N-CSRS 1 mmcsf-ncsrse.txt MCCARTHY MULTI-CAP STOCK FUND SEMIANNUAL 12-31-06 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 615 EAST MICHIGAN ST. MILWAUKEE, WI 53202 ------------------- (Name and address of agent for service) (414) 765-5340 -------------- Registrant's telephone number, including area code Date of fiscal year end: JUNE 30, 2007 ------------- Date of reporting period: DECEMBER 31, 2006 ----------------- ITEM 1. REPORT TO STOCKHOLDERS. ------------------------------ MCCARTHY MULTI-CAP STOCK FUND (MGAMX) (McCARTHY MULTI-CAP STOCK FUND LOGO) Semi-Annual Report For the Six Months Ended December 31, 2006 MCCARTHY MULTI-CAP STOCK FUND, A SERIES OF ADVISORS SERIES TRUST (MGAMX) SEMI-ANNUAL LETTER TO SHAREHOLDERS DECEMBER 31, 2006 Dear Fellow Shareholder: The McCarthy Multi-Cap Stock Fund's (the "Fund," ticker: MGAMX) performance for various periods ended December 31, 2006, and the performance for the Standard & Poor's 500 Index (the "Index" or the "S & P 500"), with dividends reinvested, are shown below: MCCARTHY MULTI-CAP STANDARD & POOR'S MGAMX TIME PERIOD STOCK FUND 500 INDEX VERSUS INDEX ----------- ---------- ----------------- ------------ Six months 8.25% 12.74% -4.49% One year 7.14% 15.79% -8.65% Three years annualized 8.75% 10.44% -1.69% Five years annualized 4.96% 6.19% -1.23% Annualized since 8/6/01 inception date 5.32% 4.96% +0.36% Cumulative since 8/6/01 inception date 32.33% 29.89% +2.44%
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE OF THE FUND MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END MAY BE OBTAINED BY VISITING WWW.MGAMX.COM. The Fund's semi-annual performance was a microcosm of the Fund's calendar-year 2006 performance. The stocks favored by our investment discipline achieved price gains, but did not keep pace with the Standard & Poor's 500 for the year. Whyo We believe the issue in 2006 was an investment style issue that occurs infrequently. The Fund's investment strategy seeks companies that generate high cash flow returns on invested capital (CFROC), a "growth" characteristic, at a discount to our estimate of value, a "value" characteristic. Companies considered for investment (1) will exhibit evidence that shareholder value will grow in the future, (2) will be priced to provide compelling future investment returns and (3) will have skilled management teams whose financial interests are, in our judgment, properly aligned with shareholders. These high CFROC businesses typically exhibit competitive advantages, have solid balance sheets and generate ample free cash flow that can be used to benefit shareholders. Our internal data shows that many of these high CFROC businesses have historically provided market-beating performance when held for a full stock market cycle. 3M Company (MMM) is a Fund holding and an example of a high-quality, high CFROC business that we believe presents compelling investment value. MMM provided a total return, price gain plus dividends, of 2.99% in 2006 and materially under- performed the 15.80% total return of the Index. MMM is an example of a stock that is consistent with the Fund's investment discipline but was not embraced by the stock market in 2006. We remain optimistic that the increasing values we observe in the businesses owned by the Fund will soon be matched by higher stock market prices. TOP FIVE INDUSTRIES % ------------------- --- Insurance 9.2% Pharmaceuticals 8.4% Oil & Gas 8.1% Software 7.6% Commercial Services & Supplies 7.4% ----- Total in Top Five Industries 40.7% TEN LARGEST HOLDINGS % -------------------- --- Wm. Wrigley Jr. Company 4.5% Berkshire Hathaway Inc Cl B 4.2% Microsoft Corp 3.6% Bed, Bath & Beyond, Inc. 3.2% Pfizer, Inc. 3.2% Johnson & Johnson, Inc. 3.1% ConocoPhillips 3.0% Tyco International Ltd. 2.7% Wal-Mart Stores, Inc. 2.7% Devon Energy Corporation 2.5% ----- Total of Ten Largest Holdings 32.7% FIVE FUND HOLDINGS WITH THE LARGEST GAINS, IN DOLLARS, FOR THE PAST SIX MONTHS: o Microsoft Corp. (MSFT) o Berkshire Hathaway, Inc. Class B (BRK/B) o Wm. Wrigley Jr. Company (WWY) o Compass Minerals International (CMP) o Packeteer, Inc. (PKTR) FIVE FUND HOLDINGS WITH THE LARGEST LOSSES, IN DOLLARS, FOR THE PAST SIX MONTHS: o Newfield Exploration Co. (NFX) o 3Com Corporation (COMS) o Novell, Inc. (NOVL) o Odyssey Healthcare, Inc. (ODSY) o Corinthian Colleges, Inc. (COCO) Thank you for being our partners in the McCarthy Multi-Cap Stock Fund! The officers, employees, and affiliates of your Fund's advisor have a substantial investment in the Fund. We believe our investment in the Fund properly aligns our interests with yours, now and in the future. Sincerely, MCCARTHY GROUP ADVISORS, LLC Richard L. Jarvis Portfolio Manager and Chief Investment Officer PLEASE REFER TO THE FOLLOWING PAGE FOR IMPORTANT DISCLOSURE INFORMATION. Opinions expressed are those of Richard L. Jarvis and are subject to change, are not guaranteed and should not be considered investment advice. THE FUND INVESTS IN SMALL- AND MID-CAP COMPANIES, WHICH INVOLVE ADDITIONAL RISKS SUCH AS LIMITED LIQUIDITY AND GREATER VOLATILITY. The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. Indexes are not available for direct investment and do not incur expenses. Fund sector allocations and portfolio holdings are subject to change and are not recommendations to buy or sell any security. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The information contained in this report is authorized for use when preceded or accompanied by a prospectus for the McCarthy Multi-Cap Stock Fund, which includes more complete information on the charges and expenses related to an ongoing investment in the Fund. Please read the prospectus carefully before you invest or send money. The Fund is distributed by Quasar Distributors, LLC. (02/07) ALLOCATION OF PORTFOLIO ASSETS AT DECEMBER 31, 2006 (UNAUDITED) Consumer Discretionary - 11% 11% Consumer Staples - 11% 11% Energy - 8% 8% Financials - 19% 19% Health Care - 14% 14% Industrials - 13% 13% Information Technology - 18% 18% Materials - 3% 3% Utilities - 1% 1% Options - 0% 0% Short-Term Investments - 2% 2% SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2006 (UNAUDITED) SHARES COMMON STOCKS - 97.43% VALUE ------ ---------------------- ----- AEROSPACE & DEFENSE - 0.86% 21,835 Innovative Solutions & Support, Inc.* $ 371,850 ----------- BEVERAGES - 1.91% 13,196 PepsiCo, Inc. 825,410 ----------- CAPITAL MARKETS - 1.42% 18,120 Federated Investors, Inc. - Class B 612,094 ----------- COMMERCIAL BANKS - 1.85% 10,200 National City Corp. 372,912 12,000 Wells Fargo & Co. 426,720 ----------- 799,632 ----------- COMMERCIAL SERVICES & SUPPLIES - 7.36% 18,635 Corinthian Colleges, Inc.* 253,995 15,755 FirstService Corp.*# 363,940 14,300 Gevity HR, Inc. 338,767 16,018 Jackson Hewitt Tax Service, Inc. 544,131 9,534 Republic Services, Inc.+ 387,748 5,000 Strayer Education, Inc. 530,250 12,250 Waste Connections, Inc.* 508,988 6,930 Waste Management, Inc. 254,816 ----------- 3,182,635 ----------- COMMUNICATIONS EQUIPMENT - 2.16% 97,000 3Com Corp.* 398,670 39,456 Packeteer, Inc.* 536,602 ----------- 935,272 ----------- CONSTRUCTION MATERIALS - 0.38% 3,770 Eagle Materials, Inc. 162,977 ----------- CONSUMER FINANCE - 5.36% 15,200 American Express Co. 922,184 22,141 MoneyGram International, Inc. 694,342 14,350 SLM Corp. 699,849 ----------- 2,316,375 ----------- FOOD & STAPLES RETAILING - 2.67% 25,000 Wal-Mart Stores, Inc. 1,154,500 ----------- FOOD PRODUCTS - 6.21% 16,465 Lancaster Colony Corp. 729,564 37,810 Wm. Wrigley Jr. Co. 1,955,533 ----------- 2,685,097 ----------- HEALTH CARE EQUIPMENT & SUPPLIES - 1.06% 10,495 Conmed Corp.* 242,645 4,810 Haemonetics Corp.* 216,546 ----------- 459,191 ----------- HEALTH CARE PROVIDERS & SERVICES - 6.72% 9,100 The Advisory Board Co.* 487,214 14,486 Caremark Rx, Inc. 827,296 14,183 Laboratory Corporation of America Holdings*+ 1,042,025 18,478 Odyssey HealthCare, Inc.* 245,018 48,424 Stewart Enterprises, Inc. - Class A 302,650 ----------- 2,904,203 ----------- HOTELS, RESTAURANTS & LEISURE - 0.77% 6,500 International Speedway Corp. - Class A 331,760 ----------- INDUSTRIAL CONGLOMERATES - 5.05% 13,200 3M Co. 1,028,676 38,000 Tyco International Ltd.# 1,155,200 ----------- 2,183,876 ----------- INSURANCE - 9.20% 12,730 American International Group, Inc. 912,232 494 Berkshire Hathaway Inc. - Class B* 1,811,004 3,108 Hanover Insurance Group, Inc. 151,670 9,415 Horace Mann Educators Corp. 190,183 23,000 Old Republic International Corp. 535,440 6,878 Triad Guaranty, Inc.* 377,396 ----------- 3,977,925 ----------- INTERNET & CATALOG RETAIL - 0.98% 19,669 Liberty Media Holding Corp. - Interactive - Class A* 424,260 ----------- IT SERVICES - 5.64% 21,199 Convergys Corp.* 504,112 30,748 First Data Corp. 784,689 13,300 Hewitt Associates, Inc. - Class A* 342,475 35,928 Western Union Co. 805,506 ----------- 2,436,782 ----------- MACHINERY - 1.92% 12,230 Kaydon Corp. 486,020 7,400 The Toro Co. 345,062 ----------- 831,082 ----------- MEDIA - 2.18% 6,720 John Wiley & Sons, Inc. - Class A 258,518 6,964 Liberty Media Holding Corp. - Capital - Class A* 682,333 ----------- 940,851 ----------- METALS & MINING - 2.31% 31,650 Compass Minerals International, Inc. 998,874 ----------- MULTI-UTILITIES & UNREGULATED POWER - 0.95% 8,740 Energen Corp. 410,256 ----------- OIL & GAS - 8.11% 12,000 Anadarko Petroleum Corp. 522,240 8,300 Apache Corp. 552,033 18,300 ConocoPhillips 1,316,685 16,206 Devon Energy Corp. 1,087,099 594 Newfield Exploration Co.* 27,294 ----------- 3,505,351 ----------- PHARMACEUTICALS - 8.37% 20,346 Johnson & Johnson 1,343,243 52,700 Pfizer, Inc. 1,364,930 16,580 Schering-Plough Corp. 391,951 30,040 Valeant Pharmaceuticals International 517,890 ----------- 3,618,014 ----------- REAL ESTATE MANAGEMENT & DEVELOPMENT - 1.41% 20,100 Realogy Corp.* 609,432 ----------- SOFTWARE - 7.65% 12,830 Fair Isaac Corp. 521,540 12,730 Intuit, Inc.* 388,392 39,121 Jack Henry & Associates, Inc. 837,189 52,200 Microsoft Corp. 1,558,692 ----------- 3,305,813 ----------- SPECIALTY RETAIL - 3.20% 36,284 Bed Bath & Beyond, Inc.* 1,382,420 ----------- THRIFTS & MORTGAGE FINANCE - 1.73% 16,439 Washington Mutual, Inc. 747,810 ----------- TOTAL COMMON STOCKS (Cost $34,217,822) 42,113,742 ----------- CONTRACTS PURCHASED PUT OPTIONS - 0.04% --------- ----------------------------- 210 S&P 500 Index Expiring January, 2007, Exercise Price: $1,325.00 (Cost $154,140) 18,900 ----------- SHARES SHORT-TERM INVESTMENTS - 2.02% ------ ------------------------------ 874,960 Federated Cash Trust Treasury Money Market Fund (Cost $874,960) 874,960 ----------- TOTAL INVESTMENTS IN SECURITIES (Cost $35,246,922) - 99.49% 43,007,602 Call Options Written - (0.33%) (141,010) Assets in Excess of Other Liabilities - 0.84% 361,343 ----------- NET ASSETS - 100.00% $43,227,935 ----------- ----------- * Non-income producing security. # U.S. traded security of a foreign issuer. + Security is subject to a written call option. The accompanying notes are an integral part of these financial statements. SCHEDULE OF CALL OPTIONS WRITTEN AT DECEMBER 31, 2006 (UNAUDITED) CONTRACTS VALUE --------- ----- 96 Laboratory Corporation of America Holdings Expiring January, 2007, Exercise Price: $60.00 $130,560 95 Republic Services, Inc. Expiring January, 2007, Exercise Price: $40.00 10,450 -------- TOTAL CALL OPTIONS WRITTEN (Premiums received $97,644) $141,010 -------- -------- The accompanying notes are an integral part of these financial statements. STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2006 (UNAUDITED) ASSETS Investments, at value (cost $35,246,922) $43,007,602 Receivables: Securities sold 673,706 Fund shares issued 13,846 Dividends and interest 26,198 Prepaid expenses 6,024 ----------- Total Assets 43,727,376 ----------- LIABILITIES Payables: Fund shares redeemed 300,000 Call options written, at value (proceeds $97,644) 141,010 Advisory fees 26,980 Professional fees 8,589 Printing and mailing fees 6,168 Fund accounting fees 5,496 Administration fees 4,420 Transfer agent fees and expenses 2,970 Custodian fees 1,803 Chief Compliance Officer fee 1,205 Accrued expenses 800 ----------- Total Liabilities 499,441 ----------- NET ASSETS $43,227,935 ----------- ----------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE [$43,227,935 / 3,620,691 shares outstanding; unlimited number of shares (par value $0.01) authorized] $11.94 ------ ------ COMPONENTS OF NET ASSETS Paid-in capital $34,779,280 Undistributed net investment income 3,971 Accumulated net realized gain on investments and option contracts written 727,370 Net unrealized appreciation of: Investments 7,673,948 Option contracts written 43,366 ----------- Net Assets $43,227,935 ----------- ----------- The accompanying notes are an integral part of these financial statements. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2006 (UNAUDITED) INVESTMENT INCOME Dividend $ 284,465 Interest 23,087 ---------- Total income 307,552 ---------- EXPENSES Advisory fees (Note 3) 139,841 Administration fees (Note 3) 24,943 Fund accounting fees (Note 3) 15,543 Professional fees 14,566 Transfer agent fees and expenses (Note 3) 12,856 Custody fees (Note 3) 6,938 Registration fees 4,256 Chief Compliance Officer fee (Note 3) 3,705 Trustee fees 3,603 Insurance 3,191 Shareholder reporting 2,730 Miscellaneous fees 1,768 ---------- Total expenses 233,940 Add: advisory fee recoupment (Note 3) 5,084 ---------- Net expenses 239,024 ---------- NET INVESTMENT INCOME 68,528 ---------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND OPTION CONTRACTS WRITTEN Net realized gain on investments 812,915 ---------- Net change in unrealized appreciation on: Investments 2,400,674 Option contracts written 43,366 ---------- Net unrealized appreciation 2,444,040 ---------- Net realized and unrealized gain on investments and option contracts written 3,256,955 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,325,483 ---------- ---------- The accompanying notes are an integral part of these financial statements. STATEMENTS OF CHANGES IN NET ASSETS SIX MONTHS ENDED DECEMBER 31, 2006 YEAR ENDED (UNAUDITED) JUNE 30, 2006 ----------------- ------------- INCREASE/(DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income/(loss) $ 68,528 $ (20,394) Net realized gain on investments and option contracts written 812,915 1,810,008 Net change in unrealized appreciation on investments and option contracts written 2,444,040 320,804 ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,325,483 2,110,418 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income (64,557) -- From net realized gain on investments and option contracts written (1,892,420) (1,974,770) ----------- ----------- TOTAL DECREASE IN NET ASSETS RESULTING FROM DISTRIBUTIONS (1,956,977) (1,974,770) ----------- ----------- CAPITAL SHARE TRANSACTIONS Net increase in net assets derived from net change in outstanding shares (a) 2,223,246 4,454,719 ----------- ----------- TOTAL INCREASE IN NET ASSETS 3,591,752 4,590,367 ----------- ----------- NET ASSETS Beginning of period $39,636,183 35,045,816 ----------- ----------- End of period $43,227,935 $39,636,183 ----------- ----------- ----------- ----------- Includes undistributed net investment income of: $ 3,971 $ -- ----------- ----------- ----------- -----------
(a) A summary of shares transactions is as follows: SIX MONTHS ENDED 12/31/2006 YEAR ENDED (UNAUDITED) JUNE 30, 2006 ------------------------ ------------------------ SHARES PAID-IN CAPITAL SHARES PAID-IN CAPITAL ------ --------------- ------ --------------- Shares sold 221,314 $2,634,287 1,036,976 $12,090,448 Shares issued in reinvestment of distributions 160,567 1,925,198 165,517 1,936,553 Shares redeemed (195,428) (2,336,239) (826,348) (9,572,282) -------- ---------- --------- ----------- Net increase 186,453 $2,223,246 376,145 $ 4,454,719 -------- ---------- --------- ----------- -------- ---------- --------- -----------
The accompanying notes are an integral part of these financial statements. FINANCIAL HIGHLIGHTS For a fund share outstanding throughout the period SIX MONTHS ENDED YEAR YEAR YEAR YEAR PERIOD DECEMBER 31, ENDED ENDED ENDED ENDED ENDED 2006 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, (UNAUDITED) 2006 2005 2004 2003 2002* ----------- -------- -------- -------- -------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $11.54 $11.46 $10.54 $ 8.77 $ 8.13 $10.00 ------ ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS: Net investment income / (loss) 0.02 (0.01) (0.03) (0.06) (0.03) 0.02 Net realized and unrealized gain on investments and option contracts written 0.95 0.73 0.95 1.83 0.67 (1.85) ------ ------ ------ ------ ------ ------ Total from investment operations 0.97 0.72 0.92 1.77 0.64 (1.83) ------ ------ ------ ------ ------ ------ LESS DISTRIBUTIONS TO SHAREHOLDERS: From net investment income (0.02) -- -- -- -- (0.03) From net realized gain on investments (0.55) (0.64) -- -- -- (0.01) ------ ------ ------ ------ ------ ------ Total distributions (0.57) (0.64) -- -- -- (0.04) ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.94 $11.54 $11.46 $10.54 $ 8.77 $ 8.13 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ TOTAL RETURN 8.25%1 6.18% 8.73% 20.18% 7.87% (18.40)%1 SUPPLEMENTAL DATA AND RATIOS: Net assets, end of period (in millions) $43.2 $39.6 $35.0 $31.2 $26.1 $26.3 Ratio of net expenses to average net assets: Before expense reimbursement / recoupment 1.13%2 1.43% 1.47% 1.51% 1.58% 1.85%2 After expense reimbursement / recoupment 1.15%2 1.22%3 1.25% 1.25% 1.25% 1.25%2 Ratio of net investment income / (loss) to average net assets: Before expense reimbursement / recoupment 0.35%2 (0.26%) (0.53%) (0.84%) (0.70%) (0.41)%2 After expense reimbursement / recoupment 0.33%2 (0.05%)3 (0.31%) (0.58%) (0.37%) 0.19%2 Portfolio turnover rate 19%1 75% 61% 51% 58% 46%1
* Commenced operations on August 6, 2001. 1 Not annualized. 2 Annualized. 3 Effective April 6, 2006, the Advisor contractually agreed to lower the net annual operating expense limit to 1.15%. The accompanying notes are an integral part of these financial statements. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 (UNAUDITED) NOTE 1 - ORGANIZATION The McCarthy Multi-Cap Stock Fund (the "Fund") is a series of Advisor 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 August 6, 2001. The investment objective of the Fund is to seek long-term growth of capital. The Fund pursues this objective by investing primarily in 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. Securities Valuation. 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 primarily traded in the NASDAQ Global 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 Global Market System shall be valued at the most recent trade price. Securities for which quotations are not readily available, or if the closing price does not represent fair market value, are valued at their respective fair values as determined in good faith by the Board of Trustees. These procedures consider many factors, including the type of security, size of holding, trading volume, and news events. Short-term investments are valued at amortized cost which approximates market value. Investments in other mutual funds are valued at their net asset value. U.S. Government securities with less than 60 days remaining to maturity when acquired by the Fund are valued on an amortized cost basis. U.S. Government securities with more than 60 days remaining to maturity are valued at their current market value (using the mean between the bid and asked price) until the 60th day prior to maturity, and are then valued at amortized cost based upon the value on such date unless the Board of Trustees determines during such 60 day period that amortized cost does not represent fair 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 calculated on the basis of first in, first out. 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 differ 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. Share Valuation. The net asset value ("NAV") per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent. A Fund's shares will not be priced on the days on which the NYSE is closed for trading. 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 and disclosure of contingent 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. 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 a 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. G. REITs. The Fund has made certain investments in real estate investment trusts ("REITs") which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REIT's taxable earnings and profits resulting in the excess portion of such dividends being designated as a return of capital. The Fund intends to include the gross dividends from such REITs in its annual distributions to its shareholders and, accordingly, a portion of the Fund's distributions may also be designated as a return of capital. H. Reclassification of Capital Accounts. Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. I. New Accounting Pronouncements. On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more- likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Application of FIN 48 is required as of the date of the last Net Asset Value ("NAV") calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact on the financial statements has not yet been determined. In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement" ("SFAS 157"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Fund believes the adoption of SFAS 157 will have no material impact on their financial statements. NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS McCarthy Group Advisors, L.L.C. (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 an annual rate of 0.75% of the first $20 million of the Fund's average daily net assets, and 0.60% of the Fund's average daily net assets over $20 million. For the six months ended December 31, 2006, the Fund incurred $139,841 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 total operating expenses, for a one year period so that its ratio of expenses to average net assets will not exceed 1.15%. Any such reductions made by the Advisor in its fees or payment of expenses which are the Fund's obligation are subject to reimbursement by the Fund to the Advisor, if so requested by the Advisor in subsequent fiscal years, provided the aggregate amount of the Fund's current operation for such fiscal year does not exceed the applicable limitation of the Fund's expenses. Under the expense limitation agreement, the Advisor may recoup reimbursements only for fee reductions and expense payments made in the previous three fiscal years. For the six months ended December 31, 2006, the Advisor recouped expenses of $5,084. The Fund must pay its current ordinary operating expenses before the Advisor is entitled to any reimbursement of fees and/or expenses. Cumulative expenses subject to recapture amount to $224,693 at December 31, 2006. 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 as follows: YEAR AMOUNT ---- ------ 2007 $ 70,953 2008 74,413 2009 79,327 -------- $224,693 -------- -------- U.S. Bancorp Fund Services, LLC, (the "Administrator") acts as administrator for the Fund. 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. U.S. Bancorp Fund Services, LLC ("USBFS") also serves as the fund accountant for the Fund. U.S. Bank, N.A., an affiliate of USBFS, serves as custodian to the Fund. For the six months ended December 31, 2006, the Fund incurred the following expenses for administration, fund accounting, and custody: Administration $24,943 Fund accounting 15,543 Custody 6,938 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 also employees of the Administrator. For the six months ended December 31, 2006, the Fund was allocated $3,705 of the Chief Compliance Officer fee. NOTE 4 - OPTION CONTRACTS WRITTEN The number of option contracts written and the premiums received by the Fund during the six months ended December 31, 2006, were as follows: NUMBER PREMIUMS OF CONTRACTS RECEIVED ------------ -------- Options outstanding, beginning of period -- $ -- Options written 191 97,644 --- ------- Options outstanding, end of period 191 $97,644 --- ------- --- ------- NOTE 5 - PURCHASES AND SALES OF SECURITIES For the six months ended December 31, 2006, the cost of purchases and proceeds from sales of securities, excluding short-term securities, were $7,508,143 and $7,560,469, respectively. NOTE 6 - LINE OF CREDIT The Fund has a line of credit in the amount of $11,750,000. This line of credit is intended to provide short-term financing, if necessary, subject to certain restrictions, in connection with shareholder redemptions. The credit facility is with the Fund's custodian, U.S. Bank, N.A. During the six months ended December 31, 2006, the Fund did not draw upon the line of credit. NOTE 7 - INCOME TAXES Net investment income/(loss) and net realized gains/(losses) differ for financial statement and tax purposes due to differing treatments of distributions received from Real Estate Investment Trusts. The tax character of distributions paid during the six months ended December 31, 2006 and the year ended June 30, 2006, the Fund's most recently completed fiscal year end, were as follows: 2007 2006 ---- ---- Ordinary income $ 141,747 $ -- Long-term capital gains $1,815,230 $1,974,770 Ordinary income distributions may include dividends paid from short-term capital gains. As of June 30, 2006, the Fund's most recently completed fiscal year end, the components of accumulated earnings/(losses) on a tax basis were as follows: Cost of investments (a) $38,817,625 ----------- ----------- Gross tax unrealized appreciation $ 5,560,754 Gross tax unrealized depreciation (291,831) ----------- Net tax unrealized appreciation $ 5,268,923 ----------- ----------- Undistributed ordinary income $ -- Undistributed long-term capital gain 1,811,226 ----------- Total distributable earnings $ 1,811,226 ----------- ----------- Other accumulated gains/losses $ -- ----------- Total accumulated earnings/(losses) $ 7,080,149 ----------- ----------- (a) Represents cost for federal income tax purposes and differs from the cost for financial purposes due to wash sales. EXPENSE EXAMPLE AT DECEMBER 31, 2006 (UNAUDITED) As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service fees; and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (7/1/06 - 12/31/06). ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses, with actual net expenses being limited to 1.15%. Although the Fund charges no sales load or transaction fees, you will be assessed fees for outgoing wire transfers, returned checks, and stop payment orders at prevailing rates charged by Gemini Fund Services, LLC, the Fund's transfer agent. The example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* 7/1/06 12/31/06 7/1/06 - 12/31/06 ------------- ------------- ------------------- Actual $1,000.00 $1,082.50 $6.04 Hypothetical (5% return $1,000.00 $1,019.41 $5.85 before expenses) * Expenses are equal to the Fund's annualized expense ratio of 1.15%, multiplied by the average account value over the period, multiplied by 184 (days in most recent fiscal half-year)/365 days to reflect the one- half year expense. NOTICE TO SHAREHOLDERS AT DECEMBER 31, 2006 (UNAUDITED) HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICIES A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling (866) 811-0228 or on the SEC's website at http://www.sec.gov. HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING RECORDS FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2006 Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2006 is available without charge, upon request, by calling (866) 811-0228. Furthermore, you can obtain the Fund's proxy voting records on the SEC's website at http://www.sec.gov. ------------------ QUARTERLY FILINGS ON FORM N-Q The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is available on the SEC's website at http://www.sec.gov. The Fund's Form N-Q may be ------------------ reviewed and copied at the SEC's Public Reference Room in Washington, DC and information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Information included in the Fund's Form N-Q is also available by calling (866) 811-0228. BOARD REVIEW OF ADVISORY AGREEMENT At a meeting held on December 12, 2006, the Board, including the Independent Trustees, considered and approved the continuance of the Advisory Agreement for an additional one-year term. Prior to the meeting, the Independent Trustees had requested detailed information from the Advisor and the Administrator regarding the Fund. This information, together with the information provided to the Independent Trustees since the Fund's inception, formed the primary (but not exclusive) basis for the Board's determinations. Below is a summary of certain factors considered by the Board and the conclusions thereto that formed the basis for the Board approving the continuance of the Advisory Agreement: 1. THE NATURE, EXTENT AND QUALITY OF THE SERVICES PROVIDED AND TO BE PROVIDED BY THE ADVISOR UNDER THE ADVISORY AGREEMENT. The Board considered the Advisor's specific responsibilities in all aspects of the day-to-day investment management of the Fund. The Board considered the qualifications, experience and responsibilities of the portfolio managers, as well as the responsibilities of the key personnel at the Advisor involved in the day-to-day activities of the Fund, including administration, marketing and compliance. The Board noted the Advisor's commitment to responsible Fund growth. The Board also considered the resources and compliance structure of the Advisor, including information regarding its compliance program, its chief compliance officer and the Advisor's compliance record, and the Advisor's business continuity plan. The Board also considered the relationship between the Advisor and the Board, as well as the Board's knowledge of the Advisor's operations, and noted that during the course of the prior year the Board had met with the Advisor to discuss various marketing and compliance topics. The Board concluded that the Advisor had the quality and depth of personnel, resources, investment methods and compliance policies and procedures essential to performing its obligations under the Advisory Agreement and that the nature, overall quality, cost and extent of such investment advisory services were satisfactory and reliable. 2. THE FUND'S HISTORICAL YEAR-TO-DATE PERFORMANCE AND THE OVERALL PERFORMANCE OF THE ADVISOR. In assessing the quality of the portfolio management services delivered by the Advisor, the Trustees reviewed the short-term and long-term performance of the Fund on both an absolute basis and in comparison to its peer group, as classified by Lipper, Inc., and the S&P 500 Index and the Lipper Multi-Cap Core Index (the "Benchmark Indices"). In reviewing performance, the Board took into account the Fund's limited period of operations (commencement of operations in 2001) and the long-term value oriented nature of the Advisor's investment approach. The Board noted that the Fund's year-to-date performance as of October 31, 2006 was below the median of its peer group and trailed its Benchmark Indices. While the Fund's performance record was below the median of its peer group and the Lipper Multi-Cap Core Index, the performance had outperformed the S&P 500 Index for the five-year period ended October 31, 2006. The Trustees also noted that during the course of the prior year they had met with the Advisor in person to discuss various performance topics and had been satisfied with the Advisor's reports. The Board concluded that the Advisor's performance overall was satisfactory under current market conditions. 3. THE COSTS OF THE SERVICES TO BE PROVIDED BY THE ADVISOR AND THE STRUCTURE OF THE ADVISOR'S FEES UNDER THE ADVISORY AGREEMENT. In considering the advisory fee and total fees and expenses of the Fund, the Board reviewed and compared the Fund's fees and expenses to those funds in its peer group, as well as the fees and expenses for similar types of accounts managed by the Advisor. The Board noted that the Advisor had agreed to maintain an annual expense ratio of 1.15% (which was reduced from 1.25% during the fiscal year). The Board further noted that the Fund had consistently and clearly disclosed to shareholders the expense ratio that shareholders should expect to experience and the Advisor had honored its agreement to cap expenses. The Trustees considered the fact that the Advisor had made great efforts to reduce the Fund's expense ratio, including a recent reduction in the Advisor's management fee from 0.95% of the Fund's average daily net assets to 0.75% on the first $20 million of the Fund's average daily net assets and 0.60% on average daily net assets over $20 million. The Trustees noted that the Fund's total expense ratio was below its peer group median and that the expense structure was in line with the fees charged by the Advisor to its other investment management clients. After taking into account this information and considering all waivers and reimbursements, the Board concluded that the fee paid to the Advisor was fair and reasonable. 4. ECONOMIES OF SCALE. The Board also considered whether the Fund was experiencing economies of scale and concluded that there were limited economies of scale at current asset levels and that the Advisor's fee reduction effectively shared these economies. The Board considered that the Fund would realize economies of scale as Fund assets continued to grow even though certain Fund expenses would increase with asset growth and assets had to grow beyond the point where subsidization from the Advisor was no longer necessary and/or had been recaptured. The Board also noted that the Fund had instituted advisory fee breakpoints, which would help the Fund achieve economies of scale. 5. THE PROFITS TO BE REALIZED BY THE ADVISOR AND ITS AFFILIATES FROM THEIR RELATIONSHIP WITH THE FUND. The Board reviewed the Advisor's financial information and took into account both the direct and indirect benefits to the Advisor from advising the Fund. The Board considered that the Advisor benefits from positive reputational value in advising the Fund. The Board noted that the Advisor had subsidized and was continuing to subsidize a portion of the Fund's operating expenses. The Board also considered the Advisor's estimate of the asset level at which the Fund would reach a break even level by covering allocated overhead costs. After its review, the Board determined that there was currently some profitability to the Advisor from the Advisory Agreement but it did not consider profits to be excessive. More importantly, the Board considered the financial soundness of the Advisor from the perspective of evaluating the Advisor's ability to continue to subsidize the Fund until it reached a point where it could cover allocated overhead costs. The Board concluded that the Advisor had adequate resources to adequately support the Fund. No single factor was determinative of the Board's decision to approve the continuance of the Advisory Agreement; rather, the Trustees based their determination on the total mix of information available to them. Based on a consideration of all the factors in their totality, the Trustees determined that the advisory arrangement with the Advisor, including the advisory fee, was fair and reasonable to the Fund, and that the Fund's shareholders were receiving reasonable value in return for the advisory fees paid. The Board (including a majority of the Independent Trustees) therefore determined that the continuance of the Advisory Agreement was in the best interests of the Fund and its shareholders. ADVISOR McCarthy Group Advisors, LLC 1125 South 103rd Street, Suite 250 Omaha, Nebraska 68124-6019 DISTRIBUTOR Quasar Distributor, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202 CUSTODIAN U.S. Bank, N.A. 1555 North RiverCenter Drive, Suite 302 Milwaukee, Wisconsin 53212 TRANSFER AGENT Gemini Fund Services, LLC 4020 South 147th Street, Suite 2 Omaha, Nebraska 68137 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Tait, Weller & Baker LLP 1818 Market Street, Suite 2400 Philadelphia, Pennsylvania 19103 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker LLP 55 Second Street, 24th Floor San Francisco, California 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. 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. ----------------------- Not applicable for semi-annual reports. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. ---------------------------------------- Not applicable for semi-annual reports. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. ----------------------------------------------- Not applicable for semi-annual reports. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. ---------------------------------------------- Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934). ITEM 6. SCHEDULE OF INVESTMENTS. -------------------------------- Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END ------------------------------------------------------------------------- MANAGEMENT INVESTMENT COMPANIES. -------------------------------- Not applicable to open-end investment companies. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. ------------------------------------------------------------------------- Not applicable to open-end investment companies. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT --------------------------------------------------------------------------- COMPANY AND AFFILIATED PURCHASERS. ---------------------------------- Not applicable to open-end investment companies. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ------------------------------------------------------------ The registrant's independent trustees serve as its nominating committee, however, they do not make use of a nominating committee charter. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of trustees. ITEM 11. CONTROLS AND PROCEDURES. --------------------------------- (a) The Registrant's President/Chief Executive Officer and Treasurer/Chief Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant's service provider. (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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. ----------------- (a) (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable. (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies. (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 3/8/07 -------------------------------------------------- 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 3/8/07 ---------------------------------------------------- By (Signature and Title)* /s/ Douglas G. Hess -------------------------- Douglas G. Hess, Treasurer Date 3/8/07 ---------------------------------------------------- * Print the name and title of each signing officer under his or her signature.