N-30D 1 cgf-a.txt CHASE GROWTH FUND Annual Report Dated September 30, 2002 Chase Investment Counsel Corporation 300 Preston Avenue Suite 403 Charlottesville, Virginia 22902-5091 Advisor: 434-293-9104 Shareholder Servicing: 888-861-7556 CHASE GROWTH FUND November 7, 2002 Dear Fellow Shareholders: As I write this annual review, over 1,000 shareholders have $64 million invested in our Chase Growth Fund (NASDAQ: CHASX). We appreciate the trust all of you have placed in our management and I want to extend a special welcome to the new shareholders since my May 16th letter. For the year ended September 30, 2002 our fund had a total return of -6.36% (pretax) and -6.46% (after tax) compared with -20.48% for the fully invested Standard & Poor's 500 Composite Stock Price Index (the S&P 500), -22.51% for the Russell 1000(R) Growth Index, and -21.30% for the Lipper Large-Cap Growth Funds Index. Although the Chase Growth Fund is an equity fund, during this past year we continued to partially cushion your portfolio against the risks and volatility of this stock market by investing 18.1% on average in interest bearing cash equivalents and U.S. Treasury Bills and Agencies. On September 30, our fund was invested in 39 stocks ranging in market capitalization from $219 billion (Wal-Mart) to $2.8 billion (Ross Stores). Over the past year the stock market continued to suffer one of its worst declines. Most of our equities declined at least moderately. Our five best performing stocks were Apollo Group +55.0%, United Health Group +31.2%, AutoZone Inc. +20.6%, Tenet Healthcare +19.4%, and Harley Davidson +19.1%. A few new purchases made during the year also helped performance: Best Buy +32.0%, L3 Communications +23.5%, and Carnival Corp. +19.7%. Although it was another difficult year, we are pleased that Lipper Analytics found the Chase Growth Fund to be the second best performing Large Cap Growth Fund in its universe for the one year ended 9/30/02 (683 funds) and the three years ended 9/30/02 (453 funds). Our investment process combines fundamental, quantitative, and technical research. We seek good quality companies that are leaders in their industries and enjoy above average, sustainable earnings growth with strong balance sheets to support that growth. The Chase Growth Fund (CGF) portfolio includes a diversified group of companies that we believe represent relatively outstanding investment opportunities. As shown in the accompanying charts, we compare the characteristics of our fund's stocks to the S&P 500. CGF stocks have enjoyed more consistent and substantially higher five-year average annual earnings per share growth rates of 16% vs. 6% for the S&P. They are significantly more profitable with a Return on Equity of 26% vs. 14%, and have stronger balance sheets with Debt to Total Capital of 33% vs. 38%. On average, they sell at an 18% lower price/earnings multiple than the S&P 500 (21.7X vs. 26.5X) based on estimated 2002 reported earnings. Our stocks are selling at only 1.34 times their five year historical growth rates compared to 4.50 times for the S&P 500. Similarly they sell at 1.02 times their projected reinvestment rates compared to 4.08 times for the S&P 500. September 30, 2002 CHASE GROWTH FUND STOCKS VS. S&P 500 Chase Growth Fund Stocks S&P 500 ------------------------ ------- Last 5 Year Earnings Growth* 16% 6% Return on Equity 26% 14% Reinvestment Rate 21% 7% Debt/Total Capital 33% 38% Weighted Avg. Cap. (Billion) 39.4 70.9 Weighted Avg. Beta (Volatility) .94 1.00 Price/Earnings Estimated 2002 21.7 26.5 Source: Chase Investment Counsel Corporation. This information is based on certain assumptions and historical data and is not a prediction of future results for the Fund or companies held in the Fund's portfolio. *CICC normalized reported earnings, S&P 500 normalized operating earnings; S&P 500 reported earnings growth 3.6%. September 30, 2002 FUNDAMENTALS AND RATIOS P/E TO FIVE-YEAR HISTORICAL GROWTH ---------------------------------- Chase Growth Fund 1.34 Russell 1000 Growth 1.61 S&P 500 4.50 P/E TO PROJECTED REINVESTMENT RATE ---------------------------------- Chase Growth Fund 1.02 Russell 1000 Growth 1.28 S&P 500 4.08 During this past fiscal year we continued to avoid most technology stocks. On September 30, 2002 that sector comprised just 3% of our portfolio, the same as a year earlier, as we continued to emphasize more reasonably priced growth stocks which we believed would have better defensive characteristics. That strategy resulted in much less of a decline (-6.36%) for FY 9/30/02 than the -21.31% experienced by the Lipper Large-Cap Growth Funds Index. The economy is struggling with a very modest recovery. The stock market reflects a tug of war between deflationary forces caused by excess capacity, rigorous competition and excess debt which is depressing profits, and the aggressive Federal Reserve policy of lower interest rates and huge expansion of liquidity (money supply). As long as all the major indexes continue to sell below their 200 day moving averages, we assume the stock market is still in a secular decline. Bearish analysts sometimes refer to the Japanese Nikkei as a possible disaster scenario, which could happen here, but they fail to mention that even that horrendous decline included three recovery rallies, which exceeded 50%. Our economy is much broader and healthier than Japan's. Even if you focus on "the Wealth Effect", the substantial decline in equity values has been partially offset by increases in real estate. The Federal Reserve recently reported that household net worth as of the second quarter of 2002 was $40.1 trillion, which was down only 5.5% from its $42.4 trillion peak in 1999. At the October lows the market was very oversold. It is currently benefiting from the November-April favorable seasonal period as well as the four-year election cycle. Since 1914 the average rise from the 22 mid-term election year lows (assume Dow 7286 on 10/9/02 this year) to the next year highs averaged 50%. Even if the long-term trend is still down, we believe it would be normal for the market to experience a mini bull rally through year-end and perhaps well into next year. However, until valuations improve we will remain cautious. Valuation is still excessive by historical norms. On October 31st, Ned Davis Research estimated total common stock market capitalization stood at 92.5% of nominal GDP. While that is down substantially from its March 2000 peak of 171.5%, it is still very high compared to ratios of 86.5% and 79.2% respectively at the 1929 and 1973 peaks. We believe our investment strategy with a well defined investment process that involves significant valuation and technical parameters seeking attractive growth stocks at a reasonable price will continue to perform relatively well for the intermediate term. We are not going to speculate on depressed stocks for which earnings have little or no visibility, but we think taking advantage of weakness in good quality growth stocks is a sounder long term strategy than buying stocks with little or no growth, many of which are cyclical and face rough competition from worldwide excess capacity. We are in a Buy and Sell market as opposed to a Buy and Hold one. The recent volatility in the stock market (for instance between Memorial Day and Labor Day, 57% of the total trading sessions involved 200 point swings in the Dow) demonstrates the need for a consistent investment discipline that has proven itself over several market cycles. Chase Investment Counsel Corp. now manages over $1-1/2 billion for clients in 27 states. The Chase Growth Fund is managed by the same investment team and senior portfolio managers, David Scott and myself, that manage our large separate accounts. As a moderate size firm, we have much more flexibility in buying and selling large and mid-cap stocks without a significant market impact. We remain tax sensitive. There will be no taxable capital gains distributions this year and we have established significant capital losses to help offset any capital gains that are taken next year. As the largest individual shareholder, I assure you that we will be working very hard to find, analyze and invest in relatively attractive stocks. The officers and employees of Chase Investment Counsel Corp., most of whom are fellow shareholders, appreciate your confidence and we look forward to a long investment relationship together. While we have already eliminated Amgen and Tenet Healthcare, listed below are the 10 largest holdings as of September 30, 2002. TOP 10 HOLDINGS 1. Procter & Gamble 6. Sysco 2. UnitedHealth Group 7. Lowe's Cos. Inc. 3. Anheuser Busch 8. AutoZone Inc. 4. Tenet Healthcare 9. AFLAC Inc. 5. HCA Inc. 10. Amgen Inc. /s/Derwood S. Chase, Jr. Derwood S. Chase, Jr., President Chase Investment Counsel Corporation Performance Figures of the fund and indexes referenced represent past performance and are not indicative of future performance of the fund or the indexes. Returns include reinvestment of dividends and capital gains distributions. 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 the original investment. The Chase Growth Fund's after tax performance figures are as follows: Pre-liquidation Post-liquidation --------------- ---------------- One year: -6.46% -3.90% Since inception (12/2/97): 6.35% 5.27% The Russell 1000(R) Growth Index performance was -22.51% for one year and -5.42% since inception of the Fund. Indexes do not incur expenses and are not available for investment. Please see page 4 of the annual report for further performance information. Fund holdings are subject to change at any time and are not recommendations to buy or sell any security. Please refer to the Schedule of Investments in the annual report for fund holdings. CHASE GROWTH FUND Comparison of the change in value of a hypothetical $10,000 investment in the Chase Growth Fund versus the S&P 500 Composite Stock Price Index and the Lipper Large Cap Growth Fund Index. Chase S&P 500 Composite Lipper Large Cap Date Growth Fund Stock Price Index Growth Fund Index ---- ----------- ----------------- ----------------- 12/2/97 $10,000 $10,000 $10,000 12/31/97 $10,200 $10,172 $10,136 3/31/98 $11,432 $11,591 $11,620 6/30/98 $11,602 $11,973 $12,211 9/30/98 $10,691 $10,782 $10,955 12/31/98 $13,224 $13,079 $13,833 3/31/99 $13,884 $13,731 $14,930 6/30/99 $14,155 $14,698 $15,491 9/30/99 $13,674 $13,781 $14,856 12/31/99 $16,747 $15,831 $18,650 3/31/00 $17,478 $16,194 $20,166 6/30/00 $16,948 $15,763 $18,694 9/30/00 $17,708 $15,610 $18,382 12/31/00 $17,238 $14,390 $14,981 3/31/01 $15,503 $12,683 $11,676 6/30/01 $15,899 $13,425 $12,462 9/30/01 $14,438 $11,453 $9,986 12/31/01 $14,872 $12,679 $11,406 3/31/02 $15,228 $12,714 $11,116 6/30/02 $14,710 $11,010 $9,358 9/30/02 $13,519 $9,108 $7,859 Average Annual Total Return Since One Inception Year (12/2/97) ---- --------- Chase Growth Fund -6.36% 6.44% S&P 500 Composite Stock Price Index -20.48% -1.92% Lipper Large Cap Growth Fund Index -21.30% -4.87% Past performance is not predictive of future performance. (The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions, or redemption of fund shares.) Returns include reinvestment of dividends and capital gain distributions. Mutual fund investing involves risks; loss of principal is possible. * The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. * The Lipper Large-Cap Growth Fund Index is comprised of funds that invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) of greater than 300% of the dollar-weighted median market capitalization of the S&P Mid-Cap 400 Index. Large-Cap Growth funds normally invest in companies with long- term earnings expected to grow significantly faster than the earnings of the stocks represented in a major unmanaged stock index. These funds will normally have an above-average price-to-earnings ratio, price-to- book ratio, and three-year earnings growth figure, compared to the U.S. diversified large-cap funds universe average. The funds in this index have a similar investment objective as the Chase Growth Fund. SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 2002 Shares COMMON STOCKS: 83.51% Market Value ------ --------------------- ------------ BEVERAGE: 6.95% 38,300 Anheuser-Busch Companies, Inc. $ 1,937,980 26,400 PepsiCo, Inc. 975,480 26,500 The Pepsi Bottling Group, Inc. 620,100 ----------- 3,533,560 ----------- BIOTECHNOLOGY: 2.94% 35,800 Amgen, Inc.* 1,492,860 ----------- CONGLOMERATES: 1.79% 16,100 United Technologies Corp. 909,489 ----------- DEFENSE: 2.55% 15,900 General Dynamics Corp. 1,293,147 ----------- DENTAL SUPPLIES: 1.87% 10,900 DENTSPLY International, Inc. 437,853 10,000 Patterson Dental Co.* 511,800 ----------- 949,653 ----------- DRUGS: 4.13% 24,700 Johnson & Johnson 1,335,776 11,400 Teva Pharmaceutical Industries, Ltd.# 763,800 ----------- 2,099,576 ----------- ENERGY/OIL/GAS/COAL: 3.06% 17,300 ConocoPhillips 799,952 44,600 Suncor Energy, Inc. 755,970 ----------- 1,555,922 ----------- FINANCE/BANKS: 5.79% 16,700 Fifth Third Bancorp 1,022,541 16,900 North Fork Bancorporation, Inc. 639,496 26,600 Wells Fargo & Co. 1,281,056 ----------- 2,943,093 ----------- FINANCIAL SERVICES - DIVERSIFIED: 5.57% 8,100 Ambac Financial Group, Inc. 436,509 22,600 H&R Block, Inc. 949,426 15,500 SLM Corp. 1,443,670 ----------- 2,829,605 ----------- FINANCIAL SERVICES - MORTGAGE RELATED: 1.77% 19,100 Countrywide Credit Industries, Inc. 900,565 ----------- FOOD: 3.08% 55,200 Sysco Corp. 1,567,128 ----------- HEALTH CARE BENEFITS: 5.77% 24,000 UnitedHealth Group, Inc. 2,093,280 11,400 WellPoint Health Networks Inc.* 835,620 ----------- 2,928,900 ----------- HOSPITALS: 6.40% 33,700 HCA, Inc. 1,604,457 33,300 Tenet Healthcare Corp.* 1,648,350 ----------- 3,252,807 ----------- HOUSEHOLD PRODUCTS: 4.40% 25,000 The Procter & Gamble Co. 2,234,500 ----------- INFORMATION SERVICES: 2.64% 13,100 ChoicePoint, Inc.* 466,884 31,200 First Data Corp. 872,040 ----------- 1,338,924 ----------- INSURANCE - LIFE: 2.95% 48,800 AFLAC, Inc. 1,497,672 ----------- LEISURE TIME: 0.95% 10,400 Harley-Davidson, Inc. 483,080 ----------- MEDIA & ADVERTISING: 2.32% 16,300 Gannett Company, Inc. 1,176,534 ----------- MEDICAL SUPPLIES & EQUIPMENT: 2.44% 15,700 Lincare Holdings, Inc.* 487,328 21,100 St. Jude Medical, Inc.* 753,270 ----------- 1,240,598 ----------- RETAIL - APPAREL: 1.02% 14,600 Ross Stores, Inc. 520,344 ----------- RETAIL - DEPARTMENT STORES: 1.66% 21,600 Sears Roebuck & Co. 842,400 ----------- RETAIL - DISCOUNT: 2.84% 29,300 Wal-Mart Stores, Inc. 1,442,732 ----------- RETAIL - DRUG STORES: 2.88% 47,500 Walgreen Co. 1,461,100 ----------- RETAIL - HOME IMPROVEMENT: 3.04% 37,300 Lowe's Companies, Inc. 1,544,220 ----------- RETAIL - SPECIALTY: 2.98% 19,200 AutoZone, Inc.* 1,514,112 ----------- SERVICE COMPANIES: 1.72% 20,100 Apollo Group, Inc. - Class A* 872,943 ----------- Total Common Stocks (Cost $41,951,725) 42,425,464 ----------- Principal Amount U.S. GOVERNMENT AGENCY: 6.25% --------- ----------------------------- FEDERAL HOME LOAN BANK $1,000,000 5.08%, 10/14/05 1,078,486 2,000,000 4.375%, 2/15/05 2,099,060 ----------- Total U.S. Government Agency (Cost $3,008,711) 3,177,546 ----------- Shares/Principal Amount SHORT-TERM INVESTMENTS: 11.56% ------------- ------------------------------ 3,870,712 Federated Cash Trust Treasury Money Market (Cost $3,870,712) 3,870,712 2,000,000 US Treasury Bill 2.044% on 10-03-2002 (Cost $1,999,771) 1,999,771 ----------- Total Short-Term Investments (Cost $5,870,483) 5,870,483 ----------- Total Investments in Securities (Cost $50,830,919): 101.32% 51,473,493 Liabilities in Excess of Other Assets: (1.32%) (670,454) ----------- Net Assets: 100.00% $50,803,039 ----------- ----------- * Non-income producing security. # American Depository Receipt. See accompanying Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 2002 ASSETS Investments in securities, at value (identified cost $50,830,919) $51,473,493 Cash 193 Receivables Fund shares issued 995,041 Dividends and interest 58,198 Prepaid expenses 10,906 ----------- Total assets 52,537,831 ----------- LIABILITIES Payables Securities purchased 1,654,813 Due to Advisor 41,910 Accrued expenses 38,069 ----------- Total liabilities 1,734,792 ----------- NET ASSETS $50,803,039 ----------- ----------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE [$50,803,039/3,823,146 shares outstanding; unlimited number of shares (par value $0.01) authorized] $ 13.29 ----------- ----------- COMPONENTS OF NET ASSETS Paid-in capital $56,297,899 Accumulated net realized loss on investments (6,137,434) Net unrealized appreciation on investments 642,574 ----------- Net assets $50,803,039 ----------- ----------- See accompanying Notes to Financial Statements. STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2002 INVESTMENT INCOME Income Dividends (net of withholding tax of $461) $ 389,489 Interest 87,474 ----------- Total income 476,963 ----------- Expenses Advisory fees (Note 3) 411,604 Administration fees (Note 3) 82,316 Transfer agent fees 31,347 Fund accounting fees 28,888 Audit fees 19,328 Registration fees 15,845 Custody fees 14,650 Legal fees 10,484 Printing and mailing fees 5,715 Directors fees 4,938 Miscellaneous 3,670 Insurance fees 3,460 ----------- Total expenses 632,245 Less: advisory fee waiver (Note 3) (22,832) ----------- Net expenses 609,413 ----------- NET INVESTMENT LOSS (132,450) ----------- REALIZED AND UNREALIZED GAIN / (LOSS) ON INVESTMENTS Net realized loss from security transactions (3,672,556) Net change in unrealized appreciation on investments 378,745 ----------- Net realized and unrealized loss on investments (3,293,811) ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(3,426,261) ----------- ----------- See accompanying Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS Year Year Ended Ended Sept. 30, 2002 Sept. 30, 2001 -------------- -------------- NET DECREASE IN NET ASSETS FROM OPERATIONS Net investment (loss) / income $ (132,450) $ 105,721 Net realized loss on security transactions (3,672,556) (2,118,432) Net change in unrealized appreciation / (depreciation) on investments 378,745 (4,407,077) ----------- ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (3,426,261) (6,419,788) ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (93,602) (12,092) Net realized gain on security transactions 0 (354,500) ----------- ----------- TOTAL DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (93,602) (366,592) ----------- ----------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase in net assets derived from net change in outstanding shares (a) 20,400,438 17,577,485 ----------- ----------- Total increase in net assets 16,880,575 10,791,105 ----------- ----------- NET ASSETS Beginning of year 33,922,464 23,131,359 ----------- ----------- END OF YEAR (includes undistributed net investment income of $0 and $93,582 in 2002 and 2001, respectively) $50,803,039 $33,922,464 ----------- ----------- ----------- -----------
(a) A summary of share transactions is as follows: Year Year Ended Ended September 30, 2002 September 30, 2001 ------------------------- ------------------------- Shares Paid in Capital Shares Paid in Capital ------ --------------- ------ --------------- Shares sold 1,704,839 $24,117,264 1,140,433 $18,568,377 Shares issued on reinvestments of distributions 6,122 88,765 21,496 365,223 Shares redeemed (271,112) (3,805,591) (85,942) (1,356,115) --------- ----------- --------- ----------- Net increase 1,439,849 $20,400,438 1,075,987 $17,577,485 --------- ----------- --------- ----------- --------- ----------- --------- -----------
See accompanying Notes to Financial Statements. FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD Year Year Year Year Ended Ended Ended Ended Dec. 2, 1997* Sept. 30, Sept. 30, Sept. 30, Sept. 30, through 2002 2001 2000 1999 Sept. 30, 1998 -------- -------- -------- -------- -------------- Net asset value, beginning of period $14.23 $17.69 $13.66 $10.68 $10.00 ------ ------ ------ ------ ------ Income from investment operations: Net investment (loss) / income (0.05)# 0.05 (0.01) (0.05) (0.01) Net realized and unrealized gain / (loss) on investments (0.85) (3.28) 4.04 3.03 0.70 ------ ------ ------ ------ ------ Total from investment operations (0.90) (3.23) 4.03 2.98 0.69 ------ ------ ------ ------ ------ Less distributions: From net investment income (0.04) (0.01) -- -- (0.01) From net realized gain 0.00 (0.22) -- -- -- ------ ------ ------ ------ ------ Total distributions (0.04) (0.23) -- -- (0.01) ------ ------ ------ ------ ------ Net asset value, end of period $13.29 $14.23 $17.69 $13.66 $10.68 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN (6.36%) (18.47%) 29.50% 27.90% 6.91%++ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $50,803 $33,922 $23,131 $9,140 $4,010 Ratio of expenses to average net assets: Before expense reimbursement 1.53% 1.57% 1.70% 2.37% 3.98%+ After expense reimbursement 1.48% 1.48% 1.48% 1.48% 1.47%+ Ratio of net investment (loss) / income to average net assets: After expense reimbursement (0.32%) 0.34% (0.06%) (0.59%) (0.17%)+ Portfolio turnover rate 96.06% 94.84% 73.94% 62.49% 54.49%
* Commencement of operations. # Based on average shares outstanding. + Annualized. ++ Not Annualized. See accompanying Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS AT SEPTEMBER 30, 2002 NOTE 1 - ORGANIZATION The Chase Growth 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's investment objective is growth of capital and it intends to achieve its objective by investing primarily in common stocks of domestic companies with large market capitalizations of $10 billion and above. The Fund began operations on December 2, 1997. 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 generally accepted accounting principles. 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. NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES For the year ended September 30, 2002, Chase Investment Counsel Corporation (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 September 30, 2002, the Fund incurred $411,604 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 the Fund's operating expenses to the extent necessary to limit the Fund's aggregate annual operating expenses to 1.48% of average net assets (the "expense cap"). Any such reductions made by the Advisor in its fees or payment of expenses which are a 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 the Fund's 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 a Fund's payment of current ordinary operating expenses. For the year ended September 30, 2002, the Advisor reduced its fees in the amount of $22,832; no amounts were reimbursed to the Advisor. Cumulative expenses subject to recapture pursuant to the aforementioned conditions amounted to $203,715 at September 30, 2002. Cumulative expenses subject to recapture expire as follows: Year Amount ---- ------ 2003 $120,289 2004 $ 60,594 2005 $ 22,832 U.S. Bancorp Fund Services, LLC, formerly 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 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 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 and the Distributor. NOTE 4 - SECURITIES TRANSACTIONS For the year ended September 30, 2002, the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $54,883,499 and $34,002,446, respectively. NOTE 5 - INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS As of September 30, 2002, the components of net assets on a tax basis were as follows: Cost of investments $50,830,919 ----------- ----------- Gross tax unrealized appreciation $ 3,195,528 Gross tax unrealized depreciation (2,552,954) ----------- Net tax unrealized appreciation $ 642,574 ----------- ----------- Capital loss carryforward expiring 2010 $(3,440,852) ----------- ----------- At September 30, 2002, the Fund had deferred capital losses occurring subsequent to October 31, 2001 of ($2,696,582). For tax purposes, such losses will be reflected in the year ending September 30, 2003. Net investment loss differs for financial statement and tax purposes due to differing treatments of net operating losses. The tax composition of dividends during the year ended September 30, 2002 was as follows: Ordinary income $ 93,602 ----------- ----------- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees and Shareholders of Chase Growth Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Chase Growth Fund, series of Advisor Series Trust (the "Fund") at September 30 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for the period from December 2, 1997 (commencement of operations) to September 30, 1998 was audited by other independent accountants whose report dated October 23, 1998 expressed an unqualified opinion on those financial highlights. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York November 23, 2002 INFORMATION ABOUT TRUSTEES AND OFFICERS (UNAUDITED) The business and affairs of the Fund are managed under the direction of the Fund's Board of Trustees. Information pertaining to the Trustees and Officers of the Fund is set forth below. Unless noted otherwise, each person has held the position listed for a minimum of five years. The SAI includes additional information about the Fund's officers and trustees and is available, without charge, upon request by calling the advisor. INDEPENDENT TRUSTEES -------------------- # OF FUNDS POSITION TERM OF OFFICE IN COMPLEX HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN OTHER DIRECTORSHIPS NAME, AGE AND ADDRESS THE TRUST TIME SERVED DURING PAST FIVE YEARS BY TRUSTEE HELD BY TRUSTEE --------------------- --------- -------------- ---------------------- ---------- ------------------- Walter E. Auch Trustee Indefinite Term Management Consultant. Sixteen Nicholas-Applegate (Born 1921) Funds, Salomon 2020 E. Financial Way Since 1997 Smith Barney Glendora, CA 91741 Funds, Bayan Strategic Realty Trust, Legend Properties, Pimco Advisors LLP, and Senele Group James Clayburn Trustee Indefinite Term Dean Emeritus, John E. Anderson Sixteen The Payden & LaForce Graduate School of Management, Rygel Investment (Born 1927) Since University of California, Los Angeles. Group, PIC 2020 E. Financial Way March 2002 Investment Trust, Glendora, CA 91741 PIC Small Cap Portfolio, PIC Balanced Portfolio, PIC Growth Portfolio, PIC Mid Cap Portfolio, Provident Investment Counsel Institutional Money Market Fund, Black Rock Funds, Jacobs Engineering, Timken Co., Concervex Donald E. O'Connor Trustee Indefinite Term Financial Consultant; formerly Executive Sixteen The Parnassus Fund (Born 1936) Vice President and Chief Operating The Parnassus 2020 E. Financial Way Since 1997 officer of ICI Mutual Insurance Income Fund Glendora, CA 91741 Company (until January, 1997); Vice The Forward Funds President, Operations, Investment Company Institute (until July, 1993). George J. Rebhan Trustee Indefinite Term Retired; formerly President, Hotchkis Sixteen E*Trade Funds (Born 1934) and Wiley Funds (mutual funds) 2020 E. Financial Way Since from 1985 to 1993. Glendora, CA 91741 March 2002 George T. Wofford III Trustee Indefinite Term Senior Vice President, Information Sixteen Not Applicable (Born 1939) Services, Federal Home Loan Bank 2020 E. Financial Way Since 1997 of San Francisco. Glendora, CA 91741
INTERESTED TRUSTEES AND OFFICERS -------------------------------- # OF FUNDS IN COMPLEX OTHER POSITION TERM OF OFFICE OVERSEEN DIRECTORSHIPS HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION BY TRUSTEE HELD BY NAME, AGE AND ADDRESS THE TRUST TIME SERVED DURING PAST FIVE YEARS OR OFFICER TRUSTEE OR OFFICER --------------------- --------- -------------- ---------------------- ---------- ------------------ Eric M. Banhazl Trustee & Indefinite Term Senior Vice President, U.S. Bancorp Fund Sixteen None (Born 1957) President Services, LLC, the Fund's administrator 2020 E. Financial Way Since 1997 (since July, 2001); Treasurer, Investec Glendora, CA 91741 Funds; formerly, Executive Vice President, Investment Company Administration, LLC (ICA) (The Fund's former administrator). John S. Wagner Treasurer Indefinite Term Assistant Vice President Compliance and Sixteen None (Born 1965) Administration, U.S. Bancorp Fund 615 E. Michigan Street Since Services, LLC since June 1999. Milwaukee, WI 53202 September 2002 Chad E. Fickett Secretary Indefinite Term Compliance Administrator, U.S. Bancorp Sixteen None (Born 1973) Fund Services, LLC since July 2000. 615 E. Michigan Street Since Milwaukee, WI 53202 March 2002
ADVISOR Chase Investment Counsel Corporation 300 Preston Avenue, Suite 403 Charlottesville, VA 22902-5091 DISTRIBUTOR Quasar Distributors, LLC 615 East Michigan Street Milwaukee, WI 53202 TRANSFER AGENT Fund Services, Incorporated 1500 Forest Avenue, Suite 111 Richmond, VA 23229 CUSTODIAN U.S. Bank, N.A. 425 Walnut Street M/L 6118 Cincinnati, OH 45202 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker, LLP 515 South Flower Street, 25th Floor Los Angeles, CA 90071 This report is intended for shareholders of the Fund and may not be used as sales literature unless preceded or accompanied by a current prospectus. For a current prospectus please call 1-888-861-7556. 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.