phocas_ref-ncsra.htm

N-CSR 1 phocas_ref-ncsra.htm PHOCAS REAL ESTATE FUND ANNUAL REPORT 12-31-11 phocas_ref-ncsra.htm

As filed with the Securities and Exchange Commission on March 6, 2012

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 Street

Milwaukee, WI 53202

(Address of principal executive offices) (Zip code)

Douglas G. Hess, President

Advisors Series Trust

c/o U.S. Bancorp Fund Services, LLC

777 East Wisconsin Avenue, 5th Floor

Milwaukee, WI 53202

(Name and address of agent for service)

(414) 765-6609

(Registrant's telephone number, including area code)

Date of fiscal year end: December 31, 2011

Date of reporting period: December 31, 2011

Item 1. Reports to Stockholders.

PHOCAS REAL ESTATE FUND

ANNUAL REPORT

December 31, 2011

February 15, 2012

Performance Summary

The securitized commercial real estate market, as measured by the NAREIT Equity REIT Index (the “Index”), rose 8.28% for the year. The Fund underperformed the Index, returning 7.89% for the one-year period ending December 31, 2011, as select stocks underperformed, as discussed in the “Detractors” section below, and the Fund’s overweight position in Office and Apartments hurt performance.

Since the beginning of the financial crisis, macro headlines have increasingly driven share price performance of REITs. The macro has tended to explain a relatively larger portion of the daily returns for large cap REITs, but has had a slightly smaller impact on small cap REITs – in other words, larger cap REITs have been slightly more correlated with the broad market. Perhaps not a coincidence, the top three performers during the quarter were small cap REITs, and two of the three laggards were the largest REITs in their respective sectors.

Following, please see a breakdown of performance and yields for the NAREIT Equity REIT Index by sector.

				Year to Date
Sector	4th Qtr 2011			2011			2010			Yield

Industrial/Office		12.2	%		-1.5	%		17.0	%		4.2	%
Office		9.9	%		-0.8	%		18.4	%		4.0	%
Industrial		18.8	%		-5.2	%		18.9	%		4.0	%
Mixed		11.7	%		2.7	%		8.8	%		5.6	%
Retail		16.1	%		12.2	%		33.4	%		3.6	%
Shopping Centers		10.4	%		-0.7	%		30.8	%		4.1	%
Regional Malls		20.8	%		22.0	%		34.6	%		3.1	%
Free Standing		5.8	%		0.4	%		37.4	%		5.4	%
Residential		12.7	%		15.4	%		46.0	%		3.3	%
Apartments		13.0	%		15.1	%		47.0	%		3.3	%
Manufactured Homes		7.0	%		20.4	%		27.0	%		3.5	%
Diversified		10.0	%		2.8	%		23.8	%		4.3	%
Lodging/Resorts		29.3	%		-14.3	%		42.8	%		2.6	%
Health Care		15.9	%		13.6	%		19.2	%		5.2	%
Self Storage		22.5	%		35.2	%		29.3	%		2.8	%
Timber		15.9	%		7.7	%		4.3	%		3.7	%
Equity REIT Index		15.3	%		8.3	%		27.9	%		3.8	%

All figures include dividends. Source: NAREIT

Fund Positioning

We enter a new year, and prefer the same old sectors. Stock selection will remain critical in 2012, but there appear to be some clear sector views, favoring malls versus neighborhood shopping centers and central business district (“CBD”) offices over suburban offices. We also see positive views on Apartments and specialty names (data centers, lab space, and student housing, etc.). We remain neutral on Lodging and Industrial, with some pockets of bullishness as the sector posted a very strong fourth quarter, and we continue to underweight Healthcare.

Contributors

As previously stated, the top performers during the quarter were a few of the smaller market capitalization names in the Fund, with Glimcher Realty Trust (GRT) leading the way. Investors are again finding value in Class B malls as GRT has strengthened its balance sheet over the last few years. Despite the continued low levels of corporate travel and consumer spending, the two Lodging REIT holdings, LaSalle Hotel Properties (LHO) and Strategic Hotels & Resorts, Inc. (BEE), were strong contributors to the Fund’s return.

Detractors

On the other end of the capitalization spectrum, Vornado Realty Trust (VNO), a very popular stock amongst sell side analysts given its large market cap and New York-centric portfolio, was the worst performing security in the Fund despite strong office tenant demand in NYC and DC, and retail tenant demand in DC. Also lagging during the quarter were Acadia Realty Trust (AKR) and Kimco Realty Corporation (KIM). The Fund remains committed to AKR’s strategy of urban infill retail locations, and we believe the company should outperform over the long term. KIM is the largest Shopping Center REIT, and as such has a diverse portfolio of assets, ranging in quality and location, and trades at a relatively attractive valuation given the assets and quality of its management team.

Market Summary

2011’s turbulence is finally in the books, and 2012 is likely to be more of the same. While we spend most of our attention on company specific matters, we must also keep a close eye on how the Europe Union handles its debt situations. It’s clear that government spending needs to be more disciplined, and that European leaders are beginning to take encouraging steps forward. Initial efforts to raise taxes are also promising. Years of profligate spending, however, and careless tax collection efforts have created an untenable situation that will not be unwound easily.

Meanwhile, here in the US we have our own issues with debt and spending. Our country’s finances can be put on more sound fiscal ground with tough new

measures. Instead, our politicians seem to be fixated on getting re-elected, and thus continue to pander to the general population with ‘feel good’ policies, or worse, no policies. Much of this may already be baked into valuations that we consider to be fairly reasonable. Mostly, domestic REITs should continue to enjoy improving, albeit slowing, fundamentals, and rising dividend yields. We expect US REITs should outperform most other domestic asset classes in 2012. Of course, this assumes we don’t experience a financial catastrophe in Europe.

Because it is quite difficult, if not impossible, to time markets or sectors on a consistent basis, our core investment strategy remains to concentrate on identifying undervalued stocks in each commercial real estate sector. Though it may not have been the best equity investment strategy for 2011, we believe that it should continue to be the best strategy, longer-term.

Best regards,

Phocas Financial Corporation


William Schaff, CFA	James Murray, CFA

Past performance is not a guarantee of future results.

The information above represents the opinions of the Fund Managers, and it not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

The Fund is exposed to the same risks that are associated with the direct ownership of real estate including, but not limited to, a general decline in the value of real estate, fluctuations in rental income, changes in interest rates, increases in property taxes, increased operating costs, overbuilding, changes in zoning laws, and changes in consumer demand for real estate. The Real Estate Fund (the “Fund”) may invest in foreign securities which involve political, economic and currency risks, greater volatility, and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund.

Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. Please refer to the Schedule of Investments in this report for complete fund holdings. Current and future portfolio holdings are subject to risk.

Correlation is a statistical measure of how two securities move in relation to each other.

The NAREIT Equity REIT Index is an unmanaged index of all tax-qualified REITs that are publicly traded, and have 75% or more of their gross invested book assets invested directly or indirectly in equity ownership of real estate. It is not possible to invest directly in an index.

Phocas Real Estate Fund

Comparison of the change in value of a $10,000 investment in the

Phocas Real Estate Fund vs the S&P 500® Index and the NAREIT Equity Index

Average Annual Total Return:

	1 Year	5 Year	Since Inception*
Phocas Real Estate Fund	7.89%	-0.40%	1.51%
S&P 500® Index	2.11%	-0.25%	1.00%
NAREIT Equity Index	8.28%	-1.42%	0.36%

Total annual fund operating expenses: 4.76%

Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. 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 calling (866) 746-2271.

Returns reflect reinvestment of dividends and capital gains distributions. Fee waivers are in effect. In the absence of fee waivers, returns would be reduced. Performance data shown does not reflect the 1% redemption fee imposed on shares held 90 days or less. If it did, total returns would be reduced. The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gains distributions, or redemption of Fund shares. Indices do not incur expenses and are not available for investment.

The S&P 500® Index is an unmanaged index generally representative of the market for stocks of large-sized U.S. companies. The figures above reflect all dividends reinvested.

The NAREIT Equity Index is an unmanaged index of all tax-qualified REITs that are publicly traded and have 75% or more of their gross invested book assets invested directly or indirectly in equity ownership of real estate. The figures above reflect all dividends reinvested.

Foreign securities typically involve greater volatility and political, economic and currency risks and differences in accounting methods than domestic securities.

* Commencement of operations on September 29, 2006.

Phocas Real Estate Fund

EXPENSE EXAMPLE – December 31, 2011 (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 (7/1/11 – 12/31/11).

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 1.50% for the Fund per the operating expenses limitation agreement. 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 U.S. Bancorp 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.

Phocas Real Estate Fund

EXPENSE EXAMPLE – December 31, 2011 (Unaudited), Continued

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During Period
	7/1/11	12/31/11	7/1/11 – 12/31/11*
Actual	$1,000.00	$964.00	$7.43
Hypothetical (5% return	$1,000.00	$1,017.64	$7.63
before expenses)

*	Expenses are equal to an annualized expense ratio of 1.50%, multiplied by the average account value over the period, multiplied by 184 (days in the most recent fiscal half-year)/365 days (to reflect the one-half year period).

SECTOR ALLOCATION OF PORTFOLIO ASSETS – December 31, 2011 (Unaudited)

Percentages represent market value as a percentage of total investments.

Phocas Real Estate Fund

SCHEDULE OF INVESTMENTS at December 31, 2011

Shares		COMMON STOCKS - 100.31%	Value

		Apartments - 15.05%
	1,774	AvalonBay Communities, Inc.	$	231,684
	5,120	Equity Residential		291,994
	704	Essex Property Trust, Inc.		98,919
				622,597
		Diversified - 7.45%
	4,430	Colonial Properties Trust		92,410
	1,617	Entertainment Properties Trust		70,679
	1,887	Vornado Realty Trust		145,035
				308,124
		Health Care - 7.09%
	2,325	HCP, Inc.		96,325
	3,575	Ventas, Inc.		197,090
				293,415
		Hotels - 6.23%
	6,751	LaSalle Hotel Properties		163,442
	17,563	Strategic Hotels & Resorts, Inc. (a)		94,313
				257,755
		Manufactured Homes - 1.00%
	1,128	Sun Communities, Inc.		41,206

		Office Property - 19.22%
	3,391	Alexandria Real Estate Equities, Inc.		233,877
	2,943	Boston Properties, Inc.		293,123
	1,936	Kilroy Realty Corp.		73,704
	2,918	SL Green Realty Corp.		194,455
				795,159
		Regional Malls - 17.26%
	10,770	Glimcher Realty Trust		99,084
	4,424	Simon Property Group, Inc.		570,430
	1,524	Tanger Factory Outlet Centers, Inc.		44,684
				714,198
		Shopping Centers - 7.25%
	4,258	Acadia Realty Trust		85,756
	1,751	Federal Realty Investment Trust		158,903
	3,400	Kimco Realty Corp.		55,216
				299,875

The accompanying notes are an integral part of these financial statements.

Phocas Real Estate Fund

SCHEDULE OF INVESTMENTS at December 31, 2011, Continued

Shares			Value

		Specialty - 10.64%
	3,098	Digital Realty Trust, Inc.	$	206,543
	9,640	DuPont Fabros Technology, Inc.		233,481
				440,024
		Storage - 6.35%
	1,953	Public Storage, Inc.		262,600

		Warehouse/Industrial - 2.77%
	4,008	Prologis, Inc.		114,589

		TOTAL COMMON STOCKS
		(Cost $2,927,755)		4,149,542

		SHORT-TERM INVESTMENTS - 0.08%

	3,411	Invesco STIT-STIC Prime Portfolio -
		Institutional Class, 0.10% (b)		3,411
		TOTAL SHORT-TERM INVESTMENTS
		(Cost $3,411)		3,411
		TOTAL INVESTMENTS IN SECURITIES
		(Cost $2,931,166) - 100.39%		4,152,953
		Liabilities in Excess
		of Other Assets - (0.39)%		(16,041	)
		NET ASSETS - 100.00%	$	4,136,912

(a)	Non-income producing security.

(b)	Rate shown is the 7-day yield as of December 31, 2011.

The accompanying notes are an integral part of these financial statements.

Phocas Real Estate Fund

STATEMENT OF ASSETS AND LIABILITIES at December 31, 2011

ASSETS
Investments in securities, at value (identified cost $2,931,166)	$	4,152,953
Cash		7,880
Receivables:
Due from Advisor (Note 4)		17,229
Dividends and interest		19,456
Prepaid expenses		1,715
Total assets		4,199,233

LIABILITIES
Payables:
Audit fees		17,200
Distribution fees		12,573
Administration fees		8,158
Fund accounting fees		7,017
Transfer agent fees and expenses		6,518
Shareholder reporting		3,887
Legal fees		2,369
Chief Compliance Officer fee		1,750
Custody fees		1,729
Accrued other expenses		1,120
Total liabilities		62,321
NET ASSETS	$	4,136,912
CALCULATION OF NET ASSET VALUE PER SHARE
Net assets applicable to shares outstanding	$	4,136,912
Shares issued and outstanding [unlimited number
of shares (par value $0.01) authorized]		205,527
Net asset value, offering and redemption price per share	$	20.13
COMPOSITION OF NET ASSETS
Paid-in capital	$	4,051,449
Undistributed net investment income		22,609
Accumulated net realized loss on investments		(1,158,933	)
Net unrealized appreciation on investments		1,221,787
Net assets	$	4,136,912

The accompanying notes are an integral part of these financial statements.

Phocas Real Estate Fund

STATEMENT OF OPERATIONS For the Year Ended December 31, 2011

INVESTMENT INCOME
Income
Dividends	$	97,184
Interest		47
Total income		97,231

Expenses
Adminstration fees (Note 4)		33,186
Advisory fees (Note 4)		32,497
Fund accounting fees (Note 4)		28,469
Transfer agent fees and expenses (Note 4)		26,188
Audit fees		17,200
Legal fees		12,682
Distribution fees (Note 5)		10,832
Custody fees (Note 4)		6,416
Chief Compliance Officer fee (Note 4)		6,000
Trustee fees		5,209
Reports to shareholders		4,283
Miscellaneous expenses		2,578
Insurance expense		2,225
Registration fees		1,983
Total expenses		189,748
Less: advisory fee waiver and expense reimbursement (Note 4)		(124,754	)
Net expenses		64,994
Net investment income		32,237
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments		12,685
Net change in unrealized appreciation on investments		276,666
Net realized and unrealized gain on investments		289,351
Net Increase in Net Assets Resulting from Operations	$	321,588

The accompanying notes are an integral part of these financial statements.

Phocas Real Estate Fund

STATEMENTS OF CHANGES IN NET ASSETS

	Year Ended			Year Ended
	December 31,			December 31,
	2011			2010
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income	$	32,237		$	25,643
Net realized gain on investments		12,685			274,295
Net change in unrealized
appreciation on investments		276,666			458,697
Net increase in net assets
resulting from operations		321,588			758,635
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income		(10,904	)		(42,958	)
Total distributions to shareholders		(10,904	)		(42,958	)
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived
from net change in outstanding shares (a)		(471,604	)		514,025
Total increase/(decrease) in net assets		(160,920	)		1,229,702
NET ASSETS
Beginning of year		4,297,832			3,068,130
End of year	$	4,136,912		$	4,297,832
Accumulated net investment income	$	22,609		$	1,276

(a)	A summary of share transactions is as follows:

	Year Ended						Year Ended
	December 31, 2011						December 31, 2010
	Shares			Paid-in Capital			Shares			Paid-in Capital
Shares sold		9,815		$	195,090			49,180		$	825,101
Shares issued on
reinvestments of
distributions		568			10,904			2,340			42,958
Shares redeemed		(34,522	)		(677,598	)		(20,650	)		(354,034	)
Net increase (decrease)		(24,139	)	$	(471,604	)		30,870		$	514,025

The accompanying notes are an integral part of these financial statements.

Phocas Real Estate Fund

FINANCIAL HIGHLIGHTS – For a share outstanding throughout each year

	Year Ended December 31,
	2011			2010			2009			2008			2007
Net asset value,
beginning of year	$	18.71		$	15.43		$	11.88		$	18.64		$	21.90
Income from
investment operations:
Net investment income		0.15			0.10			0.26		0.32^				0.18
Net realized and unrealized
gain (loss) on investments		1.32			3.37			3.56			(6.90	)		(3.15	)
Total from
investment operations		1.47			3.47			3.82			(6.58	)		(2.97	)
Less distributions:
From net investment income		(0.05	)		(0.19	)		(0.27	)		(0.17	)		(0.18	)
From net realized
gain on investments		—			—			—			(0.02	)		(0.11	)
Total distributions		(0.05	)		(0.19	)		(0.27	)		(0.19	)		(0.29	)
Redemption fees retained		—			—			—		0.01		^		—
Net asset value,
end of year	$	20.13		$	18.71		$	15.43		$	11.88		$	18.64
Total return		7.89	%		22.50	%		32.25	%		-35.11	%		-13.56	%

Ratios/supplemental data:
Net assets, end of
period (thousands)	$	4,137		$	4,298		$	3,068		$	2,694		$	3,659
Ratio of expenses to
average net assets:
Before expense
reimbursement		4.38	%		4.76	%		6.47	%		4.85	%		5.00	%
After expense
reimbursement		1.50	%		1.50	%		1.50	%		1.50	%		1.50	%
Ratio of net investment income
(loss) to average net assets:
Before expense
reimbursement		(2.14	)%		(2.57	)%		(2.90	)%		(1.38	)%		(2.33	)%
After expense
reimbursement		0.74	%		0.69	%		2.07	%		1.97	%		1.17	%
Portfolio turnover rate		17.61	%		65.76	%		60.14	%		98.56	%		24.81	%

^	Based on average shares outstanding.

The accompanying notes are an integral part of these financial statements.

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011

NOTE 1 – ORGANIZATION

The Phocas Real Estate Fund (the “Fund”) is a series of Advisors Series Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) as an open-end management investment company. The investment objective of the Fund is long-term total investment return through a combination of capital appreciation and current income. The Fund commenced operations on September 29, 2006.

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.

Security Valuation: All investments in securities are recorded at their estimated fair value, as described in note 3.

Federal Income Taxes: It is the Fund’s policy to comply with the requirements of Subchapter M 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 or excise tax provision is required.

The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2008 – 2010, or expected to be taken in the Fund’s 2011 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal and the state of Wisconsin; however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

Securities Transactions, Income and Distributions: Securities transactions are accounted for on the trade date. Realized gains and losses on securities sold are determined on a first-in, first-out basis. Interest income is recorded on an accrual basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

The Fund distributes substantially all net investment income, if any, and net realized capital gains, if any, annually. 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

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011, Continued

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.

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.

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.

Redemption Fees: The Fund charges a 1.00% redemption fee to shareholders who redeem shares held for 90 days or less. Such fees are retained by the Fund and accounted for as an addition to paid-in capital. During the year ended December 31, 2011, the Fund retained no redemption fees.

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 their annual distributions to its shareholders and, accordingly, a portion of the Fund’s distributions may also be designated as a return of capital.

Events Subsequent to the Fiscal Year End: In preparing the financial statements as of December 31, 2011, management considered the impact of subsequent events for potential recognition or disclosure in the financial statements.

NOTE 3 – SECURITIES VALUATION

The Fund has adopted authoritative fair value accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value, a discussion in changes in valuation techniques and related inputs

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011, Continued

during the period and expanded disclosure of valuation levels for major security types. These inputs are summarized in the three broad levels listed below:

	Level 1 –	Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
	Level 2 –	Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
	Level 3 –	Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

Following is a description of the valuation techniques applied to the Fund’s major categories of assets and liabilities measured at fair value on a recurring basis.

Equity Securities – 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 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 securities which are not traded in the NASDAQ Global Market System shall be valued at the most recent sales price. Investments in open-end mutual funds are valued at their net asset value per share. To the extent, these securities are actively traded and valuation adjustments are not applied, they are categorized in level 1 of the fair value hierarchy.

Securities for which market quotations are not readily available or if the closing price does not represent fair value, are valued following procedures approved by the Board of Trustees. These procedures consider many factors, including the type of security, size of holding, trading volume and news events. Depending on the relative significance of the valuation inputs, these securities may be classified in either level 2 or level 3 of the fair value hierarchy.

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011, Continued

Short-Term Securities – Short-term securities having a maturity of 60 days or less are valued at amortized cost, which approximates market value. To the extent the inputs are observable and timely, these securities would be classified in level 2 of the fair value hierarchy.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Fund’s securities as of December 31, 2011:

	Level 1		Level 2		Level 3		Total
Common Stocks (REITS)
Apartments	$	622,597	$	—	$	—	$	622,597
Diversified		308,124		—		—		308,124
Health Care		293,415		—		—		293,415
Hotels		257,755		—		—		257,755
Manufactured Homes		41,206		—		—		41,206
Office Property		795,159		—		—		795,159
Regional Malls		714,198		—		—		714,198
Shopping Centers		299,875		—		—		299,875
Specialty		440,024		—		—		440,024
Storage		262,600		—		—		262,600
Warehouse/Industrial		114,589		—		—		114,589
Total Common Stocks
(REITS)		4,149,542		—		—		4,149,542
Short-Term Investments		3,411		—		—		3,411
Total Investments
in Securities	$	4,152,953	$	—	$	—	$	4,152,953

Refer to the Fund’s Schedule of Investments for a detailed break-out of common stocks by industry classification. Transfers between levels are recognized at December 31, 2011, the end of the reporting period. The Fund recognized no transfers to/from level 1 or level 2. There were no level 3 securities held in the Fund during the year ended December 31, 2011.

New Accounting Pronouncement – On May 12, 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) modifying Topic 820, Fair Value Measurements and Disclosures. At the same time, the International Accounting Standards Board (“IASB”) issued International Financial Reporting Standard (“IFRS”) 13, Fair Value Measurement. The objective by the FASB and IASB is convergence of their guidance on fair value measurements and disclosures. Specifically, the ASU requires reporting entities to disclose i) the amounts of any transfers between Level 1 and Level 2, and the reasons for the transfers, ii) for Level 3 fair value measurements, a) quantitative

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011, Continued

information about significant unobservable inputs used, b) a description of the valuation processes used by the reporting entity and c) a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. The effective date of the ASU is for interim and annual periods beginning after December 15, 2011. At this time, the Funds are evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.

In December 2011, FASB issued ASU No. 2011-11 related to disclosures about offsetting assets and liabilities. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. The Fund is currently evaluating the impact ASU 2011-11 will have on the financial statement disclosures.

NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER

TRANSACTIONS WITH AFFILIATES

The Fund has an investment advisory agreement with Phocas Financial Corporation (the “Advisor”) pursuant to which the Advisor is responsible for providing investment management services to the Fund. The Advisor furnished all investment advice, office space and facilities, and provides most of the personnel needed by the Fund. As compensation for its services, the Advisor is entitled to a fee, computed daily and payable monthly. The Fund pays fees calculated at an annual rate of 0.75% based upon the average daily net assets of the Fund. For the year ended December 31, 2011, the Fund incurred $32,497 in advisory fees.

The Fund is responsible for its own operating expenses. The Advisor has agreed to reduce fees payable to it by the Fund and to pay Fund operating expenses to the extent necessary to limit the aggregate annual operating expenses to 1.50% of average daily net assets of the Fund. 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. Any such reimbursement is also contingent upon Board of Trustees review and

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011, Continued

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, 2011, the Advisor reduced its fees and absorbed Fund expenses in the amount of $124,754 for the Fund.

Cumulative expenses subject to recapture pursuant to the aforementioned conditions and the year of expiration are as follows:

2012	2013	2014	Total
$117,654	$120,363	$124,754	$362,771

U.S. Bancorp Fund Services, LLC (the “Administrator”) acts as the Fund’s Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Fund’s custodian, transfer agent and accountants; coordinates the preparation and payment of the Fund’s expenses and reviews the Fund’s expense accruals. For the year ended December 31, 2011, the Fund incurred $33,186 in administration fees.

U.S. Bancorp Fund Services, LLC (“USBFS” or the “Transfer Agent”) also serves as the fund accountant and transfer agent to the Fund. For the year ended December 31, 2011, the Fund incurred $28,469 in fund accounting fees and $17,238 transfer agent fees (excluding out-of-pocket expenses). U.S. Bank N.A., an affiliate of USBFS, serves as the Fund’s custodian. For the year ended December 31, 2011, the Fund incurred $6,403 in custody fees.

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 employees of the Administrator.

For the year ended December 31, 2011, the Fund was allocated $6,000 of the Chief Compliance Officer fee.

NOTE 5 – DISTRIBUTION AGREEMENT AND PLAN

The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 (the “Plan”). The Plan permits the Fund to pay the Distributor for distribution and related expenses at an annual rate of up to 0.25% of the Fund’s average daily net assets. 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. For the year ended December 31, 2011, the Fund paid the Distributor $10,832.

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011, Continued

NOTE 6 – PURCHASES AND SALES OF SECURITIES

For the year ended December 31, 2011, the cost of purchases and the proceeds from sales of securities (excluding short-term securities) were $768,421 and $1,100,045, respectively.

NOTE 7 – LINE OF CREDIT

During the fiscal year end December 31, 2011, the Fund had a line of credit in the amount of $515,000. The line of credit was intended to provide short-term financing, if necessary, subject to certain restrictions, in connection with shareholder redemptions. The credit facility was with the Fund’s custodian, U.S. Bank, N.A. During the year ended December 31, 2011, the Fund did not draw upon its line of credit.

NOTE 8 – INCOME TAXES AND DISTRIBUTIONS TO SHAREHOLDERS

Net investment income/(loss) and net realized gains/(losses) differ for financial statement and tax purposes due to investments in real estate investment trusts.

The distributions paid by the Fund during the year ended December 31, 2011 and the year ended December 31, 2010 were characterized as follows:

	12/31/11	12/31/10
Ordinary income	$10,904	$42,958

Ordinary income distributions may include dividends paid from short-term capital gains.

As of December 31, 2011, the components of accumulated earnings/(losses) on a tax basis were as follows:

Cost of investments for tax purposes (a)	$	3,035,127
Gross tax unrealized appreciation		1,254,211
Gross tax unrealized depreciation		(136,385	)
Net tax unrealized appreciation		1,117,826
Undistributed ordinary income		22,609
Undistributed long-term capital gain		—
Total distributable earnings		22,609
Other accumulated losses		(1,054,972	)
Total accumulated losses	$	85,463

(a)	Difference between book losses and tax losses is attributable to the tax treatment of wash sales.

Phocas Real Estate Fund

NOTES TO FINANCIAL STATEMENTS at December 31, 2011, Continued

At December 31, 2011, the Fund had tax capital losses which may be carried over to offset future gains. Such losses expire as follows:

		Short-Term	Long-Term
2016	2017	Indefinite	Indefinite	Total
$520,545	$500,961	$25,709	$7,757	$1,054,972

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after December 31, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Under the law in effect prior to the Act, pre-enactment net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

Phocas Real Estate Fund

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees

Advisors Series Trust and Shareholders of:

Phocas Real Estate Fund

We have audited the accompanying statement of assets and liabilities of the Phocas Real Estate Fund, a series of Advisors Series Trust (the “Trust”), including the schedule of investments, as of December 31, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2011, by correspondence with the custodian. We believe that our audits provide 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 Phocas Real Estate Fund, as of December 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

TAIT, WELLER & BAKER LLP

Philadelphia, Pennsylvania

February 27, 2012

Phocas Real Estate Fund

NOTICE TO SHAREHOLDERS at December 31, 2011

For the year ended December 31, 2011, the Phocas Real Estate Fund designated $10,904 as ordinary income for purposes of the dividends paid deduction.

For the year ended December 31, 2011, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from net investment income designated as qualified dividend income was 6.17%.

For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends Received deduction for the year ended December 31, 2011 was 8.16%.

The percentage of taxable ordinary income distributions that are designated as interest related income under Internal Revenue Section 871(k)(2)(C) for the year ended December 31, 2011 was 0.00%.

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) 746-2271 or on the U.S. Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

How to Obtain a Copy of the Fund’s Proxy Voting Records for the 12 months Ended June 30, 2011

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12 months ended June 30, 2011 is available without charge, upon request, by calling (866) 746-2271. 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 (202) 551-8090. Information included in the Fund’s Form N-Q is also available by calling (866) 746-2271.

Phocas Real Estate Fund

INFORMATION ABOUT TRUSTEES AND OFFICERS (Unaudited)

This chart provides information about the Trustees and Officers who oversee the Fund. Officers elected by the Trustees manage the day-to-day operation of the Fund and execute policies formulated by the Trustees.

		Term of		Number of
		Office		Portfolios
	Position	and	Principal	in Fund	Other
	Held	Length	Occupation	Complex	Directorships
Name, Address	with the	of Time	During Past	Overseen by	Held During
and Age	Trust	Served	Five Years	Trustee(2)	Past Five Years

Independent Trustees(1)

Sallie P. Diederich	Trustee	Indefinite	Independent	1	Trustee,
(age 61)		term	Mutual Fund		Advisors
615 E. Michigan Street		since	Consultant,		Series Trust
Milwaukee, WI 53202		January	(1995 to present);		(for series not
		2011.	Corporate		affiliated with
			Controller,		the Fund).
			Transamerica
			Fund Management
			Company (1994 to
			1995); Senior Vice
			President, Putnam
			Investments (1992
			to 1993); Vice
			President and
			Controller,
			American Capital
			Mutual Funds
			(1986 to 1992).

Donald E. O’Connor	Trustee	Indefinite	Retired; former	1	Trustee,
(age 75)		term	Financial		Advisors
615 E. Michigan Street		since	Consultant and		Series Trust
Milwaukee, WI 53202		February	former Executive		(for series not
		1997.	Vice President and		affiliated with
			Chief Operating		the Fund);
			Officer of ICI		Trustee, The
			Mutual Insurance		Forward Funds
			Company (until		(37 portfolios).
			January 1997).

Phocas Real Estate Fund

INFORMATION ABOUT TRUSTEES AND OFFICERS (Unaudited), Continued

		Term of		Number of
		Office		Portfolios
	Position	and	Principal	in Fund	Other
	Held	Length	Occupation	Complex	Directorships
Name, Address	with the	of Time	During Past	Overseen by	Held During
and Age	Trust	Served	Five Years	Trustee(2)	Past Five Years

George J. Rebhan	Trustee	Indefinite	Retired; formerly	1	Trustee,
(age 77)		term	President, Hotchkis		Advisors
615 E. Michigan Street		since	and Wiley Funds		Series Trust
Milwaukee, WI 53202		May	(mutual funds)		(for series not
		2002.	(1985 to 1993).		affiliated with
					the Fund);
					Independent
					Trustee from
					1999 to 2009,
					E*TRADE
					Funds.

George T. Wofford	Trustee	Indefinite	Retired; formerly	1	Trustee,
(age 72)		term	Senior Vice		Advisors
615 E. Michigan Street		since	President, Federal		Series Trust
Milwaukee, WI 53202		February	Home Loan Bank		(for series not
		1997.	of San Francisco.		affiliated with
					the Fund).
Interested Trustee

Joe D. Redwine(3)	Interested	Indefinite	President, CEO,	1	Trustee,
(age 64)	Trustee	term	U.S. Bancorp Fund		Advisors
615 E. Michigan Street		since	Services, LLC		Series Trust
Milwaukee, WI 53202		September	(May 1991 to		(for series not
		2008.	present).		affiliated with
					the Fund).

Phocas Real Estate Fund

INFORMATION ABOUT TRUSTEES AND OFFICERS (Unaudited), Continued

Officers

		Term of
		Office
	Position	and	Principal
	Held	Length	Occupation
Name, Address	with the	of Time	During Past
and Age	Trust	Served	Five Years

Joe D. Redwine	Chairman	Indefinite	President, CEO, U.S. Bancorp Fund Services,
(age 64)	and Chief	term	LLC (May 1991 to present).
615 E. Michigan Street	Executive	since
Milwaukee, WI 53202	Officer	September
		2007.

Douglas G. Hess	President	Indefinite	Senior Vice President, Compliance and
(age 44)	and	term	Administration, U.S. Bancorp Fund Services,
615 E. Michigan Street	Principal	since	LLC (March 1997 to present).
Milwaukee, WI 53202	Executive	June
Officer		2003.

Cheryl L. King	Treasurer	Indefinite	Vice President, Compliance and
(age 50)	and	term	Administration, U.S. Bancorp Fund Services,
615 E. Michigan Street	Principal	since	LLC (October 1998 to present).
Milwaukee, WI 53202	Financial	December
Officer		2007.

Michael L. Ceccato	Vice	Indefinite	Vice President, U.S. Bancorp Fund Services,
(age 54)	President,	term	LLC (February 2008 to present); General
615 E. Michigan Street	Chief	since	Counsel/Controller, Steinhafels, Inc.
Milwaukee, WI 53202	Compliance	September	(September 1995 to February 2008).
	Officer	2009.
	and AML
	Officer

Jeanine M. Bajczyk, Esq.	Secretary	Indefinite	Senior Vice President and Counsel, U.S.
(age 46)		term	Bancorp Fund Services, LLC (May 2006 to
615 E. Michigan Street		since	present); Senior Counsel, Wells Fargo Funds
Milwaukee, WI 53202		June	Management, LLC (May 2005 to May 2006);
		2007.	Senior Counsel, Strong Financial Corporation
			(January 2002 to April 2005).

(1)	The Trustees of the Trust who are not “interested persons” of the Trust as defined under the 1940 Act (“Independent Trustees”).

(2)

Trustis comprised of numerous portfolios managed by unaffiliated investment advisers. The term “Fund Complex” applies only to the Fund. The Fund does not hold itself out as related to any other series within the Trust for investment purposes, nor does it share the same investment adviser with any other series.

(3)	Mr. Redwine is an “interested person” of the Trust as defined by the 1940 Act. Mr. Redwine is an interested Trustee of the Trust by virtue of the fact that he is an interested person of Quasar Distributors, LLC who acts as principal underwriter to the series of the Trust.

Phocas Real Estate Fund

HOUSEHOLDING

In an effort to decrease costs, the Transfer Agent intends to reduce the number of duplicate prospectuses, annual and semi-annual reports, proxy statements and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders the Transfer Agent reasonably believes are from the same family or household. Once implemented, if you would like to discontinue householding for your accounts, please call toll-free at 1-866-746-2271 to request individual copies of these documents. Once the Transfer Agent receives notice to stop householding, the Transfer Agent will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.

Phocas Real Estate Fund

APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited)

At a meeting held on December 6-8, 2011, the Board, including all the persons who are Independent Trustees as defined under the Investment Company Act of 1940, as amended, considered and approved the continuance of the Advisory Agreement for the Phocas Real Estate Fund with the Advisor for another annual term. At this meeting, and at a prior meeting held on October 26-27, 2011, the Board received and reviewed substantial information regarding the Fund, the Advisor and the services provided by the Advisor to the Fund under the Advisory Agreement. This information, together with the information provided to the Board throughout the course of the year, formed the primary (but not exclusive) basis for the Board’s determinations. Below is a summary of the factors considered by the Board and the conclusions that formed the basis for the Board’s continuance of the Advisory Agreement:

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 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 other key personnel of the Advisor involved in the day-to-day activities of the Fund. 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 prior relationship between the Advisor and the Trust, as well as the Board’s knowledge of the Advisor’s operations, and noted that during the course of the prior year they had met with the Advisor to discuss various marketing and compliance topics, including the Advisor’s diligence in risk oversight. 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 duties under the Advisory Agreement and that the nature, overall quality, cost and extent of such management services are satisfactory.

THE FUND’S HISTORICAL YEAR-TO-DATE PERFORMANCE AND THE OVERALL PERFORMANCE OF THE ADVISOR. In assessing the quality of the portfolio management delivered by the Advisor, the Board reviewed the short-term and long-term performance of the Fund as of August 31, 2011 on both an absolute basis, and in comparison to its peer funds as classified by Lipper and Morningstar.

Phocas Real Estate Fund

APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited), Continued

The Board noted that the Fund’s performance, with regard to its Lipper comparative universe, was above its peer group median and Lipper Index for the three-year and since inception periods, and below its peer group median and Lipper Index for the three-month, year-to-date and one-year periods.

The Board noted that the Fund’s performance, with regard to its Morningstar comparative universe, was above its peer group median and average for the three-year and since inception periods, above its peer group average but below its peer group median for the year-to-date period, and below its peer group median and average for the three-month and one-year periods.

The Board also considered any differences in performance between similarly managed accounts and the performance of the Fund and found any differences to be reasonable.

THE COSTS OF THE SERVICES TO BE PROVIDED BY THE ADVISOR AND THE STRUCTURE OF THE ADVISOR’S FEE UNDER THE ADVISORY AGREEMENT. In considering the advisory fee and total fees and expenses of the Fund, the Board reviewed comparisons to its Lipper peer funds and to separate accounts for other types of clients advised by the Advisor, all Fund expense waivers and reimbursements, as well as information regarding fee offsets for separate accounts invested in the Fund.

The Board noted that the Advisor had contractually agreed to maintain an annual expense ratio for the Fund of 1.50% (the “Expense Cap”). The Board noted that the Fund’s total expense ratio was higher than the median and average of its peer group. Additionally, the Board noted that when the Fund’s peer group was adjusted to include only funds with similar asset sizes, the total expense ratio for the Fund was below both the median and average of this segment of its peer group. The Board also noted that the contractual advisory fee was marginally above the average of its peer group and equal to the median of its peer group. The Board also considered that after advisory fee waivers and the payment of Fund expenses necessary to maintain the Expense Cap, the Advisor received no advisory fees from the Fund during the most recent fiscal period. The Board also took into consideration the services the Advisor provided to its separately managed account clients, comparing the fees charged for those management services to the management fees charged to the Fund. The Board found that the management fees charged to the Fund were below the fees charged to the Advisor’s separately managed account clients and

Phocas Real Estate Fund

APPROVAL OF INVESTMENT ADVISORY AGREEMENT (Unaudited), Continued

below or equal to the fees charged to the Advisor’s institutional clients. As a result, the Trustees noted that the Fund’s expenses and advisory fee were not outside the range of its peer group.

ECONOMIES OF SCALE. The Board also considered that economies of scale would be expected to be realized by the Advisor as the assets of the Fund grow. The Board noted that the Advisor has contractually agreed to reduce its advisory fees or reimburse Fund expenses so that the Fund does not exceed its specified Expense Cap. The Board concluded that there were no effective economies of scale to be shared with the Fund at current asset levels, but would revisit this issue in the future as circumstances changed and asset levels increased.

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 benefits and the indirect benefits to the Advisor from advising the Fund. The Board considered the profitability to the Advisor from its relationship with the Fund and considered any additional benefits derived by the Advisor from its relationship with the Fund, including benefits received in the form of Rule 12b-1 fees for the Fund. After such review, the Board determined that the profitability to the Advisor with respect to the Advisory Agreement was not excessive, and that the Advisor had sufficient resources to support the services it provides to the Fund.

No single factor was determinative of the Board’s decision to approve the continuance of the Advisory Agreement for the Phocas Real Estate Fund, but rather the Board based its determination on the total mix of information available to them. Based on a consideration of all the factors in their totality, the Board determined that the advisory arrangement with the Advisor, including the advisory fee, were fair and reasonable. The Board therefore determined that the continuance of the Advisory Agreement for the Phocas Real Estate Fund would be in the best interest of the Fund and its shareholders.

Phocas Real Estate Fund

PRIVACY NOTICE

The Fund collects non-public information about you from the following sources:

•	Information we receive about you on applications or other forms;

•	Information you give us orally; and/or

•	Information about your transactions with us or others.

We do not disclose any non-public personal information about our customers or former customers without the customer’s authorization, except as permitted by law or in response to inquiries from governmental authorities. We may share information with affiliated and unaffiliated third parties with whom we have contracts for servicing the Fund. We will provide unaffiliated third parties with only the information necessary to carry out their assigned responsibilities. We maintain physical, electronic and procedural safeguards to guard your non-public personal information and require third parties to treat your personal information with the same high degree of confidentiality.

In the event that you hold shares of the Fund through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared by those entities with unaffiliated third parties.

Investment Advisor

Phocas Financial Corporation

980 Atlantic Avenue, Suite 106

Alameda, CA 94501

Independent Registered Public Accounting Firm

Tait, Weller & Baker LLP

1818 Market Street, Suite 2400

Philadelphia, PA 19103

Legal Counsel

Paul Hastings LLP

77 East 55th Street

New York, NY 10022

Custodian

U.S. Bank N.A.

1555 N. River Center Drive, Suite 302

Milwaukee, WI 53212

Distributor

Quasar Distributors, LLC

615 East Michigan Street

Milwaukee, WI 53202

Transfer Agent, Fund Accountant and Fund Administrator

U.S. Bancorp Fund Services, LLC

615 East Michigan Street

Milwaukee, WI 53202

(866) 746-2271

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 (866) 746-2271. 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 period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.

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 there is at least one audit committee financial expert serving on its audit committee. Ms. Sallie P. Diederich is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.

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. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.

	FYE 12/31/2011	FYE 12/31/2010
Audit Fees	$14,300	$13,900
Audit-Related Fees	N/A	N/A
Tax Fees	$2,900	$2,800
All Other Fees	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.

The percentage of fees billed by Tait, Weller, & Weller LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:

	FYE 12/31/2011	FYE 12/31/2010
Audit-Related Fees	0%	0%
Tax Fees	0%	0%
All Other Fees	0%	0%

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 or expected to be 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 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 12/31/2011	FYE 12/31/2010
Registrant	N/A	N/A
Registrant’s Investment Adviser	N/A	N/A

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. Investments.

(a)	Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

(b) Not Applicable.

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.

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/Principal Executive Officer and Treasurer/Principal 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 fourth 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. Filed herewith.

(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/ Douglas G. Hess

Douglas G. Hess, President

Date 3/5/12

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/ Douglas G. Hess

Douglas G. Hess, President

Date 3/5/12

By (Signature and Title)* /s/ Cheryl L. King

Cheryl L. King, Treasurer

Date 3/5/12

* Print the name and title of each signing officer under his or her signature.