KAMINSKI POLAND FUND

                       Statement of Additional Information

                              Dated March 16, 1999
                            Supplemented May 3, 1999

This  Statement  of  Additional  Information  is not a  prospectus  and contains
information  in  addition to that set forth in: the  prospectus  for the Class I
shares of the Kaminski  Poland Fund dated October 30, 1998,  and the  prospectus
for the Class A shares of the Kaminski  Poland Fund,  dated March 16, 1999, each
as may be revised from time to time (each a "prospectus" and  collectively,  the
"prospectuses").  Kaminski  Poland  Fund (the  "Fund")  is a series of  Advisors
Series Trust (the "Trust").  Kaminski Asset Management, Inc. (the "Advisor"), is
the Advisor to the Fund.  Copies of the  prospectuses  may be obtained  from the
Fund at 319 1st Avenue North,  Minneapolis,  Minnesota,  telephone  number (612)
305-9026.

                                TABLE OF CONTENTS



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

                                               
Investment Objective and Policies...........  B-2    Investment Objectives and Policies

Management..................................  B-11   Management of the Fund

Distribution Arrangements...................  B-14   Management of the Fund

Portfolio Transactions and Brokerage........  B-14   Management of the Fund

Net Asset Value.............................  B-15   Investor Guide

Taxation ...................................  B-16   Distributions and Taxes

Dividends and Distributions.................  B-18   Distributions and Taxes

Performance Information.....................  B-19   General Information

General Information.........................  B-20   General Information

                                       B-1

                       INVESTMENT OBJECTIVES AND POLICIES

     The investment objective of the Fund is long term growth of capital,  which
it  attempts to achieve by  investing  in equity  securities  that are issued by
companies  based in the Republic of Poland.  There is no assurance that the Fund
will  achieve  its  objective.  The  discussion  below  supplements  information
contained in the prospectus as to investment policies of the Fund.

CONVERTIBLE SECURITIES AND WARRANTS

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

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

SHORT-TERM INVESTMENTS

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

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

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

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

                                       B-2

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

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

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

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

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

INVESTMENT COMPANY SECURITIES

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

GOVERNMENT OBLIGATIONS

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

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

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

                                       B-3

service its debt in a timely manner.

FOREIGN INVESTMENTS AND CURRENCIES

     The Fund will invest in securities of foreign issuers that are not publicly
traded in the United States. The Fund may also invest in depositary receipts and
in foreign currency futures contracts and may purchase and sell foreign currency
on a spot basis.

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

     RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign securities
involve certain inherent risks, which are described in the Fund's prospectus.

OPTIONS ON SECURITIES

     PURCHASING  PUT AND CALL OPTIONS.  The Fund may purchase  covered "put" and
"call"  options  with respect to  securities  which are  otherwise  eligible for
purchase by the Fund  subject to certain  restrictions.  The Fund will engage in
trading of such derivative securities exclusively for hedging purposes.

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

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

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

     WRITING  CALL  OPTIONS.  The Fund may write  covered call  options.  A call
option is "covered" if the Fund owns the security  underlying the call or has an
absolute right to acquire the security  without  additional  cash  consideration
(or, if additional cash  consideration is required,  cash or cash equivalents in
such amount as are held in a segregated account by the Custodian). The writer of
a call option receives a premium and gives the purchaser the right to buy the

                                       B-4

security  underlying  the  option at the  exercise  price.  The  writer  has the
obligation  upon  exercise  of the option to  deliver  the  underlying  security
against payment of the exercise price during the option period. If the writer of
an  exchange-traded  option wishes to terminate his obligation,  he may effect a
"closing purchase  transaction." This is accomplished by buying an option of the
same series as the option previously  written. A writer may not effect a closing
purchase transaction after it has been notified of the exercise of an option.

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

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

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

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

     In  addition,  when  trading  options  on  foreign  exchanges,  many of the
protections  afforded to participants in United States option exchanges will not
be available.  For example,  there may be no daily price  fluctuation  limits in
such exchanges or markets, and adverse market movements could therefore continue
to an  unlimited  extent over a period of time.  Although  the  purchaser  of an
option cannot lose more than the amount of the premium plus related  transaction
costs, this entire amount could be lost. Moreover,  the Fund as an option writer
could lose amounts substantially in excess of its initial investment, due to the
margin  and  collateral  requirements  typically  associated  with  such  option
writing. See "Dealer Options".

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

                                       B-5

the loss of the premium paid by the Fund as well as loss of the expected benefit
of the transaction.

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

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

     FOREIGN CURRENCY OPTIONS.  The Fund may buy or sell put and call options on
foreign  currencies.  A put or call  option  on a  foreign  currency  gives  the
purchaser of the option the right to sell or purchase a foreign  currency at the
exercise  price until the option  expires.  The Fund will use  foreign  currency
options separately or in combination to control currency  volatility.  Among the
strategies  employed to control  currency  volatility  is an option  collar.  An
option collar involves the purchase of a put option and the simultaneous sale of
a call  option  on the same  currency  with the  same  expiration  date but with
different exercise (or "strike") prices.  Generally, the put option will have an
out-of-the-money  strike  price,  while  the call  option  will  have  either an
at-the-money  strike price or an  in-the-money  strike price.  Foreign  currency
options are  derivative  securities.  Currency  options  traded on U.S. or other
exchanges  may be subject to position  limits which may limit the ability of the
Fund to reduce foreign currency risk using such options.

     As with other  kinds of option  transactions,  the  writing of an option on
foreign  currency will  constitute only a partial hedge, up to the amount of the
premium  received.  The Fund  could be  required  to  purchase  or sell  foreign
currencies at  disadvantageous  exchange rates,  thereby incurring  losses.  The
purchase of an option on foreign  currency may  constitute  an  effective  hedge
against  exchange  rate  fluctuations:  however,  in the event of exchange  rate
movements adverse to the Fund's position, the Fund may forfeit the entire amount
of the premium plus related transaction costs.

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

                                       B-6

FORWARD CURRENCY CONTRACTS

     The Fund may enter into  forward  currency  contracts  in  anticipation  of
changes in currency exchange rates. A forward currency contract is an obligation
to purchase or sell a specific currency at a future date, which 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.  For example,  the Fund might  purchase a
particular  currency or enter into a forward  currency  contract to preserve the
U.S.  dollar price of  securities  it intends to or has  contracted to purchase.
Alternatively,  it might sell a particular  currency on either a spot or forward
basis to hedge against an anticipated  decline in the dollar value of securities
it intends to or has  contracted to sell.  Although this strategy could minimize
the risk of loss due to a decline in the value of the hedged currency,  it could
also limit any potential gain from an increase in the value of the currency.

REPURCHASE AGREEMENTS

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

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS

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

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

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

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

BORROWING

     The Fund is  authorized  to borrow  money from time to time for  temporary,
extraordinary or emergency  purposes or for clearance of transactions in amounts
up to 10% of the value of its total assets at the time of such  borrowings.  The
use of borrowing by the Fund involves special risk  considerations  that may not
be associated  with other funds

                                        B-7

having similar  objectives and policies.  Since  substantially all of the Fund's
assets  fluctuate in value,  whereas the interest  obligation  resulting  from a
borrowing  will be fixed by the terms of the Fund's  agreement  with its lender,
the  asset  value per  share of the Fund  will  tend to  increase  more when its
portfolio  securities  increase in value and to decrease more when its portfolio
assets  decrease in value than would  otherwise  be the case if the Fund did not
borrow  funds.  In addition,  interest  costs on borrowings  may fluctuate  with
changing market rates of interest and may partially  offset or exceed the return
earned on borrowed funds. Under adverse market  conditions,  the Fund might have
to sell  portfolio  securities to meet interest or principal  payments at a time
when fundamental investment considerations would not favor such sales.

LENDING PORTFOLIO SECURITIES

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

SHORT SALES

     The Fund is authorized to make short sales of securities it owns or has the
right to  acquire at no added  cost  through  conversion  or  exchange  of other
securities  it owns  (referred to as short sales  "against the box") and to make
short sales of securities which it does not own or have the right to acquire.

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

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

     If the Fund  makes a short  sale  "against  the  box,"  the Fund  would not
immediately  deliver the securities sold and would not receive the proceeds from
the sale.  The seller is said to have a short  position in the  securities  sold
until it delivers the securities sold, at which time it receives the proceeds of
the sale. To secure its obligation to deliver  securities  sold short,  the Fund
will deposit in escrow in a separate  account with the Custodian an equal amount
of the securities sold short or securities  convertible into or exchangeable for
such  securities.  The Fund can close out its short  

                                       B-8


position by purchasing  and  delivering an equal amount of the  securities  sold
short,  rather than by delivering  securities  already held by the Fund, because
the Fund might want to continue to receive  interest  and  dividend  payments on
securities in its portfolio that are convertible into the securities sold short.

     The  Fund's  decision  to make a short  sale  "against  the  box"  may be a
technique to hedge against market risks when the Advisor believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund or a security  convertible into or exchangeable  for such security.  In
such case,  any future losses in the Fund's long position  would be reduced by a
gain in the short position. The extent to which such gains or losses in the long
position  are  reduced  will  depend  upon the amount of  securities  sold short
relative  to the amount of the  securities  the Fund owns,  either  directly  or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.

     The extent to which the Fund may enter into short sales transactions may be
limited by the Code  requirements  for  qualification of the Fund as a regulated
investment company. See "Taxation."

ILLIQUID SECURITIES

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

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

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

RISKS OF INVESTING IN SMALL COMPANIES

     As stated in the prospectus,  the Fund may purchase securities of companies
with  market  capitalization  as low as $10  million.  Additional  risks of such
investments  include the markets on which such securities are frequently traded.
In  many  instances  the  securities  of  smaller   companies  are  traded  only
over-the-counter  or on a regional  securities  exchange,  and the frequency and
volume  of their  trading  is  substantially  less  than is  typical  of  larger
companies.  Therefore,  the  securities  of smaller  companies may be subject to
greater and more abrupt price  fluctuations.  When making large sales,  the Fund
may have to sell portfolio  holdings at discounts from quoted prices or may have
to make a series  of small  sales  over an  extended  period  of time due to the
trading volume of smaller company  securities.  Investors  should be aware that,
based on the  foregoing  factors,  an  investment  in the Fund may be subject to
greater price fluctuations than an investment in a fund that invests exclusively
in larger, more established  companies.  The Advisor's research efforts may also
play a greater  role in  selecting  securities  for the Fund than in a fund that
invests in larger, more established companies.

                                       B-9

INVESTMENT RESTRICTIONS

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

     As a matter of fundamental policy, the Fund is non-diversified; I.E., as to
50% of the value of a its total assets:  (i) no more than 5% of the value of its
total  assets may be invested in the  securities  of any one issuer  (other than
U.S. Government securities); and (ii) the Fund may not purchase more than 10% of
the outstanding voting securities of an issuer. The Fund's investment  objective
is also  fundamental.  The Fund will also,  as a matter of  fundamental  policy,
invest at least 80% of its total  assets,  under normal  market  conditions,  in
securities of issuers based in the Republic of Poland.

     In addition, the Fund may not:

     1. Issue senior securities,  borrow money or pledge its assets, except that
(i) the Fund may  borrow on an  unsecured  basis  from  banks for  temporary  or
emergency purposes or for the clearance of transactions in amounts not exceeding
10% of its total assets (including the amount  borrowed),  provided that it will
not make investments  while borrowings in excess of 5% of the value of its total
assets are outstanding;  and (ii) this  restriction  shall not prohibit the Fund
from engaging in options and foreign currency transactions or short sales;

     2. Purchase securities on margin,  except such short-term credits as may be
necessary for the clearance of transactions:

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

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

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

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

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

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

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

     The Fund may not:

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

     2. Invest more than 15% of its assets in securities which are restricted as
to  disposition  or otherwise are illiquid or have no readily  available  market
(except  for  securities  which are  determined  by the Board of  Trustees to be
liquid).

                                   MANAGEMENT

     The overall  management  of the business and affairs of the Trust is vested
with its  Board of  Trustees.  The Board  approves  all  significant  agreements
between the Trust and persons or companies  furnishing services to it, 

                                      B-10

including the agreements with the Advisor, Administrator, Custodian and Transfer
Agent.  The day to day  operations  of the Trust are  delegated to its officers,
subject  to the  Fund's  investment  objectives  and  policies  and  to  general
supervision by the Board of Trustees.

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



NAME, ADDRESS AND AGE            POSITION     PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ---------------------            --------     -------------------------------------------
                                        
Walter Auch, Sr. (Born 1921)     Trustee      Director, Mutual Funds, Nicholas-Applegate, Brinson
6002 N. 62d Place                             Funds (since 19940, Smith Barney Trak Fund, Pimco  
Paradise Valley, AZ 85253                     Advisors L.P., Banyan Realty Trust, Banyan Land    
                                              Fund II and Legend Properties.                     
                                              
Eric M. Banhazl (Born 1957)*     Trustee,     Senior Vice President, Investment Company                  
2025 E. Financial Way            President    Administration Corporation; Vice President, First Fund
Glendora, CA 91740               and          Distributors, Inc.; Assistant Treasurer, RNC Mutual   
                                 Treasurer    Fund Group; Treasurer, Guinness Flight Investment     
                                              Funds, Inc. and Professionally Managed Portfolios.    
                                              
Donald E. O'Connor               Trustee      Retired; formerly Executive Vice President and chief Operating
(Born 1936)                                   Officer of ICI Mutual Insurance Company (until January 1997), 
1700 Taylor Avenue                            Vice President, Operations, Investment Company Institute      
Fort Washington, MD 20744                     (until June 1993).                                            
                                              
George T. Wofford III            Trustee      Vice President, Information Services, Federal Home Loan Bank    
(Born 1939)                                   San Francisco (since March 1993); formerly Director of          
305 Glendora Circle                           Management Information Services, Morrison & Foerster (law firm).
Danville, CA 94526                            

Steven J. Paggioli (Born 1950)   Vice         Executive Vice President, Robert H. Wadsworth &          
479 W. 22d Street                President    Associates, Inc. and Investment Company                  
New York, NY 10011                            Administration Corporation; Vice President, First Fund   
                                              Distributors, Inc.; President and Trustee, Professionally
                                              Managed Portfolios; Director, Managers Funds, Inc.       
                                              
Robert H. Wadsworth              Vice         President, Robert H. Wadsworth & Associates, Inc.,  
(Born 1940)                      President    Investment Company Administration Corporation and   
4455 E. Camelback Road                        First Fund Distributors, Inc.; Vice President,      
Suite 261E                                    Professional Managed Portfolios; President Guinness 
Phoenix, AZ 85018                             Flight Investment Funds, Inc.; Director, Germany    
                                              Fund, Inc. New Germany Fund, Inc., Central European 
                                              Equity Fund, Inc. and Deutsche Funds, Inc.          
                                              
Chris O. Moser (Born 1949)       Secretary    Employed by Investment Company Administration      
4455 E. Camelback Road                        (since July 1996); formerly employed by Bank One,  
Suite 261E                                    N.A. (From August 1995 until July 1996); O'Connor, 
Phoenix, AZ 85018                             Cavanagh, Anderson, Killingsworth and Beshears (law
Trustee                                       firm) (until August 1995).                         

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

                                      B-11

NAME AND POSITION                         AGGREGATE COMPENSATION FROM THE TRUST*
- -----------------                         --------------------------------------
Walter E. Auch, Sr., Trustee                                $12,000
Donald E. O'Connor, Trustee                                 $12,000
George T. Wofford III, Trustee                              $12,000

*Estimated for the current fiscal year. For the fiscal year ended June 30, 1998,
the  aggregate  compensation  paid by the Trust to each Trustee was $8,500.  The
Trust has no pension or  retirement  plan. No other entity  affiliated  with the
Trust pays any compensation to the Trustees.

THE ADVISOR

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

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

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

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

                                      B-12

the Fund,  if any;  and all other  charges and costs of its  operation  plus any
extraordinary and non-recurring expenses,  except as otherwise prescribed in the
Advisory Agreement.

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

     During the period  beginning  July 9, 1997 and ending  June 30,  1998,  the
Advisor earned $13,159 in advisory fees. The Advisor has contractually agreed to
limit total fund operating expenses to 2.75% of average net assets annually.  As
a result of that  limitation,  the Advisor waived the full amount of its fee and
paid Fund operating expenses in the amount of $121,213.

     The Advisor is controlled by M. G. Kaminski.

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

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

THE ADMINISTRATOR.

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

For its  services,  the  Administrator  receives a fee monthly at the  following
annual rate:

Fund asset level                            Fee rate
- ----------------                            --------

First $50 million                   0.20% of average daily net assets

Next $50 million                    0.15% of average daily net assets

Next $50 million                    0.10% of average daily net assets

Next $50 million, and thereafter    0.05% of average daily net assets

                                      B-13

                            DISTRIBUTION ARRANGEMENTS

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

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

     Under the Plan, the Trustees will be furnished  quarterly with  information
detailing  the amount of expenses paid under the Plan and the purposes for which
payments were made. The Plan may be terminated at any time by vote of a majority
of the Trustees of the Trust who are not interested persons. Continuation of the
Plan is considered by such Trustees no less frequently than annually. During the
period  beginning  July 9, 1997 and ending June 30,  1998,  the Fund paid to the
Distribution  Coordinator  distribution  fees  totaling  $1,977 for the original
class of shares of the Fund.

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

     On occasions  when the Advisor  deems the purchase or sale of a security yo
be in the best interest of the Fund as well as other clients of the Advisor, the
Advisor,  to the  extent  permitted  by  applicable  laws and  regulations,  may
aggregate the  securities to be so purchased or sold in order to obtain the most
favorable price of lower brokerage 

                                      B-14

commissions and the most efficient execution.  In such event,  allocation of the
securities  so  purchased  or  sold,  as well as the  expenses  incurred  in the
transaction,  will be made by the Advisor in the manner it  considers to be most
equitable and consistent with its fiduciary  obligations to the Fund and to such
other clients.

     Brokerage  commissions  paid during the period  beginning July 9, 1997, and
ending June 30, 1998, aggregated $30,234.

                                 NET ASSET VALUE

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

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

     Generally,   trading  in  and   valuation  of   securities   in  Poland  is
substantially  completed  each day prior to the close of the NYSE.  In addition,
trading in, and valuation of, those  securities  may not take place on some days
in which the NYSE is open for trading. In that case, the price used to determine
the Fund's net asset value on the last day on which such  security was traded of
was priced will be used, unless the Trust's Board of Trustees  determines that a
different  price should be used.  Furthermore,  trading takes place in Poland on
days which the NYSE is not open for  trading on which the Fund's net asset value
is not calculated.  Occasionally, events affecting the values of such securities
in U.S.  dollars on a day on which the Fund  calculates  its net asset value may
occur  between  the times when such  securities  are valued and the close of the
NYSE that will not be reflected in the computation of the Fund's net asset value
unless the Board or its delegates deem that such events would materially  affect
the net asset value, in which case and adjustment would be made.

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

     The Fund's  securities,  including ADRs, EDRs and GDRs, which are traded on
securities  exchanges are valued at the last sale price on the exchange on which
such  securities  are  traded,  as of the  close  of  business  on the  day  the
securities are being valued or, lacking any reported  sales, at the mean between
the last available bid and asked price.  Securities that are traded on more than
one  exchange  are valued on the  exchange  determined  by the Advisor to be the
primary market.  Securities traded in the over-the-counter  market are valued at
the mean  between  the last  available  bid and asked price prior to the time of
valuation.  Securities  and assets for which market  quotations  are not readily
available (including  restricted  securities which are subject to limitations as
to their sale) are valued at fair value as  determined in good faith by or under
the direction of the Board.

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

     Any  assets  or  liabilities   initially  expressed  in  terms  of  foreign
currencies are translated  into U.S.  dollars at the official  exchange rate or,
alternatively,  at the  mean  of the  current  bid  and  asked  prices  of  such
currencies against the U.S. dollar last quoted by a major bank that is a regular
participant in the foreign  exchange market or on the basis of a pricing service
that takes into account the quotes  provided by a number of such major banks. if
neither of these  alternatives  is available or both are deemed not to provide a
suitable  methodology for converting a foreign currency into U.S.  dollars,  the
Board in good faith will establish a conversion rate for such currency.

                                      B-15

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

                                    TAXATION

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

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

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

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

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

     The Fund may receive dividend distributions from U.S. corporations.  To the
extent that the Fund receives such


                                      B-16

dividends  and  distributes  them to its  shareholders,  and meets certain other
requirements of the Code, corporate  shareholders of the Fund may be entitled to
the "dividends received" deduction.  Availability of the deduction is subject to
certain holding period and debt-financing limitations.

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

     The Fund may be subject  to  foreign  withholding  taxes on  dividends  and
interest earned with respect to securities of foreign corporations.

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

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

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

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

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

                                      B-17

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

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

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

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

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

                           DIVIDENDS AND DISTRIBUTIONS

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

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

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

     Any dividend or distribution  paid by the Fund reduces the Fund's net asset
value per share on the date paid 

                                      B-18

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

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

                             PERFORMANCE INFORMATION

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

TOTAL RETURN

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

         P(1 + T)n = ERV

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

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

     For the period from July 9, 1997 (commencement of operations)  through June
30, 1998, the Kaminski Poland Fund had a Total Return of (17.6)%.

YIELD

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

         YIELD = 2 [(a-b + 1)6 - 1]
                     ---     
                     cd

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

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

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

OTHER INFORMATION

     Performance  data of the Fund quoted in advertising  and other  promotional
materials  represents  past  

                                      B-19

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

                               GENERAL INFORMATION

     Advisors  Series  Trust  is  an  open-end  management   investment  company
organized as a Delaware  business  trust under the laws of the State of Delaware
on October  3,  1996.  The Trust  currently  consists  of 17 series of shares of
beneficial  interest,  par value of $0.01 per share.  The  Declaration  of Trust
permits the Trustees to issue an unlimited number of full and fractional  shares
of  beneficial  interest  and to divide or combine  the shares into a greater or
lesser number of shares without thereby  changing the  proportionate  beneficial
interest  in  the  Fund.   Each  share   represents  an  interest  in  the  Fund
proportionately  equal to the  interest  of each  other  share.  Upon the Fund's
liquidation, all shareholders would share pro rata in the net assets of the Fund
available for distribution to shareholders.

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

     If they deem it advisable  and in the best  interest of  shareholders,  the
Board of Trustees may create  additional series of shares which differ from each
other  only as to  dividends.  The Board of  Trustees  has  created 15 series of
shares,  and may  create  additional  series in the  future,  each of which have
separate assets and liabilities.  Income and operating expenses not specifically
attributable to a particular Fund are be allocated fairly among the Funds by the
Trustees, generally on the basis of the relative net assets of each Fund.

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

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

     The Fund's principal underwriter is First Fund Distributors,  Inc., 4455 E.
Camelback Road, Suite 261E,  Phoenix,  AZ 85018. The Fund's  custodian,  Firstar
Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202 is responsible for holding
the Funds' assets.  Citibank,  N.A. acts as the Fund's  sub-custodian in Poland.
American Data Services, 150 Motor Parkway,  Suite 109, Hauppauge,  NY 11788 acts
as  the  Fund's  transfer  agent  and  accounting  services  agent.  The  Fund's
independent  accountants,  PricewaterhouseCoopers  LLP 650 Third  Avenue  South,
Suite 1300,  Minneapolis,  MN 55402 assist in the preparation of certain reports
to the Securities and Exchange Commission and the Fund's tax returns.

                                      B-20

     The Fund is a management, open-end, diversified investment company.

     The validity of the shares offered by the prospectus  have been passed upon
by Paul, Hastings,  Janofsky & Walker LLP, 345 California Street, San Francisco,
California 94104.

     Shares of the Fund owned by the  Trustees and officers as a group were less
than 1% at April 30, 1999.

     On April 30, 1999, the following  additional persons owned of record and/or
beneficially more than 5% of the Fund's outstanding voting securities:

     Mager,  Donald V. and Shirley M., 2111 Delaware  Ave.,  St. Paul, MN 55118,
6.13% record.

                                      B-21

                            THE LIBERTY FREEDOM FUND

                       Statement of Additional Information

                               Dated June 29, 1998
                            Supplemented May 3, 1999

This Statement of Additional  Information is not a prospectus,  and it should be
read in conjunction  with the prospectus  dated June 29, 1998, as may be amended
from  time to time,  of The  Liberty  Freedom  Fund  (the  "Fund"),  a series of
Advisors Series Trust (the "Trust").  Liberty Bank and Trust Company, 3801 Canal
Street,  New Orleans,  Louisiana  70019,  is the Manager of the Fund.  The Edgar
Lomax  Company (the  "Advisor")  is the  Sub-Advisor  to the Fund. A copy of the
prospectus may be obtained from the Fund at 4101 Pauger Street, New Orleans,  LA
70122; or by calling the Fund's shareholder servicing agent at (888) 229-2105.

                                TABLE OF CONTENTS


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

                                                                                     
Investment Objective and Policies.............   B-2        Investment Objective and Policies

Management....................................   B-7        Management of the Fund

Portfolio Transactions and Brokerage..........   B-12       Management of the Fund

Net Asset Value...............................   B-12       Investor Guide

Taxation  ....................................   B-13       Distributions and Taxes

Dividends and Distributions...................   B-16       Distributions and Taxes

Performance Information.......................   B-16       General Information

General Information...........................   B-17       General Information


                                       B-1

                       INVESTMENT OBJECTIVES AND POLICIES

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

CONVERTIBLE SECURITIES AND WARRANTS

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

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

SHORT-TERM INVESTMENTS

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

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

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

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

                                       B-2

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

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

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

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

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

INVESTMENT COMPANY SECURITIES

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

GOVERNMENT OBLIGATIONS

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

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

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

                                      B-3

conditioned on a sovereign  debtor's  implementation  of economic reforms and/or
economic  performance  and the  timely  service  of such  debtor's  obligations.
Failure to meet such conditions  could result in the  cancellation of such third
parties'  commitments to lend funds to the sovereign  debtor,  which may further
impair  such  debtor's  ability or  willingness  to service its debt in a timely
manner.

FOREIGN INVESTMENTS AND CURRENCIES

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

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

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

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

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

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

REPURCHASE AGREEMENTS

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

                                      B-4

WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS

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

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

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

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

ILLIQUID SECURITIES

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

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

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

                                      B-5

may determine that such securities are not illiquid  securities  notwithstanding
their legal or contractual  restrictions on resale. In all other cases, however,
securities subject to restrictions on resale will be deemed illiquid.

INVESTMENT RESTRICTIONS

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

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

     In addition, the Fund may not:

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

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

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

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

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

     6. Purchase or sell commodities or commodity futures contracts;

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

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

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

     The Fund may not:

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

     2.  Invest  more  than  15% of its  net  assets  in  securities  which  are
restricted  as to  disposition  or  otherwise  are  illiquid  or have no readily
available  market  (except for  securities  which are determined by the Board of
Trustees to be liquid);

     3. Sell securities short;

     4. Make loans of securities; or

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

                                      B-6

                                   MANAGEMENT

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

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



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

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

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

George T. Wofford III            Trustee         Vice President, Information Services, Federal Home Loan Bank 
(Born 1939)                                      of San Francisco (since March, 1993); formerly Director of
305 Glendora Circle                              Management Information Services, Morrison & Foerster (law
                                                 firm).

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

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

Chris O. Moser (49)              Secretary       Employed by Investment Company Administration, LLC
4455 E. Camelback Road                           (since July,  1996);  formerly employed by Bank One, N.A.
Suite 261-E                                      (from August, 1995 until July, 1996); O'Connor, Cavanagh, Anderson,
Phoenix, AZ 85018                                Killingsworth and Beshears (law firm) (until August, 1995) .


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

NAME AND POSITION                        AGGREGATE COMPENSATION FROM THE TRUST*
- -----------------                        --------------------------------------
Walter E. Auch, Sr., Trustee                             $12,000
Donald E. O'Connor, Trustee                              $12,000
George T. Wofford III, Trustee                           $12,000

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

                                      B-7

THE MANAGER

     Subject to the supervision of the Board of Trustees,  investment management
and related  services  are  provided by the  Manager,  pursuant to a  Management
Agreement  (the  "Management  Agreement").   The  Manager  is  a  majority-owned
subsidiary of Liberty Financial Services, Inc.

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

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

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

                                      B-8

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

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

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

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

THE SUB-ADVISOR

     Subject to the supervision of the Board of Trustees,  investment management
and  related  services  are  also  provided  by  the  Advisor,   pursuant  to  a
Sub-Advisory Agreement (the "Advisory Agreement").

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

     Without limiting the generality of the foregoing, the Advisor has agreed to
(i)  furnish  the Fund with  advice  and  recommendations  with  respect  to the
investment of the Fund's assets,  (ii) effect the purchase and sale of portfolio
securities; (iii) manage and oversee the investments of the Fund, subject to the
ultimate  supervision  and  direction  of the Manager  and the Trust's  Board of
Trustees;  (iv) vote  proxies and take other  actions with respect to the Fund's
securities;  (v) maintain the books and records  required to be maintained  with
respect to the  securities in the Fund's  portfolio;  (vi) furnish such reports,
statements and other data on securities,  economic  conditions and other matters
related to the  investment  of the Fund's assets as the Trustees or the officers
of the Trust may  reasonably  request;  and (vii) render to the Trust's Board of
Trustees such periodic and special reports as the Board may reasonably  request.
The Advisor has also  agreed,  at its own  expense,  to maintain  such staff and
employ or retain such  personnel and consult with such other persons as it shall
from  time  to  time  determine  to be  necessary  to  the  performance  of  its
obligations under the Advisory Agreement.  Personnel of the Advisor may serve as
officers of the Trust provided they do so without  compensation  from the Trust.
Without limiting the generality of the foregoing, the staff and personnel of the
Advisor shall be deemed to include  persons  employed or retained by the Advisor
to furnish statistical  

                                      B-9

information,  research, and other factual information, advice regarding economic
factors  and  trends,  information  with  respect to  technical  and  scientific
developments,  and such other information,  advice and assistance as the Advisor
or the Trust's Board of Trustees may desire and reasonably request. With respect
to the operation of the Fund, the Advisor has agreed to be  responsible  for the
expenses of printing and  distributing  extra  copies of the Fund's  prospectus,
statement of additional  information,  and sales and advertising  materials (but
not the legal,  auditing or accounting  fees  attendant  thereto) to prospective
investors (but not to existing shareholders); and the costs of any special Board
of Trustees meetings or shareholder meetings convened for the primary benefit of
the Advisor.

     As compensation for the Advisor's  services,  the Fund pays it a fee at the
rate specified in the prospectus.  The Advisor may agree to waive certain of its
fees or reimburse the Fund for certain  expenses,  in order to limit the expense
ratio of the Fund.  In that event,  subject to approval by the Trust's  Board of
Trustees, the Fund may reimburse the Advisor in subsequent years for fees waived
and expenses reimbursed, provided the expense ratio before reimbursement is less
than the expense limitation in effect at that time.

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

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

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

     DISTRIBUTION  PLAN.  The Fund has adopted a  Distribution  Plan pursuant to
Rule 12b-1  under the 1940 Act with  respect to its Class A shares.  The Manager
acts as Distribution Coordinator under the Plan, and may make payments on behalf
of the Fund  for  distribution  and  related  expenses  of the  Fund,  including
preparation,  printing and mailing of prospectuses;  shareholder reports such as
semi-annual  and annual  reports,  performance  reports and  newsletters;  sales
literature and other promotional material to prospective investors;  direct mail
solicitation;  advertising;  public relations;  compensation of sales personnel,
advisors  or other  third  parties  for their  assistance  with  respect  to the
distribution  of the Funds'  shares;  payments to financial  intermediaries  for
shareholder support; administrative and accounting services with respect to Fund
shareholders;  and such other expenses related to the distribution of the Fund's
shares.

     Plan  payments will be reviewed by the  Trustees.  However,  it is possible
that at  times  the  amount  of the  Advisor's  compensation  could  exceed  the
Advisor's  distribution  expenses,  resulting in a profit to the Advisor. If the
Plan is terminated,  the Fund will not be required to make payments for expenses
incurred after the termination.

     THE  ADMINISTRATOR.  The  Administrator  has agreed to be  responsible  for
providing  such services as the Trustees may reasonably  request,  including but
not  limited to (i)  maintaining  the  Trust's  books and  records  (other  than
financial or accounting books and records maintained by any custodian,  transfer
agent or accounting  services  agent);  (ii)  overseeing  the Trust's  insurance
relationships;  (iii)  preparing  for the Trust  (or  assisting  counsel  and/or
auditors in the preparation of) all required tax returns,  proxy  statements and
reports  to the  Trust's  shareholders  and  Trustees  and  reports to and other
filings  with the  Commission  and any  other  governmental  agency  (the  Trust
agreeing to supply or cause to be supplied to the  Administrator  all  necessary
financial  and  other  information  in  connection  with  the  foregoing);  (iv)
preparing such  applications and reports as may be necessary to permit the offer
and sale of the shares of the Trust under the  securities  or "blue sky" laws of
the various  states  selected by the Trust (the Trust agreeing to pay all filing
fees or other  similar fees in  connection  therewith);  (v)  responding  to all
inquiries or other 

                                      B-10

communications of shareholders, if any, which are directed to the Administrator,
or if any such inquiry or  communication  is more properly to be responded to by
the Trust's custodian,  transfer agent or accounting services agent,  overseeing
their response thereto;  (vi) overseeing all relationships between the Trust and
any custodian(s),  transfer agent(s) and accounting services agent(s), including
the  negotiation  of agreements and the  supervision of the  performance of such
agreements;  and (vii)  authorizing  and  directing  any of the  Administrator's
directors,  officers and employees who may be elected as Trustees or officers of
the Trust to serve in the capacities in which they are elected.  All services to
be furnished by the Administrator  under this Agreement may be furnished through
the medium of any such directors, officers or employees of the Administrator.

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

Fund asset level                             Fee rate
- ----------------                             --------

First $50 million                            0.20% of average daily net assets

Next $50 million                             0.15% of average daily net assets

Next $50 million                             0.10% of average daily net assets

Next $50 million, and thereafter             0.05% of average daily net assets

                            DISTRIBUTION ARRANGEMENTS

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

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

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

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

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

                                      B-11

favorable than that available  from another  broker-dealer  if the difference is
reasonably  justified  by other  aspects  of the  portfolio  execution  services
offered.

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

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

                                 NET ASSET VALUE

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

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

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

     The Fund's  securities,  including ADRs, EDRs and GDRs, which are traded on
securities  exchanges are valued at the last sale price on the exchange on which
such  securities  are  traded,  as of the  close  of  business  on the  day  the
securities are being valued or, lacking any reported  sales, at the mean between
the last available bid and asked price.  Securities that are traded on more than
one  exchange  are valued on the  exchange  determined  by the Advisor to be the
primary market.  Securities traded in the over-the-counter  market are valued at
the mean  between  the last  available  bid and asked price prior to the time of
valuation.  Securities  and assets for which market  quotations  are not readily
available (including  restricted  securities which are subject to limitations as
to their sale) are valued at fair value as  determined in good faith by or under
the direction of the Board.

     Short-term debt obligations with remaining  maturities in excess of 60 days
are valued at current market prices, as discussed above.  Short-term  securities
with 60 days or less  remaining  to maturity  are,  unless  conditions  

                                      B-12

indicate  otherwise,  amortized  to maturity  based on their cost to the Fund if
acquired  within 60 days of maturity or, if already held by the Fund on the 60th
day, based on the value determined on the 61st day.

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

                                    TAXATION

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

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

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

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

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

                                      B-13

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

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

     The Fund may be subject  to  foreign  withholding  taxes on  dividends  and
interest earned with respect to securities of foreign corporations.

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

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

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

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

     Section 988 of the Code  contains  special tax rules  applicable to certain
foreign currency  transactions that may affect the amount,  timing and character
of income,  gain or loss  recognized  by the Fund.  Under these  rules,  foreign
exchange gain or loss realized with respect to foreign currency-denominated debt
instruments,  foreign 

                                      B-14

currency  forward   contracts,   foreign  currency   denominated   payables  and
receivables  and foreign  currency  options and  futures  contracts  (other than
options and futures contracts that are governed by the  mark-to-market and 60/40
rules of Section  1256 of the Code and for which no election is made) is treated
as ordinary  income or loss. Some part of the Fund's gain or loss on the sale or
other disposition of shares of a foreign  corporation may, because of changes in
foreign  currency  exchange  rates,  be treated as ordinary income or loss under
Section 988 of the Code rather than as capital gain or loss.

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

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

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

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

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

                           DIVIDENDS AND DISTRIBUTIONS

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

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

     The Fund also may derive  capital gains or losses in connection  with sales
or other  dispositions  of its portfolio  securities.  Any net gain the Fund may
realize  from  transactions  involving  investments  held less  than the  period
required for long-term  capital gain or loss recognition or otherwise  producing
short-term  capital  gains and losses  (taking  into  account any  carryover  of
capital losses from the eight previous  taxable years),  although a distribution
from capital gains,  will be distributed to  shareholders  with and as a part of
dividends giving rise to 

                                      B-15

ordinary income. If during any year the Fund realizes a net gain on transactions
involving  investments held more than the period required for long-term  capital
gain or loss  recognition  or otherwise  producing  long-term  capital gains and
losses,  the Fund will have a net long-term capital gain. After deduction of the
amount of any net short-term capital loss, the balance (to the extent not offset
by any capital losses  carried over from the eight previous  taxable years) will
be  distributed  and  treated  as  long-term  capital  gains in the hands of the
shareholders  regardless  of the length of time the Fund's  shares may have been
held by the shareholders.  For more information  concerning  applicable  capital
gains tax rates, see your tax advisor.

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

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

                             PERFORMANCE INFORMATION

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

TOTAL RETURN

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

         P(1 + T)n = ERV

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

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

YIELD

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

         YIELD = 2 [(a-b + 1)6 - 1]
                     ---
                      cd

                                      B-16

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

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

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

OTHER INFORMATION

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

                               GENERAL INFORMATION

     Advisors  Series  Trust  is  an  open-end  management   investment  company
organized as a Delaware  business  trust under the laws of the State of Delaware
on October  3,  1996.  The Trust  currently  consists  of 17 series of shares of
beneficial  interest,  par value of $0.01 per share.  The  Declaration  of Trust
permits the Trustees to issue an unlimited number of full and fractional  shares
of  beneficial  interest  and to divide or combine  the shares into a greater or
lesser number of shares without thereby  changing the  proportionate  beneficial
interest  in  the  Fund.   Each  share   represents  an  interest  in  the  Fund
proportionately  equal to the  interest  of each  other  share.  Upon the Fund's
liquidation, all shareholders would share pro rata in the net assets of the Fund
available for distribution to shareholders.

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

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

     The Fund intends to pay cash (U.S.  dollars) for all shares redeemed,  but,
under abnormal  conditions  that make payment in cash unwise,  the Fund may make
payment  partly in its portfolio  securities  with a current  amortized  cost or
market value, as appropriate,  equal to the redemption price.  Although the Fund
does  not  anticipate  that it will  make any part of a  redemption  payment  in
securities,  if such payment were made, an investor may incur brokerage costs in
converting  such securities to cash. The Trust has elected to be governed by the
provisions of Rule 18f-1 under the  Investment  Company Act,  which require that
the Fund pay in cash all 

                                      B-17

requests for redemption by any shareholder of record limited in amount, however,
during any 90-day  period to the  lesser of  $250,000  or 1% of the value of the
Fund's net assets at the beginning of such period.

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

         The Fund's principal underwriter is First Fund Distributors, Inc., 4455
E. Camelback Road, Suite 261E, Phoenix, AZ 85018. The Fund's custodian,  Firstar
Bank, 425 Walnut Street,  Cincinnati,  Ohio 45202 is responsible for holding the
Funds' assets. American Data Services, P.O. Box 5536, Hauppauge NY 11788 acts as
the Fund's transfer agent and accounting  services agent. The Fund's independent
accountants,  McGladrey & Pullen,  LLP, 555 Fifth  Avenue,  New York,  NY 10017,
assist in the  preparation  of certain  reports to the  Securities  and Exchange
Commission and the Fund's tax returns.

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

         Shares of the Fund owned by the  Trustees  and officers as a group were
less than 1% at June 29, 1998.

                                      B-18