N-30D 1 hcaf-se.txt HOWARD CAPITAL APPRECIATION FUND SEMI-ANNUAL REPORT MAY 31, 2002 HOWARD CAPITAL APPRECIATION FUND SEMI-ANNUAL REPORT JULY 31, 2002 Dear Shareholder: The equity markets continue to be roiled by insider trading scandals, accounting fraud, and corporate excess. The equity markets weakness is further compounded by constant announcements of poor management decisions that have lead to write-downs, restructurings and even bankruptcy. All of the above continue to bear down upon an investor universe that still 'overowns' equities. The twenty-year secular bull market has left individuals and institutions alike with an asset allocation to equities still too far above equilibrium. This has resulted in unenthusiastic buying when the market rises on good news and continuous liquidation during periods of consolidation. Many sectors of the market are currently at or below levels reached during the climactic lows of last September. Year-to-date, as of June 30, 2002, the S&P 500 and NASDAQ Composite have depreciated by -13.16% and -24.84% respectively. I am pleased to report that based upon average annual total return, the Fund has outperformed the S&P 500 Index for the year, as well as since inception. For the six-month period ended June 30th, the Fund outperformed the S&P 500 Index by 555 basis points, -7.61% vs. -13.16%. Since inception (12/28/1998), the Fund has outperformed the S&P 500 Index by more than 15 full percentage points on a cumulative basis, -0.29% vs. -15.52% (-0.08% and -4.70% on an annualized basis). Recent economic data suggests that the U.S. economic recovery is fully intact, albeit moving forward at a grudging pace. The Fed Funds rate is the lowest in the past 40 years and the Federal Reserve has indicated that it will not be raising interest rates anytime soon. The problem continues to lie in valuation issues, which are two-fold. Firstly, on the assumption that some level of real GDP profit growth can be estimated, questions over corporate accounting have placed all earnings forecasts in serious doubt. Secondly, though a series of frauds preceded the Enron event, its bankruptcy has made investors fear that fraud could be systemic. The Tyco unraveling and pending Worldcom bankruptcy have heightened these fears. We continue to maintain a defensive posture in the Fund although recent weakness has lead to our consideration of an increase in equity weightings across specific sectors. Our current equity exposure remains through the large- cap, blue-chip, multi-national companies predominantly represented in the Dow Jones Industrial Average. The technology and telecommunications sectors should continue to be avoided to the maximum extent possible. Although the percentage trading opportunities in the NASDAQ are enticing, the long-term fundamentals continue to erode. Sincerely, /s/Anthony Orphanos Anthony Orphanos Chief Investment Officer Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Opinions expressed are those of Anthony Orphanos and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security. As of 6/30/02, the securities mentioned above were not held by the fund. Fund holdings are subject to change at any time and are not recommendations to buy or sell any security. The S&P 500, NASDAQ and DJIA Indices are unmanaged indices commonly used to measure performance of U.S. stocks. You cannot invest directly in an index. SCHEDULE OF INVESTMENTS AT MAY 31, 2002 (UNAUDITED) Shares COMMON STOCKS: 40.52% Market Value ------------------------------------------------------------------------------- AEROSPACE/DEFENSE - EQUIPMENT: 6.33% 17,000 Honeywell International, Inc. $ 666,400 ----------- ELECTRIC EQUIPMENT: 2.75% 5,000 Emerson Electric Co. 289,250 ----------- ELECTRONIC COMPONENTS - SEMICONDUCTOR: 3.54% 13,000 Texas Instruments, Inc. 372,710 ----------- FINANCIALS - DIVERSIFIED FINANCIAL SERVICES: 9.99% 3,000 American International Group, Inc. 200,910 8,900 Citigroup, Inc. 384,302 13,000 J.P. Morgan Chase & Co. 467,350 ----------- 1,052,562 ----------- HEALTHCARE - PHARMACEUTICALS: 8.25% 8,500 Merck & Co., Inc. 485,350 8,900 Pharmacia Corp. 384,391 ----------- 869,741 ----------- MEDICAL - BIOMEDICAL/GENOMICS: 4.68% 5,800 Amgen, Inc.* 276,254 15,000 Applera Corporation - Celera Genomics Group* 216,750 ----------- 493,004 ----------- MULTIMEDIA: 2.31% 13,000 AOL Time Warner, Inc.* 243,100 ----------- TECHNOLOGY - SEMICONDUCTORS: 2.67% 8,000 Intel Corp. 220,960 13,000 Lucent Technologies, Inc.* 60,450 ----------- 281,410 ----------- Total Common Stocks (Cost $6,105,199) 4,268,177 ----------- SHORT-TERM INVESTMENTS: 59.68% 6,286,986 Federated Cash Trust Treasury Money Market (Cost $6,286,986) 6,286,986 ----------- Total Investments in Securities (Cost $12,392,185): 100.20% 10,555,163 Liabilities Less Other Assets : (0.20%) (20,723) ----------- Net Assets: 100.00% $10,534,440 ----------- ----------- * Non-income producing securities. See Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES AT MAY 31, 2002 (UNAUDITED) ASSETS Investments in securities, at value (identified cost $12,392,185) $10,555,163 Receivables Dividends 11,007 Prepaid expenses 9,913 ----------- Total assets 10,576,083 ----------- LIABILITIES Payables Due to Advisor 5,028 Distribution fees 2,256 Due to administrator 2,548 Due to custodian 8,876 Accrued expenses and other liabilities 22,935 ----------- Total liabilities 41,643 ----------- NET ASSETS $10,534,440 ----------- ----------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE [$10,534,440 / 1,015,302 shares outstanding; unlimited number of shares (par value $0.01) authorized] $10.38 ------ ------ COMPONENTS OF NET ASSETS Paid-in capital $13,902,176 Accumulated net realized loss on investments (1,530,714) Net unrealized depreciation on investments (1,837,022) ----------- Net assets $10,534,440 ----------- ----------- See Notes to Financial Statements. STATEMENT OF OPERATIONS - FOR THE PERIOD ENDED MAY 31, 2002 (UNAUDITED) INVESTMENT INCOME Income Dividends $ 65,739 --------- Expenses Advisory fees (Note 3) 54,003 Administration fees (Note 3) 14,959 Distribution Expense (Note 3) 13,501 Professional fees 13,315 Registration fees 8,583 Fund accounting fees 7,679 Transfer agent fees 6,881 Trustee fees 2,493 Miscellaneous 2,244 Custody fees 1,995 Reports to shareholders 1,745 Insurance expense 631 --------- Total expenses 128,029 Less: advisory fee waiver (Note 3) (22,752) --------- Net expenses 105,277 --------- Net investment loss (39,538) --------- REALIZED AND UNREALIZED GAIN / (LOSS) ON INVESTMENTS Net realized gain from security transactions 117,545 Net change in unrealized depreciation on investments (671,957) --------- Net realized and unrealized loss on investments (554,412) --------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(593,950) --------- --------- See Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS Period Ended Year May 31, 2002 Ended (Unaudited) November 30, 2001 ------------ ----------------- (DECREASE)/INCREASE IN NET ASSETS FROM: OPERATIONS Net investment loss $ (39,538) $ (19,725) Net realized gain / (loss) on security transactions 117,545 (517,047) Net change in unrealized (depreciation) / appreciation on investments (671,957) 984,905 ----------- ----------- NET (DECREASE) / INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (593,950) 448,133 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income (27,851) (235) From net realized gain on security transactions 0 (146,109) ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (27,851) (146,344) ----------- ----------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net decrease in net assets derived from net change in outstanding shares (a) (147,787) (2,832,833) ----------- ----------- TOTAL DECREASE IN NET ASSETS (769,588) (2,531,044) NET ASSETS Beginning of period 11,304,028 13,835,072 ----------- ----------- END OF PERIOD $10,534,440 $11,304,028 ----------- ----------- ----------- -----------
(a) A summary of share transactions is as follows: Period Ended Year May 31, 2002 Ended (Unaudited) November 30, 2001 ------------------------ ----------------------- Shares Paid in Capital Shares Paid in Capital ------ --------------- ------ --------------- Shares sold 123,878 $1,320,006 89,764 $ 949,910 Shares issued for reinvestments of dividends 2,517 26,635 12,056 131,045 Shares redeemed (140,139) (1,494,428) (362,518) (3,913,788) -------- ---------- -------- ----------- Net decrease (13,744) $ (147,787) (260,698) $(2,832,833) -------- ---------- -------- ----------- -------- ---------- -------- -----------
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD Period Ended Year Ended December 29, 1998* May 31, 2002 November 30, through (Unaudited) 2001 2000++ November 30, 1999 ------------ ---- ---------- ----------------- Net asset value, beginning of period $10.98 $10.73 $12.04 $10.00 ------ ------ ------ ------ Income from investment operations: Net investment (loss) (0.04) (0.02) (0.04) 0.00 Net realized and unrealized (loss)/gain on investments (0.53) 0.39 (1.27) 2.04 ------ ------ ------ ------ Total from investment operations (0.57) 0.37 (1.31) 2.04 ------ ------ ------ ------ Less distributions: From net investment income (0.03) 0.00** 0.00** 0.00 From realized gain from security transactions 0.00 (0.12) 0.00 0.00 ------ ------ ------ ------ Total distributions (0.03) (0.12) 0.00 0.00 ------ ------ ------ ------ Net asset value, end of period $10.38 $10.98 $10.73 $12.04 ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN (5.22%)++ 3.50% (10.86%) 20.40%++ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $10,534 $11,304 $13,835 $9,992 Ratio of expenses to average net assets: Before expense reimbursement 2.37%+ 2.42% 2.01% 4.39%+ After expense reimbursement 1.95%+ 1.95% 1.95% 1.95%+ Ratio of net investment (loss) / income to average net assets After expense reimbursement (0.73%)+ (0.17%) (0.26%) 0.07%+ Portfolio turnover rate 71.11% 187.57% 181.51% 211.31%
* Commencement of operations. ** Amount distributed represents less than one-half of one cent per share. + Annualized. ++ Not Annualized. ++ Computed using average shares outstanding. See Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS AT MAY 31, 2002 (UNAUDITED) NOTE 1 - ORGANIZATION The Howard Capital Appreciation 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 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. The Fund began operations on December 29, 1998. 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 accounting principles generally accepted in the United States of America. 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. Realized gains and losses on securities sold are determined on the basis of identified cost. Dividend income and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions to shareholders from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations which differs from accounting principles generally accepted in the United States of America. To the extent these book/tax differences are permanent such amounts are reclassified within the capital accounts based on their Federal tax treatment. D. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. E. Securities Sold Short. The Fund may sell securities it does not own in anticipation of a decline in the market value of the securities. The Fund will generally borrow the security (generally from the broker through which the short sale is made) sold short in order to make delivery to the buyer then replace the borrowed security by purchasing it at the market price at the time of replacement. Until the security is replaced, the proceeds of the short sale are retained by the broker and the Fund is required to pay to the broker a negotiated portion of any dividend or interest which accrue during the period of the loan. The Fund would realize a gain if the security declines in price between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund would incur a loss as a result of the short sale if the price of the security increases. NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES For the period ended May 31, 2002, 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 period ended May 31, 2002, the Fund incurred $54,003 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 reduction 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, 2002, the Advisor reduced its fees and absorbed Fund expenses in the amount of $22,752; no amounts were reimbursed to the Advisor. Cumulative expenses subject to recapture pursuant to the aforementioned conditions amounted to $189,889 at May 31, 2002. U.S. Bancorp Fund Services, 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 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 personnel involved in selling shares of the Fund. Payments made pursuant to the Plan will represent compensation for distribution and service activities, not reimbursements 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 period ended May 31, 2002, the Fund paid the Distribution Coordinator $13,501. Quasar Distributors, LLC (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 of the Administrator. NOTE 4 - PURCHASES AND SALES OF SECURITIES For the period ended May 31, 2002, the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $4,205,719 and $7,122,087, respectively. NOTE 5 - INCOME TAXES At May 31, 2002, the cost of securities for Federal tax purposes was $12,431,586 for the Howard Capital Appreciation Fund. Gross unrealized appreciation and depreciation of investments for tax purposes was as follows: Appreciation $ 140,992 Depreciation (2,017,415) ----------- Net unrealized appreciation on investments $(1,876,423) ----------- ----------- (LOGO) HOWARD CAPITAL MANAGEMENT ADVISOR Howard Capital Management 45 Rockefeller Plaza, Suite 1440 New York, New York 10111 DISTRIBUTOR Quasar Distributors, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 CUSTODIAN U.S. Bank, N.A. 425 Walnut Street Cincinnati, Ohio 45202 TRANSFER AGENT U.S. Bancorp Fund Services, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers, LLP 1177 Avenue of the Americas New York, New York 10036 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker, LLP 55 Second Street, 24th Floor San Francisco, California 94105 This report is intended for the shareholders of the Fund and may not be used as sales literature unless preceded or accompanied by a current prospectus. To obtain a current prospectus please call 866-205-0528. Past performance results shown in this report should not be considered a representation of future performance. Share price and returns will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are dated and are subject to change.