N-30D 1 j_cmf-a.txt (JACOBS & COMPANY LOGO) JACOBS & COMPANY MUTUAL FUND TICKER SYMBOL: JACOX CUSIP: 007 989 775 SHAREHOLDER SERVICES TOLL FREE (877) 560-6823 ANNUAL REPORT JANUARY 31, 2003 JACOBS & COMPANY MUTUAL FUND April 2003 Dear Shareholder: In last year's annual report, I spoke of the terrorist attacks on the World Trade Center and Pentagon as life altering events and how these events changed the way we look at the world. Directly or indirectly, 9/11 and other confidence shaking events relating to specific companies and sectors, followed by the threat of war, then the war in Iraq, have had an effect on the overall performance of the financial markets. As the war now winds down, and we are faced with post-war reconstruction of both the government and infrastructure in Iraq, the political and economic uncertainties continue. Through all of this, as illustrated by the graph on page 6, the Jacobs & Company Mutual Fund's performance has exceeded its benchmark. For the year ended January 31, 2003, the Fund was down 8.39%, while the Fund's benchmark, the Lipper Balanced Fund Index, was down 11.25%. Since the inception of the Fund on June 11, 2001, the Fund was down 3.60% while the Lipper Balanced Fund Index was down 9.13%. For the same periods, the U.S. Government 5-7 Year Total Return Bond Index was up 11.83% and 10.54%, respectively, and the Standard & Poor's 100 Index was down 24.57% and 21.70%, respectively. The Fund continued its disciplined and balanced approach to pursuing its objective of current income and growth of capital, consistent with preservation of capital. In response to the continued weakness in the economy and the uncertainties raised by current geopolitical events, we elected to reduce our common stock holdings from 51.47% of the Fund's portfolio at the beginning of the year to 38.73% at year's end. We continued to concentrate on quality in our stock selections. 3M, United Technologies, Hewlett-Packard Company, IBM Corp, Exxon-Mobil, Conoco-Phillips and Intel remained core holdings of the Fund, and we replaced Schering Plough and Merck with Conagra Foods, Sara Lee and Del Monte because of the defensive nature of these food stocks. We also added Chevron- Texaco and replaced our primary holdings in telecommunications, representing 2.05% of the Fund's assets, with an exchange traded fund that invests in a more broadly based selection of stocks of the telecommunications sector. Throughout the period, we systematically wrote covered calls on our stock holdings to enhance the income of the Fund. The income generated by the option premiums offset the general negative performance of our equity portfolio during this period. Based on our assessment of risk, we elected to hedge our common stock holdings further with a selective use of put options on the Dow Jones Industrial Average Index. Our use of options enabled us to insulate the Fund from sharp declines in the equity markets, although at times our use of these hedging techniques limited our participation in brief rallies. Nevertheless, we believe that our strategies have kept the Fund's portfolio positioned to participate in long term positive movements in the equity markets as the economy recovers. Early in the fiscal year we elected to reposition the fixed income portion of the Fund's portfolio by selling our small denomination GNMA securities. This enabled us to significantly reduce administrative expenses that were adversely affecting the Fund. While we are gradually reacquiring GNMAs that meet our investment criteria, pending such acquisitions our fixed income portfolio has included a greater than normal weighting of other U.S. government agency securities, including Federal Home Loan Bank Step-Up Notes. The overall U.S. Government Agency portion of the portfolio has remained a relatively constant 34.19% at the beginning of the year and 33.00% at year's end. To augment our fixed income holdings, we have increased our preferred stocks from around 5.19% of the Fund's assets to 12.65% by investing in additional high quality preferreds of companies that meet our investment criteria, such as Verizon, General Electric and Sears. At year's end, short-term investments amounted to 10.15% of the portfolio versus 4.03% at the beginning of the year. Of those short-term investments almost 70% were invested in U.S. Treasury Bills. As we feel the prices of GNMAs become more attractive, it is our intention to reinvest the fixed income portion of our portfolio primarily in GNMAs. Our portfolio turnover was 190.70% for the fiscal year ended January 31, 2003, as compared to 49.70% for the period from June 11, 2001 through January 31, 2002. This was higher than would normally be expected and was influenced by a number of factors, all of which were intended to enhance shareholder value. These factors included our repositioning of the Fund's portfolio, our strategy of utilizing covered calls to enhance portfolio income, our taking advantage of isolated trading opportunities, and our investment of the fixed-income portion of the Fund's portfolio in short-term government securities pending reinvestment in GNMAs. The markets continue to try to digest the geopolitical tensions, the threat of terrorist activities and other uncertainties that have become all too familiar to us. As these events are assimilated, we believe the focus will again shift from the day-to-day headlines to the economic outlook 6 to 9 months forward, and volatility levels will lessen. We believe our investment strategies should continue to provide the potential for us to achieve above average returns versus our benchmarks. We remain confident in the health and vitality of the financial markets over the long term. As always, if you have any questions about your investment in the Jacobs & Company Mutual Fund, please call us. Thank you again for allowing us to help you achieve your investment objectives. Sincerely, /s/ John M. Jacobs John M. Jacobs Opinions expressed are those of John M. Jacobs and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security. Must be preceded or accompanied by a prospectus. Please read it carefully before investing. Mutual fund investing involves risk. Principal loss is possible. Options involve risk and are not suitable for all investors. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chips stocks that are generally the leaders in their industry. One cannot invest directly in an index. Please refer to the schedule of investments on pages 7-10 of the report for holdings information. Fund holdings and sector allocations are subject to change at any time and are not to be considered a recommendation to buy or sell any security. Quasar Distributors, LLC (04/03) JACOBS & CO. MUTUAL FUND VS. LIPPER BALANCED FUND INDEX VS. S&P 100 INDEX VS. BLOOMBERG/EFFAS BOND INDEX, U.S. GOVERNMENT 5-7 YEARS Lipper Balanced Bloomberg/EFFAS Jacobs & Company Fund Index Bond Index, Date Mutual Fund (the Fund's Benchmark) S&P 100 Index U.S. Gov't 5-7 Years ---- ----------- ---------------------- ------------- -------------------- 6/11/2001 $10,000.00 $10,000.00 $10,000.00 $10,000.00 7/31/2001 $10,220.40 $9,840.11 $9,625.66 $10,228.81 10/31/2001 $9,760.69 $9,251.81 $8,424.06 $10,799.99 1/31/2002 $10,278.08 $9,604.03 $8,873.72 $10,539.85 4/30/2002 $10,277.87 $9,513.68 $8,238.06 $10,656.16 7/31/2002 $9,853.74 $8,635.91 $7,100.43 $11,250.30 10/31/2002 $9,207.31 $8,546.10 $6,981.67 $11,731.13 1/31/2003 $9,414.96 $8,523.16 $6,693.51 $11,787.13
AVERAGE ANNUAL TOTAL RETURN1 1 YEAR SINCE INCEPTION (6/11/01) ------ ------------------------- Fund -8.39% -3.60% Lipper Balanced Fund Index (the Fund's Benchmark) -11.25% -9.13% S&P 100 Index -24.57% -21.70% Bloomberg/EFFAS Bond Index, U.S. Gov't 5-7 Years 11.83% 10.54% 1 Average Annual Total Return represents the average change in account value over the periods indicated. Past performance does not guarantee future results. The performance data and the graph do not reflect the deduction of taxes that a shareholder would pay on the dividends, capital gain distributions, or redemption of Fund shares. The investment return and principal value of an investment will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost. Returns include reinvestment of dividends and capital gains and fee waivers in effect. In the absence of fee waivers, returns would be reduced. Short term performance, in particular, is not a good indication of the fund's future performance, and an investment should not be made based solely on returns. The Lipper Balanced Fund Index is an unmanaged, net asset value - weighted index of the 30 largest balanced mutual funds that serves as the Fund's benchmark. The S&P 100 Index is a market-capitalization weighted index consisting of 100 large blue chip stocks across various industries. The Bloomberg/EFFAS indices are designed as transparent benchmarks for government bond markets. Indices are grouped by country and maturity sectors. Bloomberg computes daily returns and index characteristics for each sector. The return and valuation calculations for the Lipper Balanced Fund Index are for the period 6/1/01-1/31/03. You cannot invest directly in an index. SCHEDULE OF INVESTMENTS AT JANUARY 31, 2003 Shares COMMON STOCKS: 38.73% Market Value ------ ---------------------- ------------ AEROSPACE/DEFENSE: 7.17% 13,000 United Technologies Corp. # $ 826,540 ----------- COMPUTER SYSTEMS (DIVERSIFIED): 6.58% 9,000 Hewlett-Packard Co. # 156,690 7,700 International Business Machines Corp. # 602,371 ----------- 759,061 ----------- FOOD (MISCELLANEOUS): 10.85% 26,500 ConAgra Foods, Inc. # 650,045 48,000 Del Monte Foods Co.* 401,760 10,000 Sara Lee Corp. # 199,400 ----------- 1,251,205 ----------- MANUFACTURING: 2.92% 2,700 3M Co. # 336,285 ----------- PETROLEUM (INTEGRATED): 8.19% 7,000 ChevronTexaco Corp. # 450,800 6,000 ConocoPhillips # 289,140 6,000 Exxon Mobil Corp. # 204,900 ----------- 944,840 ----------- SEMICONDUCTOR: 1.36% 10,000 Intel Corp. # 156,600 ----------- TELECOMMUNICATION SERVICES: 1.66% 31,500 AT&T Wireless Services, Inc.* # 191,205 ----------- TOTAL COMMON STOCKS (Cost $4,592,536) 4,465,736 ----------- EXCHANGE-TRADED FUNDS: 2.05% 13,000 iShares Dow Jones U.S. Telecommunications Sector Index Fund# 236,080 ----------- TOTAL EXCHANGE TRADED FUNDS (Cost $255,750) 236,080 ----------- PREFERRED STOCKS: 12.65% ------------------------- FINANCIAL SERVICES: 12.65% 26,700 City Holding Capital Trust II 694,200 5,000 Corts-TR Verizon Global, 7.375%, 12/01/30 Series 128,900 10,000 General Electric Capital Corp., 6.10%, 11/15/32 Series 258,250 10,000 Saturns-AWE, 9.25%, 3/1/31 Series 253,200 5,000 Sears Roebuck Acceptance, 7.00%, 7/15/42 Series 124,775 ----------- TOTAL PREFERRED STOCKS (Cost $1,335,527) 1,459,325 ----------- Principal Amount U.S. GOVERNMENT AGENCY: 33.00% --------- ------------------------------- FEDERAL HOME LOAN MORTGAGE CORPORATION: 4.35% $500,000 4.00%, 10/29/12 501,767 ----------- FEDERAL HOME LOAN BANK: 19.95% 350,000 4.00%, 12/10/10 348,636 200,000 4.00%, 10/24/12 200,600 500,000 4.00%, 10/15/09 500,211 500,000 4.00%, 11/07/17 499,761 750,000 4.25%, 09/26/11 751,057 ----------- 2,300,265 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION: 8.70% 122,363 6.00%, 01/15/24 128,444 275,178 6.00%, 04/15/29 287,024 299,081 6.00%, 10/15/32 311,742 262,574 6.50%, 07/15/32 276,019 ----------- 1,003,229 ----------- Shares ------ UNIT INVESTMENT TRUST: 0.00% 14,728 Government Securities Income Fund Unit, Series 1C-GNMA 492 ----------- TOTAL U.S. GOVERNMENT AGENCY (Cost $3,782,923) 3,805,753 ----------- Principal Amount CORPORATE BONDS: 0.81% --------- ----------------------- SHIPPING: 0.81% $100,000 Sea Containers Ltd., 12.50%, 12/1/2004 93,500 ----------- TOTAL CORPORATE BONDS (Cost $76,693) 93,500 ----------- Contracts PUT OPTIONS PURCHASED: 2.83% --------- ----------------------------- DOW JONES INDUSTRIAL AVERAGE INDEX 500 Expiration March 2003, Exercise Price $78.00 132,500 645 Expiration March 2003, Exercise Price $79.00 193,500 ----------- TOTAL PUT OPTIONS PURCHASED (Cost $382,783) 326,000 ----------- Shares/ Principal Amount SHORT-TERM INVESTMENTS: 10.15% --------- ------------------------------- 371,303 Federated Cash Trust Series II Treasury 371,303 $800,000 US Treasury Bill, 1.65%, 02/27/03 799,376 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $1,170,679) 1,170,679 ----------- Total Investments in Securities (Cost $11,596,891): 100.22% 11,557,073 Call Options Written: (1.52%) (175,180) Other Assets in excess of Liabilities: 1.30% 150,139 ----------- Net Assets: 100.00% $11,532,032 ----------- ----------- * Non-income producing security. # Security is subject to written call option. See Notes to Financial Statements. SCHEDULE OF CALL OPTIONS WRITTEN AT JANUARY 31, 2003 Contracts Market Value --------- ------------ AT&T Wireless Services 315 Expiration July 2003, Exercise Price $7.50 $ (17,325) ChevronTexaco Corp. 70 Expiration June 2003, Exercise Price $65.00 (25,900) ConAgra Foods, Inc. 165 Expiration June 2003, Exercise Price $25.00 (17,325) ConocoPhillips 60 Expiration May 2003, Exercise Price $47.50 (18,300) Exxon Mobil Corp. 60 Expiration July 2003, Exercise Price $35.00 (12,600) Hewlett-Packard Co. 90 Expiration May 2003, Exercise Price $20.00 (7,650) Intel Corp. 100 Expiration July 2003, Exercise Price $20.00 (8,000) International Business Machines Corp. 50 Expiration April 2003, Exercise Price $80.00 (22,500) 27 Expiration April 2003, Exercise Price $85.00 (6,750) iShares Dow Jones U.S. Telecommunications Sector Index Fund 40 Expiration May 2003, Exercise Price $20.00 (2,500) 70 Expiration May 2003, Exercise Price $21.00 (2,275) Sara Lee Corp. 100 Expiration March 2003, Exercise Price $20.00 (7,250) 3M Co. 27 Expiration April 2003, Exercise Price $135.00 (5,805) United Technologies Corp. 90 Expiration February 2003, Exercise Price $65.00 (12,600) 40 Expiration May 2003, Exercise Price $70.00 (8,400) --------- Total Call Options Written (proceeds $234,471) $(175,180) --------- --------- See Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES AT JANUARY 31, 2003 ASSETS Investments in securities, at value (identified cost $11,596,891) $11,557,073 Cash 89,005 Receivables Securities sold 214,055 Fund shares sold 2,500 Dividends and interest 45,166 Due from Advisor 27,773 Prepaid expenses 4,279 ----------- Total assets 11,939,851 ----------- LIABILITIES Call options written, at value (proceeds $234,471) 175,180 Payables Securities purchased 189,264 Administration fees 3,058 Distribution fees 2,454 Other accrued expenses 37,863 ----------- Total liabilities 407,819 ----------- NET ASSETS $11,532,032 ----------- ----------- Net asset value, offering and redemption price per share [$11,532,032 / 1,253,746 shares outstanding; unlimited number of shares (par value $0.01) authorized] $9.20 ----- ----- COMPONENTS OF NET ASSETS Paid-in capital $12,356,540 Undistributed net investment income 18,444 Accumulated net realized loss on investments (862,425) Net unrealized appreciation/(depreciation) of: Investments (39,818) Options written 59,291 ----------- NET ASSETS $11,532,032 ----------- ----------- See Notes to Financial Statements. STATEMENT OF OPERATIONS FOR THE YEAR ENDED JANUARY 31, 2003 INVESTMENT INCOME Income Dividends $ 247,572 Interest 123,255 ----------- Total income 370,827 ----------- Expenses Advisory fees (Note 3) 105,853 Legal fees 69,894 Administration fees (Note 3) 36,000 Custody fees 37,636 Fund accounting fees 33,305 12b-1 fees (Note 4) 26,464 Transfer agent fees 19,258 Audit fees 15,459 Directors fees 13,977 Other 7,390 Registration fees 4,924 Shareholder reporting 4,874 ----------- Total expenses 375,034 Less: advisory fee waiver and expense reimbursement (Note 3) (163,327) ----------- Net expenses 211,707 ----------- NET INVESTMENT INCOME 159,120 ----------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss from security transactions (972,073) Net change in unrealized depreciation on investments (104,159) ----------- Net realized and unrealized loss on investments (1,076,232) ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (917,112) ----------- ----------- See Notes to Financial Statements. STATEMENT OF CHANGES IN NET ASSETS June 11, 2001* Year Ended Through January 31, January 31, 2003 2002 ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income $ 159,120 $ 61,511 Net realized gain/(loss) on security transactions (972,073) 153,753 Net change in unrealized appreciation/ (depreciation) on investments (104,159) 123,633 ----------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (917,112) 338,897 ----------- ---------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income (155,060) (66,565) From net realized gain -- (24,668) ----------- ---------- TOTAL DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS (155,060) (91,233) ----------- ---------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase in net assets derived from net change in outstanding shares (a) 2,672,948 9,683,592 ----------- ---------- TOTAL INCREASE IN NET ASSETS 1,600,776 9,931,256 NET ASSETS Beginning of period 9,931,256 0 ----------- ---------- END OF PERIOD $11,532,032 $9,931,256 ----------- ---------- ----------- ----------
(a) A summary of share transactions is as follows: Year June 11, 2001* Ended through January 31, 2003 January 31, 2002 ----------------------- ------------------------- Shares Paid in Capital Shares Paid in Capital ------ --------------- ------ --------------- Shares sold 424,249 $4,082,294 1,002,896 $9,964,113 Shares issued for reinvestment of dividends and distributions 16,292 150,377 8,999 91,160 Shares redeemed (161,905) (1,559,723) (36,785) (371,681) -------- ---------- --------- ---------- Net increase 278,636 $2,672,948 975,110 $9,683,592 -------- ---------- --------- ---------- -------- ---------- --------- ----------
* Commencement of operations. See Notes to Financial Statements. FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD June 11, 2001* Year Ended Through January 31, January 31, 2003 2002 ----------- ----------- Net asset value, beginning of period $10.18 $10.00 ------ ------ Income from investment operations: Net investment income 0.13 0.06 Net realized and unrealized gain/(loss) on investments (0.98) 0.21 ------ ------ Total from investment operations (0.85) 0.27 ------ ------ Less Distributions: From net investment income (0.13) (0.07) From net realized gain on investments 0.00 (0.02) ------ ------ Total distributions (0.13) (0.09) ------ ------ Net asset value, end of period $ 9.20 $10.18 ------ ------ ------ ------ TOTAL RETURN (8.39%) 2.74%+ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $11,532 $9,931 Ratio of expenses to average net assets: Before expense reimbursement 3.54% 5.96%** After expense reimbursement 2.00% 2.00%** Ratio of net investment income to average net assets After expense reimbursement 1.50% 1.57%** Portfolio turnover rate 190.7% 49.7%
* Commencement of operations. + Not Annualized. ** Annualized. See Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS AT JANUARY 31, 2003 NOTE 1 - ORGANIZATION The Jacobs & Company Mutual Fund (the "Fund") is a series of shares of beneficial interest of the Advisors Series Trust (the "Trust") which is registered under the Investment Company Act of 1940 (the "1940 Act") as a diversified open-end management investment company. The Fund commenced operations on June 11, 2001. The investment objective of the Fund is to seek a combination of current income and growth of capital, consistent with preservation of capital. The Fund seeks to achieve its objective by investing in equity securities of large-capitalization domestic companies that the Advisor believes to be of high-quality, based on its analysis of factors such as potential earnings growth, strength of management, product development and dividend history and fixed income securities. Covered call options are written on equity securities to enhance total return and provide additional protection during corrections and consolidations in the equity markets. In selecting fixed-income securities, the Advisor seeks safety of principal, monthly cash flows and above-average yield, with a sensitivity to risk. 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. Securities Valuation. The Fund's investments are carried at fair value. Securities traded on a national exchange or Nasdaq are valued at the last reported sale price at the close of regular trading on the last business day of the period; securities traded on an exchange or Nasdaq for which there have been no sales, and other over-the-counter securities, are valued at the mean between the last reported bid and asked prices. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees. Short-term investments are stated at cost which, when combined with accrued interest, 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. Securities Transactions, Dividend Income and Distributions. Securities transactions are accounted for on the trade date. 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 security. Paydown gains and losses on mortgage backed securities are recorded as adjustments to interest income. 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. Options Transactions. The Fund may write call options only if it (i) owns an offsetting position in the underlying security or (ii) maintains cash or other liquid assets in an amount equal to or greater than its obligation under the option. When the Fund writes a call option, an amount equal to the premium received is included in the statement of assets and liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. As writer of an option, the Fund has no control over whether the underlying securities are subsequently sold (called) and, as a result, retains the market risk of an unfavorable change in the price of the security underlying the written option. The Fund may purchase put and call options. Put options are purchased to hedge against a decline in the value of securities held in the Fund's portfolio. If such a decline occurs, the put options will permit the Fund to sell the securities underlying such options at the exercise price, or to close out the options at a profit. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises or declines sufficiently, the option may expire worthless to the Fund. In addition, in the event that the price of the security in connection with which an option was purchased moves in a direction favorable to the Fund, the benefits realized by the Fund as a result of such favorable movement will be reduced by the amount of the premium paid for the option and related transaction costs. Written and purchased options are non-income producing securities. NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS Jacobs & Company (the "Advisor") provides the Fund with investment management services under an Investment Advisory Agreement (the "Agreement"). Under the Agreement the Advisor furnishes all investment advice, office space, facilities, and most of the personnel needed by the Fund. As compensation for its services, the Advisor receives a monthly fee at the annual rate of 1.00% of the Fund's average daily net assets. For the year ended January 31, 2003, the Fund incurred $105,853 in advisory fees. The Fund is responsible for its own operating expenses. The Advisor has contractually agreed to limit the Fund's total operating expenses by reducing all or a portion of its fees and reimbursing the Fund's expenses, for an indefinite period, so that its ratio of expenses to average net assets will not exceed 2.00%. In the case of the Fund's initial period of operations any fee withheld or voluntarily reduced and/or any Fund expense absorbed by the Advisor pursuant to an agreed upon expense cap shall be reimbursed by the Fund to the Advisor, if so requested by the Advisor, anytime before the end of the fifth fiscal year following the year to which the fee waiver and/or expense absorption relates, provided the aggregate amount of the Fund's current operating expenses for such fiscal year does not exceed the applicable limitation on Fund expenses. For the year ended January 31, 2003, the Advisor absorbed expenses of $163,327. The Fund must pay its current ordinary operating expenses before the Advisor is entitled to any reimbursement of fees and/or expenses. Any such reimbursement is also contingent upon Board of Trustees review and approval prior to the time the reimbursement is initiated. Cumulative expenses subject to recapture expire are as follows: Year Amount ---- ------ 2007 $124,518 2008 $163,327 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; prepares reports and materials to be supplied to the trustees; monitors the activities of the Fund's custodian, transfer agent and accountant; coordinates the preparation and payment of Fund expenses and reviews the Fund's expense accruals. For its services, the Administrator receives a monthly fee at the following annual rates: Fund Asset Level Fee rate ---------------- -------- Less than $24 million $36,000 $24 to $100 million 0.15% of average daily net assets $100 to $150 million 0.10% of average daily net assets More than $150 million 0.05% of average daily net assets For the year ended January 31, 2003, the Fund incurred $36,000 in administration fees. U.S. Bancorp Fund Services, LLC provides fund accounting and transfer agency services for the Fund. 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 Trust are officers of the Administrator and the Distributor. In the normal course of business the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Company expects the risk of loss to be remote. NOTE 4 - DISTRIBUTION COSTS 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 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 year ended January 31, 2003, the Fund paid the Distribution Coordinator $26,464. NOTE 5 - OPTION CONTRACTS WRITTEN The number of option contracts written and the premiums received by the Jacobs & Company Mutual Fund during the year ended January 31, 2003, were as follows: NUMBER OF CONTRACTS PREMIUMS RECEIVED ------------------- ----------------- Options outstanding, beginning of period 700 $ 143,094 Options written 10,756 1,936,093 Options exercised (310) (99,157) Options expired (760) (118,386) Options closed (9,082) (1,627,173) ------ ----------- Options outstanding, end of period 1,304 $ 234,471 ------ ----------- ------ ----------- NOTE 6 - PURCHASES AND SALES OF SECURITIES During the year ended January 31, 2003, the aggregate purchases and sales of securities (excluding short-term investments) were: PURCHASES SALES --------- ----- Long Transactions $19,971,242 $17,381,600 NOTE 7 - INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. The tax character of distributions paid during years ended January 31, 2003 and 2002 were as follows: 2003 2002 ---- ---- Ordinary income $155,060 $91,233 At January 31, 2003, the components of net assets (excluding paid in capital) on a tax basis were as follows: Undistributed ordinary income $ 138,882 Accumulated capital loss (548,051) Unrealized depreciation (415,339) --------- $(824,508) --------- --------- At January 31, 2003, the Fund had a net capital loss carryforward of $366,622, which expires in 2011. In addition, the Fund elected to defer $181,429 of post- October losses and treat them as arising on February 1, 2003. The difference between book-basis and tax-basis unrealized depreciation is attributable primarily to the tax deferral on wash sales. On January 31, 2003, the cost of investments for Federal income tax purposes was $12,088,487. Gross unrealized appreciation / (depreciation) for tax purposes, excluding options, were as follows: Tax basis unrealized appreciation $ 337,239 Tax basis unrealized depreciation (809,362) --------- Net tax basis unrealized depreciation $(472,123) --------- --------- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees and Shareholders of Jacobs & Company Mutual 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 Jacobs & Company Mutual Fund, a series of Advisors Series Trust, ("the "Fund") at January 31, 2003, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the year then ended and for the period from June 11, 2001 (commencement of operations) through January 31, 2002, 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 January 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York March 21, 2003 ADDITIONAL INFORMATION 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. Each Trustee and Officer oversees sixteen funds in the complex. 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 -------------------- TERM OF PRINCIPAL OTHER POSITION OFFICE AND OCCUPATION DIRECTORSHIPS NAME, AGE HELD WITH LENGTH OF DURING PAST HELD BY AND ADDRESS THE TRUST TIME SERVED FIVE YEARS TRUSTEE OR OFFICER ----------- --------- ----------- ---------- ------------------ Walter E. Auch Trustee Indefinite Management Nicholas-Applegate (Born 1921) Term Consultant Funds, Citigroup, 2020 E. Financial Way Pimco Advisors LLP, Glendora, CA 91741 Since 1997 and Senele Group James Clayburn Trustee Indefinite Dean Emeritus, The Payden & Rygel LaForce Term John E. Anderson Investment Group, The (Born 1927) Graduate School Metzler/Payden 2020 E. Financial Way Since of Management, Investment Group, PIC Glendora, CA 91741 May 2002 University of Investment Trust, PIC California, Small Cap Portfolio, Los Angeles PIC Balanced Portfolio, PIC Growth Portfolio, PIC Mid Cap Portfolio, Provident Investment Counsel Institutional Money Market Fund, Black Rock Funds, Jacobs Engineering, Arena Pharmaceuticals, Cancervax Donald E. O'Connor Trustee Indefinite Financial The Forward Funds (Born 1936) Term Consultant; 2020 E. Financial Way formerly Glendora, CA 91741 Since 1997 Executive Vice President and Chief Operating officer of ICI Mutual Insurance Company (until January, 1997). George J. Rebhan Trustee Indefinite Retired; E*Trade Funds (Born 1934) Term formerly 2020 E. Financial Way President, Glendora, CA 91741 Since Hotchkis May 2002 and Wiley Funds (mutual funds) from 1985 to 1993. George T. Wofford III Trustee Indefinite Senior Vice Not Applicable (Born 1939) Term President, 2020 E. Financial Way Information Glendora, CA 91741 Since 1997 Services, Federal Home Loan Bank of San Francisco. INTERESTED TRUSTEES AND OFFICERS -------------------------------- Eric M. Banhazl Trustee & Indefinite Senior Vice None (Born 1957) President Term President, U.S. 2020 E. Financial Way Bancorp Fund Glendora, CA 91741 Since 1997 Services, LLC, the Fund's administrator (since July, 2001); Treasurer, Investec Funds; formerly, Executive Vice President, Investment Company Administration, LLC ("ICA") (The Fund's former administrator). John S. Wagner Treasurer Indefinite Assistant Vice None (Born 1965) Term President 615 E. Michigan Street Compliance and Milwaukee, WI 53202 Since Administration, September U.S. Bancorp 2002 Fund Services, LLC, since June 1999. Chad E. Fickett Secretary Indefinite Compliance None (Born 1973) Term Administrator, 615 E. Michigan Street U.S. Bancorp Milwaukee, WI 53202 Since Fund Services, March 2002 LLC since July 2000.
ADVISOR Jacobs & Company 300 Summers Street, Suite 970 Charleston, WV 25301 www.jacobsandcompany.com DISTRIBUTOR Quasar Distributors, LLC 615 East Michigan Street, 2nd Floor Milwaukee, WI 53202 CUSTODIAN U.S. Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 TRANSFER AGENT U.S. Bancorp Fund Services, LLC 615 East Michigan Street, 2nd Floor Milwaukee, WI 53202 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker, LLP 55 Second Street, 24th Floor San Francisco, CA 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. For a current prospectus please call 1-877-560-6823. 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.