HOWARD
EQUITY FUND
SEMI-ANNUAL REPORT
MAY 31, 1999
<PAGE>
HOWARD EQUITY FUND
SEMI-ANNUAL REPORT
MAY 31, 1999
Dear fellow Shareholder:
We are pleased to report that the Howard Equity Fund (the "Fund") has
outperformed the S&P 500 Index since its inception in December 1998, as well as
for the year to date. For the period January 1, 1999 through May 31, 1999, the
Fund has appreciated 8.35% compared to a 6.47% increase in the S&P 500 Index.
Since inception on December 30th, 1998, the Fund has appreciated 7.70% as
compared to a 6.83% increase in the S&P 500 Index.
The Fund's present investment strategy is to emphasize investments in sectors
and companies which will benefit from an increasingly vigorous domestic economy
and the recovering economies of the Pacific Rim. Meanwhile, many European
governments are actively promulgating growth policies which should ensure
world-wide economic growth through the year 2000.
Our focus has been on technology, telecommunications, energy services,
industrial manufacturing and consumer/industrial cyclicals. Many of our
investments in financial services, healthcare and consumer non-durables have
reached new absolute and/or recovery highs over the past two months.
Nevertheless, we have underweighted these areas in order to take advantage of
what we believe to be more attractive valuations in selected cyclically
sensitive businesses.
The Fund lagged the indices in the early part of year, when an extremely narrow
market leadership continued to focus on companies which would benefit from
slower economic growth. However, as the first quarter drew to a close, the
investment community did a complete about-face. Investment strategists and
portfolio managers, alike, embraced the concept of accelerating economic growth.
This change in opinion has led to dramatic appreciation in what previously had
been the "unattractive" sectors of the marketplace.
We believe this inflection in investment opinion is meaningful and will continue
into calendar 2000. As a consequence, the substantial corrections in the
valuation of the prior leadership should result in attractive investment
opportunities over the next several months. Nonetheless, our investment
strategy, which favors the beneficiaries of better than expected economic
growth, will continue to influence the portfolio through, at least, year-end.
/s/ Anthony Orphanos
Anthony Orphanos
Chief Investment Officer & Portfolio Manager
<PAGE>
HOWARD EQUITY FUND
SEMI-ANNUAL REPORT
MAY 31, 1999
PORTFOLIO OF INVESTMENTS AT MAY 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 66.83% Market Value
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AEROSPACE/DEFENSE - EQUIPMENT: 3.66%
2,100 United Technologies Corporation....................... $ 130,331
----------
AUTOMOBILE - CARS/LIGHT TRUCKS: 1.94%
1,000 General Motors Corporation............................ 69,000
----------
AUTOMOBILE/TRUCK PARTS & EQUIPMENT - ORIGINAL: 0.39%
699 Delphi Automotive Systems Corporation.............. 13,717
----------
CELLULAR TELECOM: 2.07%
2,000 Nextel Communications, Inc.*.......................... 73,750
----------
COMPUTERS - HARDWARE: 5.30%
2,000 Hewlett-Packard Company............................... 188,625
----------
COMPUTERS - INTEGRATED SYSTEM: 2.77%
3,500 Diebold, Incorporated................................. 98,438
----------
DIVERSIFIED MANUFACTURING OPERATIONS: 2.41%
1,000 Minnesota Mining and Manufacturing Company............ 85,750
----------
ELECTRONIC COMPONENTS - SEMICONDUCTOR: 6.08%
1,300 Texas Instruments, Incorporated....................... 142,188
3,000 Watkins-Johnson Company............................... 74,250
----------
216,438
----------
FINANCE - INVESTMENT BANKER/BROKER: 2.18%
3,500 Raymond James Financial, Inc.......................... 77,438
----------
FOOD - MISCELLANEOUS/DIVERSIFIED: 2.63%
2,500 Dean Foods Company.................................... 93,750
----------
INSTRUMENTS - SCIENTIFIC: 2.50%
3,000 EG&G, Inc............................................. 89,063
----------
2
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HOWARD EQUITY FUND
PORTFOLIO OF INVESTMENTS AT MAY 31, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
MEDICAL - BIOMEDICAL/GENETICS: 4.10%
2,000 Affymetrix, Inc.*..................................... $ 70,250
2,000 Millennium Pharmaceuticals, Inc.*..................... 75,750
----------
146,000
----------
METAL - ALUMINUM: 1.55%
1,000 Alcoa Inc............................................. 55,000
----------
MULTI - LINE INSURANCE: 2.44%
2,000 CNA Financial Corporation*............................ 86,875
----------
NETWORK SOFTWARE: 4.80%
13,000 NetSpeak Corporation*................................. 135,688
1,500 Novell, Inc.*......................................... 35,250
----------
170,938
----------
OIL - FIELD MACHINERY & EQUIPMENT: 6.41%
2,000 Camco International Inc.*............................. 72,375
2,000 Halliburton Company................................... 82,750
8,000 Varco International, Inc.............................. 73,000
----------
228,125
----------
PHOTO EQUIPMENT & SUPPLIES: 1.19%
2,000 Polaroid Corporation.................................. 42,250
----------
PIPELINES: 2.91%
2,000 The Williams Companies, Inc........................... 103,625
----------
SUPER - REGIONAL BANKS - UNITED STATES: 1.04%
800 First Union Corporation............................... 36,850
----------
TELECOM SERVICES: 2.63%
1,000 Global Crossing Ltd.*................................. 47,438
1,900 MasTec, Inc.*......................................... 46,075
----------
93,513
----------
TELEPHONE - LONG DISTANCE: 4.60%
2,950 AT&T Corp............................................. 163,725
----------
3
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HOWARD EQUITY FUND
PORTFOLIO OF INVESTMENTS AT MAY 31, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
TOBACCO: 3.25%
3,000 Philip Morris Companies Inc........................... $ 115,688
----------
Total Common Stocks ($2,305,998)...................... 2,378,889
Principal
Amount SHORT-TERM INVESTMENT: 32.53%
- --------------------------------------------------------------------------------
$1,158,101 Firstar Stellar Treasury Fund, 4.18%.................. 1,158,101
----------
Total Investments in Securities
(cost $3,464,099): 99.36%............................. 3,536,986
Other Assets in excess of Liabilities: 0.64%.......... 22,727
----------
TOTAL NET ASSETS: 100.00%............................. $3,559,713
==========
* Non-incoming producing security.
4
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HOWARD EQITY FUND
STATEMENT OF ASSETS AND LIABILITIES AT MAY 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(identified cost $3,464,099).................................. $3,536,986
Receivables
Due from Advisor............................................. 4,886
Receivable for Securities Sold............................... 32,329
Dividends and interest ...................................... 6,292
Prepaid expenses................................................ 3,652
----------
Total assets.............................................. 3,584,145
----------
LIABILITIES
Payables
Administration fees.......................................... 2,301
Redemptions payable.......................................... 1,800
Accrued expenses................................................ 20,331
----------
Total liabilities......................................... 24,432
----------
NET ASSETS......................................................... $3,559,713
==========
Net asset value, offering and redemption price per share
[$3,559,713/330,407 shares outstanding; unlimited number of
shares (par value $0.01) authorized]............................ $ 10.77
==========
COMPONENTS OF NET ASSETS
Paid-in capital................................................. $3,413,651
Accumulated net investment income............................... 6,542
Accumulated net realized gain on investments.................... 66,633
Net unrealized appreciation on investments ..................... 72,887
----------
Net assets................................................... $3,559,713
==========
See Notes to Financial Statements.
5
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HOWARD EQITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM DECEMBER 30, 1998* THROUGH MAY 31, 1999
(UNAUDITED)
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INVESTMENT INCOME
Income
Dividends.................................................... $ 4,221
Interest..................................................... 17,518
----------
Total income.............................................. 21,739
----------
Expenses
Organization expense......................................... 25,000
Custodian and accounting fees................................ 9,663
Professional fees............................................ 7,913
Advisory fees................................................ 7,793
Transfer agent fees.......................................... 5,831
Administration fee .......................................... 5,342
Reports to shareholders...................................... 4,165
Distribution Expense ........................................ 3,897
Registration fees............................................ 2,031
Other ....................................................... 1,666
Trustees' fees............................................... 1,381
Insurance expense............................................ 303
----------
Total expenses............................................ 74,985
Less, advisory fee waiver and absorption (Note 3)......... (59,788)
----------
Net expenses.............................................. 15,197
----------
Net investment income..................................... 6,542
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions.................... 66,633
Net change in unrealized appreciation on investments............ 72,887
----------
Net realized and unrealized gain on investments.............. 139,520
----------
Net Increase in Net Assets Resulting from Operations...... $ 146,062
==========
* Commencement of operations.
See Notes to Financial Statements.
6
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HOWARD EQITY FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
December 30, 1998*
through
May 31, 1999
- --------------------------------------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income........................................ $ 6,542
Net realized gain from security transactions................. 66,633
Net change in unrealized appreciation on investments......... 72,887
----------
Net decrease in net assets resulting from operations..... 146,062
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in
outstanding shares (a)..................................... 3,413,651
----------
Total increase in net assets........................... $3,559,713
==========
NET ASSETS
Beginning of period............................................. --
----------
End of period................................................... $3,559,713
==========
(a) A summary of capital shares transactions is as follows:
December 30, 1998*
through
May 31, 1999
----------------------------
Shares Paid In Capital
---------- ---------------
Shares sold ..................................... 335,370 $3,464,367
Shares redeemed.................................. (4,962) (50,716)
---------- ----------
Net increase..................................... 330,408 $3,413,651
========== ==========
* Commencement of operations.
See Notes to Financial Statements.
7
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HOWARD EQITY FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
December 30, 1998*
through
May 31, 1999
- --------------------------------------------------------------------------------
Net asset value, beginning of period.......................... $ 10.00
----------
Income from investment operations:
Net investment income...................................... 0.02
Net realized and unrealized gain on investments............ 0.75
----------
Total from investment operations.............................. 0.77
----------
Net asset value, end of period................................ $ 10.77
==========
Total return.................................................. 7.70%++
Ratios/supplemental data:
Net assets, end of period (000)............................... $ 3,560
Ratio of expenses to average net assets:
Before expense reimbursement............................... 9.67%+
After expense reimbursement................................ 1.95%+
Ratio of net investment income to average net assets:
After expense reimbursement................................ 0.84%+
Portfolio turnover rate....................................... 200.10%
* Commencement of operations.
+ Annualized.
++ Not Annualized.
See Notes to Financial Statements.
8
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HOWARD EQITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Howard Equity 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 30, 1998. The investment objective of the Fund is to seek
growth of capital. The Fund attempts to achieve its objective by investing
primarily in equity securities of large to mid capitalization companies.
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 that are primarily traded on a national securities
exchange shall be valued at the last sale price on the exchange on
which they are primarily traded on the day of valuation or, if there
has been no sale on such day, at the mean between the bid and asked
prices. Securities primarily traded in the NASDAQ National Market
System for which market quotations are readily available shall be
valued at the last sale price on the day of valuation, or if there has
been no sale on such day, at the mean between the bid and asked
prices. Over-the-counter ("OTC") securities which are not traded in
the NASDAQ National Market System shall be valued at the most recent
trade price. 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 May 31, 1999, Howard Capital Management (the
"Advisor") provided the Fund with investment management services under an
9
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HOWARD EQITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
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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 May 31, 1999, the Fund incurred $7,793 in Advisory Fees.
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 1.95% 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
May 31, 1999, the Advisor reduced its fees and absorbed Fund expenses in the
amount of $59,788; no amounts were reimbursed to the Advisor.
Investment Company Administration, L.L.C. (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 PLAN
The Trust has adopted a Distribution Plan pursuant to Rule 12b-1 (the
"Plan"). The Plan permits the Fund to pay for sales distribution and related
expenses at an annual rate of up to .50% of the Fund's average daily net assets
annually. Payments made pursuant to the Plan will represent compensation for
distribution and service activities, not reimbursement for specific expenses
incurred. For the period ended December 31, 1998, the Fund paid the Distribution
Coordinator in the amount of $3,897.
NOTE 5 - SECURITIES TRANSACTIONS
For the period ended May 31, 1999, the cost of purchases and the proceeds
from sales of securities, excluding short-term securities, were $3,699,347 and
$1,459,983, respectively.
10
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HOWARD
CAPITAL MANAGEMENT
ADVISOR
HOWARD CAPITAL MANAGEMENT
25 ROCKEFELLER PLAZA
SUITE 1440
NEW YORK, NY 10111
(212) 586-4800
DISTRIBUTOR
FIRST FUND DISTRIBUTOR, INC.
4455 EAST CAMELBACK ROAD
SUITE 261E
PHOENIX, AZ 85018
CUSTODIAN
FIRSTAR BANK, N.A.
425 WALNUT STREET
CINCINATTI, OH 45202
SHAREHOLDER SERVICING AGENT
AMERICAN DATA SERVICES, INC.
150 MOTOR PARKWAY
SUITE 109
HAUPPAUGE, NY 11788-0132
(888) 229-2105
AUDITORS
MCGLADREY & PULLEN, LLP
555 FIFTH AVENUE
NEW YORK, NY 10017
LEGAL COUNSEL
PAUL, HASTINGS, JANOFSKY
& WALKER LLP
345 CALIFORNIA STREET
SAN FRANCISCO, CA 94014
