LIBERTY FREEDOM FUND LOGO
Semi-Annual Report
For the period ended
November 30, 1998
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LIBERTY FREEDOM FUND
January 26, 1999
Dear Fellow Shareholder:
We are pleased to report on the investment performance and continuing growth of
the Liberty Freedom Fund through the end of November 1998. From its opening on
June 29, 1998 through November 30, 1998, the fund gained 2.60% (not reflecting a
sales load) and (0.96%) (reflecting the sales load) while its assets grew to
$2.8 million.
The stock market during 1998 was 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, lost 1.50% from June 29 through November 30. In
comparison, the S&P/Barra Growth index gained 6.8%.
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, from
June 29 to September 30, 1998, the Fund suffered a loss of 8.30% as compared to
a loss of 10.3% in the S&P 500, a loss of 13.2% in the S&P/Barra Value and a
loss of 7.7% 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.
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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/ Greg St. Etienne
Greg St. Etienne
Advisor
The Fund's total return from inception on June 29, 1998 through December 31,
1998 was 2.72% (not reflecting a sales load) and -.084% (reflecting the sales
load). The total returns of the S&P 500 Index, the S&P Barra Value Index, and
the S&P Barra Growth Index from the Fund's inception date at June 29, 1998
through December 31, 1998 were 9.35%, 2.27% and 15.51%, respectively.
The S&P 500 Index 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 S&P Barra Growth Index is an unmanaged capitalization-weighted index that
contains approximately 50% of the stocks in the S&P 500 with higher
price-to-book ratios.
Results shown are past performance which should not be considered predictive of
future performance. The value of the Fund's shares will fluctuate so that when
you sell your shares, they may be worth more or less than you paid for them
resulting in either a gain or a loss. Shares of the Fund are not bank deposits
and are not insured by the FDIC or any other agency. Shares of the Fund are
distributed by First Fund Distributors, Inc. Member NASD.
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LIBERTY FREEDOM FUND
SCHEDULE OF INVESTMENTS AT NOVEMBER 30, 1998 (UNAUDITED)
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Shares COMMON STOCKS: 95.98% Market Value
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Automobiles: 5.24%
2,100 General Motors Corporation.............................. $ 147,000
---------
Banks - Major Regional: 2.81%
1,539 Bank One Corporation.................................... 78,970
---------
Banks - Money Center: 2.67%
700 J.P. Morgan & Co., Incorporated......................... 74,813
---------
Chemicals: 6.97%
700 The Dow Chemical Company................................ 68,162
2,850 Union Carbide Corporation............................... 127,538
---------
195,700
---------
Communications Equipment: 2.37%
1,750 Harris Corporation...................................... 66,391
---------
Electric Companies: 5.69%
1,500 American Electric Power Company, Inc.................... 69,563
3,050 The Southern Company.................................... 89,975
---------
159,538
---------
Electrical Equipment: 5.84%
1,100 Honeywell, Inc.......................................... 87,931
1,550 Rockwell International Corporation*..................... 75,853
---------
163,784
---------
Electronics - Defense: 3.12%
1,600 Raytheon Co., Class A*.................................. 87,500
---------
Electronics - Semiconductors: 4.76%
1,750 Texas Instruments, Incorporated......................... 133,656
---------
Engineering and Construction: 3.28%
2,150 Fluor Corporation....................................... 92,047
---------
3
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LIBERTY FREEDOM FUND
SCHEDULE OF INVESTMENTS AT NOVEMBER 30, 1998 (UNAUDITED), CONTINUED
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Shares Market Value
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Insurance - Multi-Line: 7.13%
1,400 CIGNA Corporation....................................... $ 108,938
1,650 The Hartford Financial Services Group, Inc.............. 91,059
---------
199,997
---------
Manufacturing - Diversified: 4.15%
1,450 Minnesota Mining and Manufacturing Company.............. 116,453
---------
Oil - Domestic Integrated: 2.01%
850 Atlantic Richfield Company.............................. 56,525
---------
Oil - International Integrated: 13.82%
1,750 Amoco Corporation....................................... 103,141
900 Chevron Corporation..................................... 75,263
1,700 Exxon Corporation....................................... 127,606
950 Mobil Corporation....................................... 81,878
---------
387,888
---------
Paper and Forest Products: 4.26%
2,750 International Paper Company............................. 119,453
---------
Photography/Imaging: 3.88%
1,500 Eastman Kodak Company................................... 108,844
---------
Railroads: 2.76%
2,550 Norfolk Southern Corporation............................ 77,456
---------
Restaurants: 4.12%
1,650 McDonald's Corporation.................................. 115,603
---------
Retail - Specialty / Apparel: 3.15%
3,050 The Limited, Inc........................................ 88,259
---------
Telecommunications - Long Distance: 2.78%
1,250 AT&T Corp............................................... 77,890
---------
Tobacco: 5.18%
2,600 Philip Morris Companies, Inc............................ 145,437
---------
4
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LIBERTY FREEDOM FUND
SCHEDULE OF INVESTMENTS AT NOVEMBER 30, 1998 (UNAUDITED), CONTINUED
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Shares Market Value
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Total common stocks (cost $2,579,828)................... 2,693,204
---------
Principal Amount SHORT-TERM INVESTMENTS: 2.39%
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$67,101 Star Treasury Fund .............................. $ 67,101
-----------
Total Investments in Securities
(cost $2,646,929): 98.37%...................... 2,760,305
Other Assets less Liabilities: 1.63%............. 45,763
-----------
TOTAL NET ASSETS: 100.00% ....................... $ 2,806,068
===========
* Non-income producing securities.
+ At November 30, 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 ................... $ 169,205
Gross unrealized depreciation ................... 55,829
-----------
Net unrealized appreciation .................. $ 113,376
==========
5
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LIBERTY FREEDOM FUND
STATEMENT OF ASSETS AND LIABILITIES AT NOVEMBER 30, 1998 (UNAUDITED)
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ASSETS:
Investment in securities, at value (identified
cost of $2,646,929) ........................................ $ 2,760,306
Receivables
Due from Advisor .......................................... 5,735
Fund shares sold .......................................... 14,468
Dividends and interest .................................... 11,188
Deferred Organization Cost .................................. 36,646
Prepaid expenses ............................................ 8,741
-----------
Total assets ........................................... 2,837,084
-----------
LIABILITIES:
Payables
Administration fees ....................................... 2,466
Accrued expenses ............................................ 28,550
-----------
Total liabilities ...................................... 31,016
NET ASSETS .................................................... $ 2,806,068
===========
Class A - Net asset value and redemption price per share
($2,806,068/273,563 shares outstanding: unlimited number
of shares (par value $0.01) authorized) ....................... $ 10.26
===========
Class A - Maximum offering price per share .................... $ 10.63
===========
COMPONENTS OF NET ASSETS
Paid-in capital ............................................. 2,690,576
Accumulated net investment income ........................... 7,352
Accumulated net realized loss on investments ................ (5,236)
Net unrealized appreciation on investments .................. 113,376
-----------
Net assets ............................................. $ 2,806,068
===========
See accompanying Notes to Financial Statements.
6
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LIBERTY FREEDOM FUND
STATEMENT OF OPERATIONS - For the Period from June 29, 1998 through November 30,
1998 (Unaudited)
INVESTMENT INCOME
Income
Dividends ................................................... $ 24,373
Interest .................................................... 3,178
---------
Total income .............................................. 27,551
---------
Expenses
Administration fees ......................................... 12,575
Custodian and accounting fees ............................... 9,659
Professional fees ........................................... 8,518
Advisory fees ............................................... 8,163
Transfer agent fees ......................................... 7,126
Reports to shareholders ..................................... 5,031
Distribution fees (Class A) ................................. 4,802
Amortization of deferred organization costs ................. 3,354
Registration fees ........................................... 3,973
Shareholder servicing fees (Class A) ........................ 2,401
Trustees' fees .............................................. 2,021
Other ....................................................... 1,467
Insurance expense ........................................... 861
---------
Total expenses ............................................ 69,951
Less: advisory fee waiver and absorption .................. (49,752)
---------
Net expenses .............................................. 20,199
NET INVESTMENT INCOME ................................... 7,352
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions .................. (5,236)
Net change in unrealized appreciation on investments .......... 113,376
---------
Net realized and unrealized gain on investments ............. 108,140
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 115,492
=========
* Commencement of operations.
See accompanying Notes to Financial Statements.
7
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LIBERTY FREEDOM FUND
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
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June 29, 1998*
through
November 30, 1998
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INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income ........................................ $ 7,352
Net realized gain from security transactions ................. (5,236)
Net change in unrealized appreciation on investments ......... 113,376
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... 115,492
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (Class A) (a) ............................ 2,690,576
-----------
TOTAL INCREASE IN NET ASSETS ........................... $ 2,806,068
===========
NET ASSETS
Beginning of period .......................................... --
-----------
END OF PERIOD ................................................ $ 2,806,068
===========
(a) A summary of capital shares transactions is as follows:
June 29, 1998*
through
November 30, 1998
----------------------------
Shares Value
------ -----
Shares sold .............................. 312,663 $ 3,066,611
Shares issued in reinvestment of
distributions ........................... -- --
Shares redeemed .......................... (39,100) (376,035)
----------- -----------
Net increase ............................. 273,563 $ 2,690,576
=========== ===========
* Commencement of operations.
See accompanying Notes to Financial Statements.
8
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LIBERTY FREEDOM FUND
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period (Unaudited)
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June 29, 1998*
through
November 30, 1998
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Net asset value, beginning of period .......................... $10.00
------
Income from investment operations:
Net investment income ......................................... 0.03
Net realized and unrealized gain on investments ............... 0.23
------
Total from investment operations .............................. 0.26
------
Net asset value, end of period ................................ $10.26
======
Total return (Sales charge not included) ...................... 2.60%
Ratios/supplemental data:
Net assets, end of period (thousands) ......................... $2,806
Ratio of expenses to average net assets:
Before expense reimbursement .................................. 7.13%+
After expense reimbursement ................................... 2.10%+
Ratio of net investment income to average net assets:
After expense reimbursement ................................... 0.75%+
Portfolio turnover rate ....................................... 9.13%
* Commencement of operations.
+ Annualized.
See accompanying Notes to Financial Statements.
9
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LIBERTY FREEDOM FUND
NOTES TO FINANCIAL STATEMENTS AT NOVEMBER 30, 1998
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NOTE 1 - ORGANIZATION
The Liberty Freedom 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 June 29, 1998.
Shares of beneficial interest of the Fund are currently divided into two
classes, designated Class A Shares and Class I Shares. Each Class represents an
interest in the same portfolio. During the period ended November 30, 1998, Class
I was inactive.
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 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. DEFERRED ORGANIZATION COSTS: The Fund has incurred expenses of $40,000
in connection with its organization. These costs have been deferred
and are being amortized on a straight-line basis over a period of
sixty months from the date the Fund commenced investment operations.
E. 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 November 30, 1998, Liberty Bank and Trust Company (the
"Advisor") maintained overall responsibility for the Fund's assets and was
10
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LIBERTY FREEDOM FUND
NOTES TO FINANCIAL STATEMENTS AT NOVEMBER 30, 1998, CONTINUED
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responsible for monitoring the day-to-day activity of the Sub-Advisor, The Edgar
Lomax Company. As compensation for its services, the Advisor is entitled to a
monthly fee at the annual rate of 0.25% based upon the average daily net assets
of the Fund. For the period ended November 30, 1998, The Edgar Lomax Company
(the "Sub-Advisor") provided the Fund with advice on buying and selling
securities and managing the investments of the Fund. As compensation for its
services, the Sub-Advisor is entitled to a monthly fee at the annual rate of
0.60% 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 Class A shares to an annual
operating expense of 2.10% 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
November 30, 1998, the Advisor reduced its fees and absorbed Fund expenses in
the amount of $49,752; 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 of the Fund are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS
The Trust has adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act. The Distribution Plan provides
that the Fund's Class A Shares pay a fee to the Advisor, acting as Distribution
Coordinator, at an annual rate of up to 0.50% of the average daily net assets of
the Fund. The expenses which the Fund may pay include the cost of preparing and
distributing prospectuses and other sales material, advertising and public
relations expenses, payments to financial intermediaries and compensation of
personnel involved in selling shares of the Fund. Payments made pursuant to the
Distribution Plan will represent compensation for distribution and service
11
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LIBERTY FREEDOM FUND
NOTES TO FINANCIAL STATEMENTS AT NOVEMBER 30, 1998, CONTINUED
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activities, not reimbursement for specific expenses incurred. The Distribution
Plan allows excess distribution expenses to be carried forward for the following
three fiscal years.
The Trust has also adopted a Shareholder Servicing Plan (the "Servicing
Plan") which provides that the Fund's Class A Shares pay a fee to the Advisor at
an annual rate of up to 0.25% of the average daily net assets of the Fund, as
compensation for providing, or arranging for others to provide, certain
specified shareholders services to Class A shareholders. The Advisor will pay
certain banks, trust companies, broker-dealers and other financial
intermediaries (each a "Participating Organization") out of the fees the Advisor
receives from the Fund under the Servicing Plan to the extent that these
Participating Organizations perform shareholder servicing functions for Class A
shares owned from time to time by customers of the Participating Organization.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$2,763,386 and $178,321, respectively.
12
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ADVISOR
Liberty Bank and Trust Company
4101 Pauger Street, Suite 105
New Orleans, LA 70122
SUB-ADVISOR
The Edgar Lomax Company
6564 Loisdale Court, Suite 310
Springfield, VA 22150
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
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
