Edgar Lomax Value Fund
Annual Report
For the period ended
October 31, 1998
Dear Fellow Shareholder:
We are pleased to report on the investment performance and continuing
growth of the Edgar Lomax Value Fund through the end of its first fiscal year.
From its opening on December 12, 1997 through October 31, 1998, the Fund gained
7.9% while its assets grew to $3.3 million.
The stock market thus far in 1998 has been unusually strong, but volatile.
The very largest stocks in the S&P 500 index, such as Microsoft and General
Electric, have performed extremely well while the larger set of
relatively-smaller stocks have experienced only a fraction of the S&P 500
index's gain. Additionally, there is an unprecedented disparity between the
performance of "growth" and "value" stocks. Specifically, the S&P/Barra Value
index, which measures the performance of the roughly lower half - in terms of
value, based on price-to-book ratios - of the S&P 500 stocks, gained 5.3% for
the year through October 31. In comparison, the S&P/Barra Growth index gained
23.7%. Your fund, however, is running ahead of its "value" benchmark with a
year-to-date gain of 6.1%.
With respect to volatility, the stock market reached a record high on July
17, 1998, but the months that followed include a nearly-20% market decline
followed by a substantial recovery. You will be pleased to know that the
characteristics we require of our stock selections - for example, lower
price-to-earnings ratios and higher dividend yields than those of the average
stock - resulted in our strongly outperforming the market during its sharp
pullback. As a result, for the three-month period ended October 31, the Fund
gained 1.6% as compared to a loss of 1.6% in the S&P 500, a loss of 4.0% in the
S&P/Barra Value and a gain of 0.6% in the S&P/Barra Growth.
The market's recent drop reminds us that all investments assume risk,
including ours. However, our strategies are designed specifically to minimize
risk. First, we select stocks only from those comprising the S&P 500 index,
consequently limiting our portfolios to, for all practical purposes, the very
largest publicly-owned companies. We then take steps to eliminate those
companies we consider over-leveraged (that is, we believe debt represents too
large a portion of total corporate financing). A resulting portfolio should, as
a consequence, have a risk profile more favorable than that of the S&P 500
itself. Finally, we absolutely require that our companies pay dividends.
Thank you kindly for allowing us to serve you. We will continue extending
our best efforts to help you achieve your long-term investment goals.
Cordially,
/s/
Randall R. Eley
<PAGE>
<TABLE>
Edgar Lomax S & P 500 S & P/Barra Lipper Growth
Value Fund Composite Stock Value Index & Income
Price Index Fund Index
<S> <C> <C> <C> <C> <C>
12-Dec-97 $10,000 $10,000 $10,000 $10,000
31-Dec-97 $10,169 $10,187 $10,187 $10,193
31-Jan-98 $9,949 $10,303 $10,062 $10,212
28-Feb-98 $10,639 $11,041 $10,816 $10,853
31-Mar-98 $11,030 $11,606 $11,365 $11,355
30-Apr-98 $11,150 $11,724 $11,499 $11,416
31-Mar-98 $10,889 $11,519 $11,337 $11,233
30-Jun-98 $10,929 $11,989 $11,423 $11,368
31-Jul-98 $10,619 $11,864 $11,175 $11,090
31-Aug-98 $9,418 $10,148 $9,378 $9,524
30-Sep-98 $10,199 $10,796 $9,948 $9,951
31-Oct-98 $10,789 $11,679 $10,727 $10,674
</TABLE>
Past performance is not predictive of future performance.
*The S&P 500 is an unmanaged 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.
*The Lipper Growth & Income Fund Index is comprised of the 30 largest growth and
income funds. Growth and income funds combine the growth-of-earnings orientation
and an income requirement for level and/or rising dividends.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS at October 31, 1998
- ------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 98.90% Market Value
- ------------------------------------------------------------------------------------------------
Aerospace / Defense: 0.36%
<S> <C> <C>
200 General Dynamics Corporation................................. $ 11,838
-------------
Automobiles: 4.07%
2,125 General Motors Corp.......................................... 134,008
-------------
Banks - Major Regional: 3.24%
2,184 Bank One Corporation......................................... 106,743
-------------
Banks - Money Center: 2.72%
200 Citigroup Inc................................................ 9,412
850 J.P. Morgan & Co., Incorporated.............................. 80,113
-------------
89,525
-------------
Chemicals: 7.89%
200 E.I. du Pont de Nemours and Company.......................... 11,500
1,325 The Dow Chemical Company..................................... 124,053
3,225 Union Carbide Corporation.................................... 124,163
-------------
259,716
-------------
Chemicals - Specialty: 0.34%
300 International Flavors & Fragrances, Inc...................... 11,231
-------------
Communications Equipment: 1.22%
1,150 Harris Corporation........................................... 40,322
-------------
Electric Companies: 8.21%
2,575 American Electric Power Company, Inc......................... 126,014
5,125 The Southern Company......................................... 144,461
-------------
270,475
-------------
<PAGE>
Electrical Equipment: 4.03%
1,175 Honeywell, Inc............................................... 93,853
950 Rockwell International Corporation........................... 39,009
-------------
132,862
-------------
Electronics - Defense: 4.28%
1,170 Raytheon Co., Class A........................................ $ 65,520
1,300 Raytheon Co., Class B........................................ 75,481
-------------
141,001
-------------
Electronics - Instrumentation: 0.16%
300 Tektronix, Inc............................................... 5,362
-------------
Electronics - Semiconductors: 2.47%
1,275 Texas Instruments, Incorporated.............................. 81,520
-------------
Engineering and Construction: 2.65%
2,250 Flour Corporation............................................ 87,328
-------------
Financial - Diversified: 0.48%
100 American Express Company..................................... 8,838
100 American General Corporation................................. 6,850
-------------
15,688
-------------
Insurance - Multi-Line: 6.48%
2,125 CIGNA Corporation............................................ 154,992
1,100 The Hartford Financial Services Group, Inc................... 58,437
-------------
213,429
-------------
Leisure Time - Products: 0.30%
500 Brunswick Corporation........................................ 9,719
-------------
Machinery - Diversified: 0.41%
300 Caterpillar Inc.............................................. 13,500
-------------
Manufacturing - Diversified: 4.01%
1,650 Minnesota Mining and Manufacturing Company................... 132,000
-------------
<PAGE>
Oil - Domestic Integrated: 3.24%
1,550 Atlantic Richfield Company................................... 106,756
-------------
Oil - International Integrated: 12.95%
2,700 Amoco Corporation............................................ $ 151,538
1,200 Chevron Corporation.......................................... 97,800
1,850 Exxon Corporation............................................ 131,813
600 Mobil Corporation............................................ 45,412
-------------
426,563
-------------
Other: 1.34%
400 Standard & Poor's Depositary Receipts........................ 44,025
-------------
Paper and Forest Products: 4.51%
3,000 International Paper Company.................................. 139,313
200 Weyerhaeuser Company......................................... 9,363
-------------
148,676
-------------
Photography/Imaging: 4.65%
1,975 Eastman Kodak Company........................................ 153,062
-------------
Railroads: 4.30%
4,300 Norfolk Southern Corporation................................. 141,631
-------------
Restaurants: 2.59%
1,275 McDonalds Corporation........................................ 85,266
-------------
Retail - Specialty / Apparel: 4.09%
64 Abercrombie & Fitch Co.*..................................... 2,540
5,150 The Limited, Inc............................................. 131,969
-------------
134,509
-------------
Telecommunications - Long Distance: 2.55%
1,350 AT&T Corp.................................................... 84,037
-------------
Telephone: 0.32%
200 Bell Atlantic Corporation.................................... 10,625
-------------
Tobacco: 5.04%
3,250 Philip Morris Companies, Inc................................. 166,156
-------------
Total common stocks (cost $3,090,027)........................ 3,257,573
-------------
<PAGE>
Principal Amount SHORT-TERM INVESTMENTS: 1.84%
- ------------------------------------------------------------------------------------------------
$60,534 Star Treasury Fund (cost $60,534)............................ $ 60,534
-------------
Total Investments in Securities (cost $3,150,561): 100.74%... 3,318,107
Liabilities in excess of other assets: (0.74)%............... (24,273)
-------------
Total Net assets: 100.00% ................................... $ 3,293,834
==============
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES at October 31, 1998
- ------------------------------------------------------------------------------------------------
ASSETS:
<S> <C> <C>
Investment in securities, at value (identified cost of $3,150,561).......... $ 3,318,107
Receivables
Due from Advisor...................................................... 4,338
Fund shares sold...................................................... 275,000
Dividends and interest................................................ 2,279
Prepaid expenses............................................................ 2,498
-------------
Total assets.................................................... 3,602,222
-------------
LIABILITIES:
Payables
Administration fees................................................... 2,548
Securities purchased.................................................. 282,303
Accrued expenses............................................................ 23,537
-------------
Total liabilities............................................... 308,388
-------------
NET ASSETS ....................................................................... $ 3,293,834
==============
Net asset value, offering and redemptions price per share
($3,293,834/305,456 shares outstanding: unlimited number
of shares (par value $0.01) authorized)..................................... $ 10.78
==============
COMPONENTS OF NET ASSETS
Paid-in capital............................................................. 3,097,583
Accumulated net investment income........................................... 17,331
Accumulated net realized gain on investments................................ 11,374
Net unrealized appreciation on investments.................................. 167,546
-------------
Net assets............................................................ $ 3,293,834
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
For the Period from December 12, 1997* through October 31, 1998
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
<S> <C>
Dividends............................................................. $ 57,093
Interest.............................................................. 3,472
-------------
Total income.................................................... 60,565
-------------
Expenses
Administration fee (Note 3)........................................... 26,383
Advisory fees (Note 3)................................................ 23,571
Custodian and accounting fees......................................... 18,471
Professional fees..................................................... 14,342
Transfer agent fees................................................... 10,934
Reports to shareholders............................................... 6,157
Trustees' fees........................................................ 4,247
Other................................................................. 3,003
Insurance expense..................................................... 1,778
Registration fees..................................................... 1,560
-------------
Total expenses.................................................. 110,446
Less: advisory fee waiver and absorption (Note 3)............... (69,087)
-------------
Net expenses.................................................... 41,359
-------------
Net investment income .................................... 19,206
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions................................ 11,374
Net change in unrealized appreciation on investments........................ 167,546
-------------
Net realized and unrealized gain on investments....................... 178,920
-------------
Net increase in net assets resulting from operations .......... $ 198,126
==============
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
December 12, 1997*
through
October 31, 1998
- -----------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM
OPERATIONS
<S> <C>
Net investment income.............................................................. $ 19,206
Net realized gain from security transactions....................................... 11,374
Net change in unrealized appreciation on investments............................... 167,546
---------------
Net increase in net assets resulting from operations ........................ 198,126
---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.............................................................. (1,875)
---------------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net chante in outstanding shares (a)....... 3,097,583
---------------
Total increase in net assets ................................................ $3,293,834
===============
NET ASSETS
Beginning of period................................................................ -
---------------
End of period ..................................................................... $3,293,834
===============
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
December 12, 1997*
through
October 31, 1998
- --------------------------------------------------------------------------------
Shares Paid In Capital
- --------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ........................................ 334,640 $3,410,803
Shares issued in reinvestment of distributions...... 185 1,875
Shares redeemed..................................... (29,369) (315,095)
- --------------------------------------------------------------------------------
Net increase........................................ 305,456 $3,097,583
================================================================================
</TABLE>
*Commencement of operations.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
- --------------------------------------------------------------------------------
December 12, 1997*
through
October 31, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period.......................... $10.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income................................... 0.07
Net realized and unrealized gain on investments......... 0.72
- --------------------------------------------------------------------------------
Total from investment operations.............................. 0.79
- --------------------------------------------------------------------------------
Less distributions:
From net investment income.............................. (0.01)
- --------------------------------------------------------------------------------
Net asset value, end of period................................ $10.78
================================================================================
Total return.................................................. 7.89%+
Ratios/supplemental data:
Net assets, end of period (000)............................... $3,294
Ratio of expenses to average net assets:
Before expense reimbursement............................ 4.67%**
After expense reimbursement............................. 1.75%**
Ratio of net investment income to average net assets:
After expense reimbursement............................. 0.81%**
Portfolio turnover rate....................................... 32.71%
</TABLE>
*Commencement of operations.
**Annualized.
+Not annualized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS at October 31, 1998
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Edgar Lomax Value 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 12, 1997. The investment objective of the Fund is to seek
growth of capital, with a secondary objective of providing income. The Fund
seeks to achieve its objective by investing primarily in equity securities that
it believes are undervalued, reasonably priced and have prospects for continued
consistent growth.
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 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 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 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 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 October 31, 1998, The Edgar Lomax Company (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.
For the period ended October 31, 1998, the Fund incurred $23,571 in Advisory
fees.
<PAGE>
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 1.75% 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 subsequent fiscal years if the aggregate amount
actually paid by the Fund toward the operating expenses for such fiscal year
(taking into account the reimbursement) does not exceed the applicable
limitation on Fund expenses. The Advisor is permitted to be reimbursed only for
fee reductions and expense payments made in the previous three fiscal years, but
is permitted to look back five years and four years, respectively, during the
initial six years and seventh year of the Fund's operations. Any such
reimbursement is also contingent upon Board of Trustees review and approval at
the time the reimbursement is made. Such reimbursement may not be paid prior to
the Fund's payment of current ordinary operating expenses. For the period ended
October 31, 1998, the Advisor reduced its fees and absorbed Fund expenses in the
amount of $69,087; no amounts were reimbursed to the Advisor.
Investment Company Administration, LLC (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 the Fund's expenses and reviews the
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.
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 and trustees of the Trust are also officers and/or
directors of the Administrator and the Distributor.
NOTE 4 - SECURITIES TRANSACTIONS
For the period ended October 31, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$3,874,939 and $795,850, respectively.
At October 31, 1998, the gross unrealized appreciation and depreciation of
investments based on cost for Federal tax purposes of $3,151,687 were as
follows:
Gross unrealized appreciation............................ $ 247,326
Gross unrealized depreciation............................ (80,906)
---------
Net unrealized appreciation........................ $ 166,420
=========
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Trustees and Shareholders
Edgar Lomax Value Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Edgar Lomax Value Fund, series of Advisors
Series Trust, as of October 31, 1998, and the related statements of operations,
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 audit.
We conducted our audit 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
October 31, 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 audit provides 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
Edgar Lomax Value Fund, series of Advisors Series Trust, as of October 31, 1998,
the results of its operations, the changes in its net assets, and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles.
/s/
MCGLADREY & PULLEN LLP
New York, New York
December 4, 1998
<PAGE>
Advisor
The Edgar Lomax Company
6564 Loisdale Court, Suite 310
Springfield, VA 22150
www.edgarlomax.cihost.com
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Rd., Ste. 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Transfer Agent
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
(800) 385-7003
Auditors
McGladrey & Pullen LLP
555 Fifth Avenue, 8th Floor
New York, NY 10017-2416
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
