ROCKHAVEN ASSET MANAGEMENT
THE RISK MANAGERS
THE ROCKHAVEN FUND
THE ROCKHAVEN PREMIER
DIVIDEND FUND
Annual Report
For the period ended September 30, 1998
<PAGE>
Dear Investor:
This is our first annual report since the Fund's inception in November 1997, so
we would like 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.
As James Flanagan said, "This is a hard way to make an easy living". 1998 has
caused a lot of investment managers to ponder their choice of careers. From the
unprecedented out-performance of growth versus value in the first half, to the
rapid decline in valuations in the third quarter, to the whiplash recovery in
October, this has been a year for the record books. Speaking for myself, this
has been one of the toughest years of my 15-year career, but also one of the
most rewarding. We spent a lot of time reviewing and analyzing our performance
and philosophy . . . we even brought out some old text books in an effort to
tear apart every step of our process and question its validity, especially in a
low-inflation/deflation environment.
This intensive self-appraisal has lead us to refocus on the basic investment
tenets that have served us so well in the past: controlling risk and listening
to the market.
Controlling risk - It is commonly known that active investment management must
justify its fees by generating risk-adjusted returns in excess of the benchmark.
But because markets are relatively efficient, consistent outperformance is
difficult to achieve. This is also known as the "loser's game". A "loser's game"
is one where the ultimate winner is the one who makes the fewest mistakes. We
have always maintained that risk versus our benchmarks can be reduced by:
* eliminating market timing...by staying fully invested.
* eliminating sector betting...by matching our sector weights to those of
our benchmark.
* maximizing our efforts on security selection.
What our analysis revealed was that while security selection is critical,
especially in a 50-stock portfolio, the weight of each individual security in
the portfolio is even more important. The names that hurt us the most this year
have been deep value names where we had an overweight.
<PAGE>
Listening to the market - As Ned Davis states: "The degree of unprofitable
anxiety in an investor's life corresponds directly to the amount of time spent
dwelling on how an investment should be acting rather that on the way it
actually is acting". It is pure hubris that the vast majority of Wall Street
analysts are trying to decide what the market or a stock should be doing,
instead of what they are doing. "Markets aren't wrong...opinions are".
The best investors are those that are listening to market reality, identifying
what is working, rather than steadfastly forcing their biases on the market. Our
goal then is to objectively determine what the market is rewarding now and will
reward in the near future, and weighting our portfolios towards these factors.
This two-step process of controlling risk and listening to the market has led us
to develop a proprietary risk model that not only helps improve our security
selection process, but more importantly, helps us determine the appropriate
weight for each security in the portfolio.
The risk model is really quite simple, but since we live in such a competitive
world, I can only give you an overview. The investment team meets regularly to
assign the appropriate risk rating based on quantitative factors (i.e.,
financial strength, earnings consistency, earnings estimate agreement, and
earnings surprise), as well as qualitative factors (i.e., management quality,
accounting integrity, industry position, and catalysts for change). Each
security is then ranked as either low, medium, or high risk, and weightings in
the portfolio correspond directly to the risk rating.
The adoption of this risk model led to higher than normal turnover in the
quarter as we moved to lower security-specific risk in the portfolio. The beauty
of this process is that I can honestly say that I have never felt better about
my level of awareness/understanding of the risks in our portfolio. In order to
manage risk you must have a thorough understanding of the bets you are taking..
this model provides us with these tools.
Performance
The Rockhaven Fund did well in the early part of the year, struggled some during
the summer, and then improved again in the last three months. For the year
ending November 3, 1998, the Fund returned 6.70%. This compares favorably to the
S&P Barra Value Index, which was up 10.01% for the same period, but pales in
comparison to the
<PAGE>
20.14% return for the S&P 500 Index. Since the Fund's inception on November 3,
1997 through the quarter ending September 30, 1998 the Fund returned -1.61%
versus 1.10% for the S&P Barra Value Index and 9.88% for the S&P 500 Index.
The S&P 500's performance in 1998 has been dominated by a handful of mega
large-cap growth stocks. In fact, a miraculous 20 stocks accounted for 95% of
the index's performance, five stocks accounted for half of the S&P's return, and
two stocks (Microsoft and Dell) accounted for 25%. A market with such extremely
narrow leadership is also a very high-risk market.
Did we achieve our goal of providing market participation with less risk and
more income? Yes and no. We performed in line with the broader market and our
value and equity income peers, but significantly underperformed the S&P 500. We
did outperform on the downside. During the market's big sell-off from its peak
on July 17 through August 31, our Fund lost 16.70% versus a decline of 19.19%
for the S&P 500, and decline of 21.05% for the S&P Value Index.
The Rockhaven Premier Dividend Fund performed very well versus its convertible
peers. For the year ended November 3, 1998, the Fund was up 6.22% versus a
decline of 0.78% for the Merrill Lynch All-Convertible Index. Since the Fund's
inception on November 3, 1997 the quarter ending September 30, 1998 the Fund
returned -0.10% versus -3.28% for the Merrill Lynch All-Convertible Index.
Our emphasis on higher quality, more equity-sensitive convertibles contributed
greatly to the Fund's outperformance. During the S&P 500's decline of 19.19%
from July 17 through August 31, the Premier Dividend Fund declined only 14.79%.
In summary, if I were grading our performance for 1998, I would give the
Rockhaven Fund a B- and the Premier Dividend Fund an A-. Both Funds have shown
improvement as the year progressed. It has been a volatile (though rewarding)
year, and we look forward to an exciting, hopefully equally rewarding 1999.
Thanks for your support,
Chris Wiles,
President, Rockhaven Asset Management
<PAGE>
THE ROCKHAVEN FUND
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ROCKHAVEN
FUND VERSUS THE S&P 500 COMPOSITE INDEX AND THE S&P 500 BARRA VALUE INDEX
Fund total return from
commencement of
operations on November
3, 1997 to September 30,
1998: -1.61%.
FUND S&P 500 S&P 500 BARRA VALUE INDEX
---- ------- -------------------------
11/3/1997 10,000 10,000 10,000
11/30/1997 10,060 10,175 10,108
12/31/1997 10,300 10,335 10,317
1/31/1998 10,400 10,440 10,179
2/28/1998 11,082 11,175 10,917
3/31/1998 11,466 11,666 11,430
4/30/1998 11,426 11,840 11,578
5/29/1998 11,175 11,617 11,386
6/30/1998 11,186 12,075 11,459
7/31/1998 10,813 11,935 11,196
8/31/1998 9,460 10,195 9,377
9/30/1998 9,839 10,831 9,928
* The S&P 500 Composite Stock Price Index is an unmanged
capitalization-weighted index of 500 stocks designed to represent the broad
domestic economy.
* The S&P Barra Value Index is an unmanaged capitalization weighted index
that contains approximately 50% of the stocks in the S&P 500 with lower
price-to-book ratios.
5
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE ROCKHAVEN
PREMIER DIVIDEND FUND VERSUS THE MERRILL LYNCH ALL-CONVERTIBLE INDEX
Fund total return from
commencement of
operations on November
3, 1997 to September 30,
1998: -0.10%.
MERRILL LYNCH
FUND ALL-CONVERTIBLE INDEX
---- ---------------------
11/3/1997 10,000 10,000
11/30/1997 9,940 10,004
12/31/1997 10,106 10,102
1/31/1998 10,197 10,128
2/28/1998 10,879 10,582
3/31/1998 11,158 10,971
4/30/1998 11,532 11,040
5/29/1998 11,350 10,796
6/30/1998 11,228 10,887
7/31/1998 10,954 10,714
8/31/1998 9,706 9,483
9/30/1998 9,990 9,672
* The Valuation calculation for the Merrill Lynch All-Convertible Index is
for the period November 1, 1997 through September 30, 1998.
* The Merrill Lynch All-Convertible Index includes U.S. dollar-denominated
convertibles of $50 million or more in size, and incorporates both
traditional and mandatory conversion structure.
6
<PAGE>
THE ROCKHAVEN FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
COMMON STOCKS &
Shares CONVERTIBLE SECURITIES: 101.5% Market Value
- --------------------------------------------------------------------------------
AEROSPACE: 1.2%
250 Lockheed Martin Corp............................... $ 25,203
--------
BASIC MATERIALS: 3.8%
1,000 E.I Du Pont de Nemours............................. 56,125
1,000 Royal Group Technologies,
CONVPRD 6.875%..................................... 18,750
--------
74,875
--------
CAPITAL GOODS/DIVERSIFIED: 6.8%
500 General Electric Co................................ 39,781
700 Emerson Electric Co................................ 43,575
1,500 Ingersoll-Rand Co., CONV PFD....................... 31,500
300 Minnesota Mining & Manufacturing Co................ 22,106
--------
136,962
--------
CONSUMER CYCLICAL: 3.7%
850 Ford Motor Co...................................... 39,897
600 Newell Co., CONV PFD 5.25%......................... 33,675
--------
73,572
--------
ENERGY: 8.4%
750 Amoco Corp......................................... 40,406
750 Exxon Corp......................................... 52,641
1,300 Shell Transport & Trading, ADR..................... 47,369
625 Tosco Corp., CONV PFD 5.75%........................ 27,031
--------
167,447
--------
FINANCE: 16.2%
930 Banc One Corp...................................... 39,641
700 BankAmerica / Jefferson Pilot,
CONV PFD 7.25%..................................... 66,500
700 J.P. Morgan & Co., Inc............................. 59,238
2,000 Lincoln National Corp, CONVPFD 7.75%............... 49,250
1,800 National Australia Bank Ltd.,
CONVPRD 7.875%..................................... 47,925
See accompanying Notes to Financial Statements.
7
<PAGE>
THE ROCKHAVEN FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
FINANCE, CONTINUED
1,400 Pacific Century Financial Corp..................... $ 23,362
700 Wilmington Trust Corp.............................. 36,050
--------
321,966
--------
HEALTH CARE: 12.8%
700 American Home Products............................. 36,663
700 Baxter International Inc........................... 41,650
950 Bausch & Lomb, Inc................................. 37,406
500 Bristol-Myers Squibb Co............................ 51,938
675 Johnson & Johnson.................................. 52,819
500 Perkin-Elmer Corp.................................. 34,344
--------
254,820
--------
RETAILING: 6.0%
75,000 Costco Companies, Inc.,
CONVBOND 0%*....................................... 46,313
35,000 Rite Aid, CONVBOND 5.25%........................... 41,519
700 Sears, Roebuck & Co................................ 30,931
--------
118,763
--------
SERVICES: 5.6%
750 McDonald's Corp.................................... 44,766
1,150 Readers Digest, CONVPRD 8.25%...................... 23,934
1,800 Sysco Corp......................................... 42,413
--------
111,113
--------
STAPLES: 9.8%
1,400 Conagra, Inc....................................... 37,712
1,100 Dole Food Co., Inc. CONVPRD 7.00%.................. 39,600
750 H.J. Heinz Company................................. 38,344
1,400 McCormick & Co., Inc............................... 40,906
850 Philip Morris Companies, Inc....................... 39,153
--------
195,715
--------
TECHNOLOGY: 16.6%
1,150 Computer Associates International.................. 42,550
1,400 Diebold, Inc....................................... 30,800
950 Electronic Data Systems Corp....................... 31,528
See accompanying Notes to Financial Statements.
8
<PAGE>
THE ROCKHAVEN FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998, CONTINUED
Shares Market Value
- --------------------------------------------------------------------------------
TECHNOLOGY, CONTINUED
25,000 EMC Corp., CONV BOND 3.25%......................... $ 64,000
750 Hewlett-Packard Co................................. 39,703
600 Motorola, Inc...................................... 25,612
1,150 Pitney Bowes, Inc.................................. 62,747
400 Xerox Corp......................................... 33,900
----------
330,840
----------
TRANSPORTATION: 1.1%
500 Union Pacific Corp................................. 21,312
----------
UTILITY: 9.5%
1,600 BCE, Inc........................................... 44,700
975 Hawaiian Electric Industries....................... 40,219
1,200 Texas Utilities, CONV PFD.......................... 67,500
700 U.S. West Inc...................................... 36,706
----------
189,125
----------
Total Investments in Securities
(cost $2,130,675):101.5%......................... 2,021,713
Liabilities less Other Assets: (1.5%).............. (30,406)
----------
TOTAL NET ASSETS: 100.0%........................... $1,991,307
==========
* Non-income producing security.
+ At September 30, 1998, the cost of securities for Federal income tax purposes
is $2,141,681. Gross unrealized appreciation and depreciation of securities were
as follows:
Gross unrealized appreciation...................... $ 76,485
Gross unrealized depreciation...................... (196,453)
----------
Net unrealized depreciation.................... $ (119,968)
==========
See accompanying Notes to Financial Statements.
9
<PAGE>
THE ROCKHAVEN FUND
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(identified cost $2,130,675)............................ $2,021,713
Receivables:
Due from Advisor........................................ 6,845
Dividends and interest.................................. 5,781
Prepaid expenses........................................... 18,098
----------
Total assets......................................... 2,052,437
----------
LIABILITIES
Cash advanced by custodian................................. 34,841
Payables:
Due to administrator.................................... 2,466
Dividends............................................... 2,082
Fund shares repurchased................................. 327
Accrued expenses........................................... 21,414
----------
Total liabilities.................................... 61,130
----------
NET ASSETS $1,991,307
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
[$1,991,307/205,131 shares outstanding; unlimited
number of shares (par value $.01) authorized]............... $ 9.71
==========
COMPONENTS OF NET ASSETS
Paid-in capital............................................ $2,216,108
Undistributed net investment income........................ 996
Accumulated net realized loss on investments............... (116,835)
Net unrealized depreciation on investments................. (108,962)
----------
Net assets.............................................. $1,991,307
==========
See accompanying Notes to Financial Statements.
10
<PAGE>
THE ROCKHAVEN FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM NOVEMBER 3, 1997* THROUGH SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends............................................... $ 36,630
Interest................................................ 4,731
---------
Total income......................................... 41,361
---------
Expenses
Administration fees (Note 3)............................ 27,123
Professional fees....................................... 14,458
Transfer agent fees..................................... 13,518
Fund accounting fee..................................... 12,015
Advisory fees (Note 3).................................. 9,321
Custodian............................................... 6,511
Registration fees....................................... 6,432
Trustees' fees.......................................... 5,022
Other .................................................. 4,716
Reports to shareholders................................. 4,066
Distribution expense (Note 3)........................... 3,107
---------
Total expenses....................................... 106,289
Less: Advisor fee waiver and absorption.............. (87,643)
---------
Net expenses......................................... 18,646
---------
NET INVESTMENT INCOME............................. 22,715
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from security transactions............... $(116,835)
Net change in unrealized depreciation on investments....... (108,962)
---------
Net realized and unrealized loss on investments......... (225,797)
---------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................................... $(203,082)
=========
* Commencement of operations.
See accompanying Notes to Financial Statements.
11
<PAGE>
THE ROCKHAVEN FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
November 3, 1997*
through
September 30, 1998
- --------------------------------------------------------------------------------
NET INCREASE IN ASSETS FROM
OPERATIONS
Net investment income......................................... $ 22,715
Net realized loss from security transactions.................. (116,835)
Net change in unrealized depreciation of securities........... (108,962)
----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS............................................ (203,082)
----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................................... (21,719)
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a).................................... 2,216,108
----------
TOTAL INCREASE IN NET ASSETS............................... 1,991,307
NET ASSETS
Beginning of period........................................... -0-
END OF PERIOD................................................. $1,991,307
==========
(a) A summary of capital share transactions is as follows:
November 3, 1997*
through
September 30, 1998
------------------------
Shares Paid In Capital
------------------------
Shares sold.................................. 205,027 $2,215,772
Shares issued in reinvestment
of distributions........................... 1,483 15,706
Shares redeemed.............................. (1,379) (15,370)
------- ----------
Net increase................................. 205,131 $2,216,108
======= ==========
* Commencement of operations.
See accompanying Notes to Financial Statements.
12
<PAGE>
THE ROCKHAVEN FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
November 3, 1997*
through
September 30, 1998
- --------------------------------------------------------------------------------
Net asset value, beginning of period.......................... $10.00
Income from investment operations:
Net investment income...................................... 0.14
Net realized and unrealized loss
on investments........................................... (0.29)
------
Total from investment operations.............................. (0.15)
------
Less distributions:
From net investment income................................. (0.14)
------
Net asset value, end of period................................ $9.71
------
TOTAL RETURN.................................................. (1.61%)+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............................... $1,991
Ratio of expenses to average net assets:
Before expense reimbursement............................... 8.51%++
After expense reimbursement................................ 1.49%++
Ratio of net investment income to average net assets:
After expense reimbursement................................ (1.82%)++
Portfolio turnover rate....................................... 98.13%
* Commencement of operations.
+ Not annualized.
++ Annualized.
See accompanying Notes to Financial Statements.
13
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
COMMON STOCKS &
Shares CONVERTIBLE SECURITIES: 97.1% Market Value
- --------------------------------------------------------------------------------
AEROSPACE: 2.4%
400 Lockheed Martin Corp.............................. $ 40,325
--------
BASIC MATERIALS: 5.4%
700 E.I. DuPont de Nemours............................ 39,287
1,400 Sealed Air, CONVPFD $2.00......................... 50,575
--------
89,862
--------
CAPITAL GOODS / DIVERSIFIED: 4.1%
2,200 Ingersoll-Rand Company,
CONVPFD 6.75%..................................... 46,200
300 Minnesota Mining & Manufacturing Co............... 22,106
--------
68,306
--------
CONSUMER CYCLICAL: 13.2%
90,000 Costco Companies, Inc.,
CONVBOND 0%*...................................... 55,575
1,400 Dollar General, CONVPFD 8.5%...................... 50,400
950 Ford Motor Co..................................... 44,591
40,000 Hilton Hotels, CONVBOND 5%........................ 34,900
800 Sears, Roebuck & Co............................... 35,350
--------
220,816
--------
ENERGY: 6.0%
950 Shell Transport & Trading, ADR.................... 34,616
750 Tosco Corp., CONVPRD 5.75%........................ 32,438
650 Unocal Corporation, CONVPRD 6.25%................. 34,288
--------
101,342
--------
FINANCE - INVESTMENT BANKING: 12.7%
550 BankAmerica / Jefferson Pilot.,
CONVPFD 7.25%..................................... 52,250
1,760 Lincoln National, CONVPFD 7.75%................... 43,340
400 J.P. Morgan & Co.................................. 33,850
1,400 National Australia Bank Ltd.,
CONVPFD 7.875%.................................... 37,275
14
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
FINANCE - INVESTMENT BANKING - CONTINUED
1,300 Pacific Century Financial Corp................ $ 21,694
950 TrustCo Bank Corp. N.Y........................ 25,323
--------
213,732
--------
SERVICES: 14.2%
25,000 Omnicom Group, Inc., CONV
BOND 4.25%.................................... 38,406
1,400 Readers Digest Trace,
CONV PFD 8.25%................................ 29,138
1,700 Sysco Corp.................................... 40,056
80,000 Times Mirror Co., CONV BOND 0%*............... 35,600
550 Time Warner / Houston Industries, Inc.,
CONV PFD 7%................................... 41,972
1,000 Wendy's, CONV PFD 5%.......................... 52,437
--------
237,609
--------
STAPLES: 10.9%
30,000 Alza Corp., CONV BOND 5%...................... 38,025
550 Bausch & Lomb, Inc............................ 21,656
1,300 Dole Food Traces, CONV PFD 7.00%.............. 46,800
900 Philip Morris Companies Inc................... 41,456
30,000 Rite Aid Corp., CONV BOND 5.25%............... 35,588
--------
183,525
--------
TECHNOLOGY: 23.4%
1,500 Diebold, Inc.................................. 33,000
25,000 EMC Corp., CONV BOND 3.25%.................... 64,000
150,000 Ingram Micro, Inc., CONV BOND 0%.............. 58,875
550 Microsoft Corp., CONV PFD $2.196.............. 53,075
1,000 Pitney Bowes, Inc............................. 54,562
1,050 Qualcom, CONV PFD 5.75%....................... 43,838
1,000 Unisys, Corp. CONV PFD 3.75%.................. 47,375
40,000 Xilinx Inc., CONV BOND 5.25%.................. 38,200
--------
392,925
--------
15
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 1998, CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
TRANSPORTATION: 2.0%
800 Union Pacific Corp............................ $ 34,100
----------
UTILITIES: 2.8%
850 Texas Utilities Co., CONV PFD 9.25%........... 47,812
----------
Total Common Stocks and Convertible
Securities (cost $1,683,202).................. 1,630,354
----------
Principal Amount SHORT-TERM INVESTMENTS: 4.8%
- --------------------------------------------------------------------------------
$80,878 Star Treasury Fund, 4.99%..................... 80,878
----------
Total Investments in Securities
(cost $1,764,080):101.9%...................... 1,711,232
Other Assets less Liabilities: (1.9)%......... (32,433)
----------
TOTAL NET ASSETS: 100.0%...................... $1,678,799
==========
* Non-income producing security.
+ At September 30, 1998, the cost of securities for Federal income tax purposes
is $1,769,214. Gross unrealized appreciation and depreciation of securities were
as follows:
Gross unrealized appreciation................. $ 50,727
Gross unrealized depreciation................. (108,709)
----------
Net unrealized depreciation............... $ (57,982)
==========
See accompanying Notes to Financial Statements.
16
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(identified cost $1,764,080)............................ $1,711,232
Receivables:
Due from Advisor........................................ 7,317
Dividends and interest.................................. 7,505
Prepaid expenses........................................... 17,566
----------
Total assets......................................... 1,743,620
----------
LIABILITIES
Payables:
Due to administrator.................................... 2,466
Dividends............................................... 595
Securities purchased.................................... 39,398
Accrued expenses........................................... 22,362
----------
Total liabilities.................................... 64,821
----------
NET ASSETS $1,678,799
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
[$1,678,799/171,257 shares outstanding; unlimited
number of shares (par value $.01) authorized]............... $ 9.80
==========
COMPONENTS OF NET ASSETS
Paid-in capital............................................ $1,768,440
Undistributed net investment income........................ 1,316
Accumulated net realized loss on investments............... (38,109)
Net unrealized depreciation on investments................. (52,848)
----------
Net assets.............................................. $1,678,799
==========
See accompanying Notes to Financial Statements.
17
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM NOVEMBER 3, 1997* THROUGH SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends............................................... $ 32,698
Interest................................................ 4,818
--------
Total income......................................... 37,516
--------
Expenses
Administration fees (Note 3)............................ 27,123
Professional fees....................................... 14,458
Transfer agent fees..................................... 13,517
Fund accounting fee..................................... 12,015
Advisory fees (Note 3)................................. 6,813
Custodian............................................... 6,511
Registration fees....................................... 6,432
Trustees' fees.......................................... 5,022
Other .................................................. 4,764
Reports to shareholders................................. 4,066
Distribution expense (Note 3)........................... 2,271
--------
Total expenses....................................... 102,992
Less: Advisory fee waiver and absorption............. (89,363)
--------
Net expenses......................................... 13,629
--------
NET INVESTMENT INCOME............................. 23,887
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from security transactions............... (38,109)
Net change in unrealized depreciation
on investments............................................. (52,848)
--------
Net realized and unrealized loss
on investments.......................................... (90,957)
--------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS...................................... $(67,070)
========
* Commencement of operations.
See accompanying Notes to Financial Statements.
18
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
November 3, 1997*
through
September 30, 1998
- --------------------------------------------------------------------------------
NET INCREASE IN ASSETS FROM
OPERATIONS
Net investment income......................................... $ 23,887
Net realized loss from security transactions.................. (38,109)
Net change in unrealized depreciation of securities........... (52,848)
----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS........................................... (67,070)
----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................................... (22,571)
----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a).................................... 1,768,440
----------
TOTAL INCREASE IN NET ASSETS............................... 1,678,799
NET ASSETS
Beginning of period........................................... -0-
----------
END OF PERIOD................................................. $1,678,799
==========
(a) A summary of capital share transactions is as follows:
November 3, 1997*
through
September 30, 1998
------------------------
Shares Paid In Capital
------------------------
Shares sold................................ 172,304 $1,777,767
Shares issued in reinvestment
of distributions........................... 2,091 21,976
Shares redeemed............................ (3,138) (31,303)
------- ----------
Net increase............................... 171,257 $1,768,440
======= ==========
* Commencement of operations.
See accompanying Notes to Financial Statements.
19
<PAGE>
THE ROCKHAVEN PREMIER DIVIDEND FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
November 3, 1997*
through
September 30, 1998
- --------------------------------------------------------------------------------
Net asset value, beginning of period........................ $10.00
Income from investment operations:
Net investment income.................................... 0.21
Net realized and unrealized loss on investments.......... (0.21)
------
Total from investment operations............................ 0.00
------
Less distributions:
Dividends from net investment income..................... (0.20)
------
Net asset value, end of period.............................. $ 9.80
======
TOTAL RETURN................................................ (0.10)%+
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000)............................. $1,679
Ratio of expenses to average net assets:
Before expense reimbursement............................. 11.28%++
After expense reimbursement.............................. 1.49%++
Ratio of net investment income to average net assets:
After expense reimbursement.............................. 2.62%++
Portfolio turnover rate..................................... 147.56%
* Commencement of operations.
+ Not annualized.
++ Annualized.
See accompanying Notes to Financial Statements.
20
<PAGE>
THE ROCKHAVEN FUND
THE ROCKHAVEN PREMIER DIVIDEND FUND
NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Rockhaven Fund and Rockhaven Premier Dividend Fund (the "Funds") are 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 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 followed by
the Funds. These policies are in conformity with generally accepted accounting
principles.
A. SECURITY VALUATION: The Funds' investments are carried at fair 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 Trustees. Short-term
investments are valued at amortized cost, which approximates market
value.
B. FEDERAL INCOME TAXES: It is the Funds' 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 on the
basis of identified cost.
D. USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
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 September 30, 1998, Rockhaven Asset Management, LLC
(the "Advisor") provided the Funds 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
Funds. As compensation for its services, the Advisor is entitled to a monthly
fee at the annual rate of 0.75% based upon the average daily net assets of each
Fund. For the period ended September 30, 1998, the Rockhaven Fund and the
Rockhaven Premier Dividend Fund incurred $9,321 and $6,813, respectively, in
Advisory Fees.
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 subsequent fiscal years if the aggregate amount
actually paid by a Fund toward the operating expenses for such fiscal year
(taking into account the reimbursement) does not exceed the applicable
limitation on the Fund's 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 review and approval at
the time the reimbursement is made. Such reimbursement may not be paid prior to
a Fund's payment of current ordinary operating expenses. For the period ended
September 30, 1998, the Advisor reduced its fees and absorbed Fund expenses in
the amount of $87,643 for The Rockhaven Fund and $89,363 for The Rockhaven
Premier Dividend Fund; no amounts were reimbursed to the Advisor.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
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 average daily net assets, subject to a minimum fee
of $30,000 annually, 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.
The Trust has 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.
Certain officers of the Fund are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - Securities Transactions
For the period ended September 30, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, for The
Rockhaven Fund, were $3,504,402 and $1,256,468, respectively.
For the period ended September 30, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, for The
Rockhaven Premier Dividend Fund, were $3,090,649 and $1,368,200, respectively.
For federal income tax purposes, The Rockhaven Fund and The Rockhaven
Premier Dividend Fund have capital loss carryforwards of $105,829 and $32,975,
respectively, which are available to offset future realized gains. The
carryforwards expire in 2006.
23
<PAGE>
INDEPENDENT AUDITOR'S REPORT
THE BOARD OF TRUSTEES AND SHAREHOLDERS
THE ROCKHAVEN FUND AND THE ROCKHAVEN PREMIER DIVIDEND FUND
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of The Rockhaven Fund and The Rockhaven Premier
Dividend Fund, series of Advisors Series Trust, as of September 30, 1998, and
the related statements of operations, the statements of changes in net assets,
and the financial highlights for the period indicated in the accompanying
financial statements. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly in all material respects, the financial position of The
Rockhaven Fund and The Rockhaven Premier Dividend Fund, series of Advisors
Series Trust, as of September 30, 1998, the results of their operations, the
changes in their net assets and their financial highlights for the period
indicated, in conformity with generally accepted accounting principles.
MCGLADREY & PULLEN, LLP
New York, New York
October 23, 1998
24
<PAGE>
ADVISOR
Rockhaven Asset Management, LLC
100 First Avenue, Suite 1050
Pittsburgh, PA 15222
www.rockhaven.com
800-522-3508
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
AUDITORS
McGladrey & Pullen LLP
555 Fifth Avenue, 8th Floor
New York, NY 10017-2416
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.
