N-CSR 1 taff-ncsra.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07959 ADVISORS SERIES TRUST --------------------- (Exact name of registrant as specified in charter) 615 EAST MICHIGAN ST. MILWAUKEE, WI 53202 ------------------- (Address of principal executive offices) (Zip code) ERIC M. BANHAZL ADVISORS SERIES TRUST 2020 EAST FINANCIAL WAY, SUITE 100 GLENDORA, CA 91741 ------------------ (Name and address of agent for service) (414) 765-5340 --------------- Registrant's telephone number, including area code Date of fiscal year end: DECEMBER 31, 2003 ----------------- Date of reporting period: DECEMBER 31, 2003 ----------------- ITEM 1. REPORT TO STOCKHOLDERS. ------------------------------ (AL FRANK FUND LOGO) THE AL FRANK FUND ANNUAL REPORT DECEMBER 31, 2003 THE AL FRANK FUND 32392 COAST HIGHWAY, SUITE 260 LAGUNA BEACH, CA 92651 SHAREHOLDER SERVICES (888) 263-6443 WWW.ALFRANKFUND.COM AL FRANK ASSET MANAGEMENT, INC. 32392 Coast Highway Suite 260, Laguna Beach, CA 92651 www.alfrankfund.com February 2004 Given that our total assets have climbed from $48 million at the start of 2003 to $262 million as of this writing, we would like to take a moment to welcome all of our new shareholders and to offer the reminder that our mutual fund is designed for long-term oriented investors. We are obviously thrilled with our +77.97% total return for 2003, but we are more excited about our long-term track record. For the past five years, The Al Frank Fund has shown an average annualized rate of return of +24.01% and for the life of the Fund (inception was on January 2, 1998), VALUX has enjoyed an average annualized rate of return of +17.73%. Obviously, these numbers compare extremely well to the benchmarks traditionally associated with mutual funds in general and our Fund in particular. FUND PERFORMANCE THROUGH DECEMBER 31, 2003 1 Year 3 Years 5 Years 4th Quarter Average Average Average Life of Fund Fund Name 2003 Annualized Annualized Annualized (1/2/98) ------------------------------------------------------------------------------------------------- AL FRANK FUND 21.82% 77.97% 19.58% 24.01% 17.73% Russell 2000 Index 14.52% 47.25% 6.27% 7.13% 5.45% S&P 500 Index 12.18% 28.68% -4.05% -0.57% 3.78% Wilshire 5000 Index 12.42% 31.64% -2.48% 0.42% 3.89%
The secret to our long-term success is that we have never wavered from our disciplined approach of buying and patiently holding a broadly diversified portfolio of undervalued stocks. We may not always have top-of- the table performance in the short run, but those who have stuck with us through the inevitable ups and downs of the market have been handsomely rewarded. While hares may temporarily jump ahead with hot momentum stocks, technical signals and the like, we will continue to plod along like the tortoise, satisfied that our time-tested approach will allow us to continue to win the long-term race. Of course, we understand that some of our shareholders may not share the same long-term philosophy, but we urge those thinking of heading for the hills at the first sign of a downturn to consider what happened over the past two years after we had attracted a significant amount of new money following our excellent returns in 2001. Sadly, many of those new investors chose to quickly redeem their shares in the summer of 2002, often after suffering significant short-term losses. While there were obviously never any guarantees, the Fund came roaring back in 2003, with the big advance fueled by the very same stocks that led to the short-term setback. We are often asked why we performed so well last year and I usually joke that it was because of all of the lousy stocks we bought in 2002. It was not as if we suddenly saw the light on January 1, 2003 and dumped all of our losers while picking up the new year's winners! Generally speaking, 2002's goats became 2003's heroes. "Twas ever thus," as Al Frank used to say. Clearly, we realize that no matter how much we emphasize long-term investing, we will always attract those looking to make a quick buck. In order to discourage day-traders and other short-term-oriented shareholders, and long before Eliot Spitzer made it fashionable, we have had a short-term redemption fee in place since mid-2002 whereby those who do not hold their shares for 60 days are penalized 2% when they redeem. These redemption fees, which totaled $131,470 in 2003, definitely enhance the value of the remaining shares and while we can't make any formal claims about expense reduction or return augmentation, they clearly are a benefit for all of us who are truly investing for the long-term. To illustrate this point, we offer the real-world example of an Al Frank Fund shareholder who purchased $4 million of VALUX last August. This individual chose to hold his shares for only 45 days and while he still managed to make a few dollars on the overall investment, the Fund was enriched by more than $80,000 in short-term redemption fees due to his early departure. Evidently he did not read our prospectus, which clearly states that the Fund's Goal is long-term capital appreciation! OUTLOOK We know that many experts are suggesting that equities may struggle in 2004 as fears of another technology-stock bubble are rising, but we haven't discovered how to time the market yet and we concede that we never will. What we have figured out is that market history proves that stocks have historically been the best performing financial asset class for long-term-oriented investors. IBBOTSON ASSOCIATES SUMMARY STATISTICS OF ANNUAL RETURNS FROM 1926 TO 2003 Large Company Stocks 10.4% Ibbotson Small Company Stocks 12.7% Mid-Cap Stocks* 11.3% Low-Cap Stocks* 11.7% Micro-Cap Stocks* 12.7% Long-Term Corporate Bonds 5.9% Long-Term Government Bonds 5.4% Intermediate-Term Government Bonds 5.4% Treasury Bills 3.7% Inflation 3.0% * Source: Center for Security Prices, University of Chicago Ibbotson Associates provides wonderful historical data that not only helps in keeping the faith in times of turmoil, but also keeps expectations realistic in periods of euphoria. Monthly updates from Ibbotson are expensive, but the above table covering 78 years of market history might be worth the subscription price all by itself! In the table, Mid-Cap stocks have market capitalizations between $1,167 and $4,794 million, Low-Caps are between $331 and $1,167 million and Micro-Caps are below $331 million. While the markets may be long overdue for a normal and healthy correction, as there has not been so much as a 5% setback since last March, our outlook remains bullish. Equities have always been the place to be for the long-term oriented investor and we think 2004 will be a solid year, especially as alternative investments remain unappealing. Of course, as of this writing, the new year is off to a good start. Those shareholders who are also subscribers to our Prudent Speculator newsletter have heard our reasons for optimism on many occasions, but they are worth repeating. We are in the seasonally favorable fourth year of the Presidential Cycle, the economic recovery is gaining strength, the Federal Reserve remains "patient" in keeping interest rates at historically low levels and dividend, capital gains and income tax cuts are still benefiting investors. In addition, the barrage of corporate earnings reports so far this year have been very good on average and merger and acquisition activity has picked up considerably. Certainly, we can not expect this year's performance to duplicate last year's stellar returns, but even if we do a quarter as well, we will be quite pleased. As the table above indicates, large company stocks have historically returned 10.4% while small-company issues have enjoyed a 12.7% annualized rate of return. While The Al Frank Fund has only been around for six plus years, our strategy of buying and patiently holding broadly diversified portfolios of undervalued stocks has allowed us to handily beat those long-term Ibbotson numbers, even as the performance of the overall markets fell significantly below the historical averages. There can never be any guarantees but we continue to shoot for 15% to 20% average annualized gains, which is in line with our historical performance rate. Of course, I must add that with inflation virtually non- existent and returns on 'risk-free' instruments incredibly low, even a 10% to 12% return going forward would be excellent! All of us at Al Frank Asset Management appreciate your patronage and we promise that we will continue to put forth the "extra" that can turn an ordinary mutual fund into an extraordinary one! As I strongly believe in putting my money where my mouth is, I have recently added to my personal holdings in VALUX and I will soon be buying more shares. As we work to improve communications with our shareholders, we have launched some very exciting e-mail newsletters and updates. Please visit www.alfrankfund.com/ar for additional information and to sign up for this free ---------------------- service. Sincerely, /s/ John Buckingham John Buckingham President & Chief Portfolio Manager 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 the original cost. Investment performance reflects voluntary fee waivers in effect 1998 and 1999. In the absence of such waivers, total return would have been reduced. The advisor has since received reimbursement from the fund for these waivers. Investing in securities of small and medium-capitalization companies may involve greater price volatility than large-capitalization companies. Mutual fund investing involves risk; loss of principal is possible. Opinions expressed are those of John Buckingham, which are subject to change and are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. The S&P 500, Russell 2000, and Wilshire 5000 Indices are unmanaged indices commonly used to measure performance of U.S. stocks. You cannot invest directly in an index. 02/04 THE AL FRANK FUND Comparison of the change in value of a hypothetical $10,000 investment in The Al Frank Fund versus the Russell 2000 Index, the Wilshire 5000 Equity Index and the S&P 500 Index. The Al Wilshire 5000 Russell S&P 500 Date Frank Fund Equity Index 2000 Index Index ---- ---------- ------------ ---------- ----- 1/2/1998 $10,000 $10,000 $10,000 $10,000 6/30/1998 $9,830 $11,515 $10,493 $11,771 12/31/1998 $9,070 $12,310 $9,746 $12,857 6/30/1999 $11,350 $13,771 $10,650 $14,449 12/31/1999 $14,550 $15,210 $11,818 $15,563 6/30/2000 $16,160 $15,082 $12,177 $15,498 12/31/2000 $15,566 $13,553 $11,461 $14,146 6/30/2001 $19,130 $12,768 $12,246 $13,199 12/31/2001 $20,195 $12,066 $11,745 $12,465 6/30/2002 $18,968 $10,646 $11,193 $10,824 12/31/2002 $14,945 $9,549 $9,339 $9,710 6/30/2003 $18,649 $10,782 $11,009 $10,851 12/31/2003 $26,598 $12,571 $13,753 $12,494 AVERAGE ANNUAL TOTAL RETURN1 Al Frank S&P 500 Russell 2000 Wilshire 5000 Fund Index Index Equity Index -------- ------- ------------ ------------- 1 Year 77.97% 28.68% 47.25% 31.64% 5 Year 24.01% -0.57% 7.13% 0.42% Since inception (1/2/98) 17.73% 3.78% 5.45% 3.89% Past performance is no guarantee of future results. 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. Share value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original investment. Indices do not incur expenses and are not available for investment. 1 Average Annual Total Return represents the average change in account value over the periods indicated. The Wilshire 5000 Equity Index tracks the performance of all equity securities issued by the U.S. head-quartered companies regardless of exchange. As of 12/00, the index was comprised of 6,590 companies. The Russell 2000 Index is a widely regarded small cap index of the 2,000 smallest securities of the Russell 3000 Index which is comprised of the 3,000 largest U.S. securities as determined by total market capitalization. The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. The valuation calculation for the S&P 500 Index and Russell 2000 Index is for the period December 31, 1997 through December 31, 2003. SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2003 Shares Common Stocks: 93.68% Market Value ------ --------------------- ------------ ADVANCED INDUSTRIAL EQUIPMENT: 0.65% 4,002 MTS Systems Corp. $ 76,958 40,700 New Focus, Inc.* 204,314 49,000 O.I. Corp.* 428,701 80,000 The Lamson & Sessions Co.* 461,600 ------------ 1,171,573 ------------ ADVANCED MEDICAL DEVICES: 1.14% 20,000 Coherent, Inc.* 476,000 273,300 Equidyne Corp.* 163,980 15,074 Utah Medical Products, Inc.* 390,718 144,950 Vascular Solutions, Inc.* 847,958 8,000 VISX, Inc.* 185,200 ------------ 2,063,856 ------------ AEROSPACE & DEFENSE: 3.29% 24,100 AAR Corp. 360,295 60,000 BE Aerospace, Inc.* 324,000 20,000 Ducommun, Inc.* 447,000 37,500 Kaman Corp. - Class A 477,375 210,200 LMI Aerospace, Inc.* 420,400 13,000 Lockheed Martin Corp. 668,200 75,000 Orbit International Corp.* 562,500 12,300 Pemco Aviation Group, Inc.* 424,350 5,000 Precision Castparts Corp. 227,050 13,000 Raytheon Co. 390,520 5,000 Rockwell Collins, Inc. 150,150 80,000 SIFCO Industries, Inc.* 335,200 25,000 The Allied Defense Group, Inc.* 597,750 13,000 The Boeing Co. 547,820 ------------ 5,932,610 ------------ AIR FREIGHT/COURIERS: 0.01% 99 FedEx Corp. 6,683 ------------ AIRLINES: 0.78% 40,000 Airtran Holdings, Inc.* 476,000 11,500 Delta Air Lines, Inc. 135,815 20,000 Koninklijke Luchtvaart Maatschappij # 324,200 110,000 Midwest Express Holdings, Inc.* 463,100 ------------ 1,399,115 ------------ ALUMINUM: 0.38% 18,000 Alcoa, Inc. 684,000 ------------ AUTOMOBILE MANUFACTURERS: 0.81% 12,000 DaimlerChrysler AG # 554,640 30,000 Ford Motor Co. 480,000 8,000 General Motors Corp. 427,200 ------------ 1,461,840 ------------ AUTOMOBILE PARTS & EQUIPMENT: 1.41% 20,000 ArvinMeritor, Inc. 482,400 15,000 Cooper Tire & Rubber Co. 320,700 55,000 Dura Automotive Systems, Inc.* 702,350 60,000 The Goodyear Tire & Rubber Co. 471,600 55,000 Visteon Corp. 572,550 ------------ 2,549,600 ------------ BANKS: 2.64% 52,469 BFC Financial Corp. - Class A* 731,418 6,000 Bank of America Corp. 482,580 9,000 Bank One Corp. 410,310 20,000 BankAtlantic Bancorp, Inc. - Class A 380,000 13,000 Capstead Mortgage Corp. 218,140 10,000 Citigroup, Inc. 485,400 1,605 HSBC Holdings plc - ADR # 126,506 20,000 MBNA Corp. 497,000 12,000 National City Corp. 407,280 10,000 Sovereign Bancorp, Inc. 237,500 8,000 Wachovia Corp. 372,720 7,000 Wells Fargo & Co. 412,230 ------------ 4,761,084 ------------ BIOTECHNOLOGY: 0.47% 35,000 King Pharmaceuticals, Inc.* 534,100 170,100 Zonagen, Inc.* 314,685 ------------ 848,785 ------------ BUILDING MATERIALS: 0.85% 2,000 Hughes Supply, Inc. 99,240 15,000 International Aluminum Corp. 410,400 20,000 JLG Industries, Inc. 304,600 5,000 NCI Building Systems, Inc.* 119,500 30,000 Omnova Solutions, Inc.* 144,000 300,000 Smith-Midland Corp.* 255,000 6,000 The Sherwin-Williams Co. 208,440 ------------ 1,541,180 ------------ BUSINESS SERVICES: 4.47% 40,000 Ambassadors International, Inc. 500,000 145,000 Analysts International Corp.* 488,650 90,000 Computer Horizons Corp.* 353,700 65,000 Edgewater Technology, Inc.* 319,800 151,100 HealthStream, Inc.* 392,860 30,000 IKON Office Solutions, Inc. 355,800 60,000 InFocus Corp.* 580,800 70,000 Insweb Corp.* 322,700 45,000 MasTec, Inc.* 666,450 105,000 Onvia.com, Inc.* 487,200 49,630 Quotesmith.com, Inc.* 244,229 10,861 Right Management Consultants, Inc.* 202,666 375,000 Technology Solutions Co.* 469,125 150,000 Traffix, Inc.* 817,500 98,823 ValueClick, Inc.* 897,313 85,000 Vicon Industries, Inc.* 397,800 115,000 Zomax, Inc.* 573,850 ------------ 8,070,443 ------------ CASINOS: 0.19% 5,000 MGM MIRAGE* 188,050 5,000 Station Casinos, Inc.* 153,150 ------------ 341,200 ------------ CHEMICALS - COMMODITY: 0.68% 10,000 E.I. Du Pont de Nemours and Co. 458,900 18,000 Olin Corp. 361,080 10,000 The Dow Chemical Co. 415,700 ------------ 1,235,680 ------------ CHEMICALS - SPECIALTY: 1.44% 30,000 Crompton Corp. 215,100 15,000 Great Lakes Chemical Corp. 407,850 30,000 IMC Global, Inc. 297,900 20,000 OM Group, Inc.* 523,800 15,000 Octel Corp. # 295,350 4,000 Spartech Corp. 98,560 75,000 Wellman, Inc. 765,750 ------------ 2,604,310 ------------ CLOTHING/FABRICS: 2.41% 22,500 Delta Apparel, Inc. 405,225 20,000 Haggar Corp. 390,200 100,000 Hartmarx Corp.* 417,000 5,075 Kellwood Co. 208,075 10,000 Oxford Industries, Inc. 338,800 10,000 Phillips-Van Heusen Corp. 177,400 45,000 Quaker Fabric Corp.* 427,500 30,000 Quicksilver, Inc.* 531,900 25,000 Russell Corp. 439,000 30,000 Tommy Hilfiger Corp.*# 444,300 85,000 Tropical Sportswear International Corp.* 185,300 60,000 Unifi, Inc.* 387,000 ------------ 4,351,700 ------------ COMMUNICATIONS TECHNOLOGY: 5.16% 85,000 3Com Corp.* 694,450 45,000 Andrew Corp.* 517,950 98,000 Avanex Corp.* 489,020 40,000 Avici Systems, Inc.* 318,000 180,000 Blonder Tongue Laboratories, Inc.* 577,800 65,000 Communications Systems, Inc.* 520,650 25,000 Comverse Technology, Inc.* 439,750 45,000 Cosine Communications, Inc.* 332,100 250,000 deltathree, Inc. - Class A* 730,000 66,000 Digi International, Inc.* 633,600 160,000 Forgent Networks, Inc.* 403,200 30,500 Net2Phone, Inc.* 207,400 60,000 Network Equipment Technologies, Inc.* 660,000 46,346 Novell, Inc.* 487,560 173,600 Pinnacor, Inc.* 404,488 23,000 Polycom, Inc.* 448,960 1,059 SR Telecom, Inc.*# 6,672 40,000 Stratos International, Inc.* 271,200 27,609 Symmetricom, Inc.* 200,994 98,900 TII Network Technologies, Inc.* 209,668 90,000 Tellabs, Inc.* 758,700 ------------ 9,312,162 ------------ COMPUTERS: 3.25% 70,000 Adaptec, Inc.* 618,100 35,000 Apple Computer, Inc.* 747,950 25,000 Computer Network Technology Corp.* 238,500 100,000 Gateway, Inc.* 460,000 22,500 Hewlett Packard Co. 516,825 75,000 Iomega Corp.* 448,500 40,000 Maxtor Corp.* 444,000 100,000 Optimal Robotics Corp. - Class A*# 799,000 15,000 Storage Technology Corp.* 386,250 125,000 Sun Microsystems, Inc.* 561,250 55,000 Western Digital Corp.* 648,450 ------------ 5,868,825 ------------ CONSUMER SERVICES: 0.41% 135,700 Dynabazaar, Inc.* 44,781 10,000 H & R Block, Inc. 553,700 4,000 SINA.com* # 135,000 ------------ 733,481 ------------ CONTAINERS & PACKAGING: 0.55% 67,500 American Biltrite, Inc. 519,750 80,000 Applied Extrusion Technologies, Inc.* 212,000 45,000 Rock of Ages Corp. 259,650 ------------ 991,400 ------------ COSMETICS/PERSONAL CARE: 0.13% 10,000 Helen of Troy Ltd.* # 231,500 ------------ ELECTRIC & GAS: 0.17% 15,000 Duke Energy Corp. 306,750 ------------ ELECTRIC MANUFACTURING SERVICES: 0.66% 40,000 Flextronics International LTD*# 593,600 100,000 Solectron Corp.* 591,000 ------------ 1,184,600 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 2.79% 114,900 Aetrium, Inc.* 358,488 20,000 American Power Conversion Corp.* 489,000 25,000 AVX Corp. 415,500 129,600 BMC Industries, Inc.* 6,480 25,000 C&D Technologies, Inc. 479,250 45,000 Frequency Electronics, Inc. 652,500 70,000 Innovex, Inc.* 590,100 15,000 InVision Technologies, Inc.* 503,550 40,000 Kemet Corp.* 547,600 17,000 Nam Tai Electronics, Inc. # 477,360 7,600 RF Industries, Ltd.* 60,572 20,000 Vishay Intertechnology, Inc.* 458,000 ------------ 5,038,400 ------------ FINANCIAL SERVICES, DIVERSIFIED: 0.65% 7,000 Fannie Mae 525,420 55,000 Providian Financial Corp. * 640,200 ------------ 1,165,620 ------------ FIXED LINE COMMUNICATIONS: 1.60% 210,000 ADC Telecommunications, Inc.* 623,700 20,000 AT&T Corp. 406,000 17,000 BellSouth Corp. 481,100 78,786 Endwave Corp.* 583,016 17,000 SBC Communications, Inc. 443,190 10,000 Verizon Communications, Inc. 350,800 ------------ 2,887,806 ------------ FOOD MANUFACTURERS: 0.79% 32,000 Archer-Daniels-Midland Co. 487,040 12,500 Kraft Foods, Inc. - Class A 402,750 25,000 Sara Lee Corp. 542,750 ------------ 1,432,540 ------------ FOOD RETAILERS: 0.75% 25,000 Albertson's, Inc. 566,250 20,000 Safeway, Inc.* 438,200 35,000 Winn-Dixie Stores, Inc. 348,250 ------------ 1,352,700 ------------ FOOTWEAR: 1.40% 50,000 Deckers Outdoor Corp.* 1,025,000 27,500 Maxwell Shoe Company, Inc. - Class A* 466,675 5,000 R. G. Barry Corp.* 21,950 30,000 Saucony, Inc. - Class B* 519,900 11,000 Steve Madden, Ltd.* 224,400 5,000 The Timberland Co. - Class A* 260,350 ------------ 2,518,275 ------------ FOREST PRODUCTS: 0.41% 10,000 Georgia-Pacific Corp. 306,700 25,000 Pope & Talbot, Inc. 440,250 ------------ 746,950 ------------ HEALTHCARE PROVIDERS: 3.67% 10,000 Aetna, Inc. 675,800 90,000 American Shared Hospital Services 540,000 37,000 Curative Health 510,600 130 Five Star Quality Care, Inc.* 572 12,000 HCA, Inc. 515,520 27,000 HEALTHSOUTH Corp.* 123,930 20,000 Humana, Inc.* 457,000 23,365 LCA-Vision, Inc.* 494,637 15,000 Lincare Holdings, Inc.* 450,450 60,000 Orthodontic Centers of America, Inc.* 483,000 12,000 Oxford Health Plans, Inc.* 522,000 9,400 PacifiCare Health Systems, Inc.* 635,440 49,000 Res-Care, Inc.* 396,900 25,000 Tenet Healthcare Corp.* 401,250 7,000 UnitedHealth Group, Inc. 407,260 ------------ 6,614,359 ------------ HEAVY CONSTRUCTION: 0.10% 44,050 Williams Industries, Inc.* 171,795 ------------ HEAVY MACHINERY: 0.07% 1,800 A.O. Smith Corp. 63,090 9,700 Katy Industries, Inc.* 55,387 ------------ 118,477 ------------ HOME CONSTRUCTION: 3.66% 6,500 Beazer Homes USA, Inc.* 634,790 10,000 Cavco Industries, Inc.* 240,000 5,000 Centex, Corp. 538,250 20,000 D.R. Horton, Inc. 865,200 15,000 Fleetwood Enterprises, Inc.* 153,900 3,000 Hovanian Enterprises, Inc. - Class A* 261,180 7,000 KB Home 507,640 5,000 Lennar Corp. - Class A 480,000 14,000 Orleans Homebuilders, Inc. 396,620 5,000 Pulte Homes, Inc. 468,100 50,000 Rexhall Industries, Inc.* 162,000 5,000 Ryland Group, Inc. 443,200 8,500 Standard Pacific Corp. 412,675 12,000 Toll Brothers, Inc.* 477,120 27,000 WCI Communities, Inc.* 556,470 ------------ 6,597,145 ------------ HOME FURNISHINGS: 0.84% 60,000 Applica, Inc.* 456,000 20,000 Chromcraft Revington, Inc.* 226,800 6,000 Craftmade International, Inc. 157,440 45,000 The Dixie Group, Inc.* 345,600 4,500 Whirlpool Corp. 326,925 ------------ 1,512,765 ------------ HOUSE-DURABLE: 0.73% 27,500 Department 56, Inc.* 360,250 65,000 Global-Tech Appliances, Inc.* 564,850 17,500 Newell Rubbermaid, Inc. 398,475 ------------ 1,323,575 ------------ HOUSE-NON-DURABLE: 0.11% 7,000 Central Garden & Pet Co.* 196,210 ------------ INDUSTRIAL & COMMERCIAL SERVICES: 0.83% 20,000 Avnet, Inc.* 433,200 60,000 Nu Horizons Electronics Corp.* 588,000 27,000 Spectrum Control, Inc.* 214,947 75,000 Trio-Tech International* 270,000 ------------ 1,506,147 ------------ INDUSTRIAL DIVERSIFIED: 0.81% 30,000 GenCorp, Inc. 323,100 15,000 General Electric Co. 464,700 33,000 McRae Industries, Inc. - Class A 330,000 40,000 P & F Industries, Inc. - Class A* 344,000 ------------ 1,461,800 ------------ INSURANCE, FULL LINE: 0.67% 6,500 American International Group, Inc. 430,820 4,000 Anthem, Inc.* 300,000 8,000 Hartford Financial Services Group, Inc. 472,240 ------------ 1,203,060 ------------ INSURANCE, LIFE: 0.61% 2,500 National Western Life Insurance Co. - Class A* 387,125 7,000 Torchmark Corp. 318,780 25,000 Unum Provident Corp. 394,250 ------------ 1,100,155 ------------ INSURANCE, PROPERTY & CASUALTY: 1.74% 8,000 MGIC Investment Corp. 455,520 20,000 Merchants Group, Inc. 476,400 25,000 PXRE Group LTD# 589,250 7,000 Radian Group, Inc. 341,250 25,000 RTW, Inc.* 161,000 16,000 St. Paul Companies, Inc. 634,400 11,000 The Allstate Corp. 473,220 172 Travelers Property Casualty Corp. - Class A* 2,886 355 Travelers Property Casualty Corp. - Class B* 6,024 ------------ 3,139,950 ------------ LODGING: 0.18% 30,000 Park Place Entertainment* 324,900 ------------ MARINE TRANSPORTATION/SHIPPING (NON-ENERGY): 0.49% 45,000 Sea Containers Ltd. - Class A# 821,250 6,500 Stolt-Nielsen S.A. - ADR # 62,140 ------------ 883,390 ------------ MEDICAL SUPPLIES: 0.84% 16,500 Baxter International, Inc. 503,580 30,000 Cantel Medical Corp.* 485,700 15,500 McKesson Corp. 498,480 603 Medco Health Solutions, Inc. 20,496 ------------ 1,508,256 ------------ MERCHANT ENERGY PROVIDERS: 0.43% 20,000 Aquila, Inc. 67,800 70,000 Calpine Corp.* 336,700 70,000 Mirant Corp.* 27,300 20,000 Xcel Energy, Inc. 339,600 ------------ 771,400 ------------ OIL, DRILLING: 1.05% 17,500 GlobalSantaFe Corp.# 434,525 10,000 Nabors Industries, Ltd.* # 415,000 4,000 Rowan Companies, Inc. 92,680 40,000 The Wiser Oil Co.* 338,000 22,500 Transocean, Inc.# 540,225 3,000 Unit Corp.* 70,650 ------------ 1,891,080 ------------ OIL, INTEGRATED MAJORS: 0.83% 9,500 Anadarko Petroleum Corp. 484,595 12,000 Exxon Mobil Corp. 492,000 16,000 Marathon Oil Corp. 529,440 ------------ 1,506,035 ------------ OIL, EQUIPMENT & SERVICES: 1.33% 45,000 Key Energy Services, Inc.* 463,950 20,000 Maverick Tube Corp.* 385,000 26,000 Oceaneering International, Inc.* 728,000 15,000 Offshore Logistics, Inc.* 367,800 15,000 Tidewater Inc. 448,200 ------------ 2,392,950 ------------ OIL, REFINERS: 1.20% 52,000 Giant Industries, Inc.* 622,960 12,000 Holly Corp. 330,000 45,000 Tesoro Petroleum Corp. 655,650 12,000 Valero Energy Corp. 556,080 ------------ 2,164,690 ------------ OIL, SECONDARY: 0.42% 1,690 Apache Corp. 137,059 5,000 Devon Energy Corp. 286,300 27,500 Vintage Petroleum, Inc. 330,825 ------------ 754,184 ------------ OIL, TRANSPORTATION/SHIPPING: 1.17% 95,000 OMI Corp.*# 848,350 10,000 Overseas Shipholding Group, Inc. 340,500 8,000 Teekay Shipping Corp. # 456,240 25,000 Tsakos Energy Navigation LTD.# 461,250 ------------ 2,106,340 ------------ OTHER NON-FERROUS: 0.21% 5,000 Phelps Dodge Corp.* 380,450 ------------ PAPER PRODUCTS: 0.54% 14,000 Boise Cascade Corp. 460,040 12,000 International Paper Co. 517,320 ------------ 977,360 ------------ PHARMACEUTICALS: 2.03% 20,000 Bristol-Myers Squibb Co. 572,000 12,000 Johnson & Johnson 619,920 13,500 Merck & Co. Inc. 623,700 8,000 Novartis AG ADR# 367,120 20,000 Pfizer, Inc. 706,600 20,000 Schering-Plough Corp. 347,800 10,000 Wyeth 424,500 ------------ 3,661,640 ------------ POLLUTION CONTROL/WASTE MANAGEMENT: 0.27% 50,000 IMCO Recycling, Inc.* 494,500 ------------ PRECIOUS METALS: 0.19% 35,000 Stillwater Mining Co.* 334,950 ------------ RAILROADS: 1.30% 15,000 Burlington Northern Santa Fe Corp. 485,250 20,000 CSX Corp. 718,800 25,000 Norfolk Southern Corp. 591,250 8,000 Union Pacific Corp. 555,840 ------------ 2,351,140 ------------ REAL ESTATE INVESTMENT: 0.54% 40,000 HRPT Properties Trust 403,600 120,000 Jameson Inns, Inc. 282,000 6,000 LNR Property Corp. 297,060 ------------ 982,660 ------------ RECREATIONAL PRODUCTS: 2.30% 25,000 Action Performance Companies, Inc. 490,000 12,000 Brunswick Corp. 381,960 30,000 Callaway Golf Co. 505,500 59,700 Coastcast Corp.* 118,206 60,000 Concord Camera Corp.* 555,000 17,500 Eastman Kodak Co. 449,225 100,000 Huffy Corp.* 525,000 27,500 K2, Inc.* 418,275 50,000 The Nautilus Group, Inc. 702,500 ------------ 4,145,666 ------------ RESTAURANTS: 0.49% 20,000 CKE Restaurants, Inc.* 127,800 20,000 Landry's Restaurants, Inc. 514,400 10,000 McDonald's Corp. 248,300 ------------ 890,500 ------------ RETAILERS, APPAREL: 1.33% 26,000 Abercrombie & Fitch Co. - Class A* 642,460 25,000 American Eagle Outfitters, Inc.* 410,000 10,000 AnnTaylor Stores Corp.* 390,000 15,000 Burlington Coat Factory Warehouse Corp. 317,400 55,000 Gadzooks, Inc.* 85,250 60,000 Goody's Family Clothing, Inc. 561,600 ------------ 2,406,710 ------------ RETAILERS, BROADLINE: 0.64% 20,000 J. C. Penney Company, Inc. 525,600 5,000 Nordstrom, Inc. 171,500 10,000 Sears, Roebuck and Co. 454,900 ------------ 1,152,000 ------------ RETAILERS, SPECIALTY: 2.51% 21,000 AutoNation, Inc.* 385,770 13,000 Barnes & Noble, Inc.* 427,050 50,000 Circuit City Stores, Inc. 506,500 35,000 Friedman's Inc. - Class A 234,850 20,000 Jo-Ann Stores, Inc. - Class B* 408,000 10,000 Michaels Stores, Inc.* 442,000 6,000 REX Stores Corp.* 84,960 8,000 TBC Corp.* 206,480 20,000 The Home Depot, Inc. 709,800 4,000 The Pep Boys - Manny, Moe & Jack 91,480 70,000 Toys "R" Us, Inc.* 884,800 20,000 Trans World Entertainment Corp.* 142,400 ------------ 4,524,090 ------------ SAVINGS & LOANS: 1.00% 13,000 FirstFed Financial Corp.* 565,500 2,000 Golden West Financial Corp. 206,380 22,000 PVF Capital Corp. 354,178 17,000 Washington Mutual, Inc 682,040 ------------ 1,808,098 ------------ SECURITIES BROKERS: 0.61% 8,000 Lehman Brothers Holdings, Inc. 617,760 6,000 The Bear Stearns Companies, Inc. 479,700 ------------ 1,097,460 ------------ SEMICONDUCTOR, CAPITAL EQUIPMENT: 1.81% 8,000 Applied Materials, Inc.* 179,600 17,500 Brooks Automation, Inc.* 422,975 17,000 Cohu, Inc. 325,550 40,000 Credence Systems Corp.* 526,400 75,000 Electroglas, Inc.* 273,750 25,000 Kulicke and Soffa Industries, Inc.* 359,500 12,500 Lam Research Corp.* 403,750 37,000 Mattson Technology, Inc.* 452,140 3,000 Novellus Systems, Inc.* 126,150 4,500 Varian Semiconductor Equipment Associates, Inc.* 196,605 ------------ 3,266,420 ------------ SEMICONDUCTOR, GRAPHICS CHIPS: 1.38% 40,000 ESS Technology, Inc.* 680,400 22,000 NVIDIA Corp.* 511,500 45,000 Trident Microsystems, Inc.* 783,891 163,900 Tvia, Inc.* 408,111 205,288 Vialta, Inc. - Class A* 110,856 ------------ 2,494,758 ------------ SEMICONDUCTOR, MICROPROCESSORS: 2.98% 30,000 Advanced Micro Devices, Inc.* 447,000 55,000 Atmel Corp.* 330,550 12,000 Cypress Semiconductor Corp.* 256,320 80,000 Dataram Corp.* 345,600 45,600 Diodes, Inc.* 866,400 30,000 Integrated Silicon Solution, Inc.* 470,100 6,000 International Rectifier Corp.* 296,460 50,000 Lattice Semiconductor Corp.* 484,000 70,000 LSI Logic Corp.* 620,900 42,500 Micron Technology, Inc.* 572,475 4,375 National Semiconductor Corp.* 172,419 4,449 Siliconix, Inc.* 203,319 38,200 Tower Semiconductor Ltd.* # 301,398 ------------ 5,366,941 ------------ SEMICONDUCTOR, PROGRAMMABLE LOGIC DEVICES: 0.61% 646 Agere Systems, Inc. - Class A* 1,970 15,873 Agere Systems, Inc. - Class B* 46,032 25,000 Genesis Microchip, Inc.* 451,000 35,000 Integrated Device Tech, Inc.* 600,950 ------------ 1,099,952 ------------ SOFTWARE: 5.44% 135,000 American Software, Inc. - Class A* 966,465 134,100 Apropos Technology, Inc.* 466,668 14,500 Ascential Software Corp.* 375,985 29,500 Aspect Communications Corp.* 464,920 10,000 Autodesk, Inc. 245,800 24,000 BMC Software, Inc.* 447,600 53,100 CAM Commerce Solutions, Inc.* 377,010 90,000 Captaris, Inc.* 505,800 8,450 Click Commerce, Inc.* 43,264 125,000 Compuware Corp.* 755,000 15,800 Concerto Software, Inc.* 189,284 188,286 Corio, Inc.* 515,904 21,000 Electronics for Imaging, Inc.* 546,420 72,000 Keynote Systems, Inc.* 856,800 219,100 Net Perceptions, Inc.* 87,640 33,799 NetManage, Inc.* 178,121 82,700 Peerless Systems Corp.* 206,750 48,100 Previo, Inc.* 7,696 13,336 Quovadx, Inc.* 65,346 35,000 Rainbow Technologies, Inc.* 394,100 110,000 Roxio, Inc.* 526,900 164,600 SEEC, Inc.* 57,610 75,000 Selectica, Inc.* 321,000 25,000 SonicWALL, Inc.* 195,000 30,000 Unisys Corp.* 445,500 328,500 VIA NET.WORKS, Inc.* 561,735 ------------ 9,804,318 ------------ STEEL: 0.71% 35,000 AK Steel Holding Corp.* 178,500 50,000 Ryerson Tull, Inc. 572,500 15,000 United States Steel Corp. 525,300 ------------ 1,276,300 ------------ TOBACCO: 0.96% 8,000 Altria Group, Inc. 435,360 60,000 Dimon, Inc. 405,000 8,000 R.J. Reynolds Tobacco Holdings, Inc. 465,200 12,000 UST, Inc. 428,280 ------------ 1,733,840 ------------ TOYS: 1.12% 52,000 Acclaim Entertainment, Inc.* 33,800 20,000 Hasbro, Inc. 425,600 22,500 Mattel, Inc. 433,575 45,000 THQ, Inc.* 760,950 35,000 The Topps Co.* 359,100 ------------ 2,013,025 ------------ TRANSPORTATION EQUIPMENT: 0.37% 2,225 Cummins, Inc. 108,891 18,000 Trinity Industries, Inc. 555,120 ------------ 664,011 ------------ TRUCKING: 0.34% 10,000 Arkansas Best Corp.* 313,900 2,750 SCS Transportation, Inc.* 48,345 7,000 Yellow Corp.* 253,190 ------------ 615,435 ------------ WIRELESS COMMUNICATIONS: 1.88% 115,000 Aether Systems, Inc.* 546,250 55,000 AT&T Wireless Services, Inc.* 439,450 37,000 Brightpoint, Inc.* 638,250 45,000 Corning, Inc.* 469,350 30,000 Nokia Corp. ADR# 510,000 93,333 Vyyo, Inc.* 796,130 ------------ 3,399,430 ------------ Total Common Stocks (Cost $139,212,495): $168,984,985 ------------ Shares/ Principal Short-Term Investments: 10.56% --------- ------------------------------- COMMERCIAL PAPER: 3.33% $3,000,000 American Express Commercial Paper 2,999,596 3,000,000 Citigroup Global Commercial Paper 2,999,693 ------------ 5,999,289 ------------ MONEY MARKET FUNDS: 7.23% 4,869,962 Dreyfus Treasury Prime Cash Management - Investor Class 4,869,962 8,167,934 SEI Daily Income Treasury Government - Class B 8,167,934 ------------ 13,037,896 ------------ Total Short-Term Investments (Cost $19,037,185) 19,037,185 ------------ Total Investments in Securities (Cost $158,249,680): 104.24% 188,022,170 Liabilities in Excess of Other Assets: (4.24%) (7,642,132) ------------ Net Assets: 100.00% $180,380,038 ------------ ------------ * Non-income producing security. # U.S. Security of a foreign issuer. See accompanying Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003 ASSETS Investments in securities, at value (cost $158,249,680) $188,022,170 Receivables: Fund shares sold 3,373,981 Dividends and interest 105,743 Prepaid expenses 18,736 ------------ Total assets 191,520,630 ------------ LIABILITIES Payables: Securities purchased 10,786,322 Fund shares redeemed 129,280 Due to advisor 129,231 Distribution fees 32,308 Administration fees 18,906 Custodian fees 5,031 Transfer agent fees 18,129 Accrued expenses 21,385 ------------ Total liabilities 11,140,592 ------------ NET ASSETS $180,380,038 ------------ ------------ NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE [$180,380,038/7,344,598 shares outstanding; unlimited number of shares (par value $.01) authorized] $ 24.56 ------------ ------------ COMPONENTS OF NET ASSETS Paid-in capital $152,579,042 Accumulated net realized loss on investments (1,971,494) Net unrealized appreciation on investments 29,772,490 ------------ Net assets $180,380,038 ------------ ------------ See accompanying Notes to Financial Statements. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 INVESTMENT INCOME Income Dividends (Net of foreign tax $1,346) $ 700,938 Interest 31,965 ----------- Total income 732,903 ----------- Expenses Advisory fees (Note 3) 699,272 Distribution fees (Note 4) 174,818 Administration fees (Note 3) 126,460 Transfer agent fees 102,428 Fund accounting fees 45,365 Professional fees 31,916 Registration expense 24,637 Reports to shareholders 17,992 Custody fees 14,666 Trustee fees 6,526 Miscellaneous 4,283 Insurance expense 3,838 Deferred organization expense 16 ----------- Total expenses 1,252,217 Add: expenses recouped by advisor (Note 3) 1,372 ----------- Net expenses 1,253,589 ----------- NET INVESTMENT LOSS (520,686) ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments 1,312,926 Net change in unrealized appreciation on investments 40,324,322 ----------- Net realized and unrealized gain on investments 41,637,248 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $41,116,562 ----------- ----------- See accompanying Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS Year Ended Year Ended December 31, 2003 December 31, 2002 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment loss $ (520,686) $ (825,043) Net realized gain/(loss) on investments 1,312,926 (3,387,477) Net change in unrealized appreciation/(depreciation) on investments 40,324,322 (18,654,754) ------------ ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 41,116,562 (22,867,274) DISTRIBUTIONS TO SHAREHOLDERS Net realized gain on security transactions -- (317,963) TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase in net assets derived from net change in outstanding shares (a) 90,791,683 24,413,698 ------------ ----------- TOTAL INCREASE IN NET ASSETS 131,908,245 1,228,461 NET ASSETS Beginning of year 48,471,793 47,243,332 ------------ ----------- END OF YEAR $180,380,038 $48,471,793 ------------ ----------- ------------ ----------- Accumulated net investment income -- --
(a) A summary of share transactions is as follows: Year Ended Year Ended December 31, 2003 December 31, 2002 ------------------------ ------------------------- Shares Paid in Capital Shares Paid in Capital ------ --------------- ------ --------------- Shares sold 5,061,932 $112,953,852 3,515,561 $66,821,346 Shares issued on reinvestment of distributions -- -- 22,541 309,074 Shares redeemed* (1,230,776) (22,162,169) (2,541,192) (42,716,722) ---------- ------------ ---------- ----------- Net increase 3,831,156 $ 90,791,683 996,910 $24,413,698 ---------- ------------ ---------- ----------- ---------- ------------ ---------- ----------- * Net of redemption fees of $ 131,470 $ 47,421 ------------ ----------- ------------ -----------
See accompanying Notes to Financial Statements. FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR Year Ended December 31, --------------------------------------------------------------------- 2003 2002 2001 2000 1999 ---- ---- ---- ---- ---- Net asset value, beginning of year $13.80 $18.77 $14.58 $14.55 $ 9.07 ------ ------ ------ ------ ------ Income from investment operations: Net investment gain/(loss) (0.07) (0.23) (0.13) (0.08) (0.21) Net realized and unrealized gain/(loss) on investments 10.81 (4.66) 4.47 1.18 5.69 ------ ------ ------ ------ ------ Total from investment operations 10.74 (4.89) 4.34 1.10 5.48 ------ ------ ------ ------ ------ Less distributions: From net realized gain on investments -- (0.09) (0.15) (1.07) -- ------ ------ ------ ------ ------ Redemption fees retained 0.02 0.01 -- -- -- ------ ------ ------ ------ ------ Net asset value, end of year $24.56 $13.80 $18.77 $14.58 $14.55 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Total return 77.97% (25.99%) 29.83% 6.91% 60.42% RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (thousands) $180,380 $48,472 $47,243 $19,826 $7,663 Ratio of expenses to average net assets: Before expense reimbursement 1.79% 2.25% 2.25% 2.25% 3.60% After expense reimbursement 1.79% 2.25% 2.25% 2.25% 2.20% Ratio of net investment loss to average net assets After expense reimbursement (0.74%) (1.34%) (1.15%) (0.79%) (1.32%) Portfolio turnover rate 13.64% 28.14% 18.11% 30.17% 19.00%
See accompanying Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS AT DECEMBER 31, 2003 NOTE 1 - ORGANIZATION The Al Frank Fund (the "Fund") is a series of shares of beneficial interest of Advisors Series Trust (the "Trust"), which is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund began operation on January 2, 1998. The investment objective of the Fund is to seek growth of capital. The Fund seeks to achieve its objective by investing in out of favor and undervalued equity securities. 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 using the NASDAQ Official Closing Price ("NOCP"). If the NOCP is not available, such securities 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. Deferred Organization Costs: The Fund has incurred expenses of $35,000 in connection with its organization. These costs have been deferred and are being amortized on a straight-line basis over a period of sixty months from the date of the Fund commenced investment operations. E. 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. F. Reclassification of Capital Accounts. The Fund accounts and reports for distributions to shareholders in accordance with the American Institute of Certified Public Accountant's Statement of Position 93-2: Determination, Disclosure, and Financial Statement Presentation of Income, Capital and Return of Capital Distributions by Investment Companies. For the year ended December 31, 2003, the Fund decreased accumulated net investment loss, paid in capital, and accumulated net realized loss by $520,686, $633,091, and $112,405, respectively due to certain permanent book and tax differences. Net assets were not affected by the change. NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES For year ended December 31, 2003, Al Frank Asset Management (the "Advisor") provided the Fund with investment management services under an Investment Advisory Agreement. The Advisor furnished all investment advice, office space, facilities, and provides most of the personnel needed by the Fund. As compensation for its services, the Advisor is entitled to a monthly fee at the annual rate of 1.00% based upon the average daily net assets of the Fund. For the year ended December 31, 2003, the Fund incurred $699,272 in Advisory Fees. The Fund is responsible for its own operating expenses. For the year ended December 31, 2003, the Advisor 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 2.25% of average net assets (the "expense cap"). Effective January 1, 2004, the expense cap was lowered to 1.98%. 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 year ended December 31, 2003, the Advisor recouped $1,372 of such expenses it previously reimbursed to the Fund. There were no expenses subject to recapture pursuant to the aforementioned conditions at December 31, 2003. U.S. Bancorp Fund Services, L.L.C. (the "Administrator") acts as the Fund's Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Fund's custodian, transfer agent and accountants; coordinates the preparation and payment of the Fund's expenses and reviews the Fund's expense accruals. For its services, the Administrator receives a monthly fee at the following annual rate: Fund asset level Fee rate ---------------- -------- Less than $15 million $30,000 $15 million to less than $50 million 0.20% of average daily net assets $50 million to less than $100 million 0.15% of average daily net assets $100 million to less than $150 million 0.10% of average daily net assets More than $150 million 0.05% of average daily net assets U.S. Bancorp Fund Services, LLC ("USBFS") also serves as the Fund Accountant and Transfer Agent to the Fund. U.S. Bank, N.A., an affiliate of USBFS, serves as the Fund's custodian. Quasar Distributors, LLC (the "Distributor") acts as the Fund's principal underwriter in a continuous public offering of the Fund's shares. Certain officers of the Fund are also officers of the Administrator and Distributor. 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 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 year ended December 31, 2003, the Fund paid the Distribution Coordinator $174,818. NOTE 5 - PURCHASES AND SALES OF SECURITIES For the year ended December 31, 2003, the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $88,918,159 and $9,445,573 respectively. NOTE 6 - INCOME TAXES Net investment income/(loss) and net realized gains/(losses) differ for financial statement and tax purposes due to differing treatments of wash sale losses deferred and losses realized subsequent to October 31 on the sale of securities. The tax character of distributions paid during years ended December 31, 2003 and 2002 were as follows: 2003 2002 ---- ---- Long-term capital gains -- $317,963 As of December 31, 2003, the components of accumulated earnings/(losses) on a tax basis were as follows: Cost of investments $158,388,840 ------------ Gross tax unrealized appreciation 36,551,702 Gross tax unrealized depreciation (6,918,372) ------------ Net tax unrealized appreciation $ 29,633,330 ------------ ------------ Undistributed ordinary income $ -- Undistributed long-term capital gain -- ------------ Total distributable earnings $ -- ------------ ------------ Other accumulated gains/losses $ (1,832,334) ------------ Total accumulated earnings/(losses) $ 27,800,996 ------------ ------------ The Fund had a capital loss carryforward of ($1,832,334) which expires in 2010. NOTE 7 - CHANGE OF AUDITORS On June 13, 2003, PricewaterhouseCoopers LLP ("PwC") resigned as the independent accountants for the Al Frank Fund (the "Fund"), a series of Advisors Series Trust (the "Company"). On June 13, 2003, the Company retained Tait Weller & Baker ("Tait") as the independent accountants for the Fund. The retention of Tait as the independent accountants of the Fund has been approved by the Company's Audit Committee and Board of Trustees. The reports of PwC on the financial statements of the Fund for the past four fiscal years, and the period January 2, 1998 through December 31, 1998 contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles In connection with its audits for the four recent fiscal years, and the period January 2, 1998 through December 31, 1998, and through June 13, 2003, there have been no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC would have caused them to make reference thereto in their report on the financial statements for such years. REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF ADVISORS SERIES TRUST MILWAUKEE, WI We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Al Frank Fund, a series of Advisors Series Trust, as of December 31, 2003, and the related statement of operations, the statement of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended December 31, 2002 and the financial highlights for each of the four years in the period then ended have been audited by other auditors, whose report dated February 21, 2003 expressed an unqualified opinion on such financial statement and financial highlights. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2003 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Al Frank Fund as of December 31, 2003, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. TAIT, WELLER & BAKER PHILADELPHIA, PENNSYLVANIA FEBRUARY 04, 2004 INFORMATION ABOUT TRUSTEES AND OFFICERS (UNAUDITED) This chart provides information about the Trustees and Officers who oversee your Fund. Officers elected by the Trustees manage the day-to-day operations of the Fund and execute policies formulated by the Trustees. INDEPENDENT TRUSTEES NAME, AGE ADDRESS NUMBER OF POSITION HELD WITH FUND TRUSTEE FUNDS IN COMPLEX PRINCIPAL OCCUPATION(S) AND OTHER OF FUND OVERSEEN DIRECTORSHIPS DURING PAST FIVE YEARS SINCE BY TRUSTEE ------------------------------------ ------- ---------------- Walter E. Auch, Born 1921 1997 1 2020 E. Financial Way Glendora, CA 91741 Trustee Management Consultant. Other Directorships: Nicholas-Applegate Funds, Citigroup, Pimco Advisors, LLP and Senele Group James Clayburn LaForce, Born 1927 2002 1 2020 E. Financial Way Glendora, CA 91741 Trustee Dean Emeritus, John E. Anderson Graduate School of Management, University of California, Los Angeles. Other Directorships: The Payden & Rygel Investment Group, The Metzler/Payden Investment Group, PIC Investment Trust, PIC Small Cap Portfolio, PIC Balanced Portfolio, PIC Growth Portfolio, PIC Mid Cap Portfolio, Black Rock Funds, Jacobs Engineering Arena Pharmaceuticals, Cancervax Donald E. O'Connor, Born 1936 1997 1 2020 E. Financial Way Glendora, CA 91741 Trustee Financial Consultant, formerly Executive Vice President and Chief Operating Officer of ICI Mutual Insurance Company (until January, 1997). Other Directorships: The Forward Funds George J. Rebhan, Born 1934 2002 1 2020 E. Financial Way Glendora, CA 91741 Trustee Retired; formerly President, Hotchkis and Wiley Funds (mutual funds) from 1985 to 1993. Trustee: E*Trade Funds George T. Wofford III, Born 1939 1997 1 2020 E. Financial Way Glendora, CA 91741 Trustee Senior Vice President, Information Services, Federal Home Loan Bank of San Francisco. Other Directorships: None INTERESTED TRUSTEES AND OFFICERS Eric M. Banhazl, Born 1957 1997 1 2020 E. Financial Way Glendora, CA 91741 Interested Trustee, President Senior Vice President, U.S. Bancorp Fund 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). Rodney A. DeWalt, Born 1967 2003 1 615 E. Michigan Street Milwaukee, WI 53202 Secretary Officer, U.S. Bancorp Fund Services, LLC (since January 2003). Douglas G. Hess, Born 1967 2003 1 615 E. Michigan Street Milwaukee, WI 53202 Treasurer Vice President Compliance and Administration, U.S. Bancorp Fund Services, LLC (since March 1997).
ADVISOR Al Frank Asset Management, Inc. 32392 Coast Highway, Suite 260 Laguna Beach, CA 92651 www.alfrankfund.com DISTRIBUTOR Quasar Distributors, LLC 615 East Michigan Street Milwaukee, WI 53202 TRANSFER AGENT U.S. Bancorp Fund Services, LLC 615 East Michigan Street Milwaukee, WI 53202 (888) 263-6443 CUSTODIAN U.S. Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 INDEPENDENT ACCOUNTANTS Tait, Weller & Baker 1818 Market Street, Suite 2400 Philadelphia, PA 19103 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker, LLP 55 Second Street, 24th Floor San Francisco, CA 94105 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 1-888-263-6443. 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. ITEM 2. CODE OF ETHICS. ----------------------- The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the covered period. The registrant has not granted any waivers from any provisions of the code of ethics during the covered period. A copy of the registrant's Code of Ethics is filed herewith. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. ---------------------------------------- The registrant's board of trustees has determined that it does not have an audit committee financial expert serving on its audit committee. At this time, the registrant believes that the experience provided by each member of the audit committee together offers the registrant adequate oversight for the registrant's level of financial complexity. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. ----------------------------------------------- The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. "Audit services" refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. "Tax services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no "other services" provided by the principal accountant were. The following table details the aggregate fees billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant. # of Hours spent FYE 12/31/2003 FYE 12/31/2002 in FYE 2003 --------------- --------------- ---------------- Audit Fees $13,000 $17,500 N/a Audit-Related Fees N/a N/a N/a Tax Fees $2,000 $3,800 N/a All Other Fees N/a N/a N/a The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant. All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant. The following table indicates the non-audit fees billed by the registrant's accountant for services to the registrant and to the registrant's investment adviser (and any other controlling entity, etc.--not sub-adviser) for the last two years. The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant's independence. Non-Audit Related Fees FYE 12/31/2003 FYE 12/31/2002 ---------------------- --------------- --------------- Registrant N/a N/a Registrant's Investment Adviser N/a N/a ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. ---------------------------------------------- Not applicable to open-end investment companies. ITEM 6. [RESERVED] ------------------ ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END ------------------------------------------------------------------------- MANAGEMENT INVESTMENT COMPANIES. -------------------------------- Not applicable to open-end investment companies. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT --------------------------------------------------------------------------- COMPANY AND AFFILIATED PURCHASES. --------------------------------- Not applicable to open-end investment companies. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ------------------------------------------------------------ Not applicable. ITEM 10. CONTROLS AND PROCEDURES. --------------------------------- (a) The Registrant's President/Chief Executive Officer and Treasurer/Chief Financial Officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act. (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the Registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. ----------------- (a) (1) Any code of ethics or amendment thereto. Filed herewith. (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Advisors Series Trust ----------------------------------------- By (Signature and Title) /s/ Eric M. Banhazl ------------------------------ Eric M. Banhazl, President Date 3/2/04 ---------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Eric M. Banhazl --------------------------- Eric M. Banhazl, President Date 3/2/04 ---------------------------------------- By (Signature and Title)* /s/ Douglas G. Hess -------------------------- Douglas G. Hess, Treasurer Date 3/3/04 ---------------------------------------- * Print the name and title of each signing officer under his or her signature.