Chase Growth Fund
May 13, 1998
Dear fellow Shareholder:
I want to begin by extending a warm welcome to all our shareholders. We
started the no-load, Chase Growth Fund on December 2, 1997 primarily to serve
"family and friends" who did not meet our substantial minimums for separate
account management. By the end of April, 84 shareholders had invested over
$3,000,000 with us. We appreciate the trust each of you is placing in our
management and we will be working very hard to deserve your continued
confidence.
We just celebrated our 40th anniversary at Chase Investment Counsel
Corp. and we are the oldest independent investment counsel firm domiciled in
Virginia. We manage $700 million for 65 clients in twenty states and we intend
to continue serving a relatively small number of separate accounts of which the
Chase Growth Fund is one. We have a number of advantages over many of the
larger, better known funds. As a smaller fund we have much more flexibility in
buying and selling securities without a significant market impact. The
marketability of a stock is not "wagging the investment selection dog." Your
fund is managed by our two senior portfolio managers, David Scott and myself who
average 30 years experience through good and bad markets. As part of a new fund,
shareholders are not buying into a portfolio which already has a substantial
capital gain thus subjecting themselves to deferred taxes on gains they did not
even enjoy.
It seems to us that many of the large mutual fund organizations have
de-emphasized professional investment management and become huge asset gathering
organizations with little or no opportunity for even their larger investors to
talk with an investment professional. We will be striving to serve Chase Growth
Fund shareholders better and we welcome your suggestions.
From December 2 through March 31 our fund enjoyed a total return
including dividends of 14.32% compared with 13.95% for the Standard & Poor's 500
Composite Stock Price Index (S&P "500"). On average we were a little under 80%
invested in equities, but by the end of March your fund was 99.3% invested in 42
stocks. Our heaviest industry concentrations were on Computer and Services,
Drugs, Financial Services, Insurance and Retail. During the first quarter our
best performing stocks were Ethan Allen +54.9%, American Bankers Insurance Group
+40.4%, Microsoft +38.5%, Pfizer +33.7%, TJX Cos. +32.5% and Schering Plough
+31.6%.
We are in a very difficult market environment. Based on all historical
norms, stocks are ahead of fundamentals. Valuation measurements such as Price to
Earnings, Price to Book Value, and Price to Dividends (low yields) are near
record high levels. For a couple of years, this has been a Supply/Demand and
momentum driven market. As long as high levels of money flows (buying) continue
to exceed selling and new stock offerings, prices should continue higher. While
the general market still is in an uptrend, there are signs of topping. Indeed,
the market would be healthier if it consolidated the abnormally rapid gains of
the last few years and let corporate earnings and dividends catch up.
Our investment process combines fundamental, quantitative and technical
research. We seek good quality growing companies with above average earnings
growth, strong balance sheets, and reasonable prices. Currently we are invested
in stocks with relatively low betas (volatility) in our attempt to improve
defensive qualities. We believe that the stocks of your fund's companies
represent relatively outstanding investment values. In the table below, we
compare the characteristics of our fund's stocks to the S&P "500". On average
the Chase Growth Fund stocks have enjoyed more consistent, substantially higher
5
<PAGE>
year earnings growth rates (22% vs. 15%), are significantly more profitable with
a Return on Equity of 30% vs. 22%, and have stronger balance sheets with Debt to
Total Capital of 18% vs. 33% for the S&P "500", yet sold at about the same price
earnings multiple based on `98 estimated earnings.
CHASE GROWTH FUND STOCKS VS. S&P 500
March 31, 1998
Chase Growth
Fund Stocks S&P 500
----------- -------
Last 5 Year Earnings Growth 22% 15%
Return on Equity 30% 22%
Debt/Total Capital 18% 33%
Reinvestment Rate 23% 13%
Weighed Avg. Capitalization
(Billions) 40.5 64.3
Price/Earnings Estimated '97 27.9 27.7
Price/Earnings Estimated '98 25.0 25.3
Weighed Avg. Beta (Volatility) 0.91 1.00
Source: Chase Investment Counsel. This information is based on certain
assumptions and historical data and is not a prediction of future results for
the Fund or companies held in the Fund's portfolio. S&P 500 earnings are based
on reported figures after writeoffs.
* The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks
designed to represent the broad domestic economy.
Although there can be no assurance that we will meet our objective, we
believe that a long term (more than 10 years) average annual total return goal
of 15% is possible. That goal is based on our many years of experience and the
performance of our five largest separately managed portfolios during the last 24
years. Our goal is significantly above the long term market returns of 10 to
11%. An investment return of 15% means doubling in five years, quadrupling in
ten, before taxes. We do not believe it is realistic for investors to expect
more. The Bank Credit Analyst cited a survey earlier this year which indicated
that U.S. mutual fund investors expect annual returns of 34% from stocks over
the next several years, a rate more than 3X greater than the average long term
return for U.S. equities. Such expectations suggest extreme investor euphoria.
As an equity fund we expect to be 80 to 100% invested in equities. We will be
working hard to find, analyze and invest in relatively attractive stocks. The
officers and employees of Chase Investment Counsel Corp., many of whom are
fellow shareholders, appreciate your confidence and we look forward to a long
investment relationship together.
TOP 10 HOLDINGS
1. Microsoft 6. American International Group
2. Schering Plough 7. Genetech, Inc.
3. TJX Companies 8. Albertsons, Inc.
4. Wal-Mart Stores 9. Carnival Corp.
5. Herman Miller, Inc. 10. BMC Software
/s/ Derwood S. Chase Jr.
President, Chase Investment
Counsel Corporation
<PAGE>
Chase Growth Fund
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at March 31, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 99.26% Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Apparel: 0.05%
25 Jones Apparel Group, Inc.*.............................................. $ 1,377
-------
Bio-Technology: 3.73%
1,450 Genentech, Inc.*........................................................ 102,134
-------
Building: 4.68%
752 Home Depot, Inc......................................................... 51,230
2,100 Oakwood Homes Corp...................................................... 76,912
-------
128,142
-------
Computer and Services: 12.79%
1,100 BMC Software, Inc.*..................................................... 92,228
1,400 Computer Associates International....................................... 80,850
1,325 Microsoft Corp.*........................................................ 118,546
1,400 Sun Microsystems, Inc.*................................................. 58,406
-------
350,030
-------
Conglomerates: 3.78%
1,800 Applied Power Inc. - Class A............................................ 69,300
900 Dover Corp.............................................................. 34,200
-------
103,500
-------
Containers: 2.87%
1,200 Sealed Air Corp.*....................................................... 78,600
-------
Drugs: 7.38%
650 Bristol-Myers-Squibb Co................................................. 67,803
200 Pfizer, Inc............................................................. 19,937
1,400 Schering-Plough Corp.................................................... 114,363
-------
202,103
-------
Electrical Equipment: 1.89%
600 General Electric Co..................................................... 51,713
-------
Energy/Oil Service: 2.28%
680 Diamond Offshore Drilling............................................... 30,855
720 Tidewater, Inc.......................................................... 31,545
-------
62,400
-------
Finance/Banks: 3.60%
725 Northern Trust Corp..................................................... 54,239
650 State Street Corp....................................................... 44,241
-------
98,480
-------
</TABLE>
3
<PAGE>
Chase Growth Fund
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at March 31, 1998 (Unaudited), Continued
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial Services: 9.12%
1,100 Federal National Mortgage Association................................... $ 69,575
1,200 SLM Holding Corp........................................................ 52,350
850 SunAmerica, Inc......................................................... 40,694
1,450 Travelers Group, Inc.................................................... 87,000
--------
249,619
--------
Home Furnishings: 4.73%
1,050 Ethan Allen Interiors Inc............................................... 62,737
1,300 Leggett & Platt, Inc.................................................... 66,869
--------
129,606
--------
Household Product: 0.71%
230 Proctor & Gamble Co..................................................... 19,406
--------
Insurance - Life/Health: 5.83%
550 Conseco, Inc............................................................ 31,144
1,065 Protective Life Corp.................................................... 77,745
1,100 Reliastar Financial Corp................................................ 50,669
--------
159,558
--------
Insurance - Property/Casualty: 4.72%
350 American Bankers Insurance Group........................................ 22,575
847 American International Group, Inc....................................... 106,669
--------
129,244
--------
Leisure Time: 3.44%
1,350 Carnival Corp. - Class A................................................ 94,162
--------
Office Furniture: 3.92%
3,200 Herman Miller, Inc...................................................... 107,300
--------
Retail: 5.96%
1,200 Gap, Inc................................................................ 54,000
2,150 Wal-Mart Stores, Inc.................................................... 109,247
--------
163,247
--------
Retail (Specialty): 7.85%
2,050 Pier 1 Imports, Inc..................................................... 55,606
1,100 Ross Stores, Inc........................................................ 48,572
2,450 TJX Companies, Inc...................................................... 110,863
--------
215,041
--------
</TABLE>
4
<PAGE>
Chase Growth Fund
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS at March 31, 1998 (Unaudited), Continued
- -------------------------------------------------------------------------------------------------------------------
Shares Market Value
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retail Drug Stores: 0.77%
600 Walgreen Co............................................................. $ 21,113
----------
Retail - Grocers: 6.33%
1,800 Albertson's, Inc........................................................ 94,725
1,700 Kroger Co.*............................................................. 78,519
----------
173,244
----------
Service Companies: 2.83%
1,800 CDI Corp.*.............................................................. 77,512
----------
Total Common Stocks (cost $2,432,418)................................... 2,717,531
----------
Principal Amount SHORT-TERM INVESTMENTS: 5.45%
- -------------------------------------------------------------------------------------------------------------------
$149,120 Star Treasury Fund, 4.95% (cost $149,120)............................... 149,120
----------
Total Investments in Securities (cost $2,581,538+): 104.71% ............ 2,866,651
Liabilities in excess of Other Assets: (4.71)%.......................... (128,969)
----------
Total Net Assets: 100.0% ............................................... $2,737,682
==========
*Non-incoming producing security.
+At March 31, 1998, the cost of securities for Federal tax purposes was the same as the basis for financial
reporting. Unrealized appreciation and depreciation of securities were as follows:
Gross unrealized appreciation........................................... $ 310,299
Gross unrealized depreciation........................................... (25,186)
----------
Net unrealized appreciation....................................... $ 285,113
==========
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
Chase Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments in securities, at value (identified cost $2,581,538) (Note 2) ............. $ 2,866,651
Receivables:
Fund shares sold................................................................. 10,000
Dividends and interest........................................................... 931
Due from Advisor................................................................. 4,615
Prepaid expenses....................................................................... 4,023
-----------
Total assets .............................................................. 2,886,220
-----------
LIABILITIES
Payables:
Portfolio securities purchased................................................... 137,280
Administration fee............................................................... 2,598
Accrued expenses....................................................................... 8,660
-----------
Total liabilities.......................................................... 148,538
-----------
NET ASSETS................................................................................... $ 2,737,682
===========
Net asset value, offering price and redemption price per share
($2,737,682/239,774 shares outstanding;
unlimited number of shares (par value $.01) authorized) ......................... $11.42
======
SOURCE OF NET ASSETS
Paid-in capital ....................................................................... $ 2,459,472
Dividends in excess of net investment income........................................... (329)
Accumulated net realized loss on investment transactions............................... (6,574)
Net unrealized appreciation of investments............................................. 285,113
-----------
Net assets ...................................................................... $ 2,737,682
===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
Chase Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period December 2, 1997* through March 31, 1998 (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends........................................................................ $ 2,648
Interest......................................................................... 6,735
---------
Total income............................................................... 9,383
---------
Expenses:
Custodian and accounting fees.................................................... 6,746
Advisory fees (Note 3)........................................................... 5,506
Administration fee (Note 3)...................................................... 5,404
Professional fees................................................................ 4,850
Transfer agent fees.............................................................. 3,811
Reports to shareholders.......................................................... 1,978
Other ........................................................................... 1,947
Directors' fees.................................................................. 1,892
Registration fees................................................................ 291
---------
Total expenses............................................................. 32,425
Less: Advisory fee waiver and absorption (Note 3).......................... (24,068)
---------
Net expenses............................................................... 8,357
---------
Net investment income ............................................... 1,026
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on security transactions....................................... (6,574)
Net change in unrealized appreciation of investments............................. 285,113
---------
Net realized and unrealized gain on investments............................ 278,539
---------
Net Increase in Net Assets Resulting from Operations ................ $ 279,565
=========
</TABLE>
*Commencement of operations.
See Notes to Financial Statements.
7
<PAGE>
Chase Growth Fund
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
December 2, 1997*
through
March 31, 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income...................................................................... $ 1,026
Net realized loss on security transactions................................................. (6,574)
Net change in unrealized appreciation of investments....................................... 285,113
----------
Net increase in net assets resulting from operations ................................ 279,565
----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income...................................................................... (1,355)
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions (a)..................... 2,434,472
----------
Total increase in net assets ........................................................ 2,737,682
NET ASSETS
Beginning of period........................................................................ 25,000
----------
End of period (including dividends in excess of net investment income of $329)............. $2,737,682
==========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
December 2, 1997*
through
March 31, 1998
----------------------------
Shares Value
------- ----------
<S> <C> <C>
Shares sold................................................................. 241,530 2,477,117
Shares issued on reinvestments of distributions............................. 134 1,355
Shares redeemed............................................................. (1,890) (19,000)
------- ----------
Net increase................................................................ 239,774 $2,459,472
======= ==========
</TABLE>
*Commencement of operations.
See Notes to Financial Statements.
8
<PAGE>
Chase Growth Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Per Share Operating Performance (Unaudited)
(For a share outstanding throughout the period)
- -------------------------------------------------------------------------------------------------------------------
December 2, 1997*
through
March 31, 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period....................................................... $10.00
------
Income from investment operations:
Net investment income................................................................ .01
Net realized and unrealized gain on investments...................................... 1.42
------
Total from investment operations........................................................... 1.43
------
Less distributions:
From net investment income........................................................... (.01)
------
Net asset value, end of period............................................................. $11.42
======
Total Return .............................................................................. 14.32%**
Ratios/supplemental data:
Net assets, end of period (thousands)...................................................... $2,738
Ratio of expenses to average net assets:
Before expense reimbursement......................................................... 5.71%+
After expense reimbursement.......................................................... 1.48%+
Ratio of net investment (loss) income to average net assets:
Before expense reimbursement......................................................... (4.06%)+
After expense reimbursement.......................................................... 0.18%+
Portfolio turnover rate.................................................................... 8.90%
Average commission rate paid per share..................................................... $.0839
</TABLE>
*Commencement of operations.
**Not Annualized.
+Annualized.
See Notes to Financial Statements.
9
<PAGE>
Chase Growth Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Chase Growth Fund (the "Fund") is a series of shares of Advisors
Series Trust (the "Trust"), which is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Fund began
operations on December 2, 1997. The Fund's objective is growth of capital.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation: The Fund's investments are carried at market
value. Securities listed on an exchange or quoted on a National
Market System are valued at the last sale price. Other securities
are valued at the mean between the last bid and asked prices.
Securities for which market quotations are not readily available, if
any, are valued following procedures approved by the Board of
Directors. Short-term investments are valued at amortized cost,
which approximates market value.
B. Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no federal income tax
provision is required.
C. Security Transactions, Dividends and Distributions: Security
transactions are accounted for on the trade date. Dividend income
and distributions to shareholders are recorded on the ex-dividend
date. Realized gains and losses on securities sold are determined
under the identified cost basis.
D. Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and
decreases in net assets during the reporting period. Actual results
could differ from those estimates.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period ended March 31, 1998, Chase Investment Counsel Corp. (the
"Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities, and provides most of the personnel needed by the Fund.
As compensation for its services, the Advisor is entitled to a monthly fee at
the annual rate of 1.00% based upon the average daily net assets of the Fund.
The Fund is responsible for its own operating expenses. The Advisor has
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 to 1.48% of average net assets (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 the first, second or third fiscal year next
succeeding the fiscal year of the reduction or absorption if the aggregate
amount actually paid by
10
<PAGE>
Chase Growth Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
the Fund toward the operating expenses for such fiscal year (taking into account
the reimbursement) does not exceed the applicable limitation on Fund expenses.
At this time, the Advisor intends to continue to reduce fees payable to it by
the Fund or to pay Fund operating expenses such that the Total Fund Operating
Expense Ratio will not rise above 1.48% of average net assets annually. With
respect to the reimbursement of a particular fee reduction or expense payment, a
reimbursement to the Advisor is permitted only within the three year period
following the year in which the Advisor reduced the subject fee or paid the
subject expense. Any such reimbursement is also contingent upon Board of
Trustees review and approval at the time the reimbursement is made. Such
reimbursement may be paid prior to the Fund's payment of current expenses if so
requested by the Advisor even if that practice may require the Advisor to waive,
reduce or absorb current Fund expenses. For the period ended March 31, 1998, the
Advisor reduced its fees and absorbed Fund expenses in the amount of $24,068; no
amounts were reimbursed.
Investment Company Administration Corporation (the "Administrator") acts
as the Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund's expenses and reviews the
Fund's expense accruals. For its services, the Administrator receives a monthly
fee per portfolio at the annual rate of 0.20% of average daily net assets,
subject to a minimum fee of $30,000 annually.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers of the Fund are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITES
For the period ended March 31, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$2,567,972 and $129,130, respectively.
11
<PAGE>
Advisor
Chase Investment Counsel Corp.
300 Preston Avenue, Suite 403
Charlottesville, Virginia 22902-5091
========
--------
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261-E
Phoenix, Arizona 85018
========
--------
Custodian
Star Bank, N.A.
425 Walnut Street, M/L 6118
Cincinnati, Ohio 45202
========
--------
Transfer Agent
American Data Services
P.O. Box 5536
Hauppauge, New York 11788-0132
========
--------
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104
CHASE
GROWTH
FUND
Semi-Annual
Report
dated March 31, 1998
-----------------
Chase Investment Counsel Corp.
300 Preston Avenue
Suite 403
Charlottesville, Virginia 22902-5091
Advisor: 804-293-9104
Shareholder Servicing: 888-861-7556
<PAGE>
ROCKHAVEN ASSET MANAGEMENT
The Risk Managers
THE ROCKHAVEN FUND
THE ROCKHAVEN PREMIER
DIVIDEND FUND
Semi-Annual Report
For the period ended March 31, 1998
<PAGE>
Dear Investor:
This is the first shareholder letter we've written since the Funds' inception in
November 1997, so we want to start with a simple thank you. We realize that you
have literally thousands of mutual funds from which to choose to invest your
hard-earned savings. We appreciate the confidence you have shown in us by
becoming fellow shareholders (all of the Rockhaven employees have a significant
portion of their net worth invested in the Funds), and we will continue to work
hard to justify your confidence. Again, thanks.
Our goal is to offer investors total returns which are competitive with the S&P
500 over the long run, with less downside risk, and a yield significantly
greater than the S&P 500 yield. Risk control is foremost in our investment
process. In order to attempt to achieve our goals, we manage by the following
guidelines.
- -- No market timing . . . we are always fully invested.
- -- No sector betting . . . we are sector neutral to the S&P 500.
- -- Focus purely on security selection.
Performance
- -----------
Period Quarter
11/3/97 - 3/31/98 Inception Date 1/1/98 - 3/31/98 Since Inception
Rockhaven Fund 11/3/97 11.33% 14.66%
Rockhaven Premier
Dividend Fund 11/3/97 10.41% 11.58%
Lipper Equity
Income Average 8.80% 14.23%
S&P 500 Index 13.95% 18.12%
Dow Jones
Industrial Average 11.74% 15.63%
"Beware of he who uses statistics as a drunken man uses lamp posts . . . for
support rather than illumination."
--Andrew Lang
<PAGE>
Other than baseball, investment management is one of the few professions where
your performance lends itself to daily analysis, praise, and criticism. You have
to be humble and have a thick skin to last in either profession.
At Rockhaven, we try to use performance analysis for illumination, not just
support. Our first rule is KISS - Keep It Simple Stupid. Our second rule is that
investors should strive for the highest possible return at the lower level of
risk. The magic word is "risk", and the $64,000 question is how should you
measure it?
Before we address risk, let's first look at the return portion of the equation.
From the Funds' inception on November 3, 1997 through March 31, 1998, the
Rockhaven Fund was up 14.66% and the Premier Dividend Fund was up 11.58%. On an
absolute basis, this looks pretty impressive for only five months. But when
compared to the S&P 500's meteoric rise of 18.12%, it is pretty ho-hum.
Now let's look at the risk side of the puzzle. Risk is often measured
statistically as beta or standard deviation, which are simply measures of
volatility. Therefore, beta and standard deviation measure risk on both the
upside and downside. While this is not a bad place to start, I have yet to meet
the investor who is upset that our upside volatility is greater than the market.
What investors are concerned with is downside volatility . . . more commonly
known as "loss".
In contrast, our view is that the best measure of risk is how we perform versus
a risk-free investment, such as a Treasury bill, when the market corrects. In
other words, how much downside risk are our Funds taking. The table below
highlights every correction in the S&P 500 over the last five months that was
greater than 2%. As you can readily see, both our Funds outperformed the S&P 500
during all four corrections, and on average, our Funds had only 75% of the S&P
500's underperformance. We realize that five months is a short time frame, but
for these Funds, it's all we have to work with.
In summary, we believe we are off to a good start--not a great start--but when
factoring in risk, it's a good start.
<PAGE>
Downside Performance (Corrections 2%)
The Rockhaven Fund (RF) &
The Rockhaven Premier Dividend Fund (RPDF)
Vs. S&P 500 (SPX)
<TABLE>
<CAPTION>
Total Total Total
Return Underperf. Return Underperf. Return Underperf. T-Bill
RF vs. T-Bill RPDF vs. T-Bill SPX vs. T-Bill Return
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/5/97-11/12/97 -3.23% -3.33% -3.62% -3.72% -3.84% -3.94% 0.095%
12/5/97-12/26/97 -3.25% -3.54% -3.23% -3.52% -4.75% -5.04% 0.287%
1/5/98-1/9/98 -4.24% -4.31% -4.04% -4.11% -5.02% -5.09% 0.066%
1/20/98-1/26/98 -1.17% -1.25% -0.98% -1.06% -2.20% -2.28% 0.084%
Total underperf. -12.42% -12.40% -16.34%
Total periods 4 4 4
Avg. underperf. -3.11% -3.10% -4.09%
</TABLE>
The performance data represents past performance and is not indicative of future
results. Investment returns and principal values will fluctuate so that
investors' shares, when redeemed, may be worth more or less than original cost.
Market Commentary
- -----------------
"When everyone is insane, `tis folly to be wise."
--Shakespeare
In Graham & Dodd's 1934 edition of Security Analysis, they had the following
comments on the "new era" thinking that was prevalent in 1929:
"Under New Era thinking, the investment process to consist of merely
finding prominent companies with a rising trend of earnings, and then
buying the shares regardless of price. Hence the sound policy was to buy
only what everyone else was buying - a select list of highly popular and
exceedingly expensive issues - the blue chips. The original idea of
searching for undervalued and neglected issues has dropped out of sight.
Investment trusts can boast that their portfolios consist exclusively of
the most popular and highly priced stocks. And with but slight
exaggeration, it might be asserted that under this convenient technique of
investment, the affairs of funds can be administered by the intelligence
training, and labors of a single $30-a-week clerk."
<PAGE>
We continue to be amazed at the sheer strength of this bull market, and we
continue to be fully invested and scared to death. During the first quarter, the
consumer seemed to be the main driver. Given rising real disposable personal
income, a lower debt burden, and high levels of confidence stemming from full
employment and the wealth effect (both stocks and real estate) the consumer is
king. Our best performing stocks in the quarter reflect that theme: Sears,
BancOne, Ford, McDonalds, and J.C. Penney.
On the other hand, the slow down in Asia has sapped many a tech stock and the
entire energy industry. Giving us our list of biggest losers in the quarter:
Adaptec, Motorola, Philip Morris, Diamond Offshore, and Parker Drilling.
The market continues to be supported by low inflation and interest rates, stable
earnings, and massive liquidity. The weakest leg in this trio is earnings. While
the Asian contagion has caused analysts to significantly lower their estimates
for the first quarter, many of them believe that earnings growth will bounce
back strongly in the second half. This is clearly the market's weakest link. If
earnings don't bounce back, we could be in for a tough fall, but until then, the
biggest risk is not participating.
/s/ Chris Wiles
Chris Wiles
President, Rockhaven Asset Management
<PAGE>
The Rockhaven Rund
SCHEDULE OF INVESTMENTS at March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
COMMON STOCKS &
Shares CONVERTIBLE SECURITIES: 92.64% Market Value
- --------------------------------------------------------------------------------
Aerospace: 1.06%
350 B.F. Goodrich Co.............................. $ 17,872
--------
Basic Materials: 4.03%
800 Allegheny Teledyne Inc........................ 22,250
550 IMC Global, CONV PRD 6.25%.................... 20,900
800 Royal Group Technologies,
CONV PRD 6.875%............................... 24,800
--------
67,950
--------
Classified Goods/Diversified: 7.55%
500 Emerson Electric Co........................... 32,594
700 Fluor Corp.................................... 34,825
300 General Electric Co........................... 25,856
500 PPG Industries, Inc........................... 33,969
--------
127,244
--------
Consumer Cyclical: 4.09%
550 Ford Motor Co................................. 35,647
1,250 Tupperware Corp............................... 33,281
--------
68,928
--------
Energy: 7.56%
250 British Petroleum Co. plc, ADR................ 21,515
20,000 Diamond Offshore Drilling Inc.,
CONV BOND 3.75%, due 2/15/2007................ 25,350
350 Exxon Corp.................................... 23,669
700 Shell Transport & Trading, ADR................ 30,975
425 Tosco Corp., CONV PRD 5.75%................... 25,925
--------
127,434
--------
Finance: 15.32%
730 Banc One Corp................................. 46,173
300 Bankers Trust NY Corp......................... 36,094
250 J.P. Morgan & Co., Inc........................ 33,578
900 National Australia Bank Ltd.,
CONV PRD 7.875%............................... 26,100
300 NationsBank (JP), CONV PRD 7.25%.............. 37,688
6
<PAGE>
The Rockhaven Rund
SCHEDULE OF INVESTMENTS at March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Finance, continued
1,900 Pacific Century Financial Corp................ $ 45,243
500 Wilmington Trust Corp......................... 33,281
--------
258,157
--------
Health Care: 10.69%
400 American Home Products........................ 38,150
700 Baxter International Inc...................... 38,588
375 Johnson & Johnson............................. 27,491
250 Merck & Co., Inc.............................. 32,094
1,000 Pharmacia & Upjohn, Inc....................... 43,750
--------
180,073
--------
Retailing: 5.09%
450 J.C. Penney Company, Inc...................... 34,059
900 Sears, Roebuck & Co........................... 51,694
--------
85,753
--------
Services: 5.77%
550 McDonald's Corporation........................ 33,000
1,550 Readers Digest, CONV PRD 8.25%................ 41,172
900 Sysco Corporation............................. 23,063
--------
97,234
--------
Staples: 8.23%
900 DIMON Inc., CONV PRD 8.50%.................... 15,750
900 DIMON Inc..................................... 15,019
700 Dole Food Co., Inc. CONV PRD 7.00%............ 31,675
300 General Mills, Inc............................ 22,800
450 H.J. Heinz Company............................ 26,269
650 Philip Morris Companies....................... 27,097
--------
138,610
--------
Technology: 15.76%
23,000 Adaptec Inc., CONV BOND 4.75%,
due 2/1/2004.................................. 19,148
700 Adaptec, Inc.*................................ 13,759
650 AMP Incorporated.............................. 28,478
350 Hewlett-Packard Company....................... 22,181
7
<PAGE>
The Rockhaven Rund
SCHEDULE OF INVESTMENTS at March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Technology, continued
30,000 Kent Electronics Corp.,
CONV BOND 4.50%, due 9/1/2004................. $ 25,087
600 Kent Electronics Corp.*....................... 12,638
650 Microsoft Corporation,
CONV PRD $2.196............................... 60,166
600 Motorola, Inc................................. 36,375
450 Pitney Bowes, Inc............................. 22,584
25,000 Xilinx Inc., CONV BOND 5.25%,
due 11/1/2202................................. 25,063
----------
265,479
----------
Transportation: 1.00%
300 Union Pacific Corp............................ 16,856
----------
Utility: 6.48%
650 MCN Energy Group, Inc.,
CONV PRD 8.75%................................ 21,206
750 Pacific Enterprises........................... 30,609
450 Cincinnati Bell CONV PRD 6.25%................ 30,038
500 U.S. West Communications...................... 27,375
----------
109,228
----------
Total Common Stocks and Convertible
Securities (cost $1,465,833).................. 1,560,818
----------
Principal Amount SHORT-TERM INVESTMENTS: 9.84%
- --------------------------------------------------------------------------------
$165,709 Star Treasury Fund, 4.99%..................... 165,709
----------
Total Investments in Securities
(cost $1,631,542+):102.48% ................ 1,726,527
Liabilities less Other Assets: (2.48%)........ (41,746)
----------
Total Net Assets: 100.0% ..................... $1,684,781
==========
*Non-income producing security.
8
<PAGE>
The Rockhaven Rund
SCHEDULE OF INVESTMENTS at March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Market Value
- --------------------------------------------------------------------------------
+At March 31, 1998, the cost of securities for Federal tax purposes was the same
as the basis for financial reporting. Unrealized appreciation and depreciation
of securities were as follows:
Gross unrealized appreciation................. $ 103,881
Gross unrealized depreciation................. (8,896)
---------
Net unrealized appreciation............... $ 94,985
=========
See Notes to Financial Statements.
9
<PAGE>
The Rockhaven Rund
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(identified cost $1,631,542) ........................... $1,726,527
Receivables:
Fund shares sold........................................ 11,363
Dividends and interest.................................. 3,199
Due from Advisor........................................ 8,061
Subscriptions........................................... 100,000
Prepaid expenses........................................... 13,946
----------
Total assets ........................................ 1,863,096
----------
LIABILITIES
Payables:
Administration fee...................................... 2,548
Dividends............................................... 1,032
Securities purchased.................................... 162,445
Accrued expenses........................................... 12,290
----------
Total liabilities.................................... 178,315
----------
NET ASSETS.................................................... $1,684,781
==========
Net asset value, offering and redemption
price per share ($1,684,781/147,693 shares
outstanding; unlimited number of shares
(par value $.01) authorized)............................ $11.41
======
COMPONENTS OF NET ASSETS
Paid-in capital ........................................... $1,590,365
Dividends in excess of net investment income............... (38)
Accumulated net realized loss on investments............... (531)
Net unrealized appreciation on investments................. 94,985
----------
Net assets ............................................. $1,684,781
==========
See Notes to Financial Statements.
10
<PAGE>
The Rockhaven Rund
STATEMENT OF OPERATIONS
For the Period from November 3, 1997* through March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends............................................... $ 7,660
Interest................................................ 1,562
--------
Total income......................................... 9,222
--------
Expenses
Advisory fees (Note 3).................................. 2,048
Administration fee (Note 3)............................. 12,082
12b-1 expense........................................... 683
Custodian and accounting fees........................... 8,539
Transfer agent fees..................................... 5,236
Professionals' fees..................................... 6,042
Trustees' fees.......................................... 2,396
Registration fees....................................... 2,865
Reports to shareholders................................. 2,820
Other expenses.......................................... 2,115
--------
Total expenses....................................... 44,826
Less, Advisory fee waiver and
absorption (Note 3).................................. (40,730)
Net expenses......................................... 4,096
--------
Net investment income ............................ 5,126
--------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized loss from security transactions............ (531)
Net change in unrealized appreciation
on investments........................................ 94,985
--------
Net realized and unrealized gain
on investments..................................... 94,454
--------
Net Increase in Net Assets Resulting
from Operations ................................ $ 99,580
========
*Commencement of operations.
See Notes to Financial Statements.
11
<PAGE>
The Rockhaven Rund
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
November 3, 1997*
through
March 31, 1998
- --------------------------------------------------------------------------------
NET INCREASE IN ASSETS FROM
OPERATIONS
Net investment income......................................... $ 5,126
Net realized loss from security transactions.................. (531)
Net change in unrealized appreciation of securities........... 94,985
----------
Net increase in net assets resulting
from operations ......................................... 99,580
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................................... (5,163)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a)................................... 1,590,364
----------
Total increase in net assets .............................. 1,684,781
NET ASSETS
Beginning of period........................................... -0-
----------
End of period (including dividends in excess of net
investment income of $38)................................... $1,684,781
==========
(a) A summary of capital share transactions is as follows:
November 3, 1997*
through
March 31, 1998
----------------------
Shares Value
----------------------
Shares sold................................ 147,296 $1,586,032
Shares issued in reinvestment
of distributions......................... 397 4,332
Shares redeemed............................ (0) (0)
----------------------
Net increase............................... 147,693 $1,590,364
======================
*Commencement of operations.
See Notes to Financial Statements.
12
<PAGE>
The Rockhaven Rund
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
- --------------------------------------------------------------------------------
November 3, 1997*
through
March 31, 1998
- --------------------------------------------------------------------------------
Net asset value, beginning of period........................ $ 10.00
Income from investment operations:
Net investment income.................................... 0.08
Net realized and unrealized gain on investments.......... 1.38
-------
Total from investment operations............................ 1.46
-------
Less distributions:
Dividends from net investment income..................... (0.05)
-------
Net asset value, end of period.............................. $ 11.41
=======
Total return ............................................... 14.66%+
Ratios/supplemental data:
Net assets, end of period (thousands)....................... $ 1,864
Ratio of expenses to average net assets:
Before expense reimbursement............................. 16.03%++
After expense reimbursement.............................. 1.47%++
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement............................. (12.73%)++
After expense reimbursement.............................. 1.83%++
Portfolio turnover rate..................................... 26.17%
Average commission rate paid per share...................... $0.0600
*Commencement of operations.
+Not annualized.
++Annualized.
See Notes to Financial Statements.
13
<PAGE>
The Rockhaven Premier Dividend Rund
SCHEDULE OF INVESTMENTS at March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
COMMON STOCKS &
Shares CONVERTIBLE SECURITIES: 98.35% Market Value
- --------------------------------------------------------------------------------
Aerospace: 1.63%
300 B.F. Goodrich Co.............................. $ 15,319
--------
Basic Materials: 4.55%
550 IMC Global, CONV PRD 6.25%.................... 20,900
700 Royal Group Technologies,
CONV PRD 6.875%............................... 21,700
--------
42,600
--------
Classified Goods/Diversified: 8.51%
550 Fluor Corp.................................... 27,362
1,000 Ingersoll-Rand Company,
CONV PRD 6.75%................................ 25,188
400 PPG Industries, Inc........................... 27,175
--------
79,725
--------
Consumer Cyclical: 4.41%
350 Ford Motor Co................................. 22,684
700 Tupperware Corp............................... 18,638
--------
41,322
--------
Energy: 8.28%
200 British Petroleum Co. plc, ADR................ 17,212
600 Shell Transport & Trading, ADR................ 26,550
250 Tosco Corp., CONV PRD 5.75%................... 15,250
350 Unocal Corporation, CONV PRD 6.25%............ 18,594
--------
77,606
--------
Finance: 16.01%
225 Bankers Trust NY Corp......................... 27,070
300 Frontier Insurance Group,
CONV PRD 6.25%................................ 19,313
900 National Australia Bank Ltd.,
CONV PRD 7.875%............................... 26,100
200 NationsBank (JP), CONV PRD 7.25%.............. 25,125
1,200 Pacific Century Financial Corp................ 28,575
850 TrustCo Bank Corp. N.Y........................ 23,853
--------
150,036
--------
14
<PAGE>
The Rockhaven Premier Dividend Rund
SCHEDULE OF INVESTMENTS at March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Health Care: 12.10%
20,000 ALZA Corporation, CONV BOND
5.00%, due 5/1/2006........................... $ 26,225
300 American Home Products........................ 28,613
200 Merck & Co., Inc.............................. 25,675
750 Pharmacia & Upjohn, Inc....................... 32,812
--------
113,325
--------
Retailing: 5.18%
300 J.C. Penney Company, Inc...................... 22,706
450 Sears, Roebuck & Co........................... 25,847
--------
48,553
--------
Services: 5.92%
1,100 Readers Digest, CONV PRD 8.25%................ 29,219
500 Wendy's International,
CONV PRD 5.00%................................ 26,281
--------
55,500
--------
Staples: 9.83%
1,650 DIMON Inc., CONV PRD 8.50%.................... 28,875
550 Dole Food Co., Inc. CONV PRD 7.00%............ 24,887
300 H.J. Heinz Company............................ 17,513
500 Philip Morris Companies....................... 20,844
--------
92,119
--------
Technology: 14.33%
350 Adaptec, Inc.*................................ 6,880
1,200 Adaptec Inc., CONV BOND 4.75%,
due 2/1/2004.................................. 9,990
20,000 Data General Corporation,
CONV BOND 6.00%, due 5/15/2004................ 19,550
30,000 Kent Electronics Corp.,
CONV BOND 4.50%, due 9/1/2004................. 25,088
325 Microsoft Corporation, CONV PRD............... 30,083
450 Pitney Bowes, Inc............................. 22,584
20,000 Xilinx Inc., CONV BOND 5.25%,
due 11/1/2202................................. 20,050
--------
134,225
--------
15
<PAGE>
The Rockhaven Premier Dividend Rund
SCHEDULE OF INVESTMENTS at March 31, 1998 (Unaudited), Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
Transportation: 1.20%
200 Union Pacific Corp............................ $ 11,238
---------
Utility: 6.39%
550 MCN Energy Group, Inc.,
CONV PRD 8.75%................................ 17,943
300 Cincinnati Bell CONV PRD 6.25%................ 20,025
400 U.S. West Communications...................... 21,900
---------
59,868
---------
Total Common Stocks and Convertible
Securities (cost $846,480+)................... 921,436
---------
Principal Amount SHORT-TERM INVESTMENTS: 0.41%
- --------------------------------------------------------------------------------
$3,842 Star Treasury Fund, 4.99%..................... 3,842
---------
Total Investments in Securities
(cost $850,323):98.76% .................... 925,278
Other Assets less Liabilities: 1.24%.......... 11,664
---------
Total Net Assets: 100.0% ..................... $ 936,942
=========
*Non-income producing security.
+At March 31, 1998, the cost of securities for Federal tax purposes was the same
as the basis for financial reporting. Unrealized appreciation and depreciation
of securities were as follows:
Gross unrealized appreciation................. $ 89,469
Gross unrealized depreciation................. (14,514)
---------
Net unrealized appreciation............... $ 74,955
=========
See Notes to Financial Statements.
16
<PAGE>
The Rockhaven Premier Dividend Rund
STATEMENT OF ASSETS AND LIABILITIES at March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(identified cost $850,323) ............................. $ 925,278
Receivables:
Fund shares sold........................................ 11,363
Dividends and interest.................................. 4,112
Due from Advisor........................................ 8,149
Suspense .................................................. (494)
Prepaid expenses........................................... 14,091
----------
Total assets ........................................ 962,499
----------
LIABILITIES
Payables:
Administration fee...................................... 2,548
Securities purchased.................................... 10,887
Accrued expenses........................................... 12,122
----------
Total liabilities.................................... 25,557
----------
NET ASSETS.................................................... $ 936,942
==========
Net asset value, offering and redemption
price per share ($936,942/84,744 shares
outstanding; unlimited number of shares
(par value $.01) authorized)............................ $11.06
==========
COMPONENTS OF NET ASSETS
Paid-in capital ........................................... $ 856,583
Dividends in excess of net investment income............... (40)
Accumulated net realized gain on investments............... 5,444
Net unrealized appreciation on investments................. 74,955
----------
Net assets ............................................. $ 936,942
==========
See Notes to Financial Statements.
17
<PAGE>
The Rockhaven Premier Dividend Rund
STATEMENT OF OPERATIONS
For the Period from November 3, 1997* through March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends............................................... $ 9,982
Interest................................................ 2,060
--------
Total income......................................... 12,042
--------
Expenses
Advisory fees (Note 3).................................. 2,243
Administration fee (Note 3)............................. 12,082
12b-1 expense........................................... 748
Custodian and accounting fees........................... 8,539
Transfer agent fees..................................... 5,236
Professionals' fees..................................... 6,042
Trustees' fees.......................................... 2,396
Registration fees....................................... 2,865
Reports to shareholders................................. 2,819
Other expenses.......................................... 2,165
--------
Total expenses....................................... 45,135
Less, Advisory fee waiver and
absorption (Note 3).................................. (40,649)
--------
Net expenses......................................... 4,486
--------
Net investment income ............................ 7,556
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions............ 5,444
Net change in unrealized appreciation
on investments........................................ 74,955
--------
Net realized and unrealized gain
on investments..................................... 80,399
--------
Net Increase in Net Assets Resulting
from Operations ................................ $ 87,955
========
*Commencement of operations.
See Notes to Financial Statements.
18
<PAGE>
The Rockhaven Premier Dividend Rund
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
November 3, 1997*
through
March 31, 1998
- --------------------------------------------------------------------------------
NET INCREASE IN ASSETS FROM
OPERATIONS
Net investment income......................................... $ 7,556
Net realized gain from security transactions.................. 5,444
Net change in unrealized appreciation of securities........... 74,955
---------
Net increase in net assets resulting
from operations ......................................... 87,955
---------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................................... (7,596)
---------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a)................................... 856,583
---------
Total increase in net assets .............................. 936,942
NET ASSETS
Beginning of period........................................... -0-
---------
End of period (including dividends in excess of net
investment income of $40).................................. $ 936,942
=========
(a) A summary of capital share transactions is as follows:
November 3, 1997*
through
March 31, 1998
-----------------------
Shares Value
-----------------------
Shares sold................................ 84,038 $ 849,048
Shares issued in reinvestment
of distributions......................... 712 7,596
Shares redeemed............................ (6) (61)
-----------------------
Net increase............................... 84,744 $ 856,583
=======================
*Commencement of operations.
See Notes to Financial Statements.
19
<PAGE>
The Rockhaven Premier Dividend Rund
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
- --------------------------------------------------------------------------------
November 3, 1997*
through
March 31, 1998
- --------------------------------------------------------------------------------
Net asset value, beginning of period........................ $ 10.00
Income from investment operations:
Net investment income.................................... 0.11
Net realized and unrealized gain on investments.......... 1.04
-------
Total from investment operations............................ 1.15
-------
Less distributions:
Dividends from net investment income..................... (0.09)
-------
Net asset value, end of period.............................. $ 11.06
=======
Total return ............................................... 11.58%+
Ratios/supplemental data:
Net assets, end of period (thousands)....................... $ 963
Ratio of expenses to average net assets:
Before expense reimbursement............................. 14.86%++
After expense reimbursement.............................. 1.48%++
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement............................. (10.90%)++
After expense reimbursement.............................. 2.49%++
Portfolio turnover rate..................................... 54.26%
Average commission rate paid per share...................... $0.0600
*Commencement of operations.
+Not annualized.
++Annualized.
See Notes to Financial Statements.
20
<PAGE>
The Rockhaven Fund
The Rockhaven Premier Dividend Rund
NOTES TO FINANCIAL STATEMENTS at March 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Rockhaven Fund and Rockhaven Premier Dividend Fund (the "Funds") are a
diversified series of shares of beneficial interest of Advisors Series Trust
(the "Trust"), which is registered under the Investment Company Act of 1940 (the
"1940 Act") as an open-end management investment company. The Rockhaven Fund's
primary investment objective is obtaining above average current income together
with capital appreciation. The Rockhaven Premier Dividend Fund's primary
investment objective is obtaining high current income and its secondary
objective is seeking capital appreciation. The Funds' attempt to achieve their
objectives by investing in a diversified portfolio of equity securities. The
Funds began operations on November 3, 1997.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. Investments in securities traded on a national
securities exchange or included in the NASDAQ National Market System
are valued at the last reported sale price at the close of regular
trading on the last business day of the period; securities traded on an
exchange or NASDAQ for which there have been no sales and other
over-the-counter securities are valued at the mean between the last bid
and ask prices. Securities for which quotations are not readily
available are valued at their respective fair values as determined in
good faith by the Board of Trustees. Short-term investments are stated
at cost, which when combined with accrued interest, approximates market
value.
B. Federal Income Taxes. The Funds intend to comply with the requirements
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
C. Security Transactions, Dividends and Distributions. As is common in the
industry, security transactions are accounted for on the trade date.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest
21
<PAGE>
The Rockhaven Fund
The Rockhaven Premier Dividend Rund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
- --------------------------------------------------------------------------------
income is recognized on an accrual basis. Income and capital gains
distributions to shareholders are determined in accordance with income
tax regulations, which may differ from generally accepted accounting
principles.
D. Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, as well
as the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY
TRANSACTIONS
For the period ended March 31, 1998, Rockhaven Asset Management, LLC (the
"Advisor") provided the Funds with investment management services under an
Investment Advisory Agreement. The Advisor furnishes all investment advice,
office space and certain administrative services, and provides most of the
personnel needed by the Funds. As compensation for its services, the Advisor
receives a monthly fee from each Fund at the annual rate of 0.75% based upon the
average daily net assets of each Fund.
The Funds are responsible for their own operating expenses. The Advisor
has agreed to reduce fees payable to it by each Fund and to pay each Fund's
operating expenses to the extent necessary to limit each Fund's aggregate annual
operating expenses to 1.5% of average net assets (the "expense cap"). Any such
reductions made by the Advisor in its fees or payment of expenses which are a
Fund's obligation are subject to reimbursement by the Fund to the Advisor, if so
requested by the Advisor, in the first, second or third fiscal year next
succeeding the fiscal year of the reduction or absorption if the aggregate
amount actually paid by a Fund towards the operating expenses for such fiscal
year (taking into account the reimbursement) does not exceed the applicable
limitation on the Fund's expenses. With respect to the reimbursement of a
particular fee reduction or expense payment, a reimbursement to the Advisor is
permitted only within the three year period following the year in which the
Advisor reduced the subject fee or paid the subject expense. Any such
reimbursement is also contingent upon Board of Trustees review and approval at
the time the
22
<PAGE>
The Rockhaven Fund
The Rockhaven Premier Dividend Rund
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
reimbursement is made. Such reimbursement may be paid prior to a Fund's payment
of current expenses if so requested by the Advisor even if that practice may
require the Advisor to waive, reduce or absorb current Fund expenses. For the
period ended March 31, 1998, the Advisor reduced its fees and absorbed Fund
expenses in the amount of $40,730 for The Rockhaven Fund and $40,649 for The
Rockhaven Premier Dividend Fund; no amounts were reimbursed.
Investment Company Administration Corporation (the "Administrator") acts
as the Funds' Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Funds; prepares reports and materials to be supplied to the trustees;
monitors the activities of the Funds' custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews each Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the annual rate of 0.20% of net assets, subject to a $30,000 minimum, from each
Fund.
First Fund Distributors, Inc. (the "Distributor") acts as the Funds'
principal underwriter in a continuous public offering of the Funds' shares. The
Distributor is an affiliate of the Administrator.
Certain officers and trustees of the Trust are also officers and/or
directors of the Administrator and the Distributor.
NOTE 4 - DISTRIBUTION COSTS
The Funds have adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the 1940 Act. The Plan provides that the Funds may pay a fee to
the Advisor, acting as Distribution Coordinator at an annual rate of up to 0.25%
of the average daily net assets of each Fund. The fee is paid to the
Distribution Coordinator as reimbursement for, or in anticipation of, expenses
incurred for distribution-related activity.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
For the period ended March 31, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, for The
Rockhaven Fund, were $1,640,055 and $173,374, respectively.
For the period ended March 31, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, for The
Rockhaven Premier Dividend Fund, were $1,178,574 and $337,377, respectively.
23
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Advisor
Rockhaven Asset Management, LLC
100 First Avenue, Suite 1050
Pittsburgh, PA 15222
www.rockhaven.com
Distributor
First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Transfer Agent
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
888-263-6452
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and are subject to change.
