investment objective of the Fund is to seek a high level of
current income; capital appreciation is a secondary objective. The Fund seeks to
achieve these objectives by investing primarily in a broad range of fixed income
securities. The Fund is permitted to borrow money in an amount up to one-third
of the value of its net assets for investment purposes. Such borrowing
constitutes leverage, a speculative technique that increases investment risk. No
assurance can be given that the Fund will achieve its investment objectives.

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. It should be read and
retained for future reference. A Statement of Additional Information, dated
October 1, 1997, has been filed with the Securities and Exchange Commission and,
as amended from time to time, is incorporated by reference herein. It is
available, at no charge, by contacting the Trust at the address or telephone
numbers provided above.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR
GUARANTEED BY, ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.

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

This Prospectus is dated October 1, 1997.

<PAGE>

TABLE OF CONTENTS

TOPIC PAGE
- -----

PROSPECTUS SUMMARY...........................................................3

TABLE OF FUND EXPENSES.......................................................4

INVESTMENT OBJECTIVES AND POLICIES...........................................5

RISK FACTORS AND OTHER INVESTMENT PRACTICES..................................6

MANAGEMENT OF THE FUND......................................................11

PURCHASE OF FUND SHARES.....................................................12

Distribution Arrangements.................................................12
How Shares May Be Purchased...............................................13
Systematic Investment Plan................................................13
Determining Net Asset Value...............................................13

REDEMPTION OF FUND SHARES...................................................14

How Shares May Be Redeemed................................................14
Contingent Deferred Sales Charge..........................................15

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES....................................16

Dividends and Other Distributions.........................................16
Taxation of the Fund......................................................16
Taxation of Shareholders..................................................16
Qualified Retirement Plans................................................17

PERFORMANCE INFORMATION.....................................................17

FUND SHARES.................................................................18

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT...........................19

GENERAL INFORMATION.........................................................19

APPENDIX....................................................................22

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by more detailed
information in the body of this Prospectus.

INVESTMENT POLICIES

The Fund seeks to achieve its objectives by investing normally at least
65% of its total assets in a broad range of fixed income securities, including
U.S. and foreign government securities, corporate debt securities, municipal
obligations, mortgaged-backed debt securities, financial service industry
obligations, preferred stock and repurchase agreements. See "Investment
Objectives and Policies".

INVESTMENT ADVISER

Yorktown Management & Research Company, Inc. (the "Adviser") manages
the investments of the Fund according to the Fund's investment objectives and
policies. See "Management of the Fund".

INITIAL/SUBSEQUENT INVESTMENTS AND REDEMPTIONS

The minimum initial investment is $500; subsequent investments must be at
least $100. Shares of beneficial interest in the Fund may be purchased at the
net asset value per share next computed after receipt and acceptance of the
order by Fund Services, Inc., the Fund's transfer agent. See "How Shares May Be
Purchased". Shares may also be redeemed through Fund Services, Inc. Redemptions
made within five years of purchase generally will be subject to a contingent
deferred sales charge. See "How Shares May Be Redeemed".

DIVIDENDS/OTHER DISTRIBUTIONS

Dividends and other distributions are paid annually from the Fund's net
investment income and net capital gain. See "Dividends, Other Distributions
and Taxes".

RISK FACTORS

There can be no assurance that the Fund will achieve its investment
objectives. The Fund may invest in foreign securities, which are subject to
risks relating to adverse political and economic developments abroad,
fluctuations in currency exchange rates and differing characteristics of foreign
economies and markets. In addition, the Fund may invest up to 35% of its assets
in securities rated investment grade or lower by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Services ("S&P"). Moody's considers
securities rated in the lowest tier of investment grade to have speculative
characteristics and Moody's and S&P consider securities rated below investment
grade to be predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal and may involve major risk exposure to adverse
conditions. Prior to investment an investor should consider the various types of
investments the Fund can make and the risks related to such investments. The
Fund may also engage in leveraging, thereby increasing its sensitivity to
changes in the value of its portfolio holdings. See "Investment Objectives and
Policies" and "Risk Factors and Other Investment Practices".

<PAGE>

TABLE OF FUND EXPENSES

The following tables are intended to assist investors in understanding the
expenses associated with investing in the Fund.

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases..................................None
Sales Load Imposed on Reinvested Dividends.......................None
Maximum Contingent Deferred Sales Charge
(as a percentage of net asset value)(1).........................2%

Annual Fund Operating Expenses
(as a percentage of average net assets) (2)

Management Fees.................................................0.75%
12b-1 Fees......................................................0.90%
Other Expenses (estimated)......................................0.60%
-----

Total Operating Expenses (estimated)............................2.25%

(1) The maximum 2% contingent deferred sales charge applies to redemptions made
within the first five years of purchase. No charge is imposed on redemptions of
shares held five years or longer. See "Redemption of Fund Shares".

(2) As the Fund does not have any operating history, "other expenses" have been
estimated based on a projected level of average daily net assets of $10 million
for the Fund. See "Management of the Fund".

EXAMPLE - A shareholder would pay the following expenses on a $1,000 investment
over various time periods assuming a 5% annual rate of return.

1 YEAR 3 YEARS
------ -------

Assuming a complete redemption at $43 $91
end of period (1)

Assuming no redemption $23 $71

(1) Assumes deduction at time of redemption of the maximum applicable
contingent deferred sales charge.

The Example assumes that all dividends and distributions are
reinvested and that the percentage amounts listed under Annual Fund Operating
Expenses remain the same in the years shown. The 5% annual return assumed in the
example is required by regulations of the Securities and Exchange Commission
("SEC") and is not a predication of, and does not represent, the projected or
actual performance of Fund shares. The Example should not be considered a
representation of past or future expenses. Actual expenses of the Fund may be
greater or less than those shown.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Under normal circumstances, at least 65% of the Fund's total assets will
be invested in fixed income securities which include, but are not limited to,
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government securities"), securities issued or
guaranteed by foreign governments (including foreign states, provinces or
municipalities) or their agencies, authorities or instrumentalities ("foreign
government securities"), U.S. or foreign corporate debt securities, municipal
obligations, mortgage-related securities, financial service industry
obligations, preferred stock and repurchase agreements. The Fund's remaining
assets may be invested in other equity securities which are compatible with the
investment objectives of the Fund, including common stocks and common stock
equivalents. It is intended that the equity securities will principally be
income producing, but the Fund will take advantage of opportunities to realize
capital appreciation when the Adviser deems it appropriate.

The high level of current income which the Fund seeks may generally be
obtained from debt securities rated in the lower categories by recognized rating
services and from unrated securities. The Fund may invest up to 35% of its
assets in fixed income securities that are rated Baa or lower by Moody's, or BBB
or lower by S&P or, if unrated, are determined by the Adviser to be of
comparable quality. Lower rated debt securities are sometimes referred to as
"junk bonds". Lower rated debt securities may have speculative characteristics
and may be subject to greater market fluctuations and risk of loss of income and
principal than higher rated securities. See "Risks of Lower Rated Securities".

In seeking to achieve its investment objectives, the Fund will invest in
fixed income securities based on the Adviser's analysis without relying on any
published ratings. The Fund will invest in a particular security if doing so
would be consistent with the Fund's investment objectives and policies described
above and if, in the Adviser's view, the increased yield offered, regardless of
published ratings, is sufficient to compensate for the assumed risk. Because
investments will be based upon the Adviser's analysis rather than on the basis
of published ratings, achievement of the investment objectives of the Fund may
depend more upon the abilities of the Adviser than would otherwise be the case.

Because the value of the Fund's portfolio securities will fluctuate
depending on market factors, the credit of the issuer and the current interest
rate levels, the net asset value of its shares will fluctuate. The average
maturity and the mix of the investments of the Fund will vary as the Adviser
seeks to provide a high level of income considering the available alternatives
in the market. The market value of fixed income securities will generally be
affected by changes in the level of interest rates. Because interest rates vary
with changes in economic, market, political and other conditions, there can be
no assurance that historic interest rates will be indicative of rates which may
prevail in the future. Generally, the value of the fixed income securities held
by the Fund, and thus the net asset value per share of the Fund, will rise when
interest rates decline. Conversely, when interest rates rise, the value of debt

<PAGE>

securities, and thus the net asset value per share of the Fund, may be expected
to decline. Generally, the prices of fixed income securities with longer
maturities react more to these interest rate changes. The Adviser will attempt
to adjust investments in view of prevailing or anticipated market conditions.
There can be no assurance, however, that the investment objectives of the Fund
will be achieved or that shareholders will be protected from the risk of loss
inherent in any investment.

The Fund's primary investment objective is fundamental and may not be
changed without the affirmative vote of a majority of the Fund's outstanding
voting securities as defined in the Investment Company Act of 1940 ("1940 Act").
As described in the Statement of Additional Information, certain investment
limitations that apply to the Fund also may not be changed without shareholder
approval. Unless otherwise indicated, the Fund's secondary investment objective
and all other investment policies may be changed by the Trust's Board of
Trustees without shareholder approval.

All investments involve risks, and there can be no assurance that the Fund
will achieve its investment objectives. The Fund's net asset value per share
will fluctuate based upon changes in the value of its portfolio securities.

RISK FACTORS AND OTHER INVESTMENT PRACTICES

This section contains general information about certain securities the
Fund may invest in, the investment techniques the Fund may employ and the risks
relating to these practices.

LEVERAGE

The Fund may engage in leveraging by borrowing up to one-third of the
value of its net assets for investment purposes. The 1940 Act requires the
maintenance of continuous asset coverage (that is, total assets including
borrowings, less liabilities exclusive of borrowings) of 300% of the amount
borrowed. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell some of its
portfolio holdings within three days to reduce the debt and restore the 300%
asset coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. Leveraging by the Fund may
exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
subject to interest and related costs which may or may not be recovered by
appreciation of the securities purchased. The Fund may also be required to
maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
There can be no certainty that the Fund will be able to borrow money when the
Adviser seeks to do so or that it will be able to do so on advantageous terms.

<PAGE>

HEDGING STRATEGIES

The Fund may hedge its portfolio investments through the use of options,
futures contracts and options on futures contracts. The Fund may also hedge
currency risks associated with investments in foreign securities and in
particular may hedge its portfolio through the use of forward foreign currency
contracts. The objective of a hedging strategy is to protect a profit or offset
a loss in a portfolio security from future price erosion or to assure a definite
price for a security, stock index, futures contract, or currency. The Fund's
ability to use options, futures and forward foreign currency contracts may be
limited by market conditions, regulatory limits and tax considerations.

The Statement of Additional Information contains a more complete
description of the characteristics, risks and possible benefits of hedging
transactions. New financial products and risk management techniques continue to
be developed. The Fund may use these investments and techniques consistent with
its investment objectives and regulatory and tax considerations.

U.S. AND FOREIGN GOVERNMENT SECURITIES

U.S. Government securities in which the Fund may invest include direct
obligations of the U.S. Government (such as Treasury bills, notes, bonds and
other debt securities) and obligations issued by U.S. Government agencies and
instrumentalities, including securities that are supported by the full faith and
credit of the United States (such as Government National Mortgage Association
("GNMA") certificates) and securities supported primarily or solely by the
creditworthiness of the issuer (such as securities of the Federal National
Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") and the Tennessee Valley Authority).

Foreign government securities in which the Fund may invest include
obligations supported by national, state or provincial governments or similar
political subdivisions, debt obligations of supranational entities, debt
securities of "quasi-governmental agencies," debt securities denominated in
multinational currency units and mortgage-related securities issued or
guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies. Debt securities of quasi-governmental
agencies are issued by entities owned by either a national, state or equivalent
government or are obligations of a political unit that is not backed by the
national government's full faith and credit and general taxing powers.

<PAGE>

FOREIGN SECURITIES

The Fund may invest in foreign equity securities including common stocks,
preferred stock and common stock equivalents issued by foreign companies. The
Fund may also invest in foreign debt securities. The Fund may also invest in
American Depository Receipts, European Depository Receipts and other securities
convertible into securities of corporations based in foreign countries. These
securities provide a means for investing indirectly in foreign equity or debt
securities. See the Statement of Additional Information for more information.

Investments in foreign securities involve risks relating to adverse
political and economic developments abroad as well as those that may result from
the differences between the regulation to which U.S. issuers are subject and
that applicable to foreign issuers. These risks may include adverse movements in
the market value of portfolio securities on days when the Fund's net asset value
is not determined, expropriation, withholding taxes on interest, confiscatory
taxation, limitations on the use or transfer of the Fund's assets and political
or social instability or diplomatic developments. These risks often are
heightened to the extent the Fund invests in issuers located in emerging markets
or a limited number of countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national products, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Securities of many foreign
companies may be less liquid and their prices more volatile than securities
issued by comparable U.S. companies.

LOWER RATED SECURITIES

The Fund may invest up to 35% of its assets in fixed income securities
rated BBB or lower by S&P or Baa or lower by Moody's. Moody's considers
securities rated Baa to have speculative characteristics. Moody's and S&P
consider below investment grade fixed income securities to be predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal and may involve major risk exposure to adverse conditions. Fixed
income securities rated lower than B may include securities that are in default
or face the risk of default with respect to principal or interest. Changes in

<PAGE>

economic conditions or other circumstances are more likely to lead to a weakened
capacity for such securities to make principal and interest payments than is the
case for higher grade debt securities.

Investments in debt securities in the lower rating categories or
comparable unrated securities generally provide higher yields but involve
greater price volatility and risk of loss of principal and interest than
investments in securities with higher ratings. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, regarding individual
lower rated bonds and the high yield, high risk market may depress the prices
for such securities. Companies that issue such high yielding, high risk bonds
are often highly leveraged and may not have available to them more traditional
methods of financing. Therefore, the risk associated with acquiring the bonds of
such issuers generally is greater than is the case with higher rated bonds. For
example, during an economic downturn or recession, highly leveraged issuers of
high yield, high risk bonds may experience financial stress, which could
adversely affect their ability to make payment of interest and principal and
increase the possibility of default.

The Fund may have difficulty disposing of certain high yield high risk
bonds due to the fact that there may be a thin and less active trading market
for such bonds. Such bonds may only be sold through a limited number of dealers,
and the lack of a liquid secondary market may have an adverse impact on market
price and make it more difficult for the Adviser to obtain accurate market
quotations for purposes of valuing the assets of the Fund.

The investment philosophy of the Fund with respect to high yield, high
risk bonds is based on the premise that over the long term a broadly diversified
portfolio of high yield, high risk fixed income securities should, even taking
into account possible losses, provide a higher net return than that achieved on
a portfolio of higher rated securities.

MUNICIPAL OBLIGATIONS

Under certain circumstances municipal obligations may offer the potential
for attractive yields relative to other fixed income securities even without
taking into consideration the tax-advantaged nature of interest earned on
municipal bond investments. At such times the Fund may invest in municipal
obligations of varying maturities.

Municipal obligations are debt obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia, and their political subdivisions, agencies, authorities and
instrumentalities and other qualifying issuers which pay interest that is, in
the opinion of bond counsel to the issuer, exempt from federal income tax. The
two principal classifications of municipal bonds are "general obligation" and
"revenue" bonds. General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source such as from the user
of the facility being financed. Even though the interest from municipal
obligations may be exempt from federal income tax, dividends of the Fund
attributable to that interest will be fully taxable to Fund shareholders. The
Fund may also invest up to 5% of its total assets in participation interests in
municipal obligations.

<PAGE>

MORTGAGE-RELATED SECURITIES

The Fund may invest in mortgage-related securities. Mortgage-related
securities provide capital for mortgage loans made to residential homeowners,
including securities which represent interests in pools of mortgage loans made
by lenders such as savings associations, mortgage bankers, commercial banks, and
others. These securities are designed to provide periodic payment of interest
and principal to the investor. In effect, these payments are a "pass-through" of
the payments made by the individual borrowers on their residential mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying residential property, refinancing or foreclosure, net of
fees or costs which may be incurred. Some mortgage-related securities (such as
GNMA securities) are described as 'modified pass-through" because they entitle
the holder to receive all interest and principal payments owed on the mortgage
pool, net of certain fees, regardless of whether the mortgagor actually makes
the payment.

There are three basic types of mortgage-backed securities: (1) those
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
such as GNMA, FNMA and FHLMC; (2) those issued by private issuers and
collateralized by securities issued or guaranteed by the U.S. Government; and
(3) those issued by private issuers and collateralized by mortgage loans or
other mortgage-backed securities without a government guarantee but usually with
some form of private credit enhancement. The value of all mortgage-backed
securities will vary with the creditworthiness of the issuer, the level and type
of collateralization and interest rates. In addition, the mortgage-backed
securities market in general may be adversely affected by changes in
governmental regulation or tax policies.

The yield characteristics of mortgage-backed securities differ from those
of traditional debt securities. Among the major differences are that interest
and principal payments are made more frequently, usually monthly, and that
principal may be prepaid at any time. The rates of such prepayments can be
expected to accelerate as interest rates decline. To the extent the Fund
purchases these securities at a premium or discount, prepayment rates will
affect yield to maturity. Prepayments also can result in losses on securities
purchased at a premium to the extent of the premium. In addition, prepayments
usually can be expected to be reinvested at lower interest rates than the
original investment. Derivative mortgage-backed securities, such as stripped
mortgage-backed securities or residual interests, generally are more sensitive
to changes in interest rates, and the market for such securities is less liquid
than the market for traditional debt securities and mortgage-backed securities.

FOREIGN CURRENCY TRANSACTIONS

<PAGE>

To effect the conversion of the amount of foreign currency involved in the
purchase or sale of a foreign security, the Fund may purchase or sell such
foreign currency on a "spot" (i.e. cash) basis.

PORTFOLIO TURNOVER

The Fund's portfolio turnover rate is expected not to exceed an annual
rate of 100% under normal circumstances; however, the portfolio turnover rate
may vary from year to year and is not a limiting factor when the Adviser
considers portfolio changes appropriate. A higher turnover rate (100% or more)
involves correspondingly greater transaction costs and potentially greater tax
costs, which are borne by the Fund.

TEMPORARY INVESTMENTS AND OTHER POLICIES

Pending investment, for liquidity or when the Adviser believes market
conditions warrant a defensive position, the Fund temporarily may commit all or
any portion of its assets to cash or money market instruments, including
repurchase agreements. The Fund may invest up to 15% of its net assets in
illiquid securities and up to 10% of its total assets in securities of other
investment companies. The Fund may also purchase securities in an amount not in
excess of 5% of its total assets on a "when-issued" basis.

MANAGEMENT OF THE FUND

The Trust's Board of Trustees has overall responsibility for the operation
of the Fund. Pursuant to that responsibility, the Board has selected the Adviser
to act as investment adviser for the Fund. The Adviser, whose address is 2303
Yorktown Avenue, Lynchburg, Virginia 24501, was incorporated under the laws of
the State of Maryland in 1984, and is controlled by David D. Basten. Mr. Basten
is the portfolio manager of the Trust's other series .

Services provided by the Adviser as the Fund's investment adviser and
administrator include, but are not limited to, the provision of a continuous
investment program for the Fund and supervision of all matters relating to the
operation of the Fund. Among other things, the Adviser is responsible for making
investment decisions and placing orders to buy, sell or hold particular
securities, furnishing corporate officers and clerical staff and providing
office space, office equipment and office services. In allocating portfolio
transactions, the Adviser may take into account the receipt of research,
analysis and advice and similar services and the sale of Fund shares and may
utilize Yorktown Distributors, Inc., an affiliate of the Adviser.

For its services, the Adviser receives a monthly fee, calculated daily,
payable at an annual rate of 0.75% of the average daily net assets of the Fund.
In addition to the advisory fee, the Trust and the Fund are obligated to pay
certain expenses that are not assumed by the Adviser or Distributors. These
expenses include, among others, securities registration fees, compensation for
non-interested trustees, interest expense, taxes, brokerage fees and
commissions, custodian charges, transfer agency fees, legal expenses, insurance
expenses, association membership dues and the expense of reports to the

<PAGE>

shareholders, shareholders' meetings and proxy solicitations. The Trust and the
Fund are also liable for nonrecurring expenses as may arise, including
litigation to which the Trust or a Fund may be a party.

PURCHASE OF FUND SHARES

DISTRIBUTION ARRANGEMENTS

Yorktown Distributors, Inc. ("Distributors"), whose address is 2303
Yorktown Avenue, Lynchburg, Virginia 24501, is the distributor of the Fund's
shares. Distributors is an affiliate of the Adviser and is controlled by
David D. Basten.

Under a plan of distribution ("Plan") adopted by the Trust's Board of
Trustees pursuant to Rule 12b-1 under the 1940 Act, the Fund pays Distributors,
as compensation for Distributors' distribution activities with respect to the
Fund, a monthly fee at the annual rate of 0.65% of the average daily net assets
of the Fund. In addition, the Fund pays Distributors, as compensation for
Distributors' service activities with respect to the Fund and its shareholders,
a monthly fee at the annual rate of 0.25% of the average daily net assets of the
Fund.

As distributor of Fund shares, Distributors may spend such amounts as it
deems appropriate on any activities or expenses primarily intended to result in
the sale of the Fund's shares or the servicing and maintenance of shareholder
accounts, including, but not limited to, compensation to employees of
Distributors; compensation to and expenses, including overhead and telephone and
other communication expenses, of Distributors and selected dealers who engage in
or support the distribution of shares or who service shareholder accounts; the
costs of printing and distributing prospectuses, statements of additional
information, and reports for other than existing shareholders; the costs of
preparing, printing and distributing sales literature and advertising materials;
and internal costs incurred by Distributors and allocated by Distributors to its
efforts to distribute shares of the Fund such as office rent, employee salaries,
employee bonuses and other overhead expenses.

Distributors may also pay certain banks, fiduciaries, custodians for
public funds, investment advisers and broker-dealers a fee for administrative
services in connection with the distribution of Fund shares. Such fees would be
based on the average net asset value represented by shares of the
administrators' customers invested in the Fund. This fee is in addition to any
commissions these entities may receive from Distributors out of the fees it
receives pursuant to the Plan, and, if paid, will be reimbursed by the Adviser
and not the Fund.

During the period it is in effect, the Plan obligates the Fund to pay fees
to Distributors as compensation for its distribution and service activities, not
as reimbursement for specific expenses incurred. Thus, even if Distributors'
expenses exceed its fees, the Fund will not be obligated to pay more than those
fees and, if Distributors' expenses are less than such fees, it will retain the
full fee and realize a profit.

<PAGE>

HOW SHARES MAY BE PURCHASED

Application forms for the purchase of Fund shares can be obtained from
Distributors or from a broker-dealer which has entered into an agreement with
Distributors. The Fund's minimum initial investment is $500 and the minimum for
additional investments is $100. An exception to these minimums is granted for
payments made pursuant to special plans or if approved by Distributors. All
orders will be executed at the net asset value per share next computed after
receipt and acceptance of the order by Fund Services, Inc., the Fund's transfer
agent.

The Fund does not impose a front-end sales load when Fund shares are
purchased; however, a broker-dealer may charge a fee for selling Fund shares. In
addition, Fund shares are subject to a contingent deferred sales charge payable
upon certain redemptions. The Trust and Distributors reserve the right to reject
any purchase order.

SYSTEMATIC INVESTMENT PLAN

Shareholders may purchase Fund shares through a Systematic Investment
Plan. Under the Plan, Fund Services, Inc., at regular intervals, will
automatically debit a shareholder's bank checking account monthly or quarterly
in an amount of $100 or more (subject to the $500 minimum initial investment),
as specified by the shareholder. The purchase of Fund shares will be effected at
their offering price at the close of normal trading on the New York Stock
Exchange, Inc. ("NYSE") on or about the 15th day of the month. To obtain an
application for the Systematic Investment Plan, write to Distributors at the
address shown on the back cover of this Prospectus.

DETERMINING NET ASSET VALUE

The net asset value of the Fund's shares is determined as of the close of
normal trading (currently 4:00 p.m., eastern time) on the NYSE each day that the
NYSE is open for business. The net asset value per share is computed by dividing
the value of the Fund's securities plus any cash and other assets (including
dividends accrued but not yet collected) minus all liabilities (including
accrued expenses) by the total number of Fund shares outstanding.

Fund assets are valued at current market value or, where unavailable, at
fair value as determined in good faith by or under the direction of the Board of
Trustees. The amortized cost method of valuation is used to value debt
obligations with 60 days or less remaining to maturity, unless the Board of
Trustees determines that this does not represent fair value. It should be
recognized that judgment may play a greater role in valuing lower rated debt

<PAGE>

securities because there is less reliable, objective data. All investments
denominated in foreign currency are valued daily in U.S. dollars on the basis of
the then-prevailing exchange rate.

REDEMPTION OF FUND SHARES

HOW SHARES MAY BE REDEEMED

A redemption request is considered in "good order" only if:

1. The dollar amount or number of shares to be redeemed is indicated.

2. The written request is signed by the registered owner and by any
co-owner of the account in exactly the same name or names used in
establishing the account.

3. Where share certificates have been issued, the written request must
be accompanied by such certificates for shares to be redeemed,
properly endorsed in form for transfer, and either the share
certificates or separate instructions of assignment (stock powers)
are signed by each registered owner and co-owner exactly as the
shares are registered.

4. The signatures on any share certificates (or on accompanying stock
powers) are guaranteed by a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the Stock Exchange Medallion Program
("SEMP") or the New York Stock Exchange, Inc.'s Medallion Signature
Program ("SMP"). Signature guarantees from a
notary public are not acceptable.

Redemption requests received after the close of normal trading on the NYSE
will be executed at the net asset value per share next computed. The
signature(s) on all redemption requests of $10,000 or more must be guaranteed as
described in item 4 above.

Redemption proceeds will be forwarded by check within five days of the
receipt of a redemption request. If the shares to be redeemed were paid for by
check, then to allow clearance the redemption proceeds may be delayed for up to
15 days after the purchase date. The redemption proceeds may be more or less
than the original cost.

Other supporting legal documents may be required from corporations or
other organizations, fiduciaries or persons other than the stockholder of record
making the request for redemption. If there is a question concerning the
redemption of Fund shares, contact Distributors, your broker or Fund Services,
Inc.

<PAGE>

Because of the high cost of maintaining small accounts, the Trust reserves
the right to redeem shareholder accounts of less than $100 net asset value
resulting from redemptions or exchanges. If the Trust elects to redeem such
shares, it will notify the shareholder of its intention to do so and provide the
shareholder with the opportunity to increase the amount invested to $100 or more
within 30 days of notice.

CONTINGENT DEFERRED SALES CHARGE

A contingent deferred sales charge generally is imposed on redemptions
made within five years of the date that Fund shares are purchased. The
contingent deferred sales charge is 2% of the lesser of (1) the net asset value
of the shares redeemed or (2) the cost of such shares. No contingent deferred
sales charge is imposed on amounts derived from (a) increases in the value of an
account above the total cost of such shares due to increases in the net asset
value per share of the Fund, (b) reinvestment of dividends or capital gain
distributions, or (c) shares redeemed five years or more after their purchase.

The contingent deferred sales charge will be determined as follows:

2% of amounts redeemed in the first five years
after the date of purchase

0% of amounts redeemed thereafter

In determining whether a contingent deferred sales charge is payable and,
if so, the percentage charge applicable, it is assumed that shares held the
longest are the first to be redeemed.

The contingent deferred sales charge will not be imposed on redemptions by
officers, directors, full-time employees, and sales representatives of Yorktown
Management & Research Company, Inc. or Yorktown Distributors, Inc., to the
extent permitted by law, regulations, and/or interpretations. Fund shares also
may be purchased by certain employee benefit plans ("eligible benefit plans")
without the imposition of a contingent deferred sales charge. To be an eligible
benefit plan, there must be at least 100 initial participants with accounts
investing or invested in shares of the Fund. The initial purchase by the
eligible benefit plan by or for the benefit of the initial participants of the
plan must aggregate not less than $25,000 and subsequent purchases must be at
least $100 per account and must aggregate at least $10,000. Purchases by the
eligible benefit plan must be made pursuant to a single order and may not be
made more often than monthly. A separate account will be established for each
participant in the plan. The requirements for initiating or continuing purchases
pursuant to an eligible benefit plan may be modified and the offering to such
plans may be terminated at any time without prior notice.

<PAGE>

DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES

DIVIDENDS AND OTHER DISTRIBUTIONS

Dividends from the Fund's net investment income, if any, are at least
annually. Any net capital gain (the excess of net long-term capital gain over
net short-term capital loss) realized from the sale of portfolio securities and
net realized gains from foreign currency transactions also are distributed at
least annually. Unless the Trust receives instructions to the contrary from a
shareholder before the record date, it will be assumed that the shareholder
wishes to receive both dividends and capital gain distributions in additional
Fund shares. Instructions continue in effect until the Trust is notified in
writing that a change is desired. All reinvested dividends and capital gain
distributions are reinvested in additional shares of the Fund on the payment
date at their net asset value on that day. Account statements are mailed to
shareholders evidencing each reinvestment. If the Trust has received
instructions that a shareholder wishes to receive dividends and capital gain
distributions in cash, and the U.S. Postal Service cannot deliver a check
representing the payment thereof, or if any such check remains uncashed for six
months, the check(s) will be reinvested in Fund shares at the then current net
asset value per share of the Fund and the shareholder's election will be changed
so that future distributions will be received in additional Fund shares.

TAXATION OF THE FUND

The Fund is treated as a separate corporation for federal income tax
purposes and intends to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), so that it
will be relieved of federal income tax on that part of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain) and net capital gain that is distributed to its shareholders. To
the extent, however, that the Fund does not distribute to its shareholders by
the end of any calendar year substantially all of its ordinary income for that
year and substantially all of its capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts, a 4%
excise tax will be imposed on the Fund.

TAXATION OF SHAREHOLDERS

Dividends from the Fund's investment company taxable income are taxable to
its shareholders, other than tax-exempt entities (including individual
retirement accounts and qualified retirement plans), as ordinary income, whether
received in cash or reinvested in additional Fund shares, to the extent of the
Fund's earnings and profits. Distributions of the Fund's net capital gain, when
designated as such, are taxable to those shareholders as long-term capital
gains, whether received in cash or reinvested in additional Fund shares and
regardless of the length of time the shares have been held. Under the Taxpayer
Relief Act of 1997 ("Act"), different maximum tax rates apply to net capital
gain depending on the taxpayer's holding period and marginal rate of federal
income tax -- generally, 28% for gain on capital assets held for more than one
year but not more than 18 months and 20% (10% for taxpayers in the 15% marginal
tax bracket) on capital assets held for more than 18 months. The Act, however,
does not address the application of these rules to distributions by RICs,
including whether a RIC's holding period can be "passed through" to its

<PAGE>

shareholders. Instead, the Act authorizes the issuance of regulations to do so.
Accordingly, shareholders should consult their tax advisers as to the effect of
the Act on distributions by the Fund to them of net capital gain.

The Fund advises its shareholders of the tax status of distributions
following the end of each calendar year. The Fund is required to withhold 31% of
all dividends, capital gain distributions and redemption proceeds payable to any
individuals and certain other noncorporate shareholders who do not provide the
Fund with a correct taxpayer identification number. Withholding at that rate
also is required with respect to shareholders who otherwise are subject to
backup withholding.

A redemption of Fund shares will result in taxable gain or loss to the
redeeming shareholder, depending upon whether the redemption proceeds are more
or less than the shareholder's adjusted basis for the redeemed shares. Capital
gain on the redemption or exchange of Fund shares held for more than one year
will be long-term capital gain, in which event it will be subject to federal
income tax at the rates indicated above. If a shareholder purchases Fund shares
within thirty days after redeeming other Fund shares at a loss, all or part of
that loss will not be deductible and instead will increase the basis of the
newly purchased Shares.

The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders: see the
Statement of Additional Information for a further discussion. Because other
federal, state or local tax considerations may apply, investors are urged to
consult their tax advisers.

QUALIFIED RETIREMENT PLANS

An investment in shares of the Fund may be appropriate for individual
retirement accounts (including "education individual retirement accounts" and
"Roth IRAs," both available to certain taxpayers beginning in 1998), tax
deferred annuity plans under section 403(b) of the Code, self-employed
individual retirement plans (commonly referred to as "Keogh plans"), simplified
employee pension plans and other corporate retirement plans (including section
401(k) plans). Capital gain distributions and dividends received on Fund shares
held by any of these accounts or plans are automatically reinvested in
additional Fund shares, and taxation thereof is deferred until distributed by
the account or plan. Investors who are considering establishing such an account
or plan may wish to consult their attorneys or tax advisers with respect to
individual tax questions. The option of investing in these accounts or plans
through regular payroll deductions may be arranged with Distributors and the
employer.

PERFORMANCE INFORMATION

<PAGE>

has not yet elapsed, data will be provided as of the end of a period
corresponding to the life of the Fund. Standardized Return reflects deduction of
the applicable contingent deferred sales charge imposed on a redemption of
shares held for the period and assumes that all dividends and capital gain
distributions were reinvested in shares of the Fund.

The total return of the Fund is increased to the extent that the Adviser
waives all or a portion of its advisory fee, or reimbursed all or a portion of
the Fund's expenses. Total return figures are based on historical performance of
the Fund, show the performance of a hypothetical investment and are not intended
to indicate future performance. Additional information about the Fund's
performance is contained in the Statement of Additional Information, which may
be obtained without charge by contacting the Trust at the address or telephone
numbers on the cover of this Prospectus.

FUND SHARES

The Trust was organized as a Massachusetts business trust in January 1985
under the name American Pension Investors Trust and is registered with the SEC
under the 1940 Act as an open-end management investment company. The Trust
currently consists of seven separate series: the Growth Fund, the T-l Treasury
Trust, the Capital Income Fund, the Yorktown Classic Value Trust, the Yorktown
Value Income Trust, the Treasuries Trust and the Multiple Index Trust. The Board
of Trustees may elect to add additional series in the future, although it has no
present plan to do so. This Prospectus relates only to shares of the Yorktown
Value Income Trust.

The Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value of separate series. Shares of beneficial
interest of the Fund, when issued, are fully paid, nonassessable, fully
transferable, redeemable at the option of the shareholder and have equal
dividend and liquidation rights and noncumulative voting rights. The shares of
each series of the Trust will be voted separately except when an aggregate vote
of all series is required by the 1940 Act.

<PAGE>

office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees. Under the
1940 Act, shareholders of record of no less than two-thirds of the outstanding
shares of the Trust may remove a Trustee by vote cast in person or by proxy at a
meeting called for that purpose. The Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Trustee when requested in writing to do so by the shareholders of record of not
less than 10% of the Trust's outstanding shares.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey
08540-6231 is the Fund's custodian. Fund Services, Inc., 1500 Forest Avenue,
Suite 111, Richmond, Virginia 23229, is the Fund's transfer and dividend
disbursing agent.

GENERAL INFORMATION

<PAGE>

EXECUTIVE OFFICES
American Pension Investors Trust
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501

INVESTMENT ADVISER
Yorktown Management & Research Company, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501

DISTRIBUTOR
Yorktown Distributors, Inc.
P.O. Box 2529
2303 Yorktown Avenue
Lynchburg, Virginia 24501

CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540-6231

TRANSFER AGENT
Fund Services, Inc.
P.O. Box 26305
Richmond, Virginia 23260

INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P.
250 West Pratt Street
Baltimore, Maryland 21201

19
<PAGE>

APPENDIX

<PAGE>

API TRUST
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information sets forth information
regarding API Trust ("Trust") and three of its series: the Growth Fund, the
T-1 Treasury Trust and the Capital Income Fund (collectively the "Funds").
The Growth Fund and Capital Income Fund each seek to achieve their respective
investment objective by investing in shares of open-end and closed-end
investment companies ("underlying funds"). The T-1 Treasury Trust seeks to
achieve its investment objective by investing in U.S. Treasury securities.
Yorktown Management & Research Company, Inc. ("Adviser") is the investment
adviser and administrator of each Fund; Yorktown Distributors, Inc.
("Distributors") is the distributor of each Fund.

________________________________________

This Statement of Additional Information is not a prospectus and should
be read only in conjunction with the current Prospectus of the relevant Fund
dated October 1, 1997, which may be obtained from:

Yorktown Distributors, Inc.
2303 Yorktown Avenue, P.O. Box 2529
Lynchburg, Virginia 24501

_________________________________________

October 1, 1997

<PAGE>

TABLE OF CONTENTS

Page

INVESTMENT RESTRICTIONS AND POLICIES.........................................3
Investment Limitations.................................................3
Ratings of Debt Obligations............................................5
Repurchase Agreements..................................................5
Bank Obligations.......................................................6
Commercial Paper.......................................................6
Lending of Portfolio Securities........................................6
Convertible Securities.................................................7
Illiquid Securities....................................................8
Industry Concentration.................................................8
Options Activities.....................................................8
Futures Contracts......................................................9
Options on Futures Contracts..........................................10
Short Sales...........................................................11
Warrants..............................................................11

MANAGEMENT OF THE TRUST.....................................................12
Investment Adviser and Administrator..................................12
Trustees and Officers.................................................14

DISTRIBUTION OF FUND SHARES.................................................16

PORTFOLIO TRANSACTIONS......................................................18

PRICING AND REDEMPTION OF SHARES............................................20
Determining Net Asset Value...........................................20
Redemption of Shares..................................................20

PERFORMANCE INFORMATION.....................................................21

TAXATION....................................................................22

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT...........................24

OTHER INFORMATION...........................................................24

FINANCIAL STATEMENTS........................................................25

APPENDIX....................................................................26

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<PAGE>

INVESTMENT RESTRICTIONS AND POLICIES

The following information supplements the discussion of each Fund's
investment objective and policies found in each Fund's Prospectus.

INVESTMENT LIMITATIONS

A Fund may not:

1. Purchase any security if, as a result of such purchase, more than
5% of the value of the Fund's total assets would be invested in the
securities of a single issuer or the Fund would own or hold more than 10% of
the outstanding voting securities of that issuer, except that up to 25% of
the value of the Fund's total assets may be invested without regard to this
limitation and provided that this limitation does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government securities") or to securities issued by
other open-end investment companies.

2. Purchase any security if, as a result of such purchase, 25% or
more of the value of the Fund's total assets would be invested in the
securities of issuers having their principal business activities in the same
industry, except this limitation does not apply to U.S. Government securities.

3. Purchase any security if, as a result of such purchase, more than
5% of the value of the Fund's total assets would be invested in the
securities of issuers which at the time of purchase had been in operation for
less than three years, except U.S. Government securities or securities issued
by open-end investment companies (for this purpose, the period of operation
of any issuer shall include the period of operation of any predecessor issuer
or unconditional guarantor of such issuer).

4. Purchase or sell real estate, except that the Fund may invest in
the securities of companies whose business involves the purchase or sale of
real estate.

5. Purchase or sell commodities or commodity contracts including
futures contracts.

6. Purchase participations or other direct interests in oil, gas, or
other mineral exploration or development programs.

7. Make short sales of securities or purchase securities on margin,
except for such short-term credits as may be necessary for the clearance of
purchases of portfolio securities.

8. Make loans, except that the Fund may lend portfolio securities
constituting up to 5% of its net assets, may acquire publicly distributed
debt securities, and may buy securities with an agreement by the vendor to
repurchase them (repurchase agreements).

9. Borrow money, except as a temporary measure for extraordinary or
emergency purposes, and then only from banks in amounts not exceeding the

3
<PAGE>

lesser of 10% of the Fund's total assets (valued at cost) or 5% of its total
assets (valued at market) and, in any event, only if immediately thereafter
there is asset coverage of at least 300%.

10. Invest in puts, calls, straddles, spreads, or any combinations
thereof, except that the Fund may write covered call options as described
below.

11. Mortgage, pledge or hypothecate securities, except in connection
with the borrowings permitted under restriction (9) and then only where the
market value of the securities mortgaged, pledged or hypothecated does not
exceed 15% of the Fund's assets (valued at cost), or 10% of its net assets
(valued at market).

12. Underwrite securities issued by other persons.

13. Invest in companies for the purpose of exercising management or
control.

14. Purchase or retain the securities of any issuer if, to the
knowledge of the Trust's management, the officers or trustees of the Trust
and the officers and directors of the investment adviser who each own
beneficially more than 0.50% of the outstanding securities of such issuer
together own beneficially more than 5% of such securities.

15. Purchase any securities which would cause more than 2% of the
value of the Fund's total assets at the time of such purchase to be invested
in warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange, or more than 5% of the value of its total assets to
be invested in warrants whether or not so listed, such warrants in each case
to be valued at the lesser of cost or market, but assigning no value to
warrants acquired by the Fund in units with or attached to debt securities.

16. Issue securities or other obligations senior to the Fund's shares
of beneficial interest.

17. Purchase any security if, as a result of such purchase, more than
10% of the value of the Fund's total assets would be invested in illiquid
securities (including repurchase agreements and time deposits maturing in
more than seven days) or foreign securities which are not publicly traded in
the United States.

The foregoing investment limitations cannot be changed for any Fund
without the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or (2) 67% or more of the shares present at a
shareholders' meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. If a percentage
restriction is adhered to at the time of an investment or transaction, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or the amount of total assets will not be considered a
violation of any of the Funds' investment policies or restrictions.

The following investment limitations may be changed for any Fund by the
vote of the Trust's Board of Trustees without shareholder approval. No Fund
may (1) purchase or otherwise acquire the securities of any open-end
investment company (except in connection with a merger, consolidation,

4
<PAGE>

acquisition of substantially all of the assets or reorganization of another
investment company) if, as a result, the Fund and all of its affiliates would
own more than 3% of the total outstanding stock of that company; or (2)
invest directly in real estate limited partnerships.

The underlying funds in which the Growth Fund and Capital Income Fund
invest may, but need not, have the same investment objective, policies or
limitations as the Fund. Although the Growth Fund and Capital Income Fund
may, from time to time, invest in shares of the same underlying fund, the
percentage of each Fund's assets so invested may vary, and the Adviser will
determine whether such investments are consistent with the investment
objective and policies of each particular Fund.

RATINGS OF DEBT OBLIGATIONS
- ---------------------------

Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's
Ratings Services ("S&P") are private services that provide ratings of the
credit quality of debt obligations. A description of ratings assigned to
corporate debt obligations by Moody's and S&P is included in the Appendix to
this Statement of Additional Information. These ratings represent Moody's
and S&P's opinions as to the quality of the securities that they undertake to
rate. It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, securities with the same
maturity, interest rate and rating may have different market prices.
Subsequent to its purchase by an underlying fund, an issue of securities may
cease to be rated or its ratings may be reduced below the minimum rating
required for purchase by an underlying fund.

REPURCHASE AGREEMENTS
- ---------------------

The Funds may enter into repurchase agreements secured by U.S.
Government securities with U.S. banks and dealers. A repurchase agreement is
a transaction in which a Fund purchases a security from a bank or recognized
securities dealer and simultaneously commits to resell that security to the
bank or dealer at an agreed-upon date and price reflecting a market rate of
interest unrelated to the coupon rate or maturity of the purchased security.
The Fund maintains custody of the underlying security prior to its
repurchase; thus, the obligation of the bank or securities dealer to pay the
repurchase price on the date agreed to is, in effect, secured by such
security. If the value of such security is less than the repurchase price,
the other party to the agreement shall provide additional collateral so that
at all times the collateral is at least equal to the repurchase price.

Although repurchase agreements carry certain risks not associated with
direct investments in securities, each Fund intends to enter into repurchase
agreements only with banks and dealers believed by the Adviser to present
minimum credit risks in accordance with guidelines established by the Trust's
Board of Trustees. The Adviser will review and monitor the creditworthiness
of such institutions under the Board's general supervision. To the extent
that the proceeds from any sale of collateral upon a default in the
obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the other party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to bankruptcy or other liquidation

5
<PAGE>

proceedings, there might be restrictions on the Fund's ability to sell the
collateral and the Fund could suffer a loss. Underlying funds also may enter
into repurchase agreements with banks and broker-dealers.

BANK OBLIGATIONS
- ----------------

The Funds may invest in instruments (including certificates of deposit
and bankers' acceptances) of U.S. banks and savings associations that are
insured by the Federal Deposit Insurance Corporation. To the extent a Fund
invests more than $100,000 in a single bank or savings and loan association,
the investment is not protected by federal insurance.

A certificate of deposit is an interest-bearing negotiable certificate
issued by a bank against funds deposited in the bank. A bankers' acceptance
is a short-term draft drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction. Although the
borrower is liable for payment of the draft, the bank unconditionally
guarantees to pay the draft at its face value on the maturity date.

COMMERCIAL PAPER
- ----------------

Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and finance
companies. The commercial paper purchased by the Funds consists of direct
obligations of domestic issuers that, at the time of investment, are (i)
rated Prime-1 by Moody's or A-1 by S&P, (ii) issued or guaranteed as to
principal and interest by issuers or guarantors having an existing debt
security rating of Aa or better by Moody's or AA or better by S&P or (iii)
securities that, if not rated, are, in the opinion of the Adviser, of an
investment quality comparable to rated commercial paper in which the Funds
may invest. See the Appendix to this Statement of Additional Information for
more information on ratings assigned to commercial paper.

LENDING OF PORTFOLIO SECURITIES
- -------------------------------

Each Fund may lend portfolio securities constituting up to 5% of its
net assets to brokers, dealers, banks or other institutional investors,
provided that (1) the loan is secured by cash or equivalent collateral equal
to at least 100% of the current market value of the loaned securities that is
maintained with the Trust's custodian while portfolio securities are on loan
and (2) the borrower pays the Fund an amount equivalent to any dividends or
interest received on such securities. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. Although a Fund does not have
the right to vote securities on loan, the Fund could terminate the loan and
regain the right to vote if the vote were considered important. Any
underlying fund also may lend its portfolio securities pursuant to similar
conditions in an amount not in excess of one-third of its total assets.
Loans of securities involve a risk that the borrower may fail to return the
securities or may fail to provide additional collateral.

6
<PAGE>

CONVERTIBLE SECURITIES
- ----------------------

An underlying fund may invest in a convertible security which is a
bond, debenture, note, preferred stock or other security that may be
converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. A convertible security entitles the holder to receive
interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or
exchanged. Before conversion, convertible securities have characteristics
similar to nonconvertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common
stocks of the same or similar issuers. Convertible securities rank senior to
common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. While no securities
investment is without some risk, investments in convertible securities
generally entail less risk than the issuer's common stock, although the
extent to which such risk is reduced depends in large measure upon the degree
to which the convertible security sells above its value as a fixed-income
security. Convertible securities have unique investment characteristics in
that they generally (1) have higher yields than common stocks, but lower
yields than comparable nonconvertible securities, (2) are less subject to
fluctuation in value than the underlying stock since they have fixed income
characteristics and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases.

The value of a convertible security is a function of its "investment
value" (determined by its yield comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value,
if converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with
investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price
of the underlying common stock. If the conversion value is low relative to
the investment value, the price of the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of
the underlying common stock approaches or exceeds the conversion price, the
price of the convertible security will be increasingly influenced by its
conversion value. In addition, a convertible security generally will sell at
a premium over its conversion value determined by the extent to which
investors place value on the right to acquire the underlying common stock
while holding a fixed-income security.

A convertible security may be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the fund is called for
redemption, the fund will be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party.

7
<PAGE>

ILLIQUID SECURITIES
- -------------------

An open-end fund may invest up to 15% of its net assets in securities
for which no readily available market exists ("illiquid securities") or
securities the disposition of which would be subject to legal restrictions
(so-called "restricted securities") and repurchase agreements maturing in
more than seven days. A closed-end fund may invest without limit in such
securities. A considerable period may elapse between an underlying fund's
decision to sell securities and the time when the fund is able to sell such
securities. If, during such a period, adverse market conditions were to
develop, the underlying fund might obtain a less favorable price than
prevailed when it decided to sell.

INDUSTRY CONCENTRATION
- ----------------------

An underlying fund may concentrate its investments (invest 25% or more
of its total assets) within one industry. Because the scope of investment
alternatives within an industry is limited, the value of the shares of such
an underlying fund may be subject to greater market fluctuation than an
investment in a fund that invests in a broader range of securities.

OPTIONS ACTIVITIES
- ------------------

An underlying fund may write (i.e., sell) call options ("calls") if the
calls are "covered" throughout the life of the option. A call is "covered"
if the fund owns the optioned securities. When a fund writes a call, it
receives a premium and gives the purchaser the right to buy the underlying
security at any time during the call period (usually not more than nine
months in the case of common stock) at a fixed exercise price regardless of
market price changes during the call period. If the call is exercised, the
fund will forego any gain from an increase in the market price of the
underlying security over the exercise price. Each Fund also is authorized to
write covered call options, but has no intention of doing so during the
current fiscal year.

An underlying fund may purchase a call on securities only to effect a
"closing transaction," which is the purchase of a call covering the same
underlying security and having the same exercise price and expiration date as
a call previously written by the fund on which it wishes to terminate its
obligation. If the fund is unable to effect a closing transaction, it will
not be able to sell the underlying security until the call previously written
by the fund expires (or until the call is exercised and the fund delivers the
underlying security).

An underlying fund also may write and purchase put options ("puts").
When a fund writes a put, it receives a premium and gives the purchaser of
the put the right to sell the underlying security to the fund at the exercise
price at any time during the option period. When a fund purchases a put, it
pays a premium in return for the right to sell the underlying security at the
exercise price at any time during the option period. An underlying fund also
may purchase stock index puts, which differ from puts on individual
securities in that they are settled in cash based on the values of the
securities in the underlying index rather than by delivery of the underlying
securities. Purchase of a stock index put is designed to protect against a
decline in the value of the portfolio generally rather than an individual
security in the portfolio. If any put is not exercised or sold, it will
become worthless on its expiration date.

8
<PAGE>

A fund's option positions may be closed out only on an exchange that
provides a secondary market for options of the same series, but there can be
no assurance that a liquid secondary market will exist at any given time for
any particular option. In this regard, trading in options on certain
securities (such as U.S. Government securities) is relatively new, so that it
is impossible to predict to what extent liquid markets will develop or
continue.

An underlying fund's custodian, or a securities depository acting for
it, generally acts as escrow agent as to the securities on which the fund has
written puts or calls, or as to other securities acceptable for such escrow
so that no margin deposit is required of the fund. Until the underlying
securities are released from escrow, they cannot be sold by the fund.

In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation ("OCC") has the
authority to permit other, generally comparable securities to be delivered in
fulfillment of option exercise obligations. If the OCC exercises its
discretionary authority to allow such other securities to be delivered, it
may also adjust the exercise prices of the affected options by setting
different prices at which otherwise ineligible securities may be delivered.
As an alternative to permitting such substitute deliveries, the OCC may
impose special exercise settlement procedures.

FUTURES CONTRACTS
- -----------------

An underlying fund may enter into futures contracts for the purchase or
sale of debt securities and stock indexes. A futures contract is an
agreement between two parties to buy and sell a security or an index for a
set price on a future date. Futures contracts are traded on designated
"contract markets" that, through their clearing corporation, guarantee
performance of the contracts.

Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa). Entering into a futures contract
for the sale of debt securities has an effect similar to the actual sale of
securities, although sale of the futures contract might be accomplished more
easily and quickly. For example, if an underlying fund holds long-term U.S.
Government securities and it anticipates a rise in long-term interest rates
(and therefore a decline in the value of those securities), it could, in lieu
of disposing of those securities, enter into futures contracts for the sale
of similar long-term securities. If rates thereafter increase and the value
of the fund's portfolio securities thus declines, the value of the fund's
futures contracts would increase, thereby protecting the fund by preventing
the net asset value from declining as much as it otherwise would have.
Similarly, entering into futures contracts for the purchase of debt
securities has an effect similar to the actual purchase of the underlying
securities, but permits the continued holding of securities other than the
underlying securities. For example, if an underlying fund expects long-term
interest rates to decline, it might enter into futures contracts for the
purchase of long-term securities so that it could gain rapid market exposure
that may offset anticipated increases in the cost of securities it intends to
purchase while continuing to hold higher-yield short-term securities or
waiting for the long-term market to stabilize.

A stock index futures contract may be used to hedge an underlying
fund's portfolio with regard to market risk as distinguished from risk

9
<PAGE>

relating to a specific security. A stock index futures contract does not
require the physical delivery of securities, but merely provides for profits
and losses resulting from changes in the market value of the contract to be
credited or debited at the close of each trading day to the respective
accounts of the parties to the contract. On the contract's expiration date,
a final cash settlement occurs. Changes in the market value of a particular
stock index futures contract reflect changes in the specified index of equity
securities on which the contract is based.

There are several risks in connection with the use of futures
contracts. In the event of an imperfect correlation between the futures
contract and the portfolio position that is intended to be protected, the
desired protection may not be obtained and the fund may be exposed to risk of
loss. Further, unanticipated changes in interest rates or stock price
movements may result in a poorer overall performance for the fund than if it
had not entered into futures contracts on debt securities or stock indexes.

In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject
to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions that could distort the normal relationship
between the securities and futures markets. Second, from the point of view
of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions.

Finally, positions in futures contracts may be closed out only on an
exchange or board of trade that provides a secondary market for such
futures. There is no assurance that a liquid secondary market on an
exchange or board of trade will exist at any particular time.

OPTIONS ON FUTURES CONTRACTS
- ----------------------------

An underlying fund may purchase and write (sell) put and call options
on futures contracts. An option on a futures contract gives the purchaser
the right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put), at a specified exercise price at any time during the option
period. When an option on a futures contract is exercised, delivery of the
futures position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise price of
the option. A fund may purchase put options on futures contracts in lieu of,
and for the same purpose as, a sale of a futures contract. It also may
purchase such put options in order to hedge a long position in the underlying
futures contract in the same manner as it purchases "protective puts" on
securities.

As with options on securities, the holder of an option on a futures
contract may terminate its position by selling an option of the same series.
There is no guarantee that such closing transactions can be effected. An
underlying fund is required to deposit initial margin and variation margin
with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those applicable to futures
contracts described above and, in addition, net option premiums received will
be included as initial margin deposits.

10
<PAGE>

In addition to the risks that apply to all options transactions, there
are several special risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject
to the development and maintenance of a liquid secondary market. There can
be no certainty that liquid secondary markets for all options on futures
contracts will develop. Compared to the use of futures contracts, the
purchase of options on futures contracts involves less potential risk to an
underlying fund because the maximum amount at risk is the premium paid for
the options (plus transaction costs). However, there may be circumstances
when the use of an option on a futures contract would result in a loss to the
fund when the use of a futures contract would not, such as when there is no
movement in the prices of the underlying securities. Writing an option on a
futures contract involves risks similar to those arising in the sale of
futures contracts, as described above.

SHORT SALES
- -----------

An underlying fund may sell securities short. In a short sale, the
fund sells securities that it does not own, making delivery with securities
"borrowed" from a broker. The fund is then obligated to replace the borrowed
securities by purchasing them at the market price at the time of
replacement. This price may or may not be less than the price at which the
securities were sold by the fund. Until the securities are replaced, the
fund is required to pay to the lender any dividends or interest that accrue
during the period of the loan. In order to borrow the securities, the fund
may also have to pay a premium that would increase the cost of the securities
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is
closed out.

The fund also must deposit in a segregated account an amount of cash or
U.S. Government securities equal to the difference between (a) the market
value of the securities sold short at the time they were sold short and (b)
the value of the collateral deposited with the broker in connection with the
sale (not including the proceeds from the short sale). Each day the short
position is open, the fund must maintain the segregated account at such a
level that the amount deposited in it plus the amount deposited with the
broker as collateral (1) equals the current market value of the securities
sold short and (2) is not less than the market value of the securities at the
time they were sold short. Depending upon market conditions, up to 80% of
the value of a fund's net assets may be deposited as collateral for the
obligation to replace securities borrowed to effect short sales and allocated
to a segregated account in connection with short sales.

A fund will incur a loss as a result of a short sale if the price of
the security increases between the date of the short sale and the date on
which the fund replaces the borrowed security. The fund will realize a gain
if the security declines in price between those dates. The amount of any
gain will be decreased and the amount of any loss increased by the amount of
any premium, dividends or interest the fund may be required to pay in
connection with the short sale.

WARRANTS
- --------

An underlying fund may invest in warrants, which are options to
purchase a specified security, usually an equity security such as common
stock, at a specified price (usually representing a premium over the
applicable market value of the underlying equity security at the time of the

11
<PAGE>

warrant's issuance) and usually during a specified period of time. Moreover,
they are usually issued by the issuer of the security to which they relate.
While warrants may be traded, there is often no secondary market for them. The
prices of warrants do not necessarily move parallel to the prices of the
underlying securities. Holders of warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer. To the
extent that the market value of the security that may be purchased upon exercise
of the warrant rises above the exercise price, the value of the warrant will
tend to rise. To the extent that the exercise price equals or exceeds the market
value of such security, the warrants will have little or no market value. If a
warrant is not exercised within the specified time period, it will become
worthless and the fund will lose the purchase price paid for the warrant and the
right to purchase the underlying security.

MANAGEMENT OF THE TRUST

Investment Adviser and Administrator

Yorktown Management & Research Company, Inc. provides investment advisory
and administrative services for the Funds and the Trust pursuant to an
Investment Advisory and Administrative Services Agreement ("Advisory Agreement")
dated December 28, 1990. The Adviser is controlled, as a result of stock
ownership, by David D. Basten. Mr. Basten is a trustee and officer of the Trust.

The Advisory Agreement provides that, subject to overall supervision by
the Board of Trustees, the Adviser shall act as investment adviser and shall
manage the investment and reinvestment of the assets of each Fund, obtain and
evaluate pertinent economic data relative to the investment policies of each
Fund, place orders for the purchase and sale of securities on behalf of each
Fund, and report to the Board of Trustees periodically to enable them to
determine that the investment policies of each Fund and all other provisions of
this Advisory Agreement are being properly observed and implemented. Under the
terms of the Advisory Agreement, the Adviser is further obligated to cover basic
administrative and operating services including, but not limited to,
bookkeeping, office space and equipment, executive and clerical personnel, and
telephone and communications services and to furnish supplies, stationery and
postage relating to the Adviser's obligations under the Advisory Agreement.

For its services, the Adviser receives a monthly fee, calculated daily,
payable at an annual rate of 1.00% of the first $100 million of average daily
net assets, and 0.75% of average daily net assets exceeding that amount, for
the Growth Fund; and a monthly fee, calculated daily, payable at an annual
rate of 0.60% of the average daily net assets of the T-1 Treasury Trust and
the Capital Income Fund. The advisory fee for the Growth Fund is higher than
fees paid by most other investment companies to their investment advisers.
The Adviser reduces its advisory fees on a dollar for dollar basis to the
extent sales load reallowances, if any, are received by Yorktown
Distributors, Inc., with respect to the purchase of portfolio securities by
the Growth Fund and Capital Income Fund. See "Distribution of Fund Shares",
page 15.

During the fiscal years ended May 31, 1997, 1996 and 1995, the Growth
Fund paid to the Adviser advisory fees in the amounts of $414,919, $433,697

12
<PAGE>

and $226,341, respectively, and the Adviser waived, pursuant to the
above-referenced procedure to reduce fees, a portion of its fees during those
fiscal years in the amounts of $248,499, $215,209 and $277,136,
respectively. During the fiscal year ended May 31, 1997, the T-1 Treasury
Trust paid to the Adviser advisory fees in the amount of $6,327, and the
Adviser waived a portion of its fees in the amount of $31,634. During the
fiscal years ended May 31, 1996 and 1995, the Adviser waived all advisory
fees in the amounts of $26,132 and $21,529, respectively. In addition, with
respect to the T-1 Treasury Trust, the Adviser reimbursed operating expenses
of the Fund in the amounts of $6,460 and $2,923 during the years ended May
31, 1996 and 1995, respectively. During the fiscal years ended May 31, 1997,
1996 and 1995, the Adviser waived all advisory fees in the amounts of
$33,229, $21,194 and $18,152, respectively, for the Capital Income Fund.

In addition to the advisory fees, the Trust and the Funds are obligated
to pay certain expenses that are not assumed by the Adviser or Distributors.
These expenses include, among others, securities registration fees,
compensation for non-interested trustees, interest expense, taxes, brokerage
fees, commissions and sales loads, custodian charges, transfer agency fees,
certain distribution expenses pursuant to the Rule 12b-1 Plan of
Distribution, legal expenses, insurance expenses, association membership dues
and the expense of reports to the shareholders, shareholders' meetings and
proxy solicitations. The Trust and the Funds are also liable for
nonrecurring expenses as may arise, including litigation to which the Trust
or a Fund may be a party.

The Advisory Agreement provides that it may be renewed from year to
year with respect to a Fund, provided that renewal is specifically approved
at least annually by the affirmative vote of the Trust's Board of Trustees or
by vote of a majority of the outstanding voting securities of that Fund. In
addition, renewal of the Advisory Agreement must be approved by a majority of
the Trustees who are not parties to the Advisory Agreement or "interested
persons" of any such party. Any approval of the Advisory Agreement or the
renewal thereof with respect to a Fund shall be effective to continue the
Advisory Agreement with respect to that Fund notwithstanding that (a) the
Advisory Agreement or the renewal thereof has not been approved by any other
Fund or (b) the Advisory Agreement or renewal has not been approved by the
vote of a majority of the outstanding voting securities of the Trust as a
whole.

The Advisory Agreement may be terminated as to a Fund, without penalty,
by the Board of Trustees or by the vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of that Fund, on 60 days'
written notice to the Adviser or by the Adviser on 60 days' written notice to
the Trust. The Advisory Agreement may not be terminated by the Adviser
unless another investment advisory agreement has been approved by the Fund in
accordance with the 1940 Act. The Advisory Agreement terminates
automatically upon assignment (as defined in the 1940 Act).

13
<PAGE>

Trustees and Officers

Information concerning the trustees and officers of the Trust is set
forth below.

Name, Age, Position(s) Held Principal Occupation(s)
With the Trust and Address During Past Five Years
- --------------------------- -----------------------

David D. Basten; 46 * President and Director, York-
President and Trustee town Management & Research
P.O. Box 2529 Company, Inc.; President and
2303 Yorktown Avenue Director, Yorktown Distribu-
Lynchburg, Virginia 24501 tors, Inc.; President,
Yorktown Financial Corp.
(insurance); Vice President,
The Travel Center of Virginia,
Inc.; Partner, The Rivermont
Company (real estate);
Partner, Maban Enterprises
(real estate development);
Managing Partner, Basten-Mason
Properties (real estate);
Managing Partner, D.A.D., A
Virginia General Partnership
(real estate). He is the
brother of Louis B. Basten III

Louis B. Basten III; 54 * Secretary/Treasurer and
Secretary/Treasurer and Trustee Director, Yorktown Management
P.O. Box 2529 & Research Company, Inc.;
2303 Yorktown Avenue Secretary/Treasurer and
Lynchburg, Virginia 24501 Director, Yorktown
Distributors, Inc.; President,
Mid-State Insurance;
Secretary/Treasurer, The
Travel Center of Virginia,
Inc.; Managing Partner, The
Rivermont Company (real
estate). He is the brother of
David D. Basten.

Mark A. Borel; 45 President, Borel Construction
Trustee Company, Inc.; President,
P.O. Box 640 River Properties, Inc. (real
Lynchburg, Virginia 24505 estate); President, MOBOWAD,
Inc. (real estate); Vice
President/Secretary, BOWAD,
Inc. (real estate); Partner,
James Riviera, L.L.C. (real
estate)

14
<PAGE>

Stephen B. Cox; 49 Vice-President of Operations,
Trustee Span America Medical Systems,
Route 5 Box 284 Inc. (medical equipment
Bedford, Virginia 24523 supplier)

G. Edgar Dawson III; 41 Shareholder, Officer and
Trustee Director, Petty, Livingston,
725 Church Street Dawson, Devening & Richards,
Suite 1300 P.C. (law firm); prior to
Lynchburg, Virginia 24505 January 1995, he was a partner
at the same firm.
Wayne C. Johnson; 44 Director of Personnel,
Trustee C.B. Fleet Company, Inc.
Route 2 Box 438 (pharmaceuticals)
Forest, Virginia 24551

Charles D. Foster; 37 Chief Financial Officer,
Chief Financial Officer Yorktown Management & Re-
P.O. Box 2529 search Company, Inc.; Chief
2303 Yorktown Avenue Financial Officer, Yorktown
Lynchburg, Virginia 23501 Distributors, Inc.

M. Dennis Stratton; 34 Controller, Yorktown Manage-
Controller ment & Research Company, Inc.;
P.O. Box 2529 Controller, Yorktown Distribu-
2303 Yorktown Avenue tors, Inc.
Lynchburg, Virginia 24501

______________________
* "Interested Person" of the Trust as defined in the 1940 Act by virtue
of his position with the Adviser and Distributors.

On August 31, 1997, the trustees and the officers of the Trust as a
group owned beneficially, or may be deemed to have owned beneficially, less
than 1% of the outstanding shares of the Growth Fund, T-1 Treasury Trust and
Capital Income Fund. Because the Adviser performs substantially all of the
services necessary for the operation of the Trust and the Funds, the Trust
requires no employees. No officer, director or employee of the Adviser
currently receives any compensation from the Trust for acting as a trustee or
officer.

15
<PAGE>

The Trust pays trustees who are not "interested persons" of the Trust
$900 per meeting of the board. For the fiscal year ended May 31, 1997, David
D. Basten, President and Trustee and Louis B. Basten III, Secretary/Treasurer
and Trustee received no compensation from the Trust. Trustees Mark A. Borel
and Wayne C. Johnson each received total compensation from the Trust
amounting to $3,600. Trustees Stephen B. Cox and G. Edgar Dawson III each
received total compensation from the Trust amounting to $2,700. There are no
pension or retirement benefits accrued as part of the Trust's expenses and
there are no estimated annual benefits to be paid upon retirement.

DISTRIBUTION OF FUND SHARES

Yorktown Distributors, Inc., located at 2303 Yorktown Avenue,
Lynchburg, Virginia, acts as distributor of shares under a distribution
agreement with the Trust dated December 28, 1990 ("Distribution Agreement")
that requires Distributors to use its best efforts to sell shares of the
Funds. Shares of the Funds are offered continuously. Payments by the Funds
to compensate Distributors for its activities are authorized under the
Distribution Agreement and made in accordance with a plan of distribution
adopted in the manner prescribed by Rule 12b-1 under the 1940 Act ("Plan").

Under the Plan, the Growth Fund pays Distributors, as compensation for
Distributors' distribution activities, a fee of 0.75% per annum, accrued
daily and paid monthly, of its average daily net assets; and the T-1 Treasury
Trust and Capital Income Fund each pay Distributors, as compensation for
Distributors' distribution activities, a fee of 0.25% per annum, accrued
daily and paid monthly, of their average daily net assets. In addition,
under the Plan each Fund pays Distributors, as compensation for Distributors'
service activities, a fee of 0.25% per annum, accrued daily and paid monthly,
of their average daily net assets. With respect to the T-1 Treasury Trust,
however, Distributors has agreed to limit payments it receives pursuant to
the Plan for distribution and service activities to an annual rate of 0.25%
of the T-1 Treasury Trust's average daily net assets.

For the fiscal year ended May 31, 1996, the Growth Fund, T-1 Treasury
Trust and Capital Income Fund paid to Distributors aggregate distribution
fees of $663,418, $15,817 and $27,691, respectively. For the fiscal year
ended May 31, 1997, Distributors waived a portion of the fees due from the
T-1 Treasury Trust, which amounted to $15,817. For the same period,
Distributors estimates that the following distribution related expenses were
incurred on behalf of or allocable to each Fund:

16
<PAGE>

T-1 Capital
Growth Treas. Income
Fund Trust Fund
---- ----- ----
(a) brokers' trail $600,286 $21,284 $26,943
commissions
(b) printing of
prospectuses 6,394 3,914 4,388
and statements
of additional
information
(c) allocated
costs 56,738
------ ------- -------
Total $663,418 $25,198 $31,331

"Allocated costs" include various internal costs allocated by
Distributors to its distribution efforts. These internal costs encompass
office rent and other overhead expenses of Distributors.

In approving the Plan, the Board considered all relevant factors,
including that as the size of each Fund increases, each Fund should
experience economies of scale and greater investment flexibility. The Board
also considered the compensation to be received by Distributors under the
Plan and the benefits that would accrue to the Adviser as a result of the
Plan in that the Adviser receives advisory fees that are calculated based
upon a percentage of the average net assets of each Fund, which fees would
increase if the Plan was successful and the Funds attained and maintained
significant asset levels.

The Plan will remain in effect for one year from the date of approval.
Thereafter, the Plan, together with any related agreements, will continue in
effect for successive periods of one year so long as such continuance is
specifically approved by votes of a majority of both (a) the Trust's Board
of Trustees and (b) those trustees who are not "interested persons" of the
Trust, as defined in the 1940 Act, and have no direct or indirect financial
interest in the operation of the Plan or any agreement related to it, cast in
person at a meeting called for the purpose of voting on the Plan and such
related agreements. The Plan may be terminated at any time with respect to a
Fund by vote of a majority of the disinterested trustees or by vote of a
majority of the outstanding voting securities of the Fund.

While the Plan is in effect, the selection and nomination of trustees
who are not interested persons of the Trust, as defined in the 1940 Act,
shall be committed to the discretion of the trustees who are themselves not
interested persons. Under the Plan, any person authorized to direct the
disposition of monies paid by the Trust must provide to the Board of
Trustees, at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made.

17
<PAGE>

With respect to the Growth Fund and Capital Income Fund, Distributors
also may receive dealer reallowances (up to a maximum of 1% of the public
offering price) and/or distribution payments on purchases by the Funds of
shares of open-end funds sold with a sales load and/or which have a
distribution plan. For the fiscal year ended May 31, 1997, such payments and
reallowances amounted to $249,242 and $26,443, respectively, for the Growth
Fund and Capital Income Fund.

PORTFOLIO TRANSACTIONS

Subject to policies established by the Trust's Board of Trustees, the
Adviser is responsible for the execution of the Funds' portfolio
transactions. In executing portfolio transactions, the Adviser seeks to
obtain the best net results for the Funds. With respect to purchases of
shares of open-end funds subject to a front-end sales load ("Load Fund
Shares"), the Adviser anticipates directing, to the extent possible,
substantially all of the Funds' orders to Distributors. Where Distributors
acts as the dealer with respect to purchases of Load Fund Shares, it retains
dealer reallowances on those purchases up to a maximum of 1% of the public
offering price of the shares. Distributors is not designated as the dealer on
any sales where such reallowance exceeds 1% of the public offering price. In
the event Distributors is unable to execute a particular transaction, the
Adviser will direct such order to another broker-dealer. With respect to the
T-1 Treasury Trust, portfolio securities generally are traded in the
over-the-counter market through dealers. Prices paid to dealers in principal
transactions generally include a "spread," which is the difference between
the prices at which the dealer is willing to purchase and sell a specific
security at that time.

Distributors may assist in the execution of Fund portfolio transactions
to purchase underlying fund shares for which it may receive distribution
payments from the underlying funds or their underwriters or sponsors in
accordance with the normal distribution arrangements of those funds. These
payments are separate from the dealer reallowances noted above. In providing
execution assistance, Distributors receives orders from the Adviser; places
them with the underlying fund's distributor, transfer agent or other person,
as appropriate; confirms the trade, price and number of shares purchased; and
assures prompt payment by the Fund and proper completion of the order. See
"Distribution of Fund Shares", page 15.

Distributors may retain brokerage commissions on portfolio transactions
of open-end funds held in the Funds' portfolios, including funds which have a
policy of considering sales of their shares in selecting broker-dealers for
the execution of their portfolio transactions. Payment of brokerage
commissions to Distributors on such transactions is not a factor considered
by the Adviser in selecting an underlying fund for investment. During the
year ended May 31, 1997, no such commissions were received.

Under the 1940 Act, an open-end fund must sell its shares at the price
(including sales load, if any) described in its prospectus, and current rules
under the 1940 Act do not permit negotiations of sales charges. Currently,
an open-end fund is permitted to impose a front-end sales load of up to 8.5%
of the public offering price; provided it does not also impose an asset-
based sales charge. The Adviser takes into account the amount of the

18
<PAGE>

applicable front-end sales load, if any, when it is considering whether or
not to purchase shares of an underlying fund. The Adviser anticipates
investing substantially all of each Fund's assets in funds that impose no
front-end sales load or impose a front-end sales load of no more than 3% of
the public offering price. The Adviser, to the extent possible, seeks to
reduce the front-end sales load imposed by purchasing shares pursuant to (i)
letters of intent, permitting purchases over time; (ii) rights of
accumulation, permitting it to obtain reduced front-end sales loads as it
purchases additional shares of an underlying fund; and (iii) rights to obtain
reduced front-end sales loads by aggregating its purchases of several funds
within a "family" of mutual funds. The Adviser also takes advantage of
exchange or conversion privileges offered by any "family" of mutual funds.
In addition to any front-end sales load imposed by an underlying fund, the
underlying fund may be subject to annual distribution and service fees of up
to an aggregate of 1.00% of the fund's average daily net assets.

A factor in the selection of brokers is the receipt of research,
analysis, advice and similar services. The extent that commissions reflect
an element of value for research services cannot be presently determined. To
the extent that research services of value are provided by broker-dealers
with or through whom the Adviser places the Funds' portfolio transactions,
the Adviser may be relieved of expenses that it might otherwise bear. Any
research and other services provided by brokers to the Adviser or the Funds
is considered to be in addition to and not in lieu of services required to be
performed by the Adviser under its Advisory Agreement. For the fiscal year
ended May 31, 1997, the Adviser directed $810,050 in portfolio transactions
on behalf of the Growth Fund to brokers chosen because they provided research
services, for which the Growth Fund paid $4,800 in commissions. The T-1
Treasury Trust and Capital Income Fund did not direct any portfolio
transactions to brokers or dealers chosen because they provided research
services.

Another important factor in the selection of brokers is the sale of
Fund shares. Where all major factors are equal, the fact that a broker has
sold Fund shares may be considered in placing portfolio transactions.

The Trust expects that purchases and sales of money market instruments
will usually be principal transactions and purchases and sales of other debt
securities may be principal transactions. Money market instruments are
generally purchased directly from the issuer or from an underwriter or market
maker for the securities and other debt securities may be purchased in a
similar manner. Purchases from underwriters include an underwriting
commission or concession and purchases from dealers serving as market makers
include the spread between the bid and asked price. Where transactions are
made in the over-the-counter market, the Funds will deal with the primary
market makers unless more favorable prices are obtainable elsewhere.

The policy of the Trust with respect to portfolio transactions is
reviewed by the Board from time to time. Because of the possibility of
further regulatory developments affecting the securities exchanges and
brokerage practices generally, the foregoing practices may be modified.

During the fiscal years ended May 31, 1997, May 31, 1996 and May 31,
1995, the Funds paid the following amounts in brokerage commissions.

19
<PAGE>

Fiscal Year Ended
-----------------
5/31/97 5/31/96 5/31/95
------- ------- -------

Growth Fund $26,800 $11,447 $80,653

T-1 Treasury Trust $0 $60 $0

Capital Income
Fund $5,382 $0 $50

The portfolio turnover rate may vary greatly from year to year for any
Fund and will not be a limiting factor when the Adviser deems portfolio
changes appropriate. The annual portfolio turnover rate is calculated by
dividing the lesser of a Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities
at the time of acquisition were one year or less) by the monthly average
value of the securities in the Fund during the year.

PRICING AND REDEMPTION OF SHARES

DETERMINING NET ASSET VALUE
- ---------------------------

The net asset value per share of a Fund is determined as of the close
of normal trading (currently 4:00 p.m., eastern time) on the New York Stock
Exchange, Inc. ("NYSE") on each Monday through Friday when the NYSE is open.
Currently, the NYSE is closed on New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.

REDEMPTION OF SHARES
- --------------------

Each Fund will redeem its shares at the net asset value per share next
determined after receipt of a request for redemption or an order for
repurchase that is in "good order." Redemptions or repurchases may be
suspended at times (i) when the NYSE is closed (other than customary weekends
and holidays) or trading on the NYSE is restricted, (ii) when an emergency
exists (as determined by the SEC) making disposal of portfolio securities or
the valuation of the assets of the Funds not reasonably practicable or (iii)
as the SEC may otherwise permit.

20
<PAGE>

PERFORMANCE INFORMATION

The Funds' performance data quoted in advertising and other promotional
materials ("Performance Advertisements") represents past performance and is
not intended to indicate future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost. Prior to
November 23, 1994, the T-1 Treasury Trust followed a strategy of using
multiple investment styles by investing primarily in the shares of other
open-end investment companies. Prior to February 22, 1991, the T-1 Treasury
Trust invested primarily in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities and the Growth Fund and Capital
Income Fund invested directly in market securities.

Average annual total return quotes ("Standardized Return") used in the
Funds' Performance Advertisements are calculated according to the following
formula:

P (1 + T)n = ERV

where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of that period.

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the
last day of the most recent quarter prior to submission of the advertisement
for publication. In calculating the ending redeemable value, all dividends
and distributions by the Funds are assumed to have been reinvested at net
asset value on the reinvestment dates during the period. Total return, or "T"
in the formula above, is computed by finding the average annual compounded
rate of return over the period that would equate the initial amount invested
to the ending redeemable value. The Standardized Return for the fiscal year
ended May 31, 1997 for the Growth Fund, T-1 Treasury Trust and Capital Income
Fund was 8.32%, 4.13% and 22.43%, respectively. The Standardized Return for
the Funds for the five years ended May 31, 1997 was 12.36%, 2.65% and 13.29%,
respectively. The Standardized Return for the Growth Fund for the ten years
ended May 31, 1997 was 10.13%. The Standardized Return for the Funds since
inception was 11.80%, 3.91% and 9.10%, respectively.

The Funds may also from time to time include in Performance
Advertisements total return figures that are not calculated according to the
formula set forth above ("Non-Standardized Return"). The Funds calculate
Non-Standardized Return for a specified period of time by assuming the
investment of $1,000 in shares and assuming the reinvestment of each dividend
or other distribution at net asset value. Percentage rates of return are
then determined by subtracting the value of the investment at the beginning

21
<PAGE>

of the period from the ending value and by dividing the remainder by the
beginning value. The Funds' Non-Standardized Return for the fiscal year
ended May 31, 1997 for the Growth Fund, T-1 Treasury Trust and Capital Income
Fund was 8.32%, 4.13% and 22.43%, respectively. The Non-Standardized Return
for the Funds for the five years ended May 31, 1997 was 79.07%, 13.97% and
86.59%, respectively. The Non-Standardized Return for the Growth Fund for
the ten years ended May 31, 1997 was 158.66%. Non-Standardized Return for
the Funds since inception was 280.18%, 41.96% and 121.73%, respectively.

Non-Standardized Return may be quoted for the same or different periods
as those for which Standardized Return is quoted. Non-Standardized Return
may consist of cumulative total returns, average annual total returns,
year-by-year rates or any combination thereof. In connection with
communicating a Fund's performance information to current or prospective
shareholders, the Trust also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or other unmanaged
indexes that may assume reinvestment of distributions but generally do not
reflect deductions for administrative and management costs.

TAXATION

In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended, a Fund
- -- each Fund being treated as a separate corporation for these purposes --
must distribute annually to its shareholders at least 90% of its investment
company taxable income (generally, net investment income plus net short-term
capital gain, if any) ("Distribution Requirement") and must meet several
additional requirements. With respect to each Fund, these requirements
include the following: (1) the Fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of securities and
certain other income; (2) the Fund must derive less than 30% of its gross
income for its current taxable year from the sale or other disposition of
securities held for less than three months ("Short-Short Limitation"); (3) at
the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs (including underlying funds)
and other securities, with those other securities limited, in respect of any
one issuer, to an amount that does not exceed 5% of the value of the Fund's
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (4) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. Government securities and
securities of other RICs (including underlying funds)) of any one issuer.

Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on a
date in one of those months will be deemed to have been paid by the Fund and
received by the shareholders on December 31 of that year if the distributions
are paid by the Fund during the following January. Accordingly, those
distributions will be taxed to shareholders for the year in which that
December 31 falls.

22
<PAGE>

A portion of the dividends from a Fund's investment company taxable
income (whether paid in cash or reinvested in additional Fund shares) may be
eligible for the dividends-received deduction allowed to corporations. The
eligible portion may not exceed the aggregate dividends received by the Fund
either directly from U.S. corporations (excluding RICs, among others) or
indirectly from such corporations through underlying funds in which it
invests. However, dividends received by a corporate shareholder and deducted
by it pursuant to the dividends-received deduction are subject indirectly to
the alternative minimum tax. It is not anticipated that any part of the
distributions by the T-1 Treasury Trust (which invests exclusively in debt
securities and thus receives no dividend income) will be eligible for this
deduction.

Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus
certain other amounts.

If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital
loss to the extent of any capital gain distributions received on those
shares. Investors also should be aware that if shares are purchased shortly
before the record date for any dividend or capital gain distribution, the
shareholder will pay full price for the shares and receive some portion of
the price back as a taxable distribution.

Under certain circumstances, a sales charge incurred by the Growth Fund
and the Capital Income Fund on the acquisition of an underlying fund's shares
may not be taken into account in determining the gain or loss on the
disposition of those shares. Generally, a redemption of an underlying fund's
shares will result in taxable gain or loss to the redeeming Fund, depending
on whether the redemption proceeds are more or less than the Fund's adjusted
basis for the redeemed shares (which normally includes any sales charge
paid); an exchange of an underlying fund's shares for shares of another
underlying fund normally will have similar tax consequences. However, if a
Fund disposes of an underlying fund's shares ("A shares") within 90 days
after its purchase thereof and subsequently acquires shares of another
underlying fund on which a sales charge normally is imposed or of the same
fund ("B shares"), without paying the sales charge (or paying a reduced
charge) due to an exchange privilege or a reinstatement privilege, then (1)
any gain on the disposition of the A shares will be increased, or the loss
thereon decreased, by the amount of the sales charge paid when the A shares
were acquired and (2) that amount will increase the adjusted basis of the B
shares that were subsequently acquired.

The T-1 Treasury Trust may acquire zero coupon securities or other
securities issued with original issue discount ("OID") such as "stripped"
U.S. Treasury securities. As a holder of those securities, that Fund must
include in its income the original issue discount that accrues on the
securities during the taxable year, even if it receives no corresponding
payment on the securities during the year. Because each Fund annually must
distribute substantially all of its investment company taxable income,
including any accrued OID, to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, the T-1 Treasury Trust may be required in a
particular year to distribute as a dividend an amount that is greater than
the total amount of cash it actually receives. Those distributions will be

23
<PAGE>

made from its cash assets or from the proceeds of sales of portfolio
securities, if necessary. That Fund may realize capital gains or losses from
those sales, which would increase or decrease its investment company taxable
income and/or net capital gain (the excess of net long-term capital gain over
net short-term capital loss). In addition, any such gains may be realized on
the disposition of securities held for less than three months. Because of the
Short-Short Limitation (applicable to the Fund through the end of its current
taxable year), any such gains would reduce that Fund's ability to sell other
securities held for less than three months that it might wish to sell in the
ordinary course of its portfolio management.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

MainStreet Trust Company, P.O. Box 5228, Martinsville, Virginia 24115,
serves as the custodian for the Funds. First Community Bank, an affiliate of
MainStreet Trust Company, has loans outstanding to Adviser under terms and
conditions arrived at without regard to the custodial relationship. Fund
Services, Inc., 1500 Forest Avenue, Suite 111, Richmond, Virginia 23229, is
the Trust's transfer and dividend disbursing agent.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 250 West Pratt Street, Baltimore, Maryland
21201 was appointed by the Trustees to serve as the Trust's independent
certified public accountants, providing professional services including (1)
audit of the annual financial statements, (2) assistance and consultation in
connection with SEC filings and semi-annual reports, including semi-annual
financial statements, and (3) preparation of the federal income tax returns
filed on behalf of the Funds.

OTHER INFORMATION

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
The Declaration of Trust states that no shareholder as such shall be subject
to any personal liability whatsoever to any person in connection with Trust
property or the acts, omissions, obligations or affairs of the Trust. It
also states that every written obligation, contract, instrument, certificate,
share, other security of the Trust or undertaking made or issued by the
Trustees may recite, in substance, that the same is executed or made by them
not individually, but as Trustees under the Declaration of Trust, and that
the obligations of the Trust under any such instrument are not binding upon
any of the Trust's Trustees or shareholders individually, but bind only the
Trust estate, and may contain any further recital which they or he may deem
applicable, but the omission of such recital shall not operate to bind the
Trustees or shareholders individually.

The Declaration of Trust further provides that the Trust shall
indemnify and hold each shareholder harmless from and against all claims and
liabilities to which such shareholder may become subject by reason of his
being or having been a shareholder, and shall reimburse such shareholder for
all legal and other expenses responsibility incurred by him in connection
with any such claim or liability. Thus, the risk of a shareholder incurring

24
<PAGE>

financial loss on account of shareholder liability is limited to
circumstances in which the Trust would be unable to meet it obligations.

The Prospectus for each Fund and this Statement of Additional
Information do not contain all the information included in the Trust's
registration statement filed with the SEC under the Securities Act of 1933
and the 1940 Act with respect to the securities offered hereby, certain
portions of which have been omitted pursuant to the rules and regulations of
the SEC. The registration statement, including the exhibits filed therewith,
may be examined at the offices of the SEC in Washington, D.C.

Statements contained in the Funds' Prospectuses and this Statement of
Additional Information as to the contents of any contract or other documents
referred to are not necessarily complete, and in each instance reference is
made to the copy of such contracts or other documents filed as an exhibit to
the registration statement, each such statement being qualified in all
respects by such reference.

FINANCIAL STATEMENTS

The financial statements of the Funds for the year ended May 31, 1997,
which are included in the Annual Report to Shareholders of the Funds, are
hereby incorporated by reference.

25
<PAGE>

APPENDIX

DESCRIPTION OF COMMERCIAL PAPER
AND BOND RATINGS

Description of Moody's Investors Service, Inc. ("Moody's")
Short-Term Debt Ratings

Prime-1. Issuers (or supporting institutions) rated Prime-1 ("P-1")
have a superior ability for repayment of senior short-term debt obligations.
P-1 repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries;
high rates of return on funds employed; conservative capitalization structure
with moderate reliance on debt and ample asset protection; broad margins in
earnings coverage of fixed financial charges and high internal cash
generation; well-established access to a range of financial markets and
assured sources of alternate liquidity. Prime-2. Issuers (or supporting
institutions) rated Prime-2 ("P-2") have a strong ability for repayment of
senior short-term debt obligations. This will normally be evidenced by many
of the characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.

Description of Standard & Poor's ("Standard & Poor's") Commercial Paper
Ratings

A. Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety. A-1.
This designation indicates that the degree of safety regarding timely payment
is either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted with a plus (+) sign
designation. A-2. Capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is not as high
as for issues designated A-1.

Description of Moody's Long-Term Debt Ratings

Aaa. Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues;
Aa. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities; A. Bonds
which are rated A possess many favorable investment attributes and are
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment at some time in the future;
Baa. Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but certain
protective elements may be lacking or may be characteristically unreliable

26
<PAGE>

over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well; Ba.
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class; B. Bonds which are rated B
generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small. Caa. Bonds which are
rated Caa are of poor standing. Such issues may be in default or there may
be present elements of danger with respect to principal or interest; Ca.
Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings; C. Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

Description of Standard & Poor's Corporate Debt Ratings

AAA. Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong;
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree; A.
Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories; BB, B,
CCC, CC, C. Debt rated BB, B, CCC, CC, and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions; BB. Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating; B. Debt rated

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<PAGE>

B has a greater vulnerability to default but currently has the capacity to
meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating; CCC. Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating; CC. The rating CC is typically
applied to debt subordinated to senior debt that is assigned an actual or
implied CCC rating; C. The rating C is typically applied to debt
subordinated to senior debt which is assigned an actual or implied CCC- debt
rating; CI. The rating CI is reserved for income bonds on which no interest
is being paid; D. Debt rated D is in payment default. The D rating category
is used when interest payments or principal repayments are not made on the
date due even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grace period.

28
<PAGE>

API TRUST
2303 Yorktown Avenue
Lynchburg, Virginia 24501
(804) 846-1361
(800) 544-6060

STATEMENT OF ADDITIONAL INFORMATION

Yorktown Classic Value Trust
and
Yorktown Value Income Trust

This Statement of Additional Information sets forth information regarding
the Yorktown Classic Value Trust ("Value Trust") and the Yorktown Value Income
Trust ("Income Trust") (collectively, the "Funds"), each a series of API Trust
("Trust"), an open-end management investment company organized as a
Massachusetts business trust. As of the date of this Statement of Additional
Information, the Income Trust has not commenced investment operations. Yorktown
Management & Research Company, Inc. (the "Adviser") is the investment adviser
and administrator of each Fund; Yorktown Distributors, Inc. ("Distributors") is
the distributor of each Fund.

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

This Statement of Additional Information is not a prospectus and should be
read only in conjunction with each Fund's current Prospectus dated October 1,
1997, which may be obtained from:

Yorktown Distributors, Inc.
2303 Yorktown Avenue, P.O. Box 2529
Lynchburg, Virginia 24501

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

October 1, 1997

<PAGE>

TABLE OF CONTENTS

INVESTMENT RESTRICTIONS......................................................4

INVESTMENT POLICIES..........................................................6
U.S. Government Securities and Related Securities..........................6
Foreign Securities.........................................................7
Other Investment Companies.................................................7
Repurchase Agreements......................................................7
Bank Obligations...........................................................8
Loans of Portfolio Securities..............................................8
Financial Service Industry Obligations.....................................9
Commercial Paper...........................................................9
Illiquid Securities........................................................9
When-Issued Securities.....................................................9
Short Sales (Against the Box).............................................10

HEDGING STRATEGIES..........................................................10
General Description of Hedging Strategies.................................10
Special Risks of Hedging Strategies.......................................11
Cover for Hedging Strategies..............................................12
Options Activities........................................................12
Futures Contracts.........................................................14
Options on Futures Contracts..............................................15
Forward Currency Contracts................................................16

MANAGEMENT OF THE FUNDS.....................................................18
Investment Adviser and Administrator......................................18
Trustees and Officers.....................................................19

DISTRIBUTION OF FUND SHARES.................................................21

PORTFOLIO TRANSACTIONS......................................................23
Portfolio Turnover........................................................24

PRICING AND REDEMPTION OF SHARES............................................24
Determining Net Asset Value...............................................24
Foreign Securities........................................................25
Redemption of Shares......................................................25

PERFORMANCE INFORMATION.....................................................25

TAXATION....................................................................26

2
<PAGE>

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT...........................29

INDEPENDENT ACCOUNTANTS.....................................................30

OTHER INFORMATION...........................................................30

FINANCIAL STATEMENTS........................................................31

3
<PAGE>

INVESTMENT RESTRICTIONS

The following investment restrictions are fundamental and, like the Funds'
primary investment objectives, may not be changed with respect to a Fund without
the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund or (2) 67% or more of the shares of the Fund present at a
shareholders' meeting if more than 50% of the outstanding shares are represented
at the meeting in person or by proxy.

The Value Trust may not:

1. Purchase securities of any one issuer if as a result more than 5% of
the Fund's total assets would be invested in such issuer or the Fund would own
or hold more than 10% of the outstanding voting securities of that issuer,
except that up to 50% of the Fund's total assets may be invested without regard
to this limitation and provided that this limitation does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government securities") or to securities issued by
other open-end investment companies;

2. Purchase any security if, as a result of such purchase, 25% or more of
the value of the Fund's total assets would be invested in the securities of
issuers having their principal business activities in the same industry, except
this limitation does not apply to U.S. Government securities;

3. Purchase or sell real estate (including real estate limited
partnerships);

4. Purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell interest rate, stock index and foreign currency
futures contracts and options thereon, may engage in transactions in foreign
currencies and may purchase or sell options on foreign currencies for hedging
purposes;

5. Make loans, except (a) the purchase of a portion of an issue of debt
securities; (b) engaging in repurchase agreements; or (c) engaging in securities
loan transactions limited to one- third of the Fund's total assets;

6. Borrow money, (a) except from a bank in an amount not in excess
of one-third of the Fund's net assets; or (b) by engaging in reverse
repurchase agreements;

7. Underwrite securities issued by other persons, except to the
extent that, in connection with the disposition of portfolio securities, the
Fund may be deemed an underwriter under federal securities laws; or

8. Issue senior securities, except as permitted in the 1940 Act and
provided that the Fund's use of options, futures contracts and options thereon
and currency-related contracts will not be deemed senior securities for this
purpose.

4
<PAGE>

The Income Trust may not:

1. Purchase securities of any one issuer if as a result more than 5% of
the Fund's total assets would be invested in such issuer or the Fund would own
or hold more than 10% of the outstanding voting securities of that issuer,
except that up to 25% of the Fund's total assets may be invested without regard
to this limitation and provided that this limitation does not apply to U.S.
Government securities or to securities issued by other open-end investment
companies;

2. Purchase any security if, as a result of such purchase, 25% or more of
the value of the Fund's total assets would be invested in the securities of
issuers having their principal business activities in the same industry, except
this limitation does not apply to U.S. Government securities;

3. Purchase or sell real estate (including real estate limited
partnerships);

6. Borrow money, (a) except from a bank in an amount not in excess
of one-third of the Fund's net assets; or (b) by engaging in reverse
repurchase agreements;

8. Issue senior securities, except as appropriate to evidence indebtedness
that the Fund is permitted to incur, provided that the Fund's use of options,
futures contracts and options thereon and currency-related contracts will not be
deemed senior securities for this purpose.

The following investment restrictions are non-fundamental and may be
changed by the vote of the Trust's Board of Trustees without shareholder
approval. Each Fund may not:

1. Purchase or retain the securities of any issuer if, to the knowledge of
the Fund's management, those trustees or officers of the Trust and the directors
and officers of the Adviser who individually own beneficially more than 1/2 of
1% of the outstanding securities of such issuer, together own beneficially more
than 5% of such outstanding securities;

2. Invest in oil, gas or other mineral exploration or development
programs or leases, provided that the Fund may invest in securities issued by
companies engaged in such activities;

5
<PAGE>

3. Invest more than 15% of its net assets in illiquid securities, a term
which means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued the securities and includes, among other things, repurchase agreements
maturing in more than seven days;

4. Make short sales of securities or purchase securities on margin, except
(a) for such short-term credits as may be necessary for the clearance of the
purchases of portfolio securities, (b) in connection with the Fund's use of
options, futures contracts and options on future contracts and (c) the Fund may
sell short "against the box";

5. Invest in warrants, valued at the lower of cost or market, in excess of
5% of the value of its net assets, which amount may include warrants that are
not listed on the New York or American Stock Exchanges, provided that such
warrants, valued at the lower of cost or market, do not exceed 2% of the Fund's
net assets, and further provided that this restriction does not apply to
warrants attached to, or sold as a unit with other securities; or

6. Purchase any security if as a result the Fund would have more than 5%
of its total assets invested in securities of companies which together with any
predecessors have been in continuous operation for less than three years.

If a percentage restriction is adhered to at the time of an investment or
transaction, a later increase or decrease in percentage resulting from a change
in values of portfolio securities or the amount of total assets will not be
considered a violation of any of the Funds' investment policies or restrictions.

INVESTMENT POLICIES

The following supplements the information contained in each Fund's
Prospectus concerning the Funds' investment policies.

U.S. Government Securities and Related Securities

The Income Trust may invest in U.S. Government securities and related
participation interests. In addition, the Income Trust may invest in custodial
receipts that evidence ownership of future interest payments, principal payments
or both on certain U.S. government obligations. Such obligations are held in
custody by a bank on behalf of the owners. These custodial receipts are known by
various names, including Treasury Receipts, Treasury Investors Growth Receipts
("TIGRs") and Certificates of Accrual on Treasury Securities ("CATS"). The staff
of the Securities and Exchange Commission currently takes the position that
custodial receipts are not considered U.S. Government securities.

Participation interests in U.S. Government securities are pro rata
interests in such securities which are generally underwritten by government
securities dealers. Certificates of safekeeping for U.S. Government securities

6
<PAGE>

are documentary receipts for such obligations. Both participation interests and
certificates of safekeeping are traded on exchanges and in the over-the-counter
market.

Foreign Securities

The Funds may invest in foreign equity or debt securities directly or
through the use of American Depository Receipts ("ADRs"), European Depository
Receipts ("EDRs") and other similar securities convertible into securities of
foreign companies. ADRs are receipts typically issued by a U.S. bank evidencing
ownership of the underlying foreign securities. EDRs are receipts typically
issued by a European bank evidencing ownership of the underlying foreign
securities. To the extent the ADR and EDR is issued by a bank unaffiliated with
the foreign company issuer of the underlying security, the bank has no
obligation to disclose material information about the foreign company issuer.

Foreign fixed income securities include corporate debt obligations issued
by foreign companies and debt obligations of foreign governments or
international organizations. This category may include floating rate
obligations, variable rate obligations and Yankee dollar obligations (U.S.
dollar denominated obligations issued by foreign companies and traded on foreign
markets).

Investment income on certain foreign securities in which the Funds may
invest may be subject to foreign withholding or other taxes that could reduce
the return on these securities. Tax treaties between the United States and
foreign countries, however, may reduce or eliminate the amount of foreign taxes
to which the Funds would be subject.

Other Investment Companies

The Funds are permitted to invest in other investment companies. However,
the Funds will not invest more than 10% of their total assets in securities of
other investment companies or invest more than 5% of their total assets in
securities of any investment company and will not purchase more than 3% of the
outstanding voting stock of any investment company. If a Fund invests in other
investment companies, the shareholders of the Fund may be subject to duplicative
management fees and other expenses. Investments by the Fund in CMOs and foreign
banks that are deemed to be investment companies under the 1940 Act will be
included in the limitations on investments in other investment companies (except
that the 10% limitation does not apply to debt securities and non-voting
preferred stock of foreign banks).

Repurchase Agreements

A repurchase agreement is a transaction in which a Fund purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to the bank or dealer at an agreed-upon date and price
reflecting a market rate of interest unrelated to the coupon rate or maturity of
the purchased security. The Fund maintains custody of the underlying security
prior to its repurchase; thus, the obligation of the bank or securities dealer
to pay the repurchase price on the date agreed to is, in effect, secured by such

7
<PAGE>

security. If the value of such security is less than the repurchase price, the
other party to the agreement shall provide additional collateral so that at all
times the collateral is at least equal to the repurchase price.

Although repurchase agreements carry certain risks not associated with
direct investments in securities, each Fund intends to enter into repurchase
agreements only with banks and dealers believed by the Adviser to present
minimum credit risks in accordance with guidelines established by the Trust's
Board of Trustees. The Adviser will review and monitor the creditworthiness of
such institutions under the Board's general supervision. To the extent that the
proceeds from any sale of collateral upon a default in the obligation to
repurchase were less than the repurchase price, the Fund would suffer a loss. If
the other party to the repurchase agreement petitions for bankruptcy or
otherwise becomes subject to bankruptcy or other liquidation proceedings, there
might be restrictions on the Fund's ability to sell the collateral and the Fund
could suffer a loss.

Bank Obligations

The Income Trust may invest in instruments (including certificates of
deposit and bankers' acceptances) of U.S. banks and savings associations that
are insured by the Federal Deposit Insurance Corporation. To the extent the
Income Trust invests more than $100,000 in a single bank or savings association,
the investment is not protected by federal insurance.

A certificate of deposit is an interest-bearing negotiable certificate
issued by a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.

Loans of Portfolio Securities

The Fund may lend its portfolio securities in an amount not in excess of
25% of the value of the Fund's total assets. Under the lending policy authorized
by the Board of Trustees, the borrower must agree to maintain collateral, in the
form of cash or U.S. Government securities, with the Fund's custodian on a daily
mark-to-market basis in an amount at least equal to 100% of the value of the
loaned securities. The Fund will continue to receive dividends or interest on
the loaned securities and will retain the right to terminate such loans at any
time or regain record ownership of such securities in time to vote on any matter
when the Board of Trustees determines that regaining such rights is considered
to be in the Fund's interest. With respect to loans of securities, there is the
risk that the borrower may fail to return the loaned securities or that the
borrower may not be able to provide additional collateral. In order to minimize
these risks, the Fund will make loans of securities only to firms deemed
creditworthy by the Adviser and only when, in the judgment of the Adviser, the
consideration that the Fund will receive from the borrower justifies the risk.

8
<PAGE>

Financial Service Industry Obligations

The Income Trust may invest in financial service industry obligations. The
financial services industry is subject to extensive governmental regulations
which may limit both the amounts and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
industry is largely dependent upon the availability and cost of funds for
lending purposes, general economic conditions and exposure to credit losses
arising from possible financial difficulties of borrowers. Those financial
services companies engaged in insurance underwriting may be exposed to adverse
competitive conditions which may result in underwriting losses. If the Income
Trust's portfolio contains obligations issued by foreign branches of U.S. banks
or those issued by foreign banks, it may be subject to additional investment
risks. For example, possible actions by foreign governments, including the
adoption of governmental restrictions, nationalization of foreign deposits or
establishment of exchange controls, might adversely affect the payment of
principal and interest on the obligations issued by those branches. In addition,
foreign branches of U.S. banks and foreign banks are not subject to all of the
federal and state laws and regulations applicable to U.S. banks.

Commercial Paper

The Income Trust may invest in commercial paper. Commercial paper
represents short-term unsecured promissory notes issued in bearer form by bank
holding companies, corporations and finance companies. The commercial paper
purchased by the Income Trust consists of direct obligations of domestic issuers
that, at the time of investment, are (i) rated Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or A-1 by Standard & Poor's Ratings Services ("S&P"),
(ii) issued or guaranteed as to principal and interest by issuers or guarantors
having an existing debt security rating of Aa or better by Moody's or AA or
better by S&P or (iii) securities that, if not rated, are, in the opinion of the
Adviser, of an investment quality comparable to rated commercial paper in which
the Income Trust may invest.

Illiquid Securities

Each Fund may invest up to 15% of its net assets in securities for which
no readily available market exists ("illiquid securities") or securities the
disposition of which would be subject to legal restrictions (so-called
"restricted securities") and repurchase agreements maturing in more than seven
days. A considerable period may elapse between a Fund's decision to sell
securities and the time when the Fund is able to sell such securities. If,
during such a period, adverse market conditions were to develop, a Fund may
obtain a less favorable price than prevailed when it decided to sell.

When-Issued Securities

The Income Trust may purchase securities in an amount not in excess of 5%
of its total assets on a "when-issued" basis. In such transactions, delivery and
payment occur at a date subsequent to the date of the commitment to make the
purchase. Although the Income Trust will enter into when-issued transactions

9
<PAGE>

with the intention of acquiring the securities, the Income Trust may sell the
securities prior thereto for investment reasons, which may result in a gain or
loss. Acquiring securities in this manner involves a risk that yields available
on the delivery date may be higher than those received in such transactions.
When the Income Trust agrees to purchase securities on a when-issued basis, its
custodian will set aside in a segregated account cash or securities of the U.S.
Government and its agencies and instrumentalities with a market value at least
equal to the amount of the commitment. If necessary, assets will be added to the
account daily so that the value of the account will not be less than the amount
of the Income Trust's purchase commitment. Failure of the issuer to deliver the
security may result in the Income Trust incurring a loss or missing an
opportunity to make an alternative investment.

Short Sales (Against the Box)

Each Fund may engage in short sales of securities it owns or has the right
to acquire at no added cost through conversion or exchange of other securities
it owns (short sales "against the box"). A Fund will not engage in short sales
involving securities that it does not own or have the right to acquire. A short
sale is effected by selling a security in the hope of replacing it by a later
purchase at a lower price. To make delivery to the purchaser, the executing
broker borrows the securities being sold short on behalf of the Fund. The Fund
is obligated to replace the securities borrowed at a date in the future. When
the Fund sells short, it will establish a margin account with the broker
effecting the short sale, and will deposit collateral with the broker.

HEDGING STRATEGIES

General Description of Hedging Strategies

As discussed in each Fund's Prospectus, the Adviser may use a variety of
financial instruments ("Hedging Instruments"), including options, futures
contracts (sometimes referred to as "futures") and options on futures contracts
to attempt to hedge each Fund's portfolio. The Funds' Adviser may also hedge
currency risks associated with the Funds' investments in foreign securities
through the use of forwarding foreign currency contracts.

Hedging Instruments on securities generally are used to hedge against
price movements in one or more particular securities positions that the Fund
owns or intends to acquire. Hedging Instruments on stock indices, in contrast,
generally are used to hedge against price movements in broad equity market
sectors in which the Fund has invested or expects to invest. Hedging Instruments
on debt securities may be used to hedge either individual securities or broad
fixed income market sectors.

The use of Hedging Instruments is subject to applicable regulations of
the Securities and Exchange Commission ("SEC"), the several options and
futures exchanges upon which they are traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition,
the Funds' ability to use Hedging Instruments will be limited by tax
considerations. See "Taxation."

10
<PAGE>

Special Risks of Hedging Strategies

The use of Hedging Instruments involves special considerations and risks,
as described below. Risks pertaining to particular Hedging Instruments are
described in the sections that follow:

(1) Successful use of most Hedging Instruments depends upon the Adviser's
ability to predict movements of the overall securities and interest rate
markets, which requires different skills than predicting changes in the prices
of individual securities. There can be no assurance that any particular hedging
strategy adopted will succeed.

(2) There might be imperfect correlation, or even no correlation, between
price movements of a Hedging Instrument and price movements of the investments
being hedged. For example, if the value of a Hedging Instrument used in a short
hedge increased by less than the decline in value of the hedged investment, the
hedge would not be fully successful. Such a lack of correlation might occur due
to factors unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which hedging instruments are
traded. The effectiveness of hedges using Hedging Instruments on indices will
depend on the degree of correlation between price movements in the index and
price movements in the securities being hedged.

(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements in
the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments. For example, if a Fund entered into a short
hedge because the Adviser projected a decline in the price of a security in the
Fund's portfolio, and the price of that security increased instead, the gain
from that increase might be wholly or partially offset by a decline in the price
of the Hedging Instrument. Moreover, if the price of the Hedging Instrument
declined by more than the increase in the price of the security, the Fund could
suffer a loss. In either such case, the Fund would have been in a better
position had it not hedged at all.

(4) A Fund might be required to maintain assets as "cover," maintain
segregated accounts or make margin payments when it takes positions in Hedging
Instruments involving obligations to third parties (i.e., Hedging Instruments
other than purchased options). If the Fund were unable to close out its
positions in such Hedging Instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the positions
expired or matured. These requirements might impair the Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to close out a position in a Hedging
Instrument prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of the opposite party to the transaction to enter into a transaction
closing out the position. Therefore, there is no assurance that any hedging
position can be closed out at a time and price that is favorable to the Fund.

11
<PAGE>

Cover for Hedging Strategies

The Funds will not use Hedging Instruments for speculative purposes or for
purposes of leverage. Transactions using Hedging Instruments, other than
purchased options, expose the Funds to an obligation to another party. The Funds
will not enter into any such transactions unless they own either (1) an
offsetting ("covered") position in securities or other options or futures
contracts or (2) cash, receivables and short-term debt securities, with a value
sufficient at all times to cover its potential obligations to the extent not
covered as provided in (1) above. The Funds will comply with SEC guidelines
regarding cover for hedging transactions and will, if the guidelines so require,
set aside cash or liquid, high-grade debt securities in a segregated account
with their custodian in the prescribed amount.

Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Hedging Instrument is open, unless they are
replaced with similar assets. As a result, the commitment of a large portion of
a Fund's assets to cover segregated accounts could impede portfolio management
or the Fund's ability to meet redemption requests or other current obligations.

Options Activities

Each Fund may write (i.e., sell) covered call options ("calls") on equity
and debt securities in which it is authorized to invest. A call is "covered" if
a Fund owns the optioned securities. When a Fund writes a call, it receives a
premium and gives the purchaser the right to buy the underlying security at any
time during the call period (usually not more than nine months in the case of
common stock) at a fixed exercise price regardless of market price changes
during the call period. The strategy may be used to provide limited protection
against a decrease in the market price of the security. In the event that the
market price of the underlying security held by a Fund declines, the amount of
the decline will be offset wholly or in part by the amount of the premium
received by the Fund. If, however, there is an increase in the market price of
the underlying security and the option is exercised, a Fund will be obligated to
sell the security at less than its market value. A Fund gives up the ability to
sell the portfolio securities used to cover the call option while the option is
outstanding.

Each Fund may purchase a call on securities only to effect a "closing
transaction," which is the purchase of a call covering the same underlying
security and having the same exercise price and expiration date as a call
previously written by the Fund on which it wishes to terminate its obligation.
If a Fund is unable to effect a closing transaction, it will not be able to sell
the underlying security until the call previously written by the Fund expires
(or until the call is exercised and the Fund delivers the underlying security).

Each Fund may also write and purchase put options ("puts"). When a Fund
writes a put, it receives a premium and gives the purchaser of the put the right
to sell the underlying security to the Fund at the exercise price at any time
during the option period. When a Fund purchases a put, it pays a premium in
return for the right to sell the underlying security at the exercise price at

12
<PAGE>

any time during the option period; thus the potential for loss to the Fund below
the exercise price is limited to the option premium paid. The Funds may also
purchase stock index puts, which differ from puts on individual securities in
that they are settled in cash based on the values of the securities in the
underlying index rather than by delivery of the underlying securities. Purchase
of a stock index put is designed to protect against a decline in the value of
the portfolio generally rather than an individual security in the portfolio.
Puts that expire unexercised have no value.

A Fund's position in an exchange-listed option may be closed out only on
an exchange that provides a secondary market for options of the same series, but
there can be no assurance that a liquid secondary market will exist at any given
time for any particular option. Closing transactions may be effected with
respect to options traded in the OTC markets (currently the primary markets for
options on debt securities) only by negotiating directly with the other party to
the option contract or in a secondary market for the option if such market
exists. Although the Funds will enter into OTC options with dealers that agree
to enter into, and that are expected to be capable of entering into, closing
transactions with the Fund, there can be no assurance that the Fund would be
able to liquidate an OTC option at a favorable price at any time prior to
expiration. In the event of insolvency of the contra-party, the Fund may be
unable to liquidate an OTC option. Accordingly, it may not be possible to effect
closing transactions with respect to certain options, which would result in the
Fund having to exercise those options that it has purchased in order to realize
any profit. With respect to options written by the Fund, the inability to enter
into a closing transaction may result in material losses to the Fund. For
example, because the Fund must maintain a covered position with respect to any
call option it writes on a security or stock index, the Fund may not sell the
underlying security or invest any cash, U.S. Government securities or short-term
debt securities used to cover the option during the period it is obligated under
such option. This requirement may impair the Fund's ability to sell a portfolio
security or make an investment at a time when such a sale or investment might be
advantageous.

The Fund's custodian, or a securities depository acting for it, generally
acts as escrow agent as to the securities on which the Fund has written puts or
calls, or as to other securities acceptable for such escrow so that no margin
deposit is required of the Fund. Until the underlying securities are released
from escrow, they cannot be sold by the Funds.

In view of the risks involved in using the options strategies described
above, each Fund has adopted the following investment guidelines to govern its
use of such strategies; these guidelines may be modified without shareholder
vote:

(1) a Fund will write only covered options and each such option will
remain covered so long as the Fund is obligated under the option;

(2) a Fund will not write call or put options having aggregate
exercise prices greater than 25% of its net assets; and

(3) a Fund may purchase a put or call option, including any
straddles or spreads, only if the value of its premium, when aggregated
with the premiums on all other options held by the Funds, does not exceed
5% of the Fund's total assets.

13
<PAGE>

The Funds' activities in the option markets may result in a higher
portfolio turnover rate and additional brokerage costs; however, the Funds also
may save on commissions by using options as a hedge rather than buying or
selling individual securities in anticipation of or as a result of market
movements.

Futures Contracts

The Funds may engage in futures strategies to attempt to reduce the
overall investment risk that would normally be expected to be associated with
ownership of the securities in which they invest. Each Fund may enter into
interest rate and stock index futures contracts. A futures contract is an
agreement between two parties to buy and sell a security or an index for a set
price on a future date. Futures contracts are traded on designated "contract
markets" that, through their clearing corporation, guarantee performance of the
contracts.

A Fund may use interest rate futures contracts to hedge the debt portion
of its portfolio against changes in the general level of interest rates.
Entering into a futures contract for the sale of debt securities has an effect
similar to the actual sale of securities, although sale of the futures contract
might be accomplished more easily and quickly. For example, if a Fund holds
long-term U.S. Government securities and it anticipates a rise in long-term
interest rates (and therefore a decline in the value of those securities), it
could, in lieu of disposing of those securities, enter into futures contracts
for the sale of similar long-term securities. If rates thereafter increase and
the value of the Fund's portfolio securities thus declines, the value of the
Fund's futures contracts would increase, thereby protecting the Fund by
preventing the net asset value from declining as much as it otherwise would
have. Similarly, entering into futures contracts for the purchase of debt
securities has an effect similar to the actual purchase of the underlying
securities, but permits the continued holding of securities other than the
underlying securities. For example, if a Fund expects long-term interest rates
to decline, it might enter into futures contracts for the purchase of long-term
securities so that it could gain rapid market exposure that may offset
anticipated increases in the cost of securities it intends to purchase while
continuing to hold higher-yield short-term securities or waiting for the
long-term market to stabilize.

A stock index futures contract may be used to hedge a Fund's portfolio
with regard to market risk as distinguished from risk relating to a specific
security. A stock index futures contract does not require the physical delivery
of securities, but merely provides for profits and losses resulting from changes
in the market value of the contract to be credited or debited at the close of
each trading day to the respective accounts of the parties to the contract. On
the contract's expiration date, a final cash settlement occurs. Changes in the
market value of a particular stock index futures contract reflect changes in the
specified index of equity securities on which the contract is based.

There are several risks in connection with the use of futures contracts.
Successful use by the Funds of futures contracts will depend on the Adviser's
ability to predict movements in the direction of the overall securities and
interest rate markets which requires different skills and techniques than
predicting changes in the prices of individual securities. In the event of an

14
<PAGE>

imperfect correlation between the futures contract and the portfolio position
that is intended to be protected, the desired protection may not be obtained and
the Funds may be exposed to risk of loss. Further, unanticipated changes in
interest rates or stock price movements may result in poorer overall performance
for the Funds than if they had not entered into futures contracts on debt
securities or stock indexes.

In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions that could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.

Positions in futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such futures. Although the
Funds intend to purchase or sell futures only on exchanges or boards of trade
where there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange or board of trade will exist for any
particular contract at any particular time. In such event, it may not be
possible to close a futures position, and in the event of adverse price
movements, the Funds would continue to be required to make variation margin
deposits.

As is the case with options, the Funds' activities in the futures markets
may result in a higher portfolio turnover rate and additional transaction costs
in the form of added brokerage commissions; however, the Funds also may save on
commissions by using futures contracts as a hedge rather than buying or selling
individual securities in anticipation of or as a result of market movements.

In view of the risks involved in using the futures strategies that are
described above, each Fund has adopted the following investment guidelines to
govern its use of such strategies; these guidelines may be modified without
shareholder vote.

(1) a Fund will not purchase or sell futures contracts or related
options if, immediately thereafter, the sum of the amount of initial
margin deposits on the Fund's existing futures positions and related
options and premiums paid for related options would exceed 5% of the
Fund's total assets; and

(2) futures contracts and related options will not be purchased if
immediately thereafter more than 30% of the Fund's total assets would be
so invested.

Options on Futures Contracts

The Funds may purchase and write (sell) call options on interest rate and
stock index futures contracts. The Funds also may purchase put options on

15
<PAGE>

interest rate and stock index futures contracts. An option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), at a specified exercise price at any
time during the option period. When an option on a futures contract is
exercised, delivery of the futures position is accompanied by cash representing
the difference between the current market price of the futures contract and the
exercise price of the option. A Fund may purchase put options on futures
contracts in lieu of, and for the same purpose as, a sale of a futures contract.
It also may purchase such options in order to hedge a long position in the
underlying futures contract in the same manner as it purchases "protective puts"
on securities.

As with options on securities, the holder of an option on a futures
contract may terminate its position by selling an option of the same series.
There is no guarantee that such closing transactions can be effected. The Funds
would be required to deposit initial margin and variation margin with respect to
put and call options on futures contracts written by them pursuant to brokers'
requirements similar to those applicable to futures contracts described above
and, in addition, net option premiums received will be included as initial
margin deposits.

In addition to the risks that apply to all options transactions, there are
several special risks relating to options on futures contracts. The ability to
establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. There can be no
certainty that liquid secondary markets for all options on futures contracts
will develop. Compared to the use of futures contracts, the purchase of options
on futures contracts involves less potential risk to the Funds because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the use of an option on a
futures contract would result in a loss to the Funds when the use of a futures
contract involves risks similar to those arising in the sale of futures
contracts, as described above.

Forward Currency Contracts

The Funds may use forward currency contracts to protect against
uncertainty in the level of future foreign currency exchange rates. The Funds
will not speculate with forward currency contracts or foreign currency exchange
rates.

The Funds may enter into forward currency contracts with respect to
specific transactions. For example, when a Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or the Fund
anticipates the receipt in a foreign currency of dividend or interest payments
on a security that it holds or anticipates purchasing, the Fund may desire to
"lock in" the U.S. dollar price of the security or the U.S. dollar equivalent of
such payment, as the case may be, by entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars or foreign currency, of the
amount of foreign currency involved in the underlying transaction. The Fund will
thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are made or
received.

16
<PAGE>

The Funds also may hedge by using forward currency contracts in connection
with portfolio positions to lock in the U.S. dollar value of those positions, to
increase the Fund's exposure to foreign currencies that the Adviser believes may
rise in value relative to the U.S. dollar or to shift the Fund's exposure to
foreign currency fluctuations from one country to another. For example, when the
Adviser believes that the currency of a particular foreign country may suffer a
substantial decline relative to the U.S. dollar or another currency, it may
enter into a forward contract to sell the amount of the former foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. This investment practice generally is
referred to as "cross-hedging" when another foreign currency is used.

The precise matching of the forward amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (that is, cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
the market value of the security exceeds the amount of foreign currency the Fund
is obligated to deliver. The projection of short-term currency market movements
is extremely difficult and the successful execution of a short-term hedging
strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs. The Fund may
enter into forward contracts or maintain a net exposure on such contracts only
if (1) the consummation of the contracts would not obligate the Fund to deliver
an amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency or (2) the Fund
maintains cash, U.S. government securities or liquid, high-grade debt securities
in a segregated account in an amount not less than the value of the Fund's total
assets committed to the consummation of the contract which value must be marked
to market daily. Under normal circumstances, consideration of the prospect for
currency parties will be incorporated into the longer term investment decisions
made with regard to overall diversification strategies. However, the Adviser
believes that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Fund will be served.

At or before the maturity date of a forward contract requiring the Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting forward currency
contract under either circumstance to the extent the exchange rate or rates

17
<PAGE>

between the currencies involved moved between the execution dates of the first
contract and the offsetting contract.

The cost to the Fund of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of forward currency contracts does not eliminate fluctuations in the
prices of the underlying securities the Fund owns or intends to acquire, but it
does fix a rate of exchange in advance. In addition, although forward currency
contracts limit the risk of loss due to a decline in the value of the hedged
currencies, at the same time they limit any potential gain that might result
should the value of the currencies increase.

Although each Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.

MANAGEMENT OF THE FUNDS

Investment Adviser and Administrator

The Adviser provides investment advisory and administrative services
for the Funds and the Trust pursuant to an Investment Advisory and
Administrative Services Agreement ("Advisory Agreement") dated October 1,
1992. The Adviser is controlled, as a result of stock ownership, by David D.
Basten. Mr. Basten is a trustee and officer of the Trust.

The Advisory Agreement provides that, subject to overall supervision by
the Board of Trustees, the Adviser shall act as investment adviser and shall
manage the investment and reinvestment of the assets of each Fund, obtain and
evaluate pertinent economic data relative to the investment policies of each
Fund, place orders for the purchase and sale of securities on behalf of each
Fund, and report to the Board of Trustees periodically to enable them to
determine that the investment policies of each Fund and all other provisions of
this Advisory Agreement are being properly observed and implemented. Under the
terms of the Advisory Agreement, the Adviser is further obligated to cover basic
administrative and operating expenses including, but not limited to, office
space and equipment, executive and clerical personnel, telephone and
communications and postage. The Adviser paid the Funds' organizational expenses.

For its services, the Adviser receives a monthly fee, calculated daily,
payable at an annual rate of 0.90% of the average daily net assets of the Value
Trust; and a monthly fee, calculated daily, payable at an annual rate of 0.75%
of the average daily net assets of the Income Trust. The advisory fee for the
Funds is higher than fees paid by most other investment companies to their

18
<PAGE>

investment advisers. For the fiscal years ended May 31, 1997, 1996 and 1995, the
Value Trust paid to the Adviser advisory fees in the amount of $69,685, $55,363
and $18,224, respectively, and the Adviser waived $13,937, $14,535 and $29,779
of its fees, respectively.

In addition to the advisory fees, the Trust and the Funds are obligated to
pay certain expenses that are not assumed by the Adviser or Distributors. These
expenses include, among others, securities registration fees, compensation for
non-interested trustees, interest expense, taxes, brokerage fees and
commissions, custodian charges, transfer agency fees, legal expenses, insurance
expenses, association membership dues and the expense of reports to the
shareholders, shareholders' meetings and proxy solicitations. The Trust and the
Funds are also liable for nonrecurring expenses as may arise, including
litigation to which the Trust or a Fund may be a party.

The Advisory Agreement provides that it will remain in effect for two
years and may be renewed from year to year thereafter with respect to a Fund,
provided that renewal is specifically approved at least annually by the vote of
a majority of the outstanding voting securities of that Fund, or by the
trustees, including a majority of the trustees who are not parties to the
Advisory Agreement or "interested persons" of any such party (by vote cast in
person at a meeting called for that purpose). Any approval of the Advisory
Agreement or the renewal thereof with respect to a Fund shall be effective to
continue the Advisory Agreement with respect to that Fund notwithstanding that
(a) the Advisory Agreement or the renewal thereof has not been approved by the
other Fund or (b) the Advisory Agreement or renewal has not been approved by the
vote of a majority of the outstanding voting securities of the Trust as a whole.

The Advisory Agreement may be terminated as to a Fund, without penalty, by
the trustees or by the vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of that Fund, on 60 days' written notice to the
Adviser or by the Adviser on 60 days' written notice to the Trust. The Advisory
Agreement may not be terminated by the Adviser unless another investment
advisory agreement has been approved by the Fund in accordance with the 1940
Act. The Advisory Agreement terminates automatically upon assignment (as defined
in the 1940 Act).

Trustees and Officers

Information concerning the trustees and officers of the Trust is set forth
below.

Name, Age, Position(s) Held Principal Occupation(s)
With the Trust and Address During Past Five Years
- ---------------------------- -----------------------

David D. Basten; 46 * President and Director, Yorktown
President and Trustee Management & Research Company, Inc.;
P. O. Box 2529 President and Director, Yorktown
2303 Yorktown Avenue Distributors, Inc.; President,
Lynchburg, Virginia 24501 Yorktown Financial Corp. (insurance);
Vice President, The Travel Center of
Virginia, Inc.; Partner, The Rivermont

19
<PAGE>

Name, Age, Position(s) Held Principal Occupation(s)
With the Trust and Address During Past Five Years
- --------------------------- ----------------------

Company (real estate); Partner, Maban
Enterprises (real estate development);
Managing Partner, Basten-Mason
Properties (real estate); Managing
Partner, D.A.D., A Virginia General
Partnership (real estate). He is the
brother of Louis B. Basten III.

Louis B. Basten III; 54 * Secretary/Treasurer and Director,
- -------------------
Secretary/Treasurer and Trustee Yorktown Management & Research
P. O. Box 2529 Company, Inc.; Secretary/Treasurer and
2303 Yorktown Avenue Director, Yorktown Distributors, Inc.;
Lynchburg, Virginia 24501 President, Mid-State Insurance;
Secretary/Treasurer, The Travel Center
of Virginia, Inc.; Managing Partner,
The Rivermont Company (real estate).
He is the brother of David D. Basten.

Mark A. Borel; 45 President, Borel Construction Company,
- -------------
Trustee Inc.; President, River Properties,
P. O. Box 640 Inc. (real estate); President,
Lynchburg, Virginia 24505 MOBOWAD, Inc. (real estate); Vice
President/Secretary, BOWAD, Inc. (real
estate); Partner, James Riviera,
L.L.C. (real estate).

Stephen B. Cox; 49 Vice-President of Operations, Span
- --------------
Trustee America Medical Systems, Inc. (medical
Route 5 Box 284 equipment supplier).
Bedford, Virginia 24523

G. Edgar Dawson III; 41 Shareholder, Officer and Director,
- -------------------
Trustee Petty, Livingston, Dawson, Devening &
725 Church Street Richards, P.C. (law firm); prior to
Suite 1300 January 1995, he was a partner at the
Lynchburg, Virginia 24505 same firm.

Wayne C. Johnson; 44 Director of Personnel, C.B. Fleet
- ----------------
Trustee Company, Inc. (pharmaceuticals)
Route 2 Box 438
Forest, Virginia 24551

20
<PAGE>

Name, Age, Position(s) Held Principal Occupation(s)
With the Trust and Address During Past Five Years

Charles D. Foster; 37 Chief Financial Officer, Yorktown
Chief Financial Officer Management & Research Company, Inc.;
P. O. Box 2529 Chief Financial Officer, Yorktown
2303 Yorktown Avenue Distributors, Inc.
Lynchburg, Virginia 24501

M. Dennis Stratton; 34 Controller, Yorktown Management &
Controller Research Company, Inc.; Controller,
P. O. Box 2529 Yorktown Distributors, Inc.
2303 Yorktown Avenue
Lynchburg, Virginia 24501

- ----------------------
* "Interested Person" of the Trust as defined in the 1940 Act by virtue
of his position with the Adviser and Distributors.

On August 31, 1997, the trustees and officers of the Trust as a group
owned beneficially, or may be deemed to have owned beneficially, 2.97% of the
outstanding shares of the Value Trust. Also as of that date, because of the
Adviser's initial ownership of all shares of the Income Trust, Mr. Basten may be
deemed to beneficially own 100% of the shares of the Income Trust. Because the
Adviser performs substantially all of the services necessary for the operation
of the Trust and the Funds, the Trust requires no employees. No officer,
director or employee of the Adviser currently receives any compensation from the
Trust for acting as a trustee or officer.

The Trust pays trustees who are not "interested persons" of the Trust $900
per meeting of the board. For the fiscal year ended May 31, 1997, David D.
Basten, President and Trustee, and Louis B. Basten III, Secretary/Treasurer and
Trustee, receive no compensation from the Trust. Trustees Mark A. Borel and
Wayne C. Johnson each received total compensation from the Trust amounting to
$3,600. Trustees Stephen B. Cox and G. Edgar Dawson III each received total
compensation from the Trust amounting to $2,700. There are no pension or
retirement benefits accrued as part of the Trust's expenses and there are no
estimated annual benefits to be paid upon retirement.

DISTRIBUTION OF FUND SHARES

Distributors, located at 2303 Yorktown Avenue, Lynchburg, Virginia, acts
as distributor of shares under a distribution agreement with the Trust dated
October 1, 1992 ("Distribution Agreement") that requires Distributors to use its
best efforts to sell shares of the Funds. Shares of the Funds are offered
continuously. Payments by the Funds to compensate Distributors for its
activities are authorized under the Distribution Agreement and made in
accordance with a plan of distribution adopted in the manner prescribed by Rule
12b-1 under the 1940 Act ("Plan"). Under the Plan, each Fund pays Distributors a

21
<PAGE>

fee for distribution activities of 0.65% per annum and a fee for service
activities of 0.25%, each accrued daily and paid monthly, of their average daily
net assets.

For the fiscal year ended May 31, 1997, the Value Trust paid to
Distributors aggregate fees of $83,622. For the same period, Distributors
estimates that the following distribution-related expenses were incurred on
behalf of or allocable to the Value Trust:

(a) printing of prospectuses $ 4,219
and statements of
additional information

(b) allocated costs 79,403
------

Total $83,622

"Allocated costs" include costs associated with the issuance of shares as
a purchase bonus and various internal costs allocated by Distributors to its
distribution efforts. These internal costs encompass office rent and other
overhead expenses of Distributors.

In approving the Plan, the Board considered all relevant factors,
including that, as the size of each Fund increases, each Fund should experience
economies of scale and should have greater investment flexibility. The Board
also considered the compensation to be received by Distributors under the Plan.

The Plan will remain in effect for one year from the date of approval.
Thereafter, the Plan, together with any related agreements, will continue in
effect for successive periods of one year so long as such continuance is
specifically approved by votes of a majority of both (a) the Board of Trustees
of the Trust and (b) those trustees who are not "interested persons" of the
Trust, as defined in the 1940 Act, and have no direct or indirect financial
interest in the operation of the Plan or any agreement related to it, cast in
person at a meeting called for the purpose of voting on the Plan and such
related agreements. The Plan may be terminated at any time with respect to a
Fund by vote of a majority of the disinterested trustees or by vote of a
majority of the outstanding voting securities of the Fund.

While the Plan is in effect, the selection and nomination of trustees who
are not interested persons of the Trust, as defined in the 1940 Act, shall be
committed to the discretion of the trustees who are themselves not interested
persons. Under the Plan, any person authorized to direct the disposition of
monies paid by the Trust must provide to the Board of Trustees, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.

22
<PAGE>

based on the average net asset value represented by shares of the
administrators' customers invested in the Fund. This fee is in addition to any
commissions these entities may receive from Distributors out of the fees paid to
it by the Fund pursuant to the Plan, and, if paid, will be reimbursed by the
Adviser and not the Fund.

Applicable banking laws prohibit certain deposit-taking institutions from
underwriting or distributing securities. There is currently no precedent
prohibiting banks from performing administrative services in connection with the
distribution of Fund shares. If a bank were prohibited from performing such
administrative services, its shareholder clients would be permitted to remain
shareholders of a Fund and alternate means of servicing such shareholders would
be sought. It is not expected that shareholders would suffer any adverse
financial consequences as a result of any of these occurrences.

PORTFOLIO TRANSACTIONS

The Adviser is responsible for the execution of each Fund's portfolio
transactions and the allocation of brokerage transactions. In effecting
portfolio transactions, the Adviser seeks best execution. The determination of
what may constitute best execution involves a number of considerations,
including the economic effect on the Fund (involving both price paid or received
and any commissions and other costs), the efficiency with which the transaction
is effected where a large block is involved, the availability of the broker to
stand ready to execute potentially difficult transactions, and the financial
strength and stability of the broker. Such considerations are judgmental and are
weighed by the Adviser in determining the overall reasonableness of brokerage
commissions paid. Purchases from underwriters include an underwriting commission
or concession and purchases from dealers serving as market makers include the
spread between the bid and asked price. Where transactions are made in the
over-the-counter market, the Funds will deal with the primary market makers
unless more favorable prices are obtainable elsewhere. For the fiscal years
ended May 31, 1997, 1996 and 1995, the Value Trust paid $127,552, $126,702 and
$131,037, respectively, in brokerage commissions.

A factor in the selection of brokers is the receipt of research, analysis,
advice and similar services. To the extent that research services of value are
provided by brokers with or through whom the Adviser places the Funds' portfolio
transactions, the Adviser may be relieved of expenses that it might otherwise
bear. Research services furnished by brokers through which a Fund effects
securities transactions may be used by the Adviser in advising other funds, and,
conversely, research services furnished to the Adviser by brokers in connection
with other funds the Adviser advises may be used by the Adviser in advising a
Fund. Research and other services provided by brokers to the Adviser or the
Funds is in addition to, and not in lieu of, services required to be performed
by the Adviser under its Advisory Agreement. For the fiscal year ended May 31,
1997, the Adviser directed $12,641,463 in portfolio transactions on behalf of
the Value Trust to brokers chosen because they provided research services, for
which the Value Trust paid $50,831 in commissions.

Another factor in the selection of brokers is the sale of Fund shares.
Where all major factors such as price and execution capability are equal, the
fact that a broker has sold Fund shares may be considered in placing portfolio
transactions. The Funds reserve the right to pay brokerage commissions to

23
<PAGE>

brokers affiliated with the Trust or with affiliated persons of such persons.
Any such commissions will comply with applicable securities laws and
regulations. In no instance, however, will portfolio securities be purchased
from or sold to the Adviser or any other affiliated person. Since the Funds'
inception, no brokerage commissions have been paid to such affiliated persons.

Investment decisions for each Fund are made independently of each other in
light of differing considerations. However, the same investment decision may
occasionally be made for more than one Fund. In such cases, simultaneous
transactions are inevitable. Purchases or sales are then averaged as to price
and allocated between the Funds as to amount according to a formula deemed
equitable to the Funds. While in some cases this practice could have a
detrimental effect upon the price or quantity of the security as far as a Fund
is concerned, or upon its ability to complete its entire order, in other cases
it is believed that coordination and the ability to participate in volume
transactions will be beneficial to a Fund.

The policy of the Trust with respect to brokerage is reviewed by the Board
from time to time. Because of the possibility of further regulatory developments
affecting the securities exchanges and brokerage practices generally, the
foregoing practices may be modified.

Portfolio Turnover

The portfolio turnover rate is calculated by dividing the lesser of a
Fund's annual sales or purchases of portfolio securities (exclusive of purchases
or sales of securities whose maturities at the time of acquisition were one year
or less) by the monthly average value of the securities in the Fund during the
year.

PRICING AND REDEMPTION OF SHARES

Determining Net Asset Value

Each Fund determines its net asset value per share as of the close of
normal trading (currently 4:00 p.m., eastern time) on the New York Stock
Exchange ("NYSE") on each business day, which is defined as each Monday through
Friday when the NYSE is open. Currently, the NYSE is closed on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The net asset value per share of a Fund is
determined by dividing the Fund's total net assets by the number of shares
outstanding at the time of calculation. Total net assets are determined by
adding the total current value of portfolio securities, cash, receivables and
other assets and subtracting liabilities.

Current value for portfolio securities is determined as follows. A
security listed or traded on an exchange is valued at its last sale price on the
exchange where it is principally traded. Securities traded over-the-counter
("OTC") and listed on Nasdaq are valued at the last trade price listed on
Nasdaq; other OTC securities are valued at the last bid price available prior to
valuation. Debt securities that have a remaining maturity of 60 days or less are
valued at cost, plus or minus any amortized discount or premium. Securities and

24
<PAGE>

assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees.

Foreign Securities

Foreign security prices are expressed in their local currency and
translated into U.S. dollars at current exchange rates. Any changes in the value
of forward contracts due to exchange rate fluctuations are included in the
determination of net asset value. Foreign currency exchange rates are generally
determined prior to the close of trading on the NYSE. Occasionally, events
affecting the value of foreign securities and such exchange rates occur between
the time at which they are determined and the close of trading on the NYSE. When
events materially affecting the value of such securities or exchange rates occur
during such time period, the securities will be valued at their fair value as
determined in good faith by or under the direction of the Board of Trustees.

Redemption of Shares

The Trust will redeem shares at the net asset value per share next
determined after receipt of a request for redemption or an order for repurchase
that is in "good order" (as defined in each Fund's Prospectus). Redemptions or
repurchases may be suspended at times: (i) when the NYSE is closed (other than
customary weekends and holidays) or trading on the NYSE is restricted; (ii) when
an emergency exists (as determined by the SEC) making disposal of portfolio
securities or the valuation of the assets of the Trust not reasonably
practicable; or (iii) as the SEC may otherwise permit.

PERFORMANCE INFORMATION

Average annual total return quotes ("Standardized Return") used in the
Funds' Performance Advertisements are calculated according to the following
formula:

P (1 + T)n = ERV

where:P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of that period.

25
<PAGE>

Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent quarter prior to submission of the advertisement for
publication. In calculating the ending redeemable value, all dividends and other
distributions by the Funds are assumed to have been reinvested at net asset
value on the reinvestment dates during the period. Total return, or "T" in the
formula above, is computed by finding the average annual compounded rate of
return over the period that would equate the initial amount invested to the
ending redeemable value. In calculating the ending redeemable value, the
applicable contingent deferred sales charge imposed on a redemption of Fund
shares is deducted. The Value Trust's Standardized Return for the fiscal year
ended May 31, 1997 and for the period from November 2, 1992 (commencement of
operations) to May 31, 1997 was 18.59% and 12.04%, respectively. As of the date
of this Statement of Additional Information, the Income Trust has not commenced
investment operations.

The Funds may also from time to time include in performance advertisements
total return figures that are not calculated according to the formula set forth
above ("Non-Standardized Return"). The Funds calculate Non-Standardized Return
for a specified period of time by assuming the investment of $1,000 in shares
and assuming the reinvestment of each dividend or other distribution at net
asset value. Percentage rates of return are then determined by subtracting the
value of the investment at the beginning of the period from the ending value and
by dividing the remainder by the beginning value. Contingent deferred sales
charges are not taken into account in calculating Non-Standardized Return; the
inclusion of those charges would reduce the return. The Value Trust's
Non-Standardized Return for the fiscal year ended May 31, 1997 and for the
period from November 2, 1992 (commencement of operations) to May 31, 1997 was
20.59% and 69.82%, respectively.

TAXATION

Each Fund is treated as a separate corporation for federal income tax
purposes. In order to qualify or (in the case of the Value Trust) continue to
qualify for treatment as a regulated investment company ("RIC") under the
Internal Revenue Code of 1986, as amended, each Fund must distribute annually to
its shareholders at least 90% of its investment company taxable income
(generally, net investment income plus net short-term capital gain and net gains
from certain foreign currency transactions, if any) and must meet several
additional requirements. With respect to each Fund, these requirements include
the following: (1) at least 90% of the Fund's gross income each taxable year
must be derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of securities or foreign
currencies and other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income for its current taxable year from the sale or other
disposition of securities, or any of the following, that were held less than
three months -- options or futures (other than those on foreign currencies), or
foreign currencies (or options, futures or forward contracts thereon) that are
not directly related to the Fund's principal business of investing in securities
(or options and futures with respect to securities) ("Short-Short Limitation");
(3) at the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs and other securities, with these
other securities limited, in respect of any one issuer, to an amount that does
not exceed 5% of the value of the Fund's total assets and that does not

26
<PAGE>

represent more than 10% of the issuer's outstanding voting securities; and (4)
at the close of each quarter of the Fund's taxable year, not more than 25% of
the value of its total assets may be invested in securities (other than U.S.
Government securities or securities of other RICs) of any one issuer.

If and to the extent a Fund does not distribute to its shareholders by the
end of any calendar year substantially all of its ordinary income for that year
and its capital gain net income for the one-year period ending on October 31 of
that year, plus certain other amounts, a non-deductible 4% excise tax will be
imposed.

Dividends and other distributions declared by a Fund in October, November
or December of any year and payable to shareholders of record on a date in any
one of these months will be deemed to have been paid by the Fund and received by
the shareholders on December 31 of that year if the distributions are paid by
the Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.

A portion of the dividends from a Fund's investment company taxable income
(whether paid in cash or reinvested in additional Fund shares) is eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends from U.S. corporations received by a
Fund. However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction may be subject indirectly to the
alternative minimum tax. It is not anticipated that any significant part of the
distributions by the Income Trust will be eligible for this deduction.

If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or capital gain distribution, the shareholder will pay full
price for the shares and receive some portion of the price back as a taxable
distribution.

Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.

A Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (i.e., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly,
or constructively, by "U.S. shareholders," defined as U.S. persons that
individually own, directly, indirectly, or constructively, at least 10% of that
voting power) as to which the Fund is a U.S. shareholder (effective after
October 31, 1998) -- that, in general, meets either of the following tests: (1)

27
<PAGE>

at least 75% of its gross income is passive or (2) an average of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, a Fund will be subject to federal income tax on a portion
of any "excess distribution" received on the stock of a PFIC or of any gain from
disposition of such stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders. If a Fund invests in
a PFIC and elects to treat the PFIC as a "qualified electing fund," then in lieu
of the foregoing tax and interest obligation, the Fund will be required to
include in income each year its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which probably would have to
be distributed because of the distribution requirements described above -- even
if those earnings and gain were not received by the Fund. In most instances it
will be very difficult, if not impossible, to make this election because of
certain requirements thereof.

Effective for its taxable year beginning June 1, 1998, each Fund may elect
to "mark to market" its stock in any PFIC. "Marking-to-market," in this context,
means including in ordinary income each taxable year the excess, if any, of the
fair market value of the PFIC's stock over a Fund's adjusted basis therein as of
the end of that year. Pursuant to the election, a Fund also will be allowed to
deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted
basis in PFIC stock over the fair market value thereof as of the taxable
year-end, but only to the extent of any net mark-to-market gains with respect to
that stock included by the Fund for prior taxable years. A Fund's adjusted basis
in each PFIC's stock with respect to which it makes this election will be
adjusted to reflect the amounts of income included and deductions taken under
the election. Regulations proposed in 1992 would provide a similar election with
respect to the stock of certain PFICs.

The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses a Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities or those currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition of
options and futures contracts (other than those on foreign currencies) will be
subject to the Short-Short Limitation if they are held for less than three
months. Income from the disposition of foreign currencies, and options, futures,
and forward contracts thereon, that are not directly related to a Fund's
principal business of investing in securities (or options and futures with
respect to securities) also will be subject to the Short-Short Limitation if
they are held for less than three months.

If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated

28
<PAGE>

hedge will be included in gross income for purposes of that limitation. Each
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent a Fund does not so qualify, it may be forced
to defer the closing out of certain options, futures, forward contracts, and/or
foreign currency positions beyond the time when it otherwise would be
advantageous to do so, in order for the Fund to qualify as a RIC.

Certain options and futures in which the Funds may invest will be "section
1256 contracts." Section 1256 contracts held by a Fund at the end of each
taxable year, other than section 1256 contracts that are part of a "mixed
straddle" with respect to which a Fund has made an election not to have the
following rules apply, must be "marked-to-market" (that is, treated as sold for
their fair market value) for federal income tax purposes, with the result that
unrealized gains or losses will be treated as though they were realized. Sixty
percent of any net gain or loss recognized on these deemed sales, and 60% of any
net realized gain or loss 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 1256 contracts also may be
marked-to-market for purposes of the Excise Tax.

Code section 1092 (dealing with straddles) may also affect the taxation of
options and futures contracts in which the Funds may invest. Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Section
1092 generally provides that any loss from the disposition of a position in a
straddle may be deducted only to the extent the loss exceeds the unrealized gain
on the offsetting position(s) of the straddle. Section 1092 also provides
certain "wash sale" rules, which apply to transactions where a position is sold
at a loss and a new offsetting position is acquired within a prescribed period,
and "short sale" rules applicable to straddles. If a Fund makes certain
elections, the amount, character, and timing of the recognition of gains and
losses from the affected straddle positions would be determined under rules that
vary according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax consequences to
the Funds of straddle transactions are not entirely clear.

If a Fund has an "appreciated financial position" - generally, an interest
(including an interest through an option, futures or forward contract, or short
sale) with respect to any stock, debt instrument (other than "straight debt"),
or partnership interest the fair market value of which exceeds its adjusted
basis - and enters into a "constructive sale" of the same or substantially
similar property, the Fund will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract or futures or forward contract entered into by the Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.

CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT

Custodial Trust Company ("CTC"), 101 Carnegie Center, Princeton, New
Jersey 08540-6231 is the custodian for the Funds. The Value Trust borrows

29
<PAGE>

money from CTC in connection with its leveraging activities. Fund Services,
Inc., 1500 Forest Avenue, Suite 111, Richmond, Virginia 23229, is the
transfer and dividend disbursing agent for the Funds.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 250 West Pratt Street, Baltimore, Maryland
21201, was appointed by the Trustees to serve as the Trust's independent
certified public accountants, providing professional services including (1)
audit of the annual financial statements, (2) assistance and consultation in
connection with SEC filings and semi-annual reports, including semi-annual
financial statements, and (3) preparation of the federal income tax returns
filed on behalf of the Funds.

OTHER INFORMATION

The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust. The
Declaration of Trust states that no shareholder as such shall be subject to any
personal liability whatsoever to any person in connection with Trust property or
the acts, omissions, obligations or affairs of the Trust. It also states that
every written obligation, contract, instrument, certificate, share, other
security of the Trust or undertaking made or issued by the Trustees may recite,
in substance, that the same is executed or made by them not individually, but as
Trustees under the Declaration of Trust, and that the obligations of the Trust
under any such instrument are not binding upon any of the Trust's Trustees or
shareholders individually, but bind only the Trust estate, and may contain any
further recital which they or he may deem applicable, but the omission of such
recital shall not operate to bind the Trustees or shareholders individually.

The Declaration of Trust further provides that the Trust shall indemnify
and hold each shareholder harmless from and against all claims and liabilities
to which such shareholder may become subject by reason of his being or having
been a shareholder, and shall reimburse such shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Trust would be
unable to meet its obligations.

The Prospectuses relating to the Funds and this Statement of Additional
Information do not contain all the information included in the Trust's
registration statement filed with the SEC under the Securities Act of 1933 and
the 1940 Act with respect to the securities offered hereby, certain portions of
which have been omitted pursuant to the rules and regulations of the SEC. The
registration statement, including the exhibits filed therewith, may be examined
at the offices of the SEC in Washington, D.C.

Statements contained in the Prospectuses and this Statement of Additional
Information as to the contents of any contract or other documents referred to
are not necessarily complete, and in each instance reference is made to the copy

30
<PAGE>

of such contracts or other documents filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.

FINANCIAL STATEMENTS

The financial statements of the Value Trust for the year ended May 31,
1997, which are included in the Annual Report to Shareholders of the Value
Trust, are hereby incorporated by reference. In addition, the audited Statement
of Assets and Liabilities of the Income Trust appears on the following pages.

<PAGE>

PART C. OTHER INFORMATION
-------------------------

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
- -------------------------------------------

(a) Financial Statements:

Growth Fund, Capital Income Fund, T-1 Treasury Trust and Yorktown
Classic Value Trust

Included in Part A of this Registration Statement:
Financial highlights for one share of Growth Fund, Capital Income
Fund, T-1 Treasury Trust and Yorktown Classic Value Trust.

Included in Part B of this Registration Statement through incorporation by
reference:
The Annual Reports to Shareholders for the Growth Fund, Capital
Income Fund, T-1 Treasury Trust and Yorktown Classic Value Trust for
the fiscal year ended May 31, 1997 containing financial statements
as of and for the fiscal year ended May 31, 1997 (previously filed
with the Securities and Exchange Commission through EDGAR on July
30, 1997, Accession No. 0000916641-97-000747).

YORKTOWN VALUE INCOME TRUST
---------------------------

Included in Part B of this Registration Statement:
Statement of Assets and Liabilities at May 31, 1997
Report of Independent Accountants

(b) EXHIBITS
--------

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(c) Form of Distribution Agreement for Multiple Index Trust and
Treasuries Trust 2/
(7) Bonus, Profit-Sharing, Pension or Other Similar Contracts - Not
Applicable
(8) (a) Custodian Agreement for Growth Fund, Capital Income Fund
and T-1 Treasury Trust 1/
(b) Custodian Agreement for Yorktown Classic Value Trust,
Multiple Index Trust and Treasuries Trust 1/
(9) Transfer and Dividend Disbursing Agency Agreement 1/ (10) (a)
Opinion and Consent of Counsel 1/
(b) Opinion and Consent of Counsel regarding Yorktown Classic
Value Trust and Yorktown Value Income Trust 1/
(11) (a) Consent of Independent Accountants regarding Growth Fund,
Capital Income Fund, T-1 Treasury Trust and Yorktown
Classic Value Trust (filed herewith)
(b) Consent of Independent Accountants regarding Yorktown Value
Income Trust (filed herewith)
(12) Financial Statements Omitted from Item 23 - Not Applicable
(13) Initial Capitalization Agreements 1/
(14) Prototype for Retirement Plans - Not Applicable
(15) (a) Rule 12b-1 Plan for Growth Fund, Capital Income Fund and
T-1 Treasury Trust 1/
(b) Rule 12b-1 Plan for Yorktown Classic Value Trust and Yorktown
Value Income Trust 1/
(c) Form of Subdistribution Agreement 1/

(16) Performance Information for Growth Fund, T-1 Treasury Trust, Capital
Income Fund and Yorktown Classic Value Trust 1/
(17) Financial Data Schedule (filed herewith)
(18) Rule 18f-3 Plan - Not Applicable

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

1/ Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 24 to the Registration Statement on Form
N-1A, filed on September 30, 1996.
2/ Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 26 to the Registration Statement on Form
N-1A, filed on April 16, 1997.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- -----------------------------------------------------------------------

None

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ITEM 26. NUMBER OF HOLDERS OF SECURITIES
- -----------------------------------------

Number of Record Shareholders
Title of Class As of August 31, 1997
- -------------- -----------------------------

Shares of Beneficial Interest of the:
Growth Fund........................................................4,264
T-1 Treasury Trust...................................................319
Capital Income Fund..................................................582
Yorktown Classic Value Trust.........................................549
Yorktown Value Income Trust............................................1
Treasuries Trust ......................................................6
Multiple Index Trust..................................................29

ITEM 27. INDEMNIFICATION
- -------------------------

Section 5.1 of Article V of the Declaration of Trust provides that no
Trustee, officer, employee or agent of the Trust as such shall be subject to any
personal liability whatsoever to any person in connection with Trust Property or
the affairs of the Trust, save only that to which they would be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of their duties, or by reason of their reckless disregard of their obligations
and duties with respect to such person; and all persons shall look solely to the
Trust Property for satisfaction of claims of any nature arising directly or
indirectly in connection with the affairs of the Trust. Section 5.1 also
provides that if any Trustee, officer, employee or agent, as such, of the Trust
is made party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability.

Section 5.2 of Article V of the Declaration of Trust provides that no
Trustee, officer, employee or agent of the Trust shall be liable to the Trust,
its Shareholders, or to any Shareholder, Trustee, officer, employee, or agent
thereof for any action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to redress any breach
of Trust), except for his own bad faith, willful misfeasance, gross negligence
or reckless disregard of the duties involved in the conduct of his office.

Paragraph (a) of Article VI of the By-Laws indemnifies Trustees or
officers of the Trust against losses sustained in a legal action by virtue of
such person's position with the Trust. Such person must have been acting in good
faith and in a manner which the person reasonably believed to be in, or not
opposed to, the best interests of the Trust, and in the case of a criminal
proceeding, not unlawful.

The provisions of paragraph (a) do not cover losses sustained in actions
brought by or on behalf of the Trust. The provisions of paragraph (b) are
similar to those of paragraph (a) but cover losses sustained in actions brought
by or in the right of the Trust itself. The required standard of conduct is the

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same, except that no indemnification may be made if the indemnitee is adjudged
liable of negligence or misconduct unless a court determines the indemnitee is
entitled to indemnification.

Paragraph (c) of Article VI allows a Trustee or officer to be indemnified
against expenses actually and reasonably incurred without a determination as to
the standard of conduct required in paragraphs (a) and (b) if the indemnitee is
successful on the merits of an action. Paragraph (d) provides that if such a
determination is necessary, it must be made either by a majority vote of
Trustees who were disinterested and not parties to the action or by independent
legal counsel.

Paragraph (e) of Article VI provides that expenses in defending an action
may be paid in advance if the prospective indemnitee undertakes to repay the
expenses if he or she is not found to be entitled to indemnification. A majority
of disinterested, non-party Trustees or independent legal counsel must determine
that there is reason to believe that the prospective indemnitee ultimately will
be found entitled to indemnification before such payment may be made.

Paragraph (f) of Article VI provides that agents and employees of the
Trust who are not Trustees or officers may be indemnified under the
above-mentioned standards at the discretion of the Board.

Paragraph (g) of Article VI provides that indemnification pursuant to that
Article is not exclusive of other rights, continues as to a person who has
ceased to be a Trustee or officer and inures to heirs, executors and
administrators of such a Person.

Paragraph (h) of Article VI provides that "nothing in the Declaration or
in these By-Laws shall be deemed to protect any Trustee or officer of the Trust
against any liability to the Trust or to its Shareholders to which such Person
would otherwise be subject by reason of willful malfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Person's office."

Paragraph (i) of Article VI provides that the Trust may purchase insurance
for any persons against liability but that "insurance will not be purchased or
maintained by the Trust if the purchase or maintenance of such insurance would
result in the indemnification of any Person in contravention of any rule or
regulation and/or interpretation of the Securities and Exchange Commission."

Paragraph 9 of the Investment Advisory and Administrative Services
Agreement dated December 28, 1990, provides that except as may be determined by
applicable legal standards, Yorktown Management & Research Company, Inc.
("Adviser") shall have no liability to the Trust, or its shareholders or
creditors, for any error in business judgment, or for any loss arising out of
any investment, or for any other act or omission in performance of its
obligations to the Trust pursuant to the Agreement except (1) for actions and
omissions constituting violations of the Investment Company Act of 1940 ("1940
Act"), the Securities Act of 1933 ("1933 Act") or other federal securities laws,

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(2) in circumstances where the Adviser has failed to conform to reasonable
business standards, and (3) by reason of its willful misfeasance, bad faith or
reckless disregard of its duties and obligations.

Paragraph 9 of the Investment Advisory and Administrative Services
Agreements dated October 1, 1992 and May 31, 1997, respectively, provides that
the Adviser not be liable for any error of judgment or mistake of law, for any
loss arising out of any investment, or in any event whatsoever, provided that
nothing herein shall be deemed to protect, or purport to protect, the Adviser
against any liability to the trust or to the security holders of the Trust to
which it would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence in the performance of its duties hereunder, or by reason of
reckless disregard of its obligations and duties hereunder. No provision of this
Agreement shall be construed to protect any Trustee or officer of the Trust, or
Investors, from liability in violation of Section 17(h), 17(i), or 36(b) of the
1940 Act.

Paragraph 15 of the Distribution Agreements dated December 28, 1990,
October 1, 1992 and May 31, 1997, respectively, provides that Yorktown
Distributors, Inc. shall not incur liability to the Trust or any third party and
shall be indemnified and held harmless by the Trust from and against all taxes
(except for such taxes as may be assessed against it in its corporate capacity
arising out of its compensation hereunder), charges, expenses, assessments,
losses, claims and liabilities (including counsel fees) incurred or assessed
against it in connection with the good faith performance of this Agreement,
except as such may arise from (a) its own willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations or (b) expenses incurred
pursuant to this Agreement.

Registrant undertakes to carry out all indemnification provisions of its
Declaration of Trust, By-Laws, and the above-described contracts in accordance
with the Investment Company Act Release No. 11330 (September 4, 1980) and
successor releases.

Insofar as indemnification for liability arising under the 1933 Act, as
amended, may be provided to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment of the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

C-5

<PAGE>

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- --------------------------------------------------------------
Information regarding the officers and directors of the Trust's Adviser,
Yorktown Management & Research Company, Inc. is included in its Form ADV filed
on March 25, 1997 with the Securities and Exchange Commission (registration
number 801-23441) and is incorporated herein by reference.

ITEM 29. PRINCIPAL UNDERWRITERS
- --------------------------------

Yorktown Distributors, Inc. is the distributor of the Trust's shares
and does not act as a principal underwriter, depositor or investment adviser
for any other investment company at this time. The information set forth
below is furnished for those directors or officers of Yorktown Distributors,
Inc. who also serve as trustees or officers of the Trust.

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

David D. Basten Director and President Trustee and President
2303 Yorktown Avenue
Lynchburg, VA 24501

Louis B. Basten III Director and Trustee and Secretary/
2303 Yorktown Avenue Secretary/ Treasurer Treasurer
Lynchburg, VA 24501

Charles D. Foster Chief Financial Officer Chief Financial Officer
2303 Yorktown Avenue
Lynchburg, VA 24501

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
- ------------------------------------------

With the exceptions noted below, Yorktown Management & Research Company,
Inc. (2303 Yorktown Avenue, Lynchburg, Virginia 24501) maintains the books,
accounts and records required to be maintained pursuant to Section 31(a) of the
Investment Company Act of 1940 ("1940 Act") and the rules promulgated
thereunder.

Yorktown Distributors, Inc. (2303 Yorktown Avenue, Lynchburg, Virginia
24501) maintains the books, accounts and records required to be maintained
pursuant to Rule 31(a)-1(d) under the 1940 Act.

Fund Services, Inc. (1500 Forest Avenue, Suite 111, Richmond, Virginia
23229), the Fund's transfer and dividend disbursing agent, maintains the books,
records and accounts required to be maintained pursuant to Rule 31a-1(b)(2)(iv)
under the 1940 Act.

ITEM 31. MANAGEMENT SERVICES
- -----------------------------

None

C-6

<PAGE>

ITEM 32. UNDERTAKINGS
- ----------------------

None

C-7

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS
-------

To the Board of Trustees of
the American Pension
Investors Trust:

We have audited the accompanying statement of assets and liabilities of
the Yorktown Value Income Trust (the "Trust"), one of the portfolios of the
American Pension Investors Trust, as of May 31, 1997. This financial statement
is the responsibility of the Trust's management. Our responsibility is to
express an opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Yorktown Value Income Trust as of May 31, 1997, in conformity with generally
accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.
---------------------------------------
Coopers & Lybrand L.L.P.

Baltimore, Maryland
June 13, 1997

<PAGE>

YORKTOWN VALUE INCOME TRUST

NOTES TO STATEMENT OF ASSETS AND LIABILITIES
---------

1. Organization:

American Pension Investors Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company. It is composed of seven separate portfolios. The accompanying
statement of assets and liabilities includes only the Yorktown Value
Income Trust (the "Fund"). The Fund has had no operations, other than
those relating to organizational matters, including the issuance of the
indicated number of shares of beneficial interest.

The Fund's primary investment objective is to seek a high level of current
income. Capital appreciation is a secondary objective. The Fund will seek
to achieve these objectives by investing primarily in a broad range of
fixed income securities.

2. Significant Accounting Policies:

a. Portfolio Valuation

Investments will be carried at value as determined by the last
sales price on the exchange where they are principally traded.

b. Security Transactions

Security transactions will be accounted for on the trade date.

3. Organization Costs:

All fees and expenses incurred in the organization and initial
registration of the Fund and its shares with the Securities and Exchange
Commission were paid by Yorktown Management & Research Company, Inc., the
Fund's investment advisor.

4. Distribution Plan and Fees:

A 2% contingent deferred sales charge will generally be imposed on
redemptions made within five years of the date that Fund shares are
purchased.

<PAGE>

YORKTOWN VALUE INCOME TRUST

STATEMENT OF ASSETS AND LIABILITIES

May 31, 1997
----------

Assets:
Cash $1,000
------

Net assets $1,000
======

Shares of beneficial interest outstanding
(unlimited number of no par value
shares authorized) 100
===

Net asset value and offering price per share $10.00
======

The accompanying notes are an integral
part of the financial statement.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, American Pension Investors
Trust, certifies that this Post-Effective Amendment meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Post-Effective Amendment to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Lynchburg,
and Commonwealth of Virginia on the 25th day of September, 1997.

AMERICAN PENSION INVESTORS TRUST

By: /s/ David D. Basten
---------------------------------
David D. Basten, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment has been signed below by the following persons in the
capacities and on the date indicated.

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ David D. Basten Trustee and President September 25, 1997
- ------------------------ (Principal Executive
David D. Basten Officer)

/s/ Louis B. Basten III Trustee September 25, 1997
- ------------------------
Louis B. Basten III

/s/ Mark A. Borel Trustee September 25, 1997
- ------------------
Mark A. Borel

/s/ Stephen B. Cox Trustee September 25, 1997
- ------------------------
Stephen B. Cox

/s/ G. Edgar Dawson Trustee September 25, 1997
- ------------------------
G. Edgar Dawson

/s/ Wayne C. Johnson Trustee September 25, 1997
- ------------------------
Wayne C. Johnson

/s/ Charles D. Foster Chief Financial Officer September 25, 1997
- ------------------------
Charles D. Foster

<PAGE>

AMERICAN PENSION INVESTORS TRUST
EXHIBIT INDEX

Exhibit
NUMBER

(1) (a) Declaration of Trust 1/
(b) Amendment to the Declaration of Trust 2/
(2) (a) By-Laws of the Trust 1/
(b) Amendment dated September 16, 1988 to the By-Laws of the
Trust 1/
(3) Voting Trust Agreement - Not Applicable
(4) Instrument defining the rights of holders of the Registrant's shares of
beneficial interest 1/
(5) (a) Investment Advisory and Administrative Services
Agreement for Growth Fund, Capital Income Fund and T-1
Treasury Trust 1/
(b) Investment Advisory and Administrative Services
Agreement for Yorktown Classic Value Trust and Yorktown
Value Income Trust 1/
(c) Form of Investment Advisory and Administrative Services
Agreement for Multiple Index Trust and Treasuries Trust 2/
(6) (a) Distribution Agreement for Growth Fund, Capital Income
Fund and T-1 Treasury Trust 1/
(b) Distribution Agreement for Yorktown Classic Value Trust
and Yorktown Value Income Trust 1/
(c) Form of Distribution Agreement for Multiple Index Trust
and Treasuries Trust 2/
(7) Bonus, Profit-Sharing, Pension or Other Similar Contracts -
Not Applicable
(8) (a) Custodian Agreement for Growth Fund, Capital Income Fund
and T-1 Treasury Trust 1/
(b) Custodian Agreement for Yorktown Classic Value Trust ,
Multiple Index Trust and Treasuries Trust 1/
(9) Transfer and Dividend Disbursing Agency Agreement 1/
(10) (a) Opinion and Consent of Counsel 1/
(b) Opinion and Consent of Counsel regarding Yorktown
Classic Value Trust and Yorktown Value Income Trust 1/
(11) (a) Consent of Independent Accountants regarding Growth
Fund, Capital Income Fund, T-1 Treasury Trust and
Yorktown Classic Value Trust (filed herewith)
(b) Consent of Independent Accountants regarding Yorktown
Value Income Trust (filed herewith)
(12) Financial Statements Omitted from Item 23 - Not Applicable
(13) Initial Capitalization Agreements 1/
(14) Prototype for Retirement Plans - Not Applicable

<PAGE>

(15) (a) Rule 12b-1 Plan for Growth Fund, Capital Income Fund and T-1
Treasury Trust 1/
(b) Rule 12b-1 Plan for Yorktown Classic Value Trust and
Yorktown Value Income Trust 1/
(c) Form of Subdistribution Agreement 1/
(16) Performance Information for Growth Fund, T-1 Treasury Trust, Capital
Income Fund and Yorktown Classic Value Trust 1/
(17) Financial Data Schedule (filed herewith)
(18) Rule 18f-3 Plan - Not Applicable

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

<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the annual
report as of May 31, 1997 and is qualified in its entirety by reference to such
annual report.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> CAPITAL INCOME FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 6,807,998
<INVESTMENTS-AT-VALUE> 7,925,412
<RECEIVABLES> 0
<ASSETS-OTHER> 7,809
<OTHER-ITEMS-ASSETS> 175,813
<TOTAL-ASSETS> 8,109,034
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,220
<TOTAL-LIABILITIES> 11,220
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,748,769
<SHARES-COMMON-STOCK> 406,524
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 51,399
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 180,232
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,117,414
<NET-ASSETS> 8,097,814
<DIVIDEND-INCOME> 190,939
<INTEREST-INCOME> 8,740
<OTHER-INCOME> 0
<EXPENSES-NET> 98,111
<NET-INVESTMENT-INCOME> 101,568
<REALIZED-GAINS-CURRENT> 444,441
<APPREC-INCREASE-CURRENT> 630,186
<NET-CHANGE-FROM-OPS> 1,176,195
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 231,628
<NUMBER-OF-SHARES-REDEEMED> 97,374
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,680,880
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,229
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 131,340
<AVERAGE-NET-ASSETS> 5,527,472
<PER-SHARE-NAV-BEGIN> 17.57
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> 3.49
<PER-SHARE-DIVIDEND> .48
<PER-SHARE-DISTRIBUTIONS> .98
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.92
<EXPENSE-RATIO> 1.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 2,488,093
<INVESTMENTS-AT-VALUE> 2,487,200
<RECEIVABLES> 0
<ASSETS-OTHER> 6,467
<OTHER-ITEMS-ASSETS> 45,927
<TOTAL-ASSETS> 2,539,594
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,505
<TOTAL-LIABILITIES> 11,505
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,945,720
<SHARES-COMMON-STOCK> 537,091
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 34,887
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (451,625)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (893)
<NET-ASSETS> 2,528,089
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 325,464
<OTHER-INCOME> 0
<EXPENSES-NET> 94,088
<NET-INVESTMENT-INCOME> 231,376
<REALIZED-GAINS-CURRENT> (12,667)
<APPREC-INCREASE-CURRENT> 24,149
<NET-CHANGE-FROM-OPS> 242,858
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 237,714
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 308,853
<NUMBER-OF-SHARES-REDEEMED> 1,239,835
<SHARES-REINVESTED> 49,699
<NET-CHANGE-IN-ASSETS> (4,123,603)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37,961
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 141,539
<AVERAGE-NET-ASSETS> 6,316,015
<PER-SHARE-NAV-BEGIN> 4.69
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> (.02)
<PER-SHARE-DIVIDEND> .17
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.71
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 58,787,122
<INVESTMENTS-AT-VALUE> 68,035,713
<RECEIVABLES> 0
<ASSETS-OTHER> 93,811
<OTHER-ITEMS-ASSETS> 751,223
<TOTAL-ASSETS> 68,880,747
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 163,723
<TOTAL-LIABILITIES> 163,723
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54,608,829
<SHARES-COMMON-STOCK> 5,121,502
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,859,604
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,248,591
<NET-ASSETS> 68,717,024
<DIVIDEND-INCOME> 534,826
<INTEREST-INCOME> 44,709
<OTHER-INCOME> 0
<EXPENSES-NET> 1,447,137
<NET-INVESTMENT-INCOME> (867,602)
<REALIZED-GAINS-CURRENT> 8,190,193
<APPREC-INCREASE-CURRENT> (2,016,057)
<NET-CHANGE-FROM-OPS> 5,306,534
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 822,821
<NUMBER-OF-SHARES-REDEEMED> 1,169,419
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 410,529
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 663,418
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,695,636
<AVERAGE-NET-ASSETS> 66,415,697
<PER-SHARE-NAV-BEGIN> 14.00
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> 1.25
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.66
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.42
<EXPENSE-RATIO> 2.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT AS OF MAY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> YORKTOWN CLASSIC VALUE TRUST

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 14,926,958
<INVESTMENTS-AT-VALUE> 17,950,281
<RECEIVABLES> 275,343
<ASSETS-OTHER> 53,226
<OTHER-ITEMS-ASSETS> 23,038
<TOTAL-ASSETS> 18,301,888
<PAYABLE-FOR-SECURITIES> 176,434
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,065,566
<TOTAL-LIABILITIES> 5,242,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,973,331
<SHARES-COMMON-STOCK> 917,661
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 63,234
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,023,323
<NET-ASSETS> 13,059,888
<DIVIDEND-INCOME> 250,768
<INTEREST-INCOME> 1,101
<OTHER-INCOME> 0
<EXPENSES-NET> 484,351
<NET-INVESTMENT-INCOME> (232,482)
<REALIZED-GAINS-CURRENT> 98,970
<APPREC-INCREASE-CURRENT> 2,292,605
<NET-CHANGE-FROM-OPS> 2,159,093
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 302,614
<NUMBER-OF-SHARES-REDEEMED> 153,825
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3,988,099
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83,622
<INTEREST-EXPENSE> 247,047
<GROSS-EXPENSE> 498,288
<AVERAGE-NET-ASSETS> 9,311,276
<PER-SHARE-NAV-BEGIN> 12.00
<PER-SHARE-NII> (.25)
<PER-SHARE-GAIN-APPREC> 2.69
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .21
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.23
<EXPENSE-RATIO> 5.20
<AVG-DEBT-OUTSTANDING> 3,371,414
<AVG-DEBT-PER-SHARE> 4.28

</TABLE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in the Post-Effective Amendment No. 27
to the Registration Statement on Form N-1A (File Number 2-96538) of our reports
dated June 13, 1997 on our audits of the financial statements and financial
highlights of American Pension Investors (API) Trust's Growth Fund, T-1 Treasury
Trust, Capital Income Fund, and Yorktown Classic Value Trust, which reports are
included in their respective Annual Report to Shareholders for the periods ended
May 31, 1997, which are incorporated by reference in the Registration Statement.
We also consent to the reference of our firm under the captions "Financial
Highlights" in the Prospectuses and "Independent Accountants" in the Statements
of Additional Information.

/s/ Coopers & Lybrand L.L.P.
----------------------------------------
COOPERS & LYBRAND L.L.P.

Baltimore, Maryland
September 30, 1997

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in the Post-Effective Amendment No. 27
to the Registration Statement on Form N-1A (File Number 2-96538) of American
Pension Investors (API) Trust of our report dated June 13, 1997, on our audit of
the statement of assets and liabilities of Yorktown Value Income Trust as of May
31, 1997, which is included in the Registration Statement. We also consent to
the reference of our firm under the caption "Independent Accountants."

/s/ Coopers & Lybrand L.L.P.

---------------------------------------
COOPERS & LYBRAND L.L.P.

Baltimore, Maryland
September 30, 1997