SEMI-ANNUAL REPORT
MAY 31, 2000
July 27, 2000
Dear Shareholders:
In our Annual Report, discussion of the equity environment concluded that recent
market volatility was likely to remain for several months. Our reasoning
centered upon the continued positive response to an improving economy by
cyclically sensitive businesses at the same time as the prior equity leadership
was entering a period of consolidation. The net result of these intra-market
dynamics would be a trading range with a modest downward bias for the Dow Jones
Industrial Average and the S&P 500 Index.
In order to have funds available to take advantage of the investment
opportunities which would arise in this rotational environment, the Fund
maintained 20% of its assets in cash. By early March, the S&P 500 had declined
by approximately 10% while the NASDAQ was in the early stages of a 40% decline
from its all-time high, reached only days earlier. We took advantage of
significant disparities in the relative valuations among various high growth
sectors of the NASDAQ to consolidate the Fund's exposure in the semiconductor,
software and telecommunications sectors. At the same time, we increased the
portfolio's investments in the biotech/genomic sector which continues to enjoy
improving fundamentals and significant growth potential.
The Fund's net asset value reflected the high degree of volatility exhibited by
the market. For the twelve-month period ended May 31, 2000, the Fund appreciated
9.03% as compared with the S&P 500 increase of 10.48%. As of May 31, 2000, the
Fund's six-month results declined 2.47% versus an increase in the S&P 500 of
2.88%. Over the past several weeks, the NASDAQ has risen by more than 35% and
has regained more than 50% of the spring decline. Responding to our increased
commitment to the biotech/genomic sector which has enjoyed an above average
recovery, the Fund has significantly outperformed the S&P 500 Index since the
end of May.
The net asset value (NAV) of the Fund can be followed on financial web sites and
quote machines under the symbol HEFGX.
/s/ Anthony Orphanos
Anthony Orphanos
Fund Manager
Footnotes:
Performance figures of the Fund and indexes referenced represent past
performance and are not indicative of future performance of the Fund or the
indexes. Share value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original investment. Indexes do not incur
expenses and are not available for investment.
The S&P Index is an unmanaged capitalization-weighted index of 500 stocks
designed to represent the broad domestic economy.
The Fund's annual total return for the year ended June 30, 2000 was 20.38%
The Fund's average annual total return since inception (December 29, 1998) to
June 30, 2000 was 23.42%
The Fund is distributed by First Fund Distributors, Inc., Phoenix, AZ. Member
NASD.
<PAGE>
HOWARD EQUITY FUND
SCHEDULE OF INVESTMENTS AT MAY 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Shares COMMON STOCKS: 82.24% Market Value
--------------------------------------------------------------------------------
AEROSPACE/DEFENSE-EQUIPMENT: 3.03%
8,500 United Technologies Corp............................ $ 513,718
-----------
AUCTION HOUSE/ART DEALER: 0.77%
8,000 Sothebys Holdings, Inc.-A........................... 130,500
-----------
AUTO- CARS/LIGHT TRUCKS: 2.21%
5,300 General Motors Corp................................. 374,312
-----------
AUTOMOTIVE - MEDIUM & HEAVY DUTY TRUCKS: 2.46%
13,000 Navistar International Corp......................... 417,625
-----------
CELLULAR TELECOM: 1.09%
2,000 Nextel Communications, Inc.-A....................... 185,250
-----------
COMPUTER SOFTWARE: 1.43%
30,000 Cambridge Technology Partners, Inc.................. 241,875
-----------
COMPUTERS-HARDWARE: 1.42%
2,000 Hewlett-Packard Corp................................ 240,250
-----------
DIVERSIFIED MANUFACTURING OPERATIONS: 1.26%
2,500 Minnesota Mining & Manufacturing.................... 214,375
-----------
DIVERSIFIED UNIT INVESTMENT TRUST: 12.73%
26,000 Nasdaq-100 Shares................................... 2,158,406
-----------
ELECTRONIC COMPONENTS-SEMICONDUCTOR: 8.35%
5,800 Intel Corp.......................................... 722,825
9,600 Texas Instruments, Inc.............................. 693,600
-----------
1,416,425
-----------
2
<PAGE>
HOWARD EQUITY FUND
SCHEDULE OF INVESTMENTS AT MAY 31, 2000 (UNAUDITED), CONTINUED
--------------------------------------------------------------------------------
Shares Market Value
--------------------------------------------------------------------------------
INTERNET CONTENT: 3.50%
8,000 Safeguard Scientifics, Inc.......................... $ 257,500
10,000 Security First Technologies Corp.................... 336,250
-----------
593,750
-----------
INTERNET SOFTWARE: 1.77%
160,000 Pacific Century Cyberworks Limited.................. 300,800
-----------
MEDICAL - DRUGS: 4.12%
5,000 Merck & Co., Inc.................................... 373,125
15,000 Pharmocopeia, Inc................................... 326,250
-----------
699,375
-----------
MEDICAL PRODUCTS: 5.08%
100,000 Nycomed Amersham PLC-ADR............................ 861,695
-----------
MEDICAL-BIOMEDICAL/GENOMICS: 18.92%
5,500 Affymetrix, Inc..................................... 653,125
2,000 Diversa Corp........................................ 44,000
20,000 Lexicon Genetics, Inc............................... 200,000
26,000 Lynx Therapeutics, Inc. *........................... 416,000
12,000 Millennium Pharmaceuticals.......................... 1,003,500
16,000 P.E. Corp.-Celera Genomics.......................... 890,000
-----------
3,206,625
-----------
METAL - ALUMINUM: 2.41%
7,000 Alcoa, Inc.......................................... 409,063
-----------
NETWORK SOFTWARE: 5.60%
71,000 Netspeak Corp....................................... 701,125
30,000 Novell, Inc......................................... 249,375
-----------
950,500
-----------
NETWORKING PRODUCTS: 2.35%
7,000 Cisco Systems, Inc.................................. 399,000
-----------
3
<PAGE>
HOWARD EQUITY FUND
SCHEDULE OF INVESTMENTS AT MAY 31, 2000 (UNAUDITED), CONTINUED
--------------------------------------------------------------------------------
Shares Market Value
--------------------------------------------------------------------------------
SATELLITE TELECOM: 1.08%
14,000 P.T. Pasifik Satelit Nusantara-ADR.................. $ 183,750
-----------
TELEPHONE-LONG DISTANCE: 2.66%
13,000 AT&T................................................ 450,938
-----------
634,200 Total Common Stocks (Cost $16,007,116 +): 82.24%.... 13,948,232
-----------
Principal
Amount SHORT-TERM INVESTMENTS: 18.92%
--------------------------------------------------------------------------------
$3,208,768 Firstar Stellar Treasury Fund, 4.18%
(Cost $3,208,768)................................... 3,208,768
-----------
Total Investments in Securities
(Cost $19,215,884): 101.16%......................... 17,157,000
Liabilities in Excess of Other Assets: (1.16)%...... (197,338)
-----------
Total Net Assets: 100.00%........................... $16,959,662
===========
* Non-income producing security.
+ At May 31, 2000, the cost of securities for Federal tax purposes was the same
as the basis for financial reporting. Gross unrealized appreciation and
depreciation of securities on a tax basis were as follows:
Gross unrealized appreciation....................... $ 1,052,094
Gross unrealized depreciation....................... (3,110,978)
-----------
Net unrealized depreciation.................. $(2,058,884)
===========
See Notes to Financial Statements.
4
<PAGE>
HOWARD EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES AT MAY 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (identified cost 19,215,884) $17,157,000
Receivables
Fund shares sold............................................. 133,459
Dividends and interest....................................... 19,942
Prepaid expenses............................................... 14,046
-----------
Total assets............................................... 17,324,447
-----------
LIABILITIES
Payables
Due to Investment Advisor.................................... 18,648
Fund shares repurchased...................................... 183,444
Portfolio securities purchased............................... 139,943
Administration fees.......................................... 2,548
Accrued expenses............................................... 20,202
-----------
Total liabilities.......................................... 364,785
-----------
NET ASSETS....................................................... $16,959,662
===========
Net asset value, offering and redemption price per share
[$16,959,662 / 1,444,620 shares outstanding; unlimited
number of shares (par value $0.01) authorized]................. $ 11.74
===========
COMPONENTS OF NET ASSETS
Paid-in capital................................................ $18,869,125
Undistributed net investment loss.............................. (49,122)
Accumulated net realized gain on investments................... 198,543
Net unrealized depreciation on investments..................... (2,058,884)
-----------
Net assets................................................... $16,959,662
===========
See Notes to Financial Statements.
5
<PAGE>
HOWARD EQUITY FUND
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED MAY 31, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends.................................................... $ 28,622
Interest..................................................... 87,964
-----------
Total income............................................... 116,586
-----------
Expenses
Advisory fees (Note 3)....................................... 84,521
Distribution Expense (Note 3)................................ 34,774
Custody fees................................................. 4,011
Fund accounting fees......................................... 7,020
Administration fee .......................................... 15,041
Professional fees............................................ 10,029
Transfer agent fees.......................................... 7,020
Reports to shareholders...................................... 3,510
Registration fees............................................ 2,445
Other........................................................ 1,003
Trustees' fees............................................... 1,742
Insurance expense............................................ 611
-----------
Total expenses............................................. 171,727
Less: advisory fee waiver and absorption (Note 3).......... (6,019)
-----------
Net expenses............................................... 165,708
-----------
Net investment loss...................................... (49,122)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from security transactions................... 375,842
Net change in unrealized depreciation on investments........... (3,089,915)
-----------
Net realized and unrealized loss on investments.............. (2,714,073)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $(2,763,195)
===========
See Notes to Financial Statements.
6
<PAGE>
HOWARD EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Six Months Dec. 29, 1998*
Ended through
May 31, 2000# Nov. 30, 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (DECREASE) in net assets from OPERATIONS
Net investment (loss) / income........................... $ (49,122) $ 3,092
Net realized gain / (loss) on security transactions ..... 375,842 (177,758)
Net change in unrealized (depreciation) / appreciation
on investments......................................... (3,089,915) 1,031,031
----------- -----------
NET (DECREASE) / INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................... (2,763,195) 856,365
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income............................... (2,878) --
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a)............................. 9,733,672 9,135,698
----------- -----------
TOTAL INCREASE IN NET ASSETS ............................ 6,967,599 9,992,063
NET ASSETS
Beginning of period........................................ 9,992,063 --
----------- -----------
END OF PERIOD ............................................. $16,959,662 $ 9,992,063
=========== ===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
<CAPTION>
Six Months December 29, 1998*
Ended through
May 31, 2000# November 30, 1999
---------------------------- ----------------------------
Shares Paid in Capital Shares Paid in Capital
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold ................................ 710,500 $11,097,796 842,974 $ 9,277,834
Shares issued on reinvestments
of distributions.......................... 205 2,808 -- --
Shares redeemed............................. (95,815) (1,366,932) (13,245) (142,136)
----------- ----------- ----------- -----------
Net increase................................ 614,890 $ 9,733,672 829,729 $ 9,135,698
=========== =========== =========== ===========
</TABLE>
* Commencement of operations.
# Unaudited.
See Notes to Financial Statements.
7
<PAGE>
HOWARD EQUITY FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Six Months Dec. 29, 1998*
Ended through
May 31, 2000# Nov. 30, 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period...................... $ 12.04 $ 10.00
------- -------
Income from investment operations:
Net investment income................................... (0.03) 0.00
Net realized and unrealized (loss)/gain on investments.. (0.27) 2.04
------- -------
Total from investment operations.......................... (0.30) 2.04
------- -------
Less distributions:
From net investment income.............................. 0.00** --
------- -------
Total distributions....................................... 0.00 --
------- -------
Net asset value, end of period............................ $11.74 $ 12.04
======= =======
TOTAL RETURN ............................................. (2.47%)++ 20.40%++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands)..................... $16,960 $ 9,992
Ratio of expenses to average net assets:
Before expense reimbursement............................ 2.02%+ 4.39%+
After expense reimbursement............................. 1.95%+ 1.95%+
Ratio of net investment loss to average net assets
After expense reimbursement............................. (0.58%)+ 0.07%+
Portfolio turnover rate................................... 108.07% 211.31%
</TABLE>
* Commencement of operations.
** Amount distributed represents less than one-half of one cent per share.
# Unaudited.
+ Annualized.
++ Not Annualized.
See Notes to Financial Statements.
8
<PAGE>
HOWARD EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Howard Equity Fund (the "Fund") is a series of shares of beneficial
interest 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 29, 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 fair 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, which are determined in accordance with
income tax regulations, are recorded on the ex-dividend date.
Distributions which exceed net realized gains for financial reporting
purposes but not for tax purposes are reported as distributions in
excess of net realized gains and are primarily due to differing
treatments for wash sales and realized losses subsequent to October 31
on sale of securities. Realized gains and losses on securities sold
are determined on the basis of identified cost. Discounts and premiums
on securities purchased are amortized over the life of the respective
securities.
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.
9
<PAGE>
HOWARD EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the six months ended May 31, 2000, Howard Capital Management (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 year ended May 31, 2000, the Fund incurred $84,521 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 reimbursed is made. Such reimbursement may not be paid prior to the
Fund's payment of current ordinary operating expenses. For the six months ended
May 31, 2000, the Advisor reduced its fees and absorbed Fund expenses in the
amount of $6,019; 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 following annual rate:
Fund asset level Fee rate
---------------- --------
Less than $15 million $30,000
$15 million to less than $50 million 0.20% of average daily net assets
$50 million to less than $100 million 0.15% of average daily net assets
$100 million to less than $150 million 0.10% of average daily net assets
More than $150 million 0.05% of average daily net assets
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 (the
"Plan"). The Plan permits the Fund to pay for distribution and related expenses
at an annual rate of up to 0.25% of the Fund's average daily net assets
annually. The expenses covered by the plan may include the cost of preparing and
distributing prospectuses and other sales material, advertising and public
relations expenses, payments to financial intermediaries and compensation of
10
<PAGE>
HOWARD EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
personnel involved in selling shares of the Fund. Payments made pursuant to the
Plan will represent compensation for distribution and service activities, not
reimbursement for specific expenses incurred. Pursuant to a distribution
coordination agreement adopted under the Plan, distribution fees are paid to the
Advisor as "Distribution Coordinator." For the six months ended May 31, 2000,
the Fund paid the Distribution Coordinator in the amount of $34,774.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers of the Fund are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2000, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$23,670,056 and $13,728,362, respectively.
At November 30, 1999, the Fund had tax basis capital losses of
approximately $177,000 which may be carried to offset future capital gains. Such
losses expire November 30, 2007.
11
