N-CSR 1 pff-ncsra.htm POPLAR FOREST FUNDS ANNUAL REPORT 9-30-21

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)



Jeffrey T. Rauman, President/Chief Executive Officer
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)



(626) 914-7363
Registrant's telephone number, including area code



Date of fiscal year end: September 30, 2021



Date of reporting period: September 30, 2021



Item 1. Reports to Stockholders.

(a) [Insert full text of semi-annual or annual report here]



Annual Report
September 30, 2021

 

 

 

 
Poplar Forest Funds
 

 

 
Poplar Forest Partners Fund
Class A (PFPFX)
Class I (IPFPX)

 
Poplar Forest Cornerstone Fund
Investor Class (IPFCX)









POPLAR FOREST FUNDS

TABLE OF CONTENTS

Performance
1
Letter to Partner
2
Sector Allocation of Portfolio Assets
13
Expense Example
15
Investment Highlights
17
Schedules of Investments
20
Statements of Assets and Liabilities
26
Statements of Operations
28
Statements of Changes in Net Assets
29
Financial Highlights
31
Notes to Financial Statements
34
Report of Independent Registered Public Accounting Firm
45
Notice to Shareholders
47
Information about Trustees and Officers
48
Householding
52
Privacy Notice
53





POPLAR FOREST FUNDS

Performance of each fund class for the 1-, 3-, 5-, 10-year and since inception periods as of September 30, 2021 is as follows:
 
 

*
The 60/40 blended index comprises 60% S&P 500® Index and 40% Bloomberg U.S. Aggregate Bond Index. **Returns for periods greater than 1 year have been annualized.

Performance data quoted represents past performance; 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 Funds may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling 1-877-522-8860. Performance for Class A shares with load reflects a maximum 5.00% sales charge. Class A shares without load do not take into account any sales charges which would reduce performance.
 
As of the Fund’s most recently filed registration statement, the Partners Fund Class A shares gross expense ratio is 1.33%; net expense ratio is 1.21% and is applicable to investors. The Partners Fund Institutional Class shares gross expense ratio is 1.08%; net expense ratio is 0.96% and is applicable to investors. The Cornerstone Fund gross expense ratio is 1.77%; net expense ratio is 0.91% and is applicable to investors. The Adviser has contractually agreed to the fee waiver through at least January 27, 2022.
 





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POPLAR FOREST FUNDS

Portfolio Manager Commentary

Dear Partner,
 
Despite a global pandemic that has killed more than 4.7 million people and shut down huge parts of the global economy, the stock market has done just fine. Yes, we had to live through the COVID Crash that saw the S&P 500 Index (“S&P 500”) decline by 34% over 33 days, but to my knowledge, no bear market has ever been recovered from so quickly. Trillions of dollars of fiscal and monetary stimulus clearly helped. Vaccines were developed in months, not years, and more than 6.2 billion doses have already been administered worldwide. Sports stadiums are full again, kids are back in school, and workers are slowly heading back to the office. Companies now have more job openings than there are people looking for work. The economy is doing great! No wonder the stock market is near all-time high levels.
 
With the economy getting back to normal more quickly than expected, the U.S. Federal Reserve (the “Fed”) will soon start the multi-year process of normalizing monetary policy. In the face of potentially rising interest rates, investor worries are growing: stocks look expensive, bond prices go down when yields rise, and cash earns nothing. But, there is a fourth option: value stocks. When I say value stocks, I don’t mean the Russell 1000 Value Index: I mean carefully selected securities trading at highly discounted prices. While the growth-stock-dominated S&P 500 may face a headwind in a rising rate environment, I think that carefully chosen value stocks can grow earnings and enjoy expanding P/E multiples. This isn’t an intellectual exercise for me: Poplar Forest Funds account for more than 95% of my investable assets. I own the same stocks, in the same proportions, and pay the same fees you pay. Our interests are aligned.
 
We are currently invested in 29 companies that we believe can grow earnings about 8% annually over the next few years while paying dividends that currently equal about 2.5% of the value of the portfolio. These are solid businesses – more than 90% are companies with Investment Grade credit ratings that have a history of returning cash to shareholders through the payment of dividends. Despite their financial strength and earnings growth potential, their shares are collectively valued at a bargain price of roughly 10x earnings. Despite widespread speculative excess in the stock market, selectivity has allowed us to assemble a portfolio that we believe can generate long-term investment results that should easily outpace cash, bonds or the S&P 500. While some say value stocks only work when interest rates rise, we think relative earnings growth rates and free cash flows are more important. The companies in our portfolio appear poised to grow earnings at a rate consistent with that generated by the S&P 500 over the last 50 years, yet the portfolio is valued at less than half of the S&P’s P/E.
 
At Poplar Forest, we invest based on business fundamentals. We strive to buy stocks at substantial discounts to the value of each business’ future free cash flows with the expectation that other investors will ultimately realize the value we see. Sometimes perceived value gaps close quickly, sometimes the process takes years, and sometimes we are wrong. If we have trouble finding what we believe are great ideas, cash may build up in the portfolio as we await better opportunities. (In the late 1990s when stock prices looked really out of whack, cash got to 20-25% of the portfolios I managed.) As we ended the fiscal year, cash was less than 3% of our assets as we
 


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POPLAR FOREST FUNDS

have continued to find what we believe are very attractive long-term investment opportunities. That said, we liquidated four investments while building new positions in just three. All three of these new investments are under-earning businesses that offer what we believe will be above average earnings growth over the next few years.
 
While we have no special ability to predict what will happen in the next few months, we believe we are being handsomely rewarded while we wait for the value we see to be recognized by others. Over the last 12 months, the companies in our portfolio produced free cash flow (cash from operations less capital spending) that equaled roughly 9% of their market value as of 9/30/21. This level of cash generation seems particularly attractive in an environment of unsustainably low interest rates and rampant speculation.
 
Investing versus Speculating
 
This year, the stock market has been buffeted by growing ranks of traders who are being egged on by new brokerage firms like Robinhood. While they may refer to themselves as “investors,” they look more like gamblers who found each other on message boards and united to take on the “establishment.” They gleefully created headaches for hedge funds who were positioned for expected bankruptcy at companies like GameStop and AMC Entertainment. The fundamentals of those companies were very weak, but the collective will of these speculators drove stock prices higher and allowed the companies in question to raise the funds they needed to survive in a sort of reverse Darwinism.
 
I worry when I read about the mob’s trading strategies, most particularly, YOLO. For the uninitiated, YOLO stands for “You Only Live Once” - “Let’s buy this stock that’s being touted on this message board. Sure, this thing could go to zero, but it might quickly double. You only live once!!” This short-term, get-rich-quick speculation reminds me of late 1990s behavior that ended with many day traders losing everything.
 
While speculative excess may continue to build as long as the Fed keeps flooding the market with liquidity, at some point, they will have to normalize monetary policy. I’m reminded of former Citigroup CEO Chuck Prince’s quote back in 2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance.” The WallStreetBets crowd may keep partying like its 1999, but at Poplar Forest, we are increasingly focused on managing risk given an outlook for increasing volatility and more mundane returns for the stock market as a whole. Security selection seems more important than ever.
 
Don’t Fight the Fed
 
Although I am worried about the magnitude of speculation I see in the stock market, I’m not expecting another nasty bear market any time soon. Historically, investors can sleep easy as long as the yield curve is upward sloping – when long-term interest rates are higher than short-term interest rates -- as is the case today. While the stock market regularly has short-term corrections of 5-10%, the risk of a bear market decline of 20% or more appears low until the yield curve inverts. I have no reason to believe it will be different this time, but we should all be aware that risks are rising. In short, I believe the coming period of monetary policy normalization will lead to increased volatility.
 
Everything seems to be riding on the Fed and I can’t remember a time in my career when they had as much influence on financial markets as they have today. In the
 


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POPLAR FOREST FUNDS

interest of supporting recovery from the COVID pandemic, the Fed has kept short-term interest rates pinned near 0% while continuing to buy $120 billion a month of bonds. With inflation currently running well north of the Fed’s 2% target rate, owners of bonds are losing purchasing power every day that the Fed resists normalizing monetary policy.
 
Yield on 10-year Treasury Bonds as Compared to Inflation (Core CPI)
 
 

Data Source: Intrinsic Research
 
With so much of my personal wealth invested in our funds, I understand the desire to have protection from a bear market in stocks. Government bonds have historically done well when stock prices fall – in effect, bonds are a little like an insurance policy for your stock portfolio. My concern is the current cost of that insurance. Historically, the yield on a 10-year treasury bond exceeded the underlying rate of inflation by 2-3% (this is the so-called “Real” interest rate). While bonds weren’t expected to keep up with stocks, they provided bear market protection while still helping investors grow their purchasing power by 2-3% a year. Today, that relationship has been turned on its head; bond buyers are giving up future wealth in exchange for that stock market insurance policy. In the last 50 years, bonds have only looked this expensive relative to inflation two other times (1974 and 1980).
 


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POPLAR FOREST FUNDS
 
 

 
Data Source: Intrinsic Research
 
Chairman Powell had better be right that the inflation we see everywhere really is “transitory.” Otherwise, bond yields could rise dramatically. I am not suggesting that we are on the verge of a 1970s-era inflation problem, but I do believe that the 40-year tailwind of ever-lower interest rates has ended. Rising rates could lead to falling stock P/E ratios, especially for companies with low current free cash flows and high valuations.
 
If rates rise, the growth-stock-dominated S&P could be in for a period of disappointing total returns. Over the last 50 years, the S&P 500 has grown earnings at a compound rate of 7%. The current dividend yield is 1.3%. Over the last decade, the S&P 500 has traded at 16.6x expected earnings as compared to its current ratio of 21.0x. If rising rates were to push the S&P 500’s P/E ratio back to that 16.6x average, the 20% valuation contraction could eat up more than two years of historic earnings growth and dividends.
 


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POPLAR FOREST FUNDS

 

 
Data Source: Intrinsic Research; TTM: Trailing Twelve Month
 
In looking at the graph of the S&P’s valuation over time, we see that this index is trading at a 20% premium to where it has been valued over the last decade. It is much harder to find similar data for the Russell 1000 Value Index, so I examined the top holdings of that index as a valuation indicator. Admittedly, the ten largest stocks only represent 17.5% of the Russell 1000 Value Index, but I think they make an illustrative point. Similar to the data for the S&P 500, the ten largest holdings in the Russell Value Index are currently valued at a 21% premium to where they have traded over the last decade.
 
In contrast to the S&P trading at a 20% premium and the largest Russell Value stocks at a 21% premium, the largest holdings in the Poplar Forest Partners Fund are being valued at a 10% discount. While the valuations of the leading stock market indices could contract as Fed policy normalizes, I think this data suggests that our portfolio could weather a negative market revaluation; we could actually see P/E multiples expand. While past experience is not a forecast of the future, that is what happened to the cheap stocks I owned back in the late 1990s when the tech bubble burst.
 
Conclusion – It All Comes Down to Security Selection
 
In the more than 40 years that I have been investing, I’ve watched as investor portfolios shifted from individual stocks to mutual funds to index funds and ETFs. On one hand, that has helped diversify investor portfolios while cutting costs dramatically. Some may agree with Mae West who said that “Too much of a good thing can be wonderful,” but I think things have gone too far. Free trading apps encourage speculators to buy and sell stocks without knowing what the companies they represent do and with little or no regard for valuation. The other extreme is a portfolio of ETFs
 


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and Index Funds. Yes, they offer low fees, but when you own a little bit of everything, you have nowhere to hide when almost everything looks expensive, as it does today.
 
Passive investing has grown in popularity because investors were comfortable simply getting average results in exchange for low fees. For years, active management has failed to live up to its promise of market-beating results. When it comes to active management, I don’t believe that past performance will be an indicator of future results. At a time when the broad stock averages look expensive and bonds and cash yield less than inflation, I believe this is the ideal time for a benchmark-agnostic, contrarian, high conviction investment process focused on price relative to normalized earnings and free cash flow.
 
While I expect the path of markets to be a bit choppy over the next 12-24 months as the Fed normalizes monetary policy, I believe that the securities we have selected can generate market-beating, long-term investment results. We believe that the companies in our portfolio can grow earnings at competitive rates while providing an above-market dividend yield. As the market realizes that earnings growth isn’t scarce, we could see value stocks close the valuation gap with growth stocks. And when value beats growth, we believe Poplar Forest can beat both.
 

J. Dale Harvey
Founder, CIO and Portfolio Manager
 




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Partners Fund Portfolio Review

The Partners Fund Institutional Class shares produced a return of 60.63% while Class A shares (no load) produced an 60.26% return for the fiscal year ended September 30, 2021.  This compared to a return of 30.00% for the S&P 500 and 35.01% for the Russell 1000 Value Index.
 
Relative to the S&P 500, the portfolio’s top contributing sectors to performance over this fiscal period were Financials, Consumer Discretionary, Materials and Energy.  The bottom contributing sectors were Consumer Staples, Information Technology and Communication Services. Overall, positive performance was mainly due to stock selection rather than sector allocation. While allocation in most sectors only modestly impacted performance, our overweight exposure in Financials and Energy contributed the most.
 
At the security level, the Fund’s top detractors from overall performance were Herman Miller (a recent addition to the portfolio), Merck, Kroger and Conagra Brands. Offsetting this was positive contribution from top contributors Tapestry, American International Group, Nucor, CNH Industrial and Ally Financial.
 
Market Outlook
 
The COVID crash and its subsequent recovery happened with record speed compared to other historic market drawdowns.  While technically a recession, this was more of a unique suppression of economic activity driven by COVID.  Once suppressed economic activity was alleviated by the introduction of vaccines, the market came roaring back, and value stocks performed well relative to growth stocks. However, in the last two quarters, which saw a COVID resurgence driven by the delta variant, growth stocks once again outpaced value stocks.
 
Underlying economic performance has not been materially impacted by the delta variant. With the economy remaining strong, the U.S. Federal Reserve has signaled an intention to start normalizing monetary policy by reducing bond purchases in coming months and potentially raising short-term interest rates in late 2022. Once the taper starts, the shape of the yield curve will be an important indicator to watch. The shift to normalizing monetary policy should be positive for value investors.
 
However, many investors still question whether or not value can take dominance over the long-term. Perhaps this is the wrong question to ask. The real question is whether business fundamentals like free cash flow are still important. At Poplar Forest, we don’t simply take the bottom 20% in the Russell 1000 based on price to earnings and pick investments from that universe. We are decidedly more discerning with a benchmark agnostic process. The companies in our portfolio are generating plenty of free cash flow with what we believe is attractive earnings growth potential. Yet, their value is not recognized by the market. Our portfolio currently trades at ~10x earnings estimates compared to the S&P 500 at 21x and the Russell 1000 Value at 16x. We believe our portfolio of carefully chosen value stocks is poised for relative outperformance with a good chance of growing earnings about 8% annually over the next few years and the potential for P/E multiple expansion even if interest rates increase.
 


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POPLAR FOREST FUNDS

Portfolio Changes and Positioning
 
Although we are still finding what we believe are good investment opportunities, with the market near all-time highs, the search is harder. The opportunities are more one-off and company-specific in nature as opposed to being driven by a specific sector or industry theme. If opportunities start becoming scarce, our cash position could increase, though at the end of the fiscal year, cash was roughly 3% of assets.
 
Financials was one of our top contributing sectors to portfolio performance this period based on both stock selection and allocation. At a time when interest rates and inflation are hot button issues, our exposure tends to attract attention. We are comfortable holding these investments because these stocks have company-specific factors at play, separate from potential rate-sensitivity, that we believe will allow them to outperform without the help of rising rates. Admittedly, falling rates would be a headwind to future performance, but we do not expect that outcome.
 
With the economy rebounding from the COVID crash more quickly than anticipated, increases in demand have strained economic infrastructure. Ports on both coasts are overwhelmed which, when combined with trucker shortages, has resulted in 2-3 times normal delivery timeframes. Also, energy prices have increased meaningfully and there are more unfilled job openings than people looking for work. As a result, many consumer companies revised their short-term earnings guidance lower due to these supply chain issues, cost pressures, and labor shortages. Although companies are pushing through price increases at rates we haven’t seen in many years, we view this as a short-term issue for our consumer holdings, and we continue to be excited about their growth prospects.
 
Cornerstone Fund Portfolio Review

The Cornerstone Fund produced a 45.53% return. This compares to a 16.92% return for a 60/40 blend of the S&P 500 and the Bloomberg U.S. Aggregate Bond Index for the fiscal year ended September 30, 2021.
 
At the security level, the Fund benefitted from top contributing equity investments Nucor, Murphy Oil, Viacom, American International Group and CNH Industrial. The top detracting equity investments were Merck, Lumen Technologies, Conagra Brands, E*TRADE Financial and Herman Miller.
 
While the overlap between the equities owned in the Cornerstone and Partners Funds is high, the Cornerstone Fund remains far more defensive with roughly 9% in cash and equivalents and roughly 19% in fixed income investments. Normally, we expect the Fund to hold between 25% and 50% in fixed income securities. However, with the current low interest rate and high inflationary environment, it’s been difficult to find attractive value in this area of the market. The spread between treasuries and corporate bonds continues to narrow. As a result, we have trimmed our exposure to fixed income over the fiscal year compared to 24% at September 30, 2020.
 
We remain focused on trying to manage downside risk while also striving to protect our investors’ long-term purchasing power. With equities accounting for approximately 73% of the Fund, the potential draw-down in a weak stock market environment should be less than what we would expect from the Partners Fund. Furthermore, our fixed income investments offer a far different profile than what would commonly be found in
 


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POPLAR FOREST FUNDS

a balanced fund. Although we have trimmed our fixed income exposure in the portfolio, roughly 59% of the fixed income portion remains invested in Inflation Protected Treasury bonds (TIPs).
 
As we look ahead, we believe our portfolio is well positioned to generate solid inflation-adjusted returns. The Fund remains focused on high quality companies that are trading at what we believe are discounted valuations, while our bond selections continue to emphasize our goal of capital preservation.
 
Disclosures
 
Must be preceded or accompanied by a prospectus.
 
Mutual fund investing involves risk. Principal loss is possible. Investing in small and medium-sized companies may involve greater risk than investing in larger, more established companies because they can be subject to greater share price volatility.  The Funds may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods.  These risks are usually greater in emerging markets.  The Funds may invest in debt securities which typically decrease in value when interest rates rise. Asset-backed and mortgage-backed securities include market risk, interest rate risk, credit risk and prepayment risk.  This risk is usually greater for longer-term debt securities.  When a Fund invests in an exchange-traded fund (“ETF”) or mutual fund, it will bear additional expenses based on its pro rata share of the ETF’s or mutual fund’s operating expenses, including the potential duplication of management fees. The Funds may invest in options, which may be subject to greater fluctuations in value than an investment in the underlying securities.
 
Earnings growth is not a measure of a Fund’s future performance.
 
Fund holdings and sector allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security.  For a complete list of holdings, please refer to the schedule of investments in this report.
 
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.
 
Poplar Forest Capital LLC is the adviser to the Poplar Forest Funds which are distributed by Quasar Distributors, LLC.
 
The Partners Fund top ten holdings and weightings as of 9/30/21 are as follows:
 
Wells Fargo
5.05
Ally Financial
4.69
Advance Auto Parts
4.63
American International Group
4.49
Murphy Oil
4.41
CVS Health
4.28
National Fuel Gas
4.27
Equitable Holdings
4.25
Chevron
4.13
AmerisourceBergen
4.10


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The Cornerstone Fund top ten equity holdings and weightings as of 9/30/21 are as follows:
 
American International Group
3.36
Advance Auto Parts
3.19
Allstate
3.11
Murphy Oil
3.10
Wells Fargo
3.07
Ally Financial
3.00
CVS Health
2.77
Chevron
2.72
Conagra Brands
2.65
AmerisourceBergen
2.64

Active Management (also called active investing): Refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index. Conversely, in passive management, investors expect a return that closely replicates the investment weighting and returns of a benchmark index and will often invest in an index fund.
 
Bear Market: A period marked with falling stock prices. In a bear market, investor confidence is extremely low. Many investors opt to sell off their stocks during a bear market for fear of further losses.
 
The Bloomberg U.S. Aggregate Bond Index: is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities.
 
Blended index: (also known as a blended benchmark) is a combination of two or more indices in varying percentages. To take a simple example, if an investor’s assets are allocated to 60% stocks and 40% bonds, the portfolio’s performance might be best measured against a blended benchmark consisting of 60% in a stock index (e.g. S&P 500® index) and 40% in a bond index (e.g. Bloomberg U.S. Aggregate Bond Index).
 
The Consumer Price Index (CPI): is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.  The annual percentage change in a CPI is used as a measure of inflation.
 
Dividend Yield: Represents the trailing 12-month dividend yield aggregating all income distributions per share over the past year, divided by the period ending fund or stock share price. It does not reflect capital gains distributions.
 
The S&P 500® Index: is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation.
 
Earnings Per Share (EPS): is the net income of a company divided by the total number of shares it has outstanding.
 
Free Cash Flow (cash flow): is equal to the after-tax net income of a company plus depreciation and amortization less capital expenditures.
 


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Index Fund: Is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor’s 500 Index (S&P 500).
 
Inflation: Is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. Often expressed as a percentage, inflation indicates a decrease in the purchasing power of a nation’s currency.
 
Price/Earnings (P/E) Ratio: is a common tool for comparing the prices of different common stocks and is calculated by dividing the earnings per share into the current market price of a stock.
 
Passive investing: Is an investment strategy to maximize returns by minimizing buying and selling. Index investing in one common passive investing strategy whereby investors purchase a representative benchmark, such as the S&P 500 index, and hold it over a long time horizon.
 
Real Estate Investment Trust (REIT): Is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and timberlands.
 
Russell 1000® Index: An index of approximately 1,000 of the largest companies in the U.S. equity market. The Index is a subset of the Russell 3000 Index, representing the top companies by market capitalization. The Index is unmanaged, and one cannot invest directly in the Index.
 
Russell 1000® Growth Index: Measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Index is unmanaged. It is not possible to invest directly in an index.
 
The Russell 1000® Value index: measures the performance of the Russell 1000’s value segment, which is defined to include firms whose share prices have lower price/book ratios and lower expected long/term mean earnings growth rates.
 
Yield Curve: Is a line that compares the yield of bonds of equal quality but different maturity dates.  In general, bonds with longer maturity dates offer higher yields than bonds with shorter maturity dates, thus producing an upward sloping yield curve.
 



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POPLAR FOREST PARTNERS FUND

SECTOR ALLOCATION OF PORTFOLIO ASSETS at September 30, 2021 (Unaudited)


 

 
Percentages represent market value as a percentage of total investments.
 
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”).  GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
 



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POPLAR FOREST CORNERSTONE FUND

SECTOR ALLOCATION OF PORTFOLIO ASSETS at September 30, 2021 (Unaudited)


 

 

 
Percentages represent market value as a percentage of total investments.
 
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”).  GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
 



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EXPENSE EXAMPLE at September 30, 2021 (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 Funds 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 (4/1/21 - 9/30/21).
 
Actual Expenses
For each class of each Fund, two lines are presented in the tables below, with the first line providing information about actual account values and actual expenses.  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 Funds’ transfer agent.  The Example below includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees.  You may use this information, 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
For each class of each Fund, the second line provides information about hypothetical account values and hypothetical expenses based on the respective 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 Funds 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 transaction costs, such as sales charges (loads), redemption fees, or exchange fees.  Therefore, the second line of the tables for each class of each Fund 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 transaction costs were included, your costs would have been higher.
 

 

 

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EXPENSE EXAMPLE at September 30, 2021 (Unaudited), Continued

 
Beginning
Ending
Expenses Paid
Annualized
 
Account Value
Account Value
During Period
Expense
 
4/1/21
9/30/21
4/1/21 – 9/30/21
Ratio*
Poplar Forest Partners Fund
       
         
Class A Shares
       
Actual
$1,000.00
$1,061.40
$6.20
1.20%
Hypothetical (5% return
       
  before expenses)
$1,000.00
$1,019.05
$6.07
1.20%
         
Institutional Class Shares
       
Actual
$1,000.00
$1,062.90
$4.91
0.95%
Hypothetical (5% return
       
  before expenses)
$1,000.00
$1,020.31
$4.81
0.95%
         
 
Beginning
Ending
Expenses Paid
Annualized
 
Account Value
Account Value
During Period
Expense
 
4/1/21
9/30/21
4/1/21 – 9/30/21
Ratio*
Poplar Forest Cornerstone Fund
       
         
Investor Class Shares
       
Actual
$1,000.00
$1,056.90
$4.64
0.90%
Hypothetical (5% return
       
  before expenses)
$1,000.00
$1,020.56
$4.56
0.90%

*
Expenses are equal to the annualized expense ratio of each class, multiplied by the average account value over the period, multiplied by 183 (days in most recent fiscal half-year) / 365 days to reflect the one-half year expense.





Poplar Forest Funds Annual Report, September 2021
16

POPLAR FOREST PARTNERS FUND

Comparison of the change in value of a $100,000 investment in the
Poplar Forest Partners Fund – Institutional Class Shares vs
the S&P 500® Index and the Russell 1000® Value Index



Average Annual Total Return:
1 Year
5 Year
10 Year
Poplar Forest Partners Fund –
     
  Institutional Class Shares
60.63%
  8.39%
12.91%
Poplar Forest Partners Fund –
     
  Class A Shares (with sales load)
52.24%
  7.02%
12.05%
Poplar Forest Partners Fund –
     
  Class A Shares (without sales load)
60.26%
  8.12%
12.63%
S&P 500® Index
30.00%
16.90%
16.63%
Russell 1000® Value Index
35.01%
10.94%
13.51%

Performance data quoted represents past performance; 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 1-877-522-8860.
 
Returns reflect the reinvestment of dividends and capital gain distributions.  Fee waivers are in effect.  In the absence of fee waivers, returns would be reduced.  Class A shares may be subject to a 5.00% front-end sales load.  The performance data and graph do not reflect the deduction of taxes that a shareholder may pay on dividends, capital gain distributions, or redemption of Fund shares.  This chart does not imply any future performance.  Indices do not incur expenses and are not available for investment.
 
The S&P 500® Index is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation.
 
The Russell 1000® Value index measures the performance of the Russell 1000’s value segment, which is defined to include firms whose share prices have lower price/book ratios and lower expected long/term mean earnings growth rates.
 



Poplar Forest Funds Annual Report, September 2021
17

POPLAR FOREST CORNERSTONE FUND

Comparison of the change in value of $25,000 investment in the
Poplar Forest Cornerstone Fund – Investor Class Shares vs.
the S&P 500® Index, the Bloomberg U.S. Aggregate Bond Index,
the Blended Index and the Consumer Price Index +3%


 
     
Since
Average Annual Total Return:
1 Year
5 Year
Inception1
Poplar Forest Cornerstone Fund –
     
  Investor Class Shares
45.53%
  8.53%
  7.42%
S&P 500® Index
30.00%
16.90%
13.76%
Bloomberg U.S. Aggregate Bond Index
 -0.90%
  2.94%
  3.11%
60% S&P 500®/40% U.S. Aggregate Bond Index
16.92%
11.43%
  9.67%
Consumer Price Index +3%
  8.54%
  5.66%
  5.39%

Performance data quoted represents past performance; 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 1-877-522-8860.
 
Returns reflect the reinvestment of dividends and capital gain distributions.  Fee waivers are in effect.  In the absence of fee waivers, returns would be reduced.  The performance data and graph do not reflect the deduction of taxes that a shareholder may pay on dividends, capital gain distributions, or redemption of Fund shares.  This chart does not imply any future performance.  Indices do not incur expenses and are not available for investment.
 
The S&P 500® Index is a market-value weighted index consisting of 500 stocks chosen for market size, liquidity, and industry group representation.
 

 

Poplar Forest Funds Annual Report, September 2021
18

POPLAR FOREST CORNERSTONE FUND

The Bloomberg U.S. Aggregate Bond Index is a broad based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable market, including Treasuries, government related and corporate securities.
 
The blended index is a 60% S&P 500® Index and 40% Bloomberg U.S. Aggregate Bond Index blend.
 
Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.  The annual percentage change in a CPI is used as a measure of inflation.  The CPI +3% is a measure defined as an objective in the Fund's prospectus.
 
1
The Fund commenced operations on December 31, 2014.








Poplar Forest Funds Annual Report, September 2021
19

POPLAR FOREST PARTNERS FUND

SCHEDULE OF INVESTMENTS at September 30, 2021

Shares
 
COMMON STOCKS – 98.4%
 
Value
 
   
Aerospace & Defense – 2.1%
     
 
53,500
 
Curtiss-Wright Corp.
 
$
6,750,630
 
               
     
Banks – 8.9%
       
 
170,500
 
Citigroup, Inc.
   
11,965,690
 
 
341,000
 
Wells Fargo & Co.
   
15,825,810
 
           
27,791,500
 
     
Biotechnology – 3.3%
       
 
55,800
 
United Therapeutics Corp. (b)
   
10,299,564
 
               
     
Commercial Services & Supplies – 1.8%
       
 
153,000
 
Herman Miller, Inc.
   
5,761,980
 
               
     
Consumer Finance – 4.7%
       
 
288,000
 
Ally Financial, Inc.
   
14,702,400
 
               
     
Diversified Financial Services – 4.2%
       
 
450,000
 
Equitable Holdings, Inc.
   
13,338,000
 
               
     
Diversified Telecommunication Services – 3.9%
       
 
451,000
 
AT&T, Inc.
   
12,181,510
 
               
     
Food Products – 3.2%
       
 
297,000
 
Conagra Brands, Inc.
   
10,059,390
 
               
     
Gas Utilities – 4.3%
       
 
255,000
 
National Fuel Gas Co.
   
13,392,600
 
               
     
Health Care Providers & Services – 8.4%
       
 
107,500
 
AmerisourceBergen Corp.
   
12,840,875
 
 
158,000
 
CVS Health Corp.
   
13,407,880
 
           
26,248,755
 
     
Hotels, Restaurants & Leisure – 1.9%
       
 
166,500
 
Las Vegas Sands Corp. (b)
   
6,093,900
 
               
     
Household Durables – 2.6%
       
 
370,000
 
Newell Brands, Inc.
   
8,191,800
 
               
     
Insurance – 10.8%
       
 
98,000
 
Allstate Corp.
   
12,476,380
 
 
256,500
 
American International Group, Inc.
   
14,079,285
 
 
104,500
 
Lincoln National Corp.
   
7,184,375
 
           
33,740,040
 
     
IT Services – 6.7%
       
 
324,500
 
DXC Technology Co. (b)
   
10,906,445
 
 
73,000
 
International Business Machines Corp.
   
10,141,890
 
           
21,048,335
 
     
Machinery – 3.8%
       
 
720,000
 
CNH Industrial NV (a)
   
11,959,200
 


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


Poplar Forest Funds Annual Report, September 2021
20

POPLAR FOREST PARTNERS FUND

SCHEDULE OF INVESTMENTS at September 30, 2021, Continued

Shares
     
Value
 
   
Metals & Mining – 3.5%
     
 
55,000
 
Nucor Corp.
 
$
5,416,950
 
 
38,500
 
Reliance Steel & Aluminum Co.
   
5,483,170
 
           
10,900,120
 
     
Multi-Line Retail – 2.1%
       
 
69,000
 
Dollar Tree, Inc. (b)
   
6,604,680
 
               
     
Oil, Gas & Consumable Fuels – 8.5%
       
 
127,500
 
Chevron Corp.
   
12,934,875
 
 
554,000
 
Murphy Oil Corp.
   
13,833,380
 
           
26,768,255
 
     
Pharmaceuticals – 6.4%
       
 
132,000
 
Merck & Co., Inc.
   
9,914,520
 
 
306,500
 
Organon & Co.
   
10,050,135
 
           
19,964,655
 
     
Specialty Retail – 4.6%
       
 
69,500
 
Advance Auto Parts, Inc.
   
14,517,855
 
               
     
Textiles, Apparel & Luxury Goods – 2.7%
       
 
230,000
 
Tapestry, Inc.
   
8,514,600
 
     
TOTAL COMMON STOCKS
       
     
  (Cost $223,253,508)
   
308,829,769
 
               
     
MONEY MARKET FUND – 1.5%
       
 
4,595,078
 
Morgan Stanley Institutional Liquidity Funds –
       
     
  Treasury Portfolio – Institutional Class, 0.01% (c)
   
4,595,078
 
     
Total Money Market Fund
       
     
  (Cost $4,595,078)
   
4,595,078
 
     
Total Investments in Securities
       
     
  (Cost $227,848,586) – 99.9%
   
313,424,847
 
     
Other Assets in Excess of Liabilities – 0.1%
   
175,638
 
     
NET ASSETS – 100.0%
 
$
313,600,485
 

(a)
U.S. traded security of a foreign issuer.
(b)
Non-income producing security.
(c)
Rate shown is the 7-day annualized yield at September 30, 2021.

The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”).  GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.


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


Poplar Forest Funds Annual Report, September 2021
21

POPLAR FOREST CORNERSTONE FUND

SCHEDULE OF INVESTMENTS at September 30, 2021

Shares
 
COMMON STOCKS – 73.0%
 
Value
 
   
Aerospace & Defense – 2.1%
     
 
5,000
 
Curtiss–Wright Corp.
 
$
630,900
 
               
     
Banks – 5.5%
       
 
10,000
 
Citigroup, Inc.
   
701,800
 
 
19,500
 
Wells Fargo & Co.
   
904,995
 
           
1,606,795
 
     
Biotechnology – 2.6%
       
 
4,200
 
United Therapeutics Corp. (a)
   
775,236
 
               
     
Commercial Services & Supplies – 1.9%
       
 
14,700
 
Herman Miller, Inc.
   
553,602
 
               
     
Consumer Finance – 3.0%
       
 
17,300
 
Ally Financial, Inc.
   
883,165
 
               
     
Diversified Financial Services – 2.5%
       
 
25,100
 
Equitable Holdings, Inc.
   
743,964
 
               
     
Diversified Telecommunication Services – 2.5%
       
 
27,000
 
AT&T, Inc.
   
729,270
 
               
     
Food Products – 2.6%
       
 
23,000
 
Conagra Brands, Inc.
   
779,010
 
               
     
Gas Utilities – 2.6%
       
 
14,700
 
National Fuel Gas Co.
   
772,044
 
               
     
Health Care Providers & Services – 6.4%
       
 
6,500
 
AmerisourceBergen Corp.
   
776,425
 
 
800
 
Anthem, Inc.
   
298,240
 
 
9,600
 
CVS Health Corp.
   
814,656
 
           
1,889,321
 
     
Hotels, Restaurants & Leisure – 2.0%
       
 
15,800
 
Las Vegas Sands Corp. (a)
   
578,280
 
               
     
Household Durables – 1.9%
       
 
25,700
 
Newell Brands, Inc.
   
568,998
 
               
     
Insurance – 8.8%
       
 
7,200
 
Allstate Corp.
   
916,632
 
 
18,000
 
American International Group, Inc.
   
988,020
 
 
9,900
 
Lincoln National Corp.
   
680,625
 
           
2,585,277
 
     
IT Services – 4.6%
       
 
19,500
 
DXC Technology Co. (a)
   
655,395
 
 
5,000
 
International Business Machines Corp.
   
694,650
 
           
1,350,045
 


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


Poplar Forest Funds Annual Report, September 2021
22

POPLAR FOREST CORNERSTONE FUND

SCHEDULE OF INVESTMENTS at September 30, 2021, Continued

Shares
     
Value
 
   
Machinery – 2.4%
     
 
41,700
 
CNH Industrial NV (c)
 
$
692,637
 
               
     
Metals & Mining – 3.5%
       
 
5,800
 
Nucor Corp.
   
571,242
 
 
3,300
 
Reliance Steel & Aluminum Co.
   
469,986
 
           
1,041,228
 
     
Multi-Line Retail – 2.1%
       
 
6,500
 
Dollar Tree, Inc. (a)
   
622,180
 
               
     
Oil, Gas & Consumable Fuels – 5.8%
       
 
7,900
 
Chevron Corp.
   
801,455
 
 
36,500
 
Murphy Oil Corp.
   
911,405
 
           
1,712,860
 
     
Pharmaceuticals – 5.0%
       
 
9,100
 
Merck & Co., Inc.
   
683,501
 
 
23,600
 
Organon & Co.
   
773,844
 
           
1,457,345
 
     
Specialty Retail – 3.2%
       
 
4,500
 
Advance Auto Parts, Inc.
   
940,005
 
               
     
Textiles, Apparel & Luxury Goods – 2.0%
       
 
15,600
 
Tapestry, Inc.
   
577,512
 
     
TOTAL COMMON STOCKS
       
     
  (Cost $15,925,713)
   
21,489,674
 
               
Principal
           
Amount
 
CORPORATE BONDS – 5.1%
       
     
Banks – 2.5%
       
     
Citizens Financial Group, Inc.
       
$
700,000
 
3.750%, 7/1/24
   
745,906
 
               
     
Professional Services – 2.6%
       
     
Equifax, Inc.
       
 
750,000
 
3.300%, 12/15/22
   
770,282
 
     
TOTAL CORPORATE BONDS
       
     
  (Cost $1,465,273)
   
1,516,188
 


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


Poplar Forest Funds Annual Report, September 2021
23

POPLAR FOREST CORNERSTONE FUND

SCHEDULE OF INVESTMENTS at September 30, 2021, Continued

Principal
         
Amount
 
U.S. TREASURY NOTES – 10.9%
 
Value
 
   
U.S. Treasury Floating Rate Note
     
$
650,000
 
  0.084%, (USBMMY3M + 0.049%), 1/31/23 (d)
 
$
650,325
 
     
U.S. Treasury Note TIPS
       
 
796,085
 
  0.125%, 1/15/22
   
801,986
 
 
804,825
 
  0.125%, 7/15/24
   
859,413
 
 
800,460
 
  0.250%, 7/15/29
   
890,255
 
     
TOTAL U.S. TREASURY NOTES
       
     
  (Cost $3,054,468)
   
3,201,979
 
               
     
PREFERRED STOCK – 2.5%
       
     
Consumer Finance – 2.5%
       
 
700,000
 
Ally Financial, Inc. – Series B, 4.70%
   
730,783
 
     
TOTAL PREFERRED STOCK
       
     
  (Cost $713,347)
   
730,783
 
               
     
SHORT-TERM INVESTMENTS – 12.0%
       
     
Money Market Fund – 8.5%
       
 
2,504,188
 
Morgan Stanley Institutional Liquidity Funds –
       
     
  Treasury Portfolio – Institutional Class, 0.01% (b)
   
2,504,188
 
               
     
U.S. Treasury Bills – 3.5%
       
$
515,000
 
  0.039%, 11/2/21 (e)
   
514,972
 
 
515,000
 
  0.037%, 11/30/21 (e)
   
514,966
 
           
1,029,938
 
     
TOTAL SHORT-TERM INVESTMENTS
       
     
  (Cost $3,534,138)
   
3,534,126
 
     
Total Investments in Securities
       
     
  (Cost $24,692,939) – 103.5%
   
30,472,750
 
     
Liabilities in Excess of Other Assets – (3.5)%
   
(1,029,344
)
     
NET ASSETS – 100.0%
 
$
29,443,406
 

TIPS – Treasury Inflation Protected Securities
USBMMY3M – U.S. Treasury 3 Month Bill Money Market Fund
(a)
Non-income producing security.
(b)
Rate shown is the 7-day annualized yield at September 30, 2021.
(c)
U.S. traded security of a foreign issuer.
(d)
Variable or floating rate security based on a reference index and spread. The rate reported is the rate in effect as of September 30, 2021.
(e)
Rate shown is the discount rate at September 30, 2021.

The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”).  GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.


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


Poplar Forest Funds Annual Report, September 2021
24










(This Page Intentionally Left Blank.)
 












Poplar Forest Funds Annual Report, September 2021
25

POPLAR FOREST FUNDS

STATEMENTS OF ASSETS AND LIABILITIES at September 30, 2021

   
Poplar Forest
   
Poplar Forest
 
   
Partners Fund
   
Cornerstone Fund
 
ASSETS
           
Investments in securities, at value (identified cost
           
  $227,848,586 and $24,692,939, respectively)
 
$
313,424,847
   
$
30,472,750
 
Receivables
               
Fund shares issued
   
130,802
     
 
Dividends and interest
   
408,994
     
47,665
 
Prepaid expenses
   
26,408
     
5,785
 
Total assets
   
313,991,051
     
30,526,200
 
LIABILITIES
               
Payables
               
Due to custodian
   
408
     
37
 
Investments purchased
   
     
1,029,950
 
Fund shares redeemed
   
54,040
     
 
Due to Adviser
   
197,077
     
5,065
 
12b-1 fees
   
16,511
     
 
Custody fees
   
6,313
     
1,115
 
Administration and fund accounting fees
   
48,819
     
16,001
 
Transfer agent fees and expenses
   
32,533
     
3,952
 
Audit fees
   
22,500
     
22,500
 
Chief Compliance Officer fee
   
2,083
     
2,083
 
Accrued expenses
   
10,282
     
2,091
 
Total liabilities
   
390,566
     
1,082,794
 
NET ASSETS
  $
313,600,485
   
$
29,443,406
 

               



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


Poplar Forest Funds Annual Report, September 2021
26

POPLAR FOREST FUNDS

STATEMENTS OF ASSETS AND LIABILITIES at September 30, 2021, Continued

   
Poplar Forest
   
Poplar Forest
 
   
Partners Fund
   
Cornerstone Fund
 
CALCULATION OF NET ASSET VALUE PER SHARE
           
Class A Shares
           
Net assets applicable to shares outstanding
 
$
24,098,104
   
$
 
Shares issued and outstanding [unlimited number
               
  of shares (par value $0.01) authorized]
   
430,524
     
 
Net asset value and redemption price per share
 
$
55.97
   
$
 
Maximum offering price per share (Net asset value
               
  per share divided by 95.00%)
 
$
58.92
   
$
 
Investor Class Shares*
               
Net assets applicable to shares outstanding
 
$
   
$
29,443,406
 
Shares issued and outstanding [unlimited number
               
  of shares (par value $0.01) authorized]
   
     
906,165
 
Net asset value, offering and redemption price per share
 
$
   
$
32.49
 
Institutional Class Shares
               
Net assets applicable to shares outstanding
 
$
289,502,381
   
$
 
Shares issued and outstanding [unlimited number
               
  of shares (par value $0.01) authorized]
   
5,163,370
     
 
Net asset value, offering and redemption price per share
 
$
56.07
   
$
 
COMPONENTS OF NET ASSETS
               
Paid-in capital
 
$
190,119,148
   
$
20,231,776
 
Total distributable earnings
   
123,481,337
     
9,211,630
 
Net assets
 
$
313,600,485
   
$
29,443,406
 

*
Formerly Institutional Class shares.


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


Poplar Forest Funds Annual Report, September 2021
27

POPLAR FOREST FUNDS

STATEMENTS OF OPERATIONS For the Year Ended September 30, 2021

   
Poplar Forest
   
Poplar Forest
 
   
Partners Fund
   
Cornerstone Fund
 
INVESTMENT INCOME
           
Income
           
Dividends
 
$
7,695,759
   
$
552,597
 
Interest
   
687
     
241,016
 
Total Income
   
7,696,446
     
793,613
 
Expenses
               
Advisory fees (Note 4)
   
2,494,116
     
217,832
 
Administration and fund accounting fees (Note 4)
   
255,722
     
92,201
 
Transfer agent fees and expenses (Note 4)
   
126,907
     
21,162
 
Sub-transfer agent fees (Note 4)
   
68,615
     
882
 
12b-1 fees - Class A shares (Note 5)
   
55,864
     
114
 
Registration fees
   
37,074
     
11,056
 
Custody fees (Note 4)
   
31,145
     
5,560
 
Audit fees
   
22,561
     
22,561
 
Printing and mailing expense
   
16,255
     
4,804
 
Trustees fees and expenses
   
15,936
     
13,834
 
Chief Compliance Officer fee (Note 4)
   
12,533
     
12,532
 
Legal fees
   
6,919
     
7,301
 
Insurance expense
   
5,743
     
2,402
 
Interest expense (Note 7)
   
60
     
36
 
Miscellaneous
   
25,345
     
4,923
 
Total expenses
   
3,174,795
     
417,200
 
Less: Advisory fees waived (Note 4)
   
(364,246
)
   
(172,025
)
Net expenses
   
2,810,549
     
245,175
 
Net investment income
   
4,885,897
     
548,438
 
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
               
Net realized gain from investments
   
39,388,544
     
2,924,392
 
Net change in unrealized appreciation/(depreciation)
               
  on investments
   
78,809,934
     
5,994,523
 
Net realized and unrealized gain on investments
   
118,198,478
     
8,918,915
 
Net Increase in Net Assets Resulting from Operations
 
$
123,084,375
   
$
9,467,353
 


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


Poplar Forest Funds Annual Report, September 2021
28

POPLAR FOREST PARTNERS FUND

STATEMENTS OF CHANGES IN NET ASSETS

   
Year Ended
   
Year Ended
 
   
September 30, 2021
   
September 30, 2020
 
NET INCREASE/(DECREASE) IN NET ASSETS FROM:
           
OPERATIONS
           
Net investment income
 
$
4,885,897
   
$
6,459,926
 
Net realized gain/(loss) from investments
   
39,388,544
     
(1,642,063
)
Net change in unrealized appreciation/
               
  (depreciation) on investments
   
78,809,934
     
(51,871,595
)
Net increase/(decrease) in net assets
               
  resulting from operations
   
123,084,375
     
(47,053,732
)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
               
Net dividends and distributions to shareholders –
               
  Class A Shares
   
(415,085
)
   
(405,531
)
Net dividends and distributions to shareholders –
               
  Institutional Class Shares
   
(5,476,997
)
   
(6,068,125
)
Total dividends and distributions to shareholders
   
(5,892,082
)
   
(6,473,656
)
CAPITAL SHARE TRANSACTIONS
               
Net decrease in net assets derived from
               
  net change in outstanding shares (a)
   
(13,007,866
)
   
(128,784,596
)
Total increase/(decrease) in net assets
   
104,184,427
     
(182,311,984
)
NET ASSETS
               
Beginning of year
   
209,416,058
     
391,728,042
 
End of year
 
$
313,600,485
   
$
209,416,058
 

(a)
A summary of share transactions is as follows:
 
     
Year Ended
   
Year Ended
 
     
September 30, 2021
   
September 30, 2020
 
 
Class A Shares
 
Shares
   
Paid-in Capital
   
Shares
   
Paid-in Capital
 
 
Shares sold
   
25,420
   
$
1,304,406
     
21,332
   
$
784,218
 
 
Shares issued on
                               
 
  reinvestments of distributions
   
8,381
     
359,307
     
8,016
     
345,823
 
 
Shares redeemed
   
(75,059
)
   
(3,502,736
)
   
(252,959
)
   
(9,602,219
)
 
Net decrease
   
(41,258
)
 
$
(1,839,023
)
   
(223,611
)
 
$
(8,472,178
)
                                   
     
Year Ended
   
Year Ended
 
     
September 30, 2021
   
September 30, 2020
 
 
Institutional Class Shares
 
Shares
   
Paid-in Capital
   
Shares
   
Paid-in Capital
 
 
Shares sold
   
761,086
   
$
38,036,211
     
1,181,437
   
$
42,102,878
 
 
Shares issued on
                               
 
  reinvestments of distributions
   
95,132
     
4,077,349
     
111,995
     
4,828,120
 
 
Shares redeemed
   
(1,080,237
)
   
(53,282,403
)
   
(4,474,461
)
   
(167,243,416
)
 
Net decrease
   
(224,019
)
 
$
(11,168,843
)
   
(3,181,029
)
 
$
(120,312,418
)


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


Poplar Forest Funds Annual Report, September 2021
29

POPLAR FOREST CORNERSTONE FUND

STATEMENTS OF CHANGES IN NET ASSETS

   
Year Ended
   
Year Ended
 
   
September 30, 2021
   
September 30, 2020
 
NET INCREASE/(DECREASE) IN NET ASSETS FROM:
           
OPERATIONS
           
Net investment income
 
$
548,438
   
$
472,671
 
Net realized gain/(loss) from investments
   
2,924,392
     
(414,322
)
Net change in unrealized appreciation/
               
  (depreciation) on investments
   
5,994,523
     
(1,945,718
)
Net increase/(decrease) in net assets
               
  resulting from operations
   
9,467,353
     
(1,887,369
)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
               
Net dividends and distributions to shareholders –
               
  Class A Shares*
   
     
(25,515
)
Net dividends and distributions to shareholders –
               
  Investor Class Shares**
   
(472,669
)
   
(1,217,092
)
Total dividends and distributions to shareholders
   
(472,669
)
   
(1,242,607
)
CAPITAL SHARE TRANSACTIONS
               
Net decrease in net assets derived from
               
  net change in outstanding shares (a)
   
(2,174,853
)
   
(1,567,148
)
Total increase/(decrease) in net assets
   
6,819,831
     
(4,697,124
)
NET ASSETS
               
Beginning of year
   
22,623,575
     
27,320,699
 
End of year
 
$
29,443,406
   
$
22,623,575
 

(a)
A summary of share transactions is as follows:
 
     
Year Ended
   
Year Ended
 
     
September 30, 2021
   
September 30, 2020
 
 
Class A Shares*
 
Shares
   
Paid-in Capital
   
Shares
   
Paid-in Capital
 
 
Shares issued on reinvestments
                       
 
  of distributions
   
   
$
     
1,016
   
$
25,516
 
 
Payment for conversion of
                               
 
  Class A shares
   
(22,671
)
   
(515,549
)
   
     
 
 
Shares redeemed
   
(1,124
)
   
(26,622
)
   
     
 
 
Net increase/(decrease)
   
(23,795
)
 
$
(542,171
)
   
1,016
   
$
25,516
 
                                   
     
Year Ended
   
Year Ended
 
     
September 30, 2021
   
September 30, 2020
 
 
Investor Class Shares**
 
Shares
   
Paid-in Capital
   
Shares
   
Paid-in Capital
 
 
Shares sold
   
9,455
   
$
309,101
     
826
   
$
19,416
 
 
Proceeds from conversion of
                               
 
  Class A shares
   
22,612
     
515,549
     
     
 
 
Shares issued on reinvestments
                               
 
  of distributions
   
17,427
     
457,118
     
45,173
     
1,134,299
 
 
Shares redeemed
   
(113,808
)
   
(2,914,450
)
   
(120,719
)
   
(2,746,379
)
 
Net decrease
   
(64,314
)
 
$
(1,632,682
)
   
(74,720
)
 
$
(1,592,664
)

*
 
Class A Shares converted to Investor Class Shares on October 30, 2020.  See Note 1 in the Notes to Financial Statements.
**
 
Formerly Institutional Class Shares.


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


Poplar Forest Funds Annual Report, September 2021
30

POPLAR FOREST PARTNERS FUND

FINANCIAL HIGHLIGHTS For a share outstanding throughout each year

Class A Shares
   
Year Ended September 30,
 
   
2021
   
2020
   
2019
   
2018
   
2017
 
Net asset value, beginning of year
 
$
35.69
   
$
42.22
   
$
52.65
   
$
50.88
   
$
46.61
 
Income from investment operations:
                                       
Net investment income^
   
0.74
     
0.74
     
0.58
     
0.39
     
0.67
 
Net realized and unrealized
                                       
  gain/(loss) on investments
   
20.48
     
(6.65
)
   
(6.50
)
   
3.77
     
4.49
 
Total from investment operations
   
21.22
     
(5.91
)
   
(5.92
)
   
4.16
     
5.16
 
Less distributions:
                                       
From net investment income
   
(0.94
)
   
(0.62
)
   
(0.50
)
   
(0.85
)
   
(0.18
)
From net realized gain
                                       
  on investments
   
     
     
(4.01
)
   
(1.54
)
   
(0.71
)
Total distributions
   
(0.94
)
   
(0.62
)
   
(4.51
)
   
(2.39
)
   
(0.89
)
Net asset value, end of year
 
$
55.97
   
$
35.69
   
$
42.22
   
$
52.65
   
$
50.88
 
                                         
Total return
   
60.26
%
   
-14.27
%
   
-10.71
%
   
8.45
%
   
11.06
%
                                         
Ratios/supplemental data:
                                       
Net assets, end of year (thousands)
 
$
24,098
   
$
16,840
   
$
29,359
   
$
48,157
   
$
79,335
 
Ratio of expenses
                                       
  to average net assets:
                                       
Before fee waiver
   
1.34
%
   
1.43
%
   
1.36
%
   
1.28
%
   
1.28
%
After fee waiver
   
1.21
%
   
1.25
%
   
1.25
%
   
1.25
%
   
1.25
%
Ratio of net investment income
                                       
  to average net assets:
                                       
Before fee waiver
   
1.35
%
   
1.75
%
   
1.25
%
   
0.74
%
   
1.33
%
After fee waiver
   
1.48
%
   
1.93
%
   
1.36
%
   
0.77
%
   
1.36
%
Portfolio turnover rate
   
40.94
%
   
40.35
%
   
30.72
%
   
31.83
%
   
31.07
%

^
Based on average shares outstanding.


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


Poplar Forest Funds Annual Report, September 2021
31

POPLAR FOREST PARTNERS FUND

FINANCIAL HIGHLIGHTS For a share outstanding throughout each year

Institutional Class
   
Year Ended September 30,
 
   
2021
   
2020
   
2019
   
2018
   
2017
 
Net asset value, beginning of year
 
$
35.75
   
$
42.29
   
$
52.79
   
$
51.06
   
$
46.84
 
Income from investment operations:
                                       
Net investment income^
   
0.86
     
0.84
     
0.69
     
0.53
     
1.02
 
Net realized and unrealized
                                       
  gain/(loss) on investments
   
20.50
     
(6.65
)
   
(6.53
)
   
3.77
     
4.30
 
Total from investment operations
   
21.36
     
(5.81
)
   
(5.84
)
   
4.30
     
5.32
 
Less distributions:
                                       
From net investment income
   
(1.04
)
   
(0.73
)
   
(0.65
)
   
(1.03
)
   
(0.39
)
From net realized gain
                                       
  on investments
   
     
     
(4.01
)
   
(1.54
)
   
(0.71
)
Total distributions
   
(1.04
)
   
(0.73
)
   
(4.66
)
   
(2.57
)
   
(1.10
)
Net asset value, end of year
 
$
56.07
   
$
35.75
   
$
42.29
   
$
52.79
   
$
51.06
 
                                         
Total return
   
60.63
%
   
-14.03
%
   
-10.49
%
   
8.72
%
   
11.35
%
                                         
Ratios/supplemental data:
                                       
Net assets, end of year (thousands)
 
$
289,502
   
$
192,576
   
$
362,369
   
$
701,542
   
$
692,564
 
Ratio of expenses
                                       
  to average net assets:
                                       
Before fee waiver
   
1.09
%
   
1.18
%
   
1.11
%
   
1.03
%
   
1.03
%
After fee waiver
   
0.96
%
   
1.00
%
   
1.00
%
   
1.00
%
   
1.00
%
Ratio of net investment income
                                       
  to average net assets:
                                       
Before fee waiver
   
1.59
%
   
2.00
%
   
1.50
%
   
1.02
%
   
2.02
%
After fee waiver
   
1.72
%
   
2.18
%
   
1.61
%
   
1.05
%
   
2.05
%
Portfolio turnover rate
   
40.94
%
   
40.35
%
   
30.72
%
   
31.83
%
   
31.07
%

^
Based on average shares outstanding.


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


Poplar Forest Funds Annual Report, September 2021
32

POPLAR FOREST CORNERSTONE FUND

FINANCIAL HIGHLIGHTS For a share outstanding throughout each year

Investor Shares*
   
Year Ended September 30,
 
   
2021
   
2020
   
2019
   
2018
   
2017
 
Net asset value, beginning of year
 
$
22.76
   
$
25.58
   
$
28.20
   
$
26.70
   
$
25.69
 
Income from investment operations:
                                       
Net investment income^
   
0.60
     
0.45
     
0.42
     
0.33
     
0.47
 
Net realized and unrealized
                                       
  gain/(loss) on investments
   
9.64
     
(2.11
)
   
(1.83
)
   
1.81
     
1.53
 
Total from investment operations
   
10.24
     
(1.66
)
   
(1.41
)
   
2.14
     
2.00
 
Less distributions:
                                       
From net investment income
   
(0.51
)
   
(0.34
)
   
(0.42
)
   
(0.40
)
   
(0.22
)
From net realized gain
                                       
  on investments
   
     
(0.82
)
   
(0.79
)
   
(0.24
)
   
(0.77
)
Total distributions
   
(0.51
)
   
(1.16
)
   
(1.21
)
   
(0.64
)
   
(0.99
)
Net asset value, end of year
 
$
32.49
   
$
22.76
   
$
25.58
   
$
28.20
   
$
26.70
 
                                         
Total return
   
45.53
%
   
-6.89
%
   
-4.71
%
   
8.15
%
   
7.83
%
                                         
Ratios/supplemental data:
                                       
Net assets, end of year (thousands)
 
$
29,443
   
$
22,084
   
$
26,739
   
$
31,005
   
$
28,939
 
Ratio of expenses
                                       
  to average net assets:
                                       
Before fee waiver
   
1.53
%#
   
1.76
%
   
1.64
%
   
1.49
%
   
1.57
%
After fee waiver
   
0.90
%#
   
0.90
%
   
0.90
%
   
0.90
%
   
0.90
%
Ratio of net investment income
                                       
  to average net assets:
                                       
Before fee waiver
   
1.38
%
   
1.05
%
   
0.92
%
   
0.61
%
   
1.12
%
After fee waiver
   
2.01
%
   
1.91
%
   
1.66
%
   
1.20
%
   
1.79
%
Portfolio turnover rate
   
36.13
%
   
39.97
%
   
38.12
%
   
29.88
%
   
24.82
%

*
Formerly Institutional Class Shares.
^
Based on average shares outstanding.
#
Includes expenses of Class A Shares which converted to Investor Class Shares on October 30, 2020.


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


Poplar Forest Funds Annual Report, September 2021
33

POPLAR FOREST FUNDS

NOTES TO FINANCIAL STATEMENTS at September 30, 2021

NOTE 1 – ORGANIZATION
 
The Poplar Forest Partners Fund (the “Partners Fund”) and the Poplar Forest Cornerstone Fund (“Cornerstone Fund”), (each, a “Fund” and collectively, the “Funds”) are diversified 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.  Each Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services – Investment Companies.”
 
The investment objective of the Partners Fund is to seek long-term growth of capital.  The investment objective of the Cornerstone Fund is to seek to achieve current income and long-term growth of capital.  The Partners Fund currently offers Class A shares and Institutional Class shares.  The Cornerstone Fund currently offers Investor Class shares.  Class A shares are subject to a maximum front-end sales load of 5.00%, which decreases depending on the amount invested.  The Partner Fund’s Class A shares and Institutional Class shares commenced operations on December 31, 2009.
 
The Cornerstone Fund’s Class A shares and Institutional Class shares commenced operations on December 31, 2014.  At the close of business on October 30, 2020, the Cornerstone Fund’s Class A shares converted to the Institutional Class shares.  On January 28, 2021, the class name changed from Institutional Class to Investor Class.
 
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
 
The following is a summary of significant accounting policies consistently followed by the Funds. These policies are in conformity with accounting principles generally accepted in the United States of America.
 
 
A.
Security Valuation:  All investments in securities are recorded at their estimated fair value, as described in note 3.
     
 
B.
Federal Income Taxes: It is the Funds’ 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 Funds recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The tax returns of the Funds’ prior three fiscal years are open for examination. Management has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Funds’ net assets and no tax liability resulting from unrecognized tax events relating to uncertain income tax positions taken or expected to be taken on a tax return. The Funds identify their major tax jurisdictions as U.S. Federal and the state of Wisconsin. The Funds are 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.



Poplar Forest Funds Annual Report, September 2021
34

POPLAR FOREST FUNDS

NOTES TO FINANCIAL STATEMENTS at September 30, 2021, Continued

 
C.
Security Transactions, Income and Distributions: Security transactions are accounted for on the trade date. Realized gains and losses on securities sold are calculated on the basis of specific cost.  Interest income is recorded on an accrual basis.  Discounts on securities purchased are accreted over the life of the respective security.  Premiums on securities purchased are amortized to the earliest call date.  Dividend income, income and capital gain distributions from underlying funds, and distributions to shareholders are recorded on the ex-dividend date. Withholding taxes on foreign dividends have been provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates.
     
   
Investment income, expenses (other than those specific to the class of shares), and realized and unrealized gains and losses on investments are allocated to the separate classes of each Fund based upon their relative net assets on the date income is earned or expensed and realized and unrealized gains and losses are incurred.
     
   
Each Fund is charged for those expenses that are directly attributable to the Fund, such as investment advisory, custody and transfer agent fees.  Expenses that are not attributable to a Fund are typically allocated among the Funds in proportion to their respective net assets.  Common expenses of the Trust are typically allocated among the funds in the Trust based on a fund’s respective net assets, or by other equitable means.
     
   
The Funds distribute substantially all net investment income, if any, and net realized gains, if any, annually.  Distributions from net realized gains for book purposes may include short-term capital gains.  All short-term capital gains are included in ordinary income for tax purposes.
     
   
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.
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.
     
   
For the year ended September 30, 2021, the Funds made the following permanent tax adjustments on the statements of assets and liabilities:

     
Total
       
     
Distributable
       
     
Earnings
   
Paid-in Capital
 
 
Partners Fund
 
$
(2,148,467
)
 
$
2,148,467
 
 
Cornerstone Fund
 
$
(24,226
)
 
$
24,226
 



Poplar Forest Funds Annual Report, September 2021
35

POPLAR FOREST FUNDS

NOTES TO FINANCIAL STATEMENTS at September 30, 2021, Continued

 
E.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets during the reporting period. Actual results could differ from those estimates.
     
 
F.
Events Subsequent to the Fiscal Year End:   In preparing the financial statements as of September 30, 2021, management considered the impact of subsequent events for potential recognition or disclosure in the financial statements.  Management has determined there were no subsequent events that would need to be disclosed in the Funds’ financial statements.
 
NOTE 3 – SECURITIES VALUATION
 
The Funds have 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 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 Funds have 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 each 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 Funds’ major categories of assets and liabilities measured at fair value on a recurring basis.
 
Each Fund determines the fair value of its investments and computes its net asset value per share as of the close of regular trading on the New York Stock Exchange (4:00 pm EST).
 
Equity Securities:  The Funds’ investments are carried at fair value. Equity 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



Poplar Forest Funds Annual Report, September 2021
36

POPLAR FOREST FUNDS

NOTES TO FINANCIAL STATEMENTS at September 30, 2021, Continued

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 (“OTC”) securities which are not traded in the NASDAQ Global Market System shall be valued at the most recent sales price.  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.
 
Investment Companies: Investments in open-end mutual funds, including money market funds, are generally priced at their net asset value per share provided by the service agent of the funds and will be classified in level 1 of the fair value hierarchy.
 
Debt Securities: Debt securities are valued at the mean of the bid and asked prices furnished by an independent pricing service using valuation methods that are designed to represent fair value. These valuation methods can include matrix pricing and other analytical pricing models, market transactions, and dealer-supplied valuations. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. Most debt securities are categorized in level 2 of the fair value hierarchy.
 
Short-Term Securities:  Short-term debt securities, including those securities having a maturity of 60 days or less, are valued at the evaluated mean between the bid and asked prices.  To the extent the inputs are observable and timely, these securities would be classified in level 2 of the fair value hierarchy.
 
The Board of Trustees has delegated day-to-day valuation issues to a Valuation Committee of the Trust which is comprised of representatives from the Funds’ administrator, U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services”).  The function of the Valuation Committee is to value securities where current and reliable market quotations are not readily available or the closing price does not represent fair value by 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.  All actions taken by the Valuation Committee are subsequently reviewed and ratified by the Board of Trustees.
 
Depending on the relative significance of the valuation inputs, fair valued securities may be classified in either level 2 or level 3 of the fair value hierarchy.
 



Poplar Forest Funds Annual Report, September 2021
37

POPLAR FOREST FUNDS

NOTES TO FINANCIAL STATEMENTS at September 30, 2021, Continued

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 Funds’ securities as of September 30, 2021:
 
Partners Fund
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Common Stocks
                       
Communication Services
 
$
12,181,510
   
$
   
$
   
$
12,181,510
 
Consumer Discretionary
   
43,922,835
     
     
     
43,922,835
 
Consumer Staples
   
10,059,390
     
     
     
10,059,390
 
Energy
   
26,768,255
     
     
     
26,768,255
 
Financials
   
89,571,940
     
     
     
89,571,940
 
Health Care
   
56,512,974
     
     
     
56,512,974
 
Industrials
   
24,471,810
     
     
     
24,471,810
 
Information Technology
   
21,048,335
     
     
     
21,048,335
 
Materials
   
10,900,120
     
     
     
10,900,120
 
Utilities
   
13,392,600
     
     
     
13,392,600
 
Total Common Stocks
   
308,829,769
     
     
     
308,829,769
 
Money Market Fund
   
4,595,078
     
     
     
4,595,078
 
Total Investments
                               
  in Securities
 
$
313,424,847
   
$
   
$
   
$
313,424,847
 
                                 
Cornerstone Fund
                               
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Common Stocks
                               
Communication Services
 
$
729,270
   
$
   
$
   
$
729,270
 
Consumer Discretionary
   
3,286,975
     
     
     
3,286,975
 
Consumer Staples
   
779,010
     
     
     
779,010
 
Energy
   
1,712,860
     
     
     
1,712,860
 
Financials
   
5,819,201
     
     
     
5,819,201
 
Health Care
   
4,121,902
     
     
     
4,121,902
 
Industrials
   
1,877,139
     
     
     
1,877,139
 
Information Technology
   
1,350,045
     
     
     
1,350,045
 
Materials
   
1,041,228
     
     
     
1,041,228
 
Utilities
   
772,044
     
     
     
772,044
 
Total Common Stocks
   
21,489,674
     
     
     
21,489,674
 
Fixed Income
                               
Corporate Bonds
   
     
1,516,188
     
     
1,516,188
 
U.S. Treasury Notes
   
     
3,201,979
     
     
3,201,979
 
Total Fixed Income
   
     
4,718,167
     
     
4,718,167
 
Preferred Stock
   
     
730,783
     
     
730,783
 
Money Market Fund
   
2,504,188
     
     
     
2,504,188
 
U.S. Treasury Bills
   
     
1,029,938
     
     
1,029,938
 
Total Investments
                               
  in Securities
 
$
23,993,862
   
$
6,478,888
   
$
   
$
30,472,750
 



Poplar Forest Funds Annual Report, September 2021
38

POPLAR FOREST FUNDS

NOTES TO FINANCIAL STATEMENTS at September 30, 2021, Continued

Refer to the Funds’ schedules of investments for a detailed break-out of securities by industry classification.
 
In October 2020, the Securities and Exchange Commission (the “SEC”) adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”).  Funds will be required to implement and comply with Rule 18f-4 by August 19, 2022. Once implemented, Rule 18f-4 will impose limits on the amount of derivatives a fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, treat derivatives as senior securities and require funds whose use of derivatives is more than a limited specified exposure amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager.  The Funds do not currently enter into derivatives transactions.  Management is currently evaluating the potential impact of Rule 18f-4 on the Funds.
 
In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices (“Rule 2a-5”).  Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act.  Rule 2a-5 will permit fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions.  Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must fair value a security.  In connection with Rule 2a-5, the SEC also adopted related recordkeeping requirements and is rescinding previously issued guidance, including with respect to the role of a board in determining fair value and the accounting and auditing of fund investments.  The Funds will be required to comply with the rules by September 8, 2022.  Management is currently assessing the potential impact of the new rules on the Funds’ financial statements.
 
The global outbreak of COVID-19 (commonly referred to as “coronavirus”)  has disrupted economic markets and the prolonged economic impact is uncertain.  The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known.  The operational and financial performance of the issuers of securities in which the Funds invest depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Funds’ investments, impair the Funds’ ability to satisfy redemption requests, and negatively impact the Funds’ performance.
 
NOTE 4 – INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
 
Poplar Forest Capital, LLC (the “Adviser”) provides the Funds with investment management services under an investment advisory agreement. The Adviser furnishes all investment advice, office space, facilities, and provides most of the personnel needed by the Funds. As compensation for its services, each Fund pays the Adviser a monthly management fee.  For the Partners Fund, effective January 1, 2021, the fees are calculated at an annual rate of 0.85% of average daily net assets for the first $250 million
 



Poplar Forest Funds Annual Report, September 2021
39

POPLAR FOREST FUNDS

NOTES TO FINANCIAL STATEMENTS at September 30, 2021, Continued

of assets, 0.775% of the Fund’s average daily net assets for the next $750 million of assets, and 0.70% of the Fund’s average daily net assets in excess of $1 billion. For the Cornerstone Fund, the fees are calculated at an annual rate of 0.80% of average daily net assets for the first $250 million of assets, 0.70% of the Fund’s average daily net assets for the next $750 million of assets, and 0.60% of the Fund’s average daily net assets in excess of $1 billion.  For the year ended September 30, 2021, the advisory fees incurred by the Funds are disclosed in the statement of operations.  Any amount due from the Adviser is paid monthly to the Funds.
 
The Funds are responsible for their own operating expenses.  The Adviser has contractually agreed to reduce fees payable to it by the Funds and to pay Fund operating expenses (excluding acquired fund fees and expenses, interest, taxes, extraordinary expenses, Rule 12b-1 fees, shareholder servicing fees, and other class-specific expenses) to the extent necessary to limit each Fund’s aggregate annual operating expenses as a percent of average daily net assets as follows:
 
 
Partners Fund
   
0.95
%*
 
 
Cornerstone Fund
   
0.90
%
 
             
 
* Effective January 1, 2021.  Previous expense cap was 1.00%.
         

Any such reduction made by the Adviser in its fees or payment of expenses which are a Fund’s obligation are subject to reimbursement by the Fund to the Adviser, if so requested by the Adviser, in any subsequent month in the 36-month period from the date of the management fee reduction and expense payment if the aggregate amount actually paid by the Fund toward the operating expenses for such fiscal year (taking into account the reimbursement) will not cause the Fund to exceed the lesser of (1) the expense limitation in place at the time of the management fee reduction and expense payment; or (2) the expense limitation in place at the time of the reimbursement. Any such reimbursement is also contingent upon Board of Trustees review and approval at the time the reimbursement is made. Such reimbursement may not be paid prior to the Funds’ payment of current ordinary operating expenses. For the year ended September 30, 2021, the Adviser reduced its fees in the amount of $364,246 and $172,025 in the Partners Fund and the Cornerstone Fund, respectively.  No amounts were recouped by the Adviser.  The expense limitation will remain in effect through at least January 27, 2022, and may be terminated only by the Trust’s Board of Trustees.  The Adviser may recapture portions of the amounts shown below no later than the corresponding dates:
 
     
9/30/2022
   
9/30/2023
   
9/30/2024
   
Total
 
 
Partners Fund
 
$
528,027
   
$
541,745
   
$
364,246
   
$
1,434,018
 
 
Cornerstone Fund
   
209,239
     
212,025