-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NIubMb6o9P2P5Ujassh4BJUaX7IT3O4AQPxhOaQVkIL5pJY+FOiCTwBzxZOooa4g owcnFIi9sADvEDkz3e4zeA== 0000950147-01-500218.txt : 20010206 0000950147-01-500218.hdr.sgml : 20010206 ACCESSION NUMBER: 0000950147-01-500218 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVISORS SERIES TRUST CENTRAL INDEX KEY: 0001027596 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07959 FILM NUMBER: 1524949 BUSINESS ADDRESS: STREET 1: 2020 E FINANCIAL WAY SUITE 100 CITY: GLENDORA STATE: CA ZIP: 91741 BUSINESS PHONE: 8188521033 MAIL ADDRESS: STREET 1: 2020 E FINANCIAL WAY STREET 2: SUITE 100 CITY: GLENDORA STATE: CA ZIP: 91741 N-30D 1 e-6183.txt ANNUAL REPORT FOR THE YEAR ENDED 11/30/00 HOWARD EQUITY FUND ANNUAL REPORT NOVEMBER 30, 2000 HOWARD EQUITY FUND ANNUAL REPORT November 30, 2000 Dear Shareholders: The investment environment has changed dramatically since last Spring from one that rewarded high growth businesses to one in which traditional valuation concepts were the dominant criteria. The NASDAQ Composite has consistently outperformed the S&P 500 since 1990. However, beginning with the fourth quarter of 1997, that relative outperformance reached extremes never before seen -- the NASDAQ Composite appreciated 300% versus a 60% rise in the S&P 500. Our investments in telecommunications, technology and genomics contributed significantly to the success the Fund experienced during calendar 1999. Although we felt there would be a leadership transition away from the prevailing "growth at any price" philosophy, it happened much more quickly and was more severe than we anticipated. In the past, such secular changes in market leadership took place over a period of several quarters -- e.g. the energy sector in the inflationary environment of the 1970's. What we regret is that we did not act more aggressively just one or two months earlier. The 50% drop in the NASDAQ from September 2000 to November 2000 (exacerbated by tax loss selling) was especially severe. The performance disparity would have been much more narrow if more of the changes had been made prior to the end of the summer. We consistently reduced our NASDAQ related investments from April, 2000 to November, 2000 and increased our positions in "old economy" businesses such as financial services and pharmaceuticals and "old economy" companies such as 3M and United Technologies. Although the portfolio volatility was dramatically reduced, it was difficult to notice during the stock market's persistent decline throughout the fourth quarter. For the fiscal year ending November 30, 2000, the Fund's net asset value declined 10.86% versus 4.22% decline in the S&P 500 Index. We are pleased to report that since inception, the Fund's performance compared favorably with the S&P 500 -- 7.3% versus 7.2%. The investment landscape that we forecast is beginning to materialize. The sectors and companies that can perform well in this environment are proving to be the "old economy" businesses that we have favored. Should these trends continue through mid-year, it is possible that we are in the forefront of the new stock market leadership. /s/ Anthony G. Orphanos Anthony G. Orphanos Fund Manager HOWARD EQUITY FUND Comparison of the change in value of a $10,000 investment in the Howard Equity Fund versus the S&P 500 Composite Stock Price Index and the Lipper Multi-Cap Growth Fund Index. Average Annual Total Return (1) One Year ........................... (10.86%) Since inception (12/29/98) ......... 3.74% S&P 500 Lipper Howard Composite Multi-Cap Equity Stock Price Growth Fund Fund Index* Index** ---- ----- ----- 29-Dec-98 $10,000 $10,000 $10,000 26-Feb-99 $10,230 $10,093 $10,062 31-May-99 $10,770 $10,643 $10,682 31-Aug-99 $11,450 $10,830 $11,060 30-Nov-99 $12,040 $11,431 $12,715 29-Feb-00 $17,714 $10,653 $16,803 31-May-00 $11,743 $11,111 $14,300 31-Aug-00 $14,013 $11,903 $16,873 30-Nov-00 $10,733 $10,341 $12,483 Past performance is not predictive of future performance. Share value will fluctuate, so that an investors shares, when redeemed, may be worth more or less than the original investment. Indexes do not incur expenses and are not available for investment. (1) Average Annual Total Return represents the average change in account value over the periods indicated. * The S&P 500 Composite Stock Price Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. * The Lipper Multi Cap Growth Fund Index invests in a variety of market capitalization ranges, without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-Cap funds will generally have between 25% to 75% of their assets invested incompanies with market capitalizations (on a three-year weighted basis) above 300% of the dollar-weighted median market capitalization of the S&P Mid-Cap 400 Index. Multi-Cap Growth funds normally invest in companies with long-term earnings expected to grow significantly faster than the earnings of the stocks represented in a major unmanaged stock index. These funds will normally have an above-average price-to-earnings ratio, price-to-book ration, and three-year earnings growth figure, compared to the U.S. diversified multi-cap equity funds universe average. 2 HOWARD EQUITY FUND SCHEDULE OF INVESTMENTS AT NOVEMBER 30, 2000 - -------------------------------------------------------------------------------- Shares COMMON STOCKS: 90.85% Market Value - -------------------------------------------------------------------------------- AEROSPACE/DEFENSE - EQUIPMENT: 5.12% 10,000 United Technologies Corp........................... $ 708,125 ------------ AUCTION HOUSE/ART DEALER: 1.25% 8,000 Sotheby's Holdings, Inc. Class A .................. 172,500 ------------ AUTO - CARS/LIGHT TRUCKS: 3.58% 10,000 General Motors Corp. .............................. 495,000 ------------ AUTOMOTIVE - MEDIUM & HEAVY DUTY TRUCKS: 4.23% 18,000 Navistar International Corp.*...................... 585,000 ------------ CAPITAL GOODS - DIVERSIFIED MANUFACTURING: 5.30% 5,500 Eaton Corp. ....................................... 385,688 7,000 General Electric Co. .............................. 346,937 ------------ 732,625 ------------ CELLULAR TELECOM: 0.90% 4,000 Nextel Communications, Inc.*....................... 124,000 ------------ COMPUTERS - HARDWARE: 0.91% 4,000 Hewlett-Packard Co................................. 126,500 ------------ CONSUMER CYCLICALS - INSTRUMENTS/CONTROLS: 3.55% 8,900 Johnson Controls, Inc.............................. 490,612 ------------ CONSUMER STAPLES - RETAIL/RESTAURANTS: 3.00% 13,000 McDonald's Corp.................................... 414,375 ------------ DIVERSIFIED MANUFACTURING OPERATIONS: 4.84% 6,700 Minnesota Mining and Manufacturing Co.............. 669,163 ------------ DIVERSIFIED UNIT INVESTMENT TRUST: 1.58% 3,500 Nasdaq-100 Shares*................................. 219,187 ------------ 3 HOWARD EQUITY FUND SCHEDULE OF INVESTMENTS AT NOVEMBER 30, 2000, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- ELECTRONIC COMPONENTS - SEMICONDUCTOR: 3.51% 13,000 Texas Instruments, Inc................................ $ 485,062 ---------- FINANCIALS - DIVERSIFIED FINANCIAL SERVICES: 1.80% 5,000 Citigroup, Inc........................................ 249,062 ---------- FINANCIALS - LIFE/HEALTH INSURANCE: 1.68% 3,400 Jefferson-Pilot Corp.................................. 232,050 ---------- FINANCIALS - MONEY CENTER BANKS: 5.26% 10,000 Bank of America Corp.................................. 399,375 8,900 Chase Manhattan Corp.................................. 328,188 ---------- 727,563 ---------- HEALTHCARE - PHARMACEUTICALS: 10.51% 10,000 American Home Products Corp........................... 601,250 5,000 Johnson & Johnson..................................... 500,000 5,800 Pharmacia Corp........................................ 353,800 ---------- 1,455,050 ---------- HEALTHCARE -MEDICAL PRODUCTS: 3.20% 13,000 Becton Dickinson & Co................................. 442,000 ---------- MACHINERY - CONSTRUCTION & MINING: 2.27% 8,000 Caterpillar, Inc...................................... 314,500 ---------- MEDICAL - BIOMEDICAL/GENOMICS: 6.77% 2,000 Diversa Corp.*........................................ 38,750 20,000 Lynx Therapeutics, Inc.* ............................ 231,250 16,000 PE Corp. - Celera Genomics Group Stock*............... 666,000 ---------- 936,000 ---------- MEDICAL - DRUGS: 8.03% 8,500 Merck & Co., Inc...................................... 787,844 15,000 Pharmacopeia, Inc.*................................... 324,375 ---------- 1,112,219 ---------- 4 HOWARD EQUITY FUND SCHEDULE OF INVESTMENTS AT NOVEMBER 30, 2000, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- METAL - ALUMINUM: 3.46% 17,000 Alcoa, Inc...................................... $ 479,188 ----------- NETWORK SOFTWARE: 2.50% 71,000 NetSpeak Corp.*................................. 346,125 ----------- TECHNOLOGY - NETWORKING PRODUCTS: 1.46% 13,000 Lucent Technologies, Inc........................ 202,313 ----------- TECHNOLOGY - SEMICONDUCTORS: 4.62% 13,000 Advanced Micro Devices, Inc.*................... 198,250 11,600 Intel Corp...................................... 441,525 ----------- 639,775 ----------- TELECOM SERVICES: 1.52% 17,000 Global Crossing Ltd.*........................... 210,375 ----------- Total Common Stocks (Cost $14,718,339).......... 12,568,369 ----------- Principal Amount SHORT-TERM INVESTMENTS: 11.70% - -------------------------------------------------------------------------------- $1,618,735 Firstar Stellar Treasury Fund (Cost $1,618,735)............................. 1,618,735 ----------- Total Investments in Securities (Cost $16,337,074+): 102.55%................. 14,187,104 Liabilities in Excess of Other Assets: (2.55%).. (352,032) ----------- Total Net Assets: 100.00%...................... $13,835,072 =========== * Non-income producing security. + At November 30, 2000, the cost of securities for Federal tax purposes was the same as the basis for financial reporting. Gross unrealized appreciation and depreciation of securities is as follows: Gross unrealized appreciation................ $ 642,858 Gross unrealized depreciation................ (2,792,828) ----------- Net unrealized depreciation......... $(2,149,970) =========== See Notes to Financial Statements. 5 HOWARD EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES AT NOVEMBER 30, 2000 - -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (identified cost $16,337,074) ......................................... $ 14,187,104 Receivables Dividends and interest .................................... 27,087 Fund shares sold .......................................... 237,788 Prepaid expenses ............................................ 4,763 ------------ Total assets .................................... 14,456,742 ------------ LIABILITIES Payables Administration fees ....................................... 2,076 Due to advisor ............................................ 10,955 Fund shares repurchased ................................... 148,175 Portfolio securities purchased ............................ 442,042 Accrued expenses ............................................ 18,422 ------------ Total liabilities ............................... 621,670 ------------ NET ASSETS .................................................... $ 13,835,072 ============ Net asset value, offering and redemption price per share [$13,835,072/1,289,744 shares outstanding; unlimited number of shares (par value $0.01) authorized] .... $ 10.73 ============ COMPONENTS OF NET ASSETS Paid-in capital ............................................. $ 16,930,607 Accumulated net realized loss on investments ................ (945,565) Net unrealized depreciation on investments .................. (2,149,970) ------------ Net assets....................................... $ 13,835,072 ============ See Notes to Financial Statements. 6 HOWARD EQUITY FUND STATEMENT OF OPERATIONS - FOR THE YEAR ENDED NOVEMBER 30, 2000 - -------------------------------------------------------------------------------- INVESTMENT INCOME Income Dividends .................................................. $ 92,450 Interest ................................................... 204,638 ----------- Total income........................................... 297,088 ----------- Expenses Advisory fees (Note 3) ..................................... 175,622 Distribution Expense (Note 3) .............................. 57,549 Administration fee (Note 3) ................................ 36,091 Professional fees .......................................... 22,459 Fund accounting fees ....................................... 20,104 Registration fees .......................................... 13,681 Transfer agent fees ........................................ 11,536 Custody fees ............................................... 6,923 Trustees' fees ............................................. 4,249 Other ...................................................... 3,023 Insurance expense .......................................... 2,302 ----------- Total expenses ........................................ 353,539 Less: advisory fee waiver (Note 3) .................... (10,858) ----------- Net expenses .......................................... 342,681 ----------- NET INVESTMENT LOSS ................................. (45,593) ----------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss from security transactions ................. (767,807) Net change in unrealized depreciation on investments ......... (3,181,001) ----------- Net realized and unrealized loss on investments........ (3,948,808) ----------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................................... $(3,994,401) =========== See Notes to Financial Statements. 7 HOWARD EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Year Dec. 29, 1998* Ended through Nov. 30, 2000 Nov. 30, 1999 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment (loss)/income ........................... $ (45,593) $ 3,092 Net realized loss on security transactions ............. (767,807) (177,758) Net change in unrealized (depreciation)/appreciation on investments ........................................ (3,181,001) 1,031,031 ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ....................... (3,994,401) 856,365 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net investment income ............................ (2,878) -- ------------ ------------ TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase in net assets derived from net change in outstanding shares (a) ............ 7,840,288 9,135,698 ------------ ------------ TOTAL INCREASE IN NET ASSETS ..................... 3,843,009 9,992,063 ------------ ------------ NET ASSETS Beginning of period .................................... 9,992,063 -- ------------ ------------ END OF PERIOD .......................................... $ 13,835,072 $ 9,992,063 ============ ============ (a) A summary of share transactions is as follows: Year December 29, 1998* Ended through November 30, 2000 November 30, 1999 ------------------------- ------------------------- Shares Paid in Capital Shares Paid in Capital ------ --------------- ------ --------------- Shares sold ................................... 836,126 $ 12,750,717 842,974 $ 9,277,834 Shares issued on reinvestments................. of distributions ............................ 205 2,803 -- -- Shares redeemed ............................... (376,316) (4,913,232) (13,245) (142,136) -------- ------------ -------- ----------- Net increase .................................. 460,015 $ 7,840,288 829,729 $ 9,135,698 ======== ============ ======== ===========
* Commencement of operations. See Notes to Financial Statements. 8 HOWARD EQUITY FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD - --------------------------------------------------------------------------------
Year Dec. 29, 1998* Ended through Nov. 30, 2000++ Nov. 30, 1999 --------------- ------------- Net asset value, beginning of period ................... $ 12.04 $ 10.00 ------- -------- Income from investment operations: Net investment income / (loss) ....................... (0.04) 0.00 Net realized and unrealized gain / (loss) on investments ...................................... (1.27) 2.04 ------- -------- Total from investment operations ....................... (1.31) 2.04 ------- -------- Less distributions: From net investment income............................ 0.00** 0.00 ------- -------- Total distributions .................................... 0.00 0.00 ------- -------- Net asset value, end of period ......................... $ 10.73 $ 12.04 ======= ======== TOTAL RETURN ........................................... (10.86%) 20.40%# RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) .................. $13,835 $ 9,992 Ratio of expenses to average net assets: Before expense reimbursement ......................... 2.01% 4.39%+ After expense reimbursement .......................... 1.95% 1.95%+ Ratio of net investment loss to average net assets After expense reimbursement .......................... (0.26%) 0.07%+ Portfolio turnover rate ................................ 181.51% 211.31%
* Commencement of operations. ** Amount distributed represents less than one-half of one cent per share. + Annualized. # Not Annualized ++ Computed using average shares outstanding. See Notes to Financial Statements. 9 HOWARD EQUITY FUND NOTES TO FINANCIAL STATEMENTS AT NOVEMBER 30, 2000 - -------------------------------------------------------------------------------- NOTE 1 - ORGANIZATION The Howard Equity Fund (the "Fund") is a series of shares of beneficial interest of Advisors Series Trust (the "Trust"), which is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The investment objective of the Fund is to seek growth of capital. The Fund attempts to achieve its objective by investing primarily in equity securities of large to mid capitalization companies. The Fund began operations on December 29, 1998. 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 generally accepted accounting principles. A. SECURITY VALUATION: The Fund's investments are carried at fair value. Securities that are primarily traded on a national securities exchange shall be valued at the last sale price on the exchange on which they are primarily traded on the day of valuation or, if there has been no sale on such day, at the mean between the bid and asked prices. Securities primarily traded in the NASDAQ National Market System for which market quotations are readily available shall be valued at the last sale price on the day of valuation, or if there has been no sale on such day, at the mean between the bid and asked prices. Over-the-counter ("OTC") securities which are not traded in the NASDAQ National Market System shall be valued at the most recent trade price. Securities for which market quotations are not readily available, if any, are valued following procedures approved by the Board of Trustees. Short-term investments are valued at amortized cost, which approximates market value. B. FEDERAL INCOME TAXES: It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. C. SECURITY TRANSACTIONS, DIVIDENDS AND DISTRIBUTIONS: Security transactions are accounted for on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. Dividend income and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions to shareholders from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations which differs from generally accepted accounting principles. To the extent these book/tax differences are permanent such amounts are reclassified within the capital accounts based on their Federal tax treatment. The reclassification relates primarily to the net operating loss of the Fund which is not deductible for tax purposes and was reclassified to paid-in capital. D. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial 10 HOWARD EQUITY FUND NOTES TO FINANCIAL STATEMENTS, CONTINUED - -------------------------------------------------------------------------------- statements and the reported amounts of increases and decreases in net assets during the reporting period. Actual results could differ from those estimates. NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES For the year ended November 30, 2000, Howard Capital Management (the "Advisor") provided the Fund with investment management services under an Investment Advisory Agreement. The Advisor furnished all investment advice, office space, facilities, and provides most of the personnel needed by the Fund. As compensation for its services, the Advisor is entitled to a monthly fee at the annual rate of 1.00% based upon the average daily net assets of the Fund. For the year ended November 30, 2000, the Fund incurred $175,622 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 Fund's aggregate annual operating expenses to 1.95% of average net assets (the "expense cap"). Any such reduction made by the Advisor in its fees or payment of expenses which are the Fund's obligation are subject to reimbursement by the Fund to the Advisor, if so requested by the Advisor, in subsequent fiscal years if the aggregate amount actually paid by the Fund toward the operating expenses for such fiscal year (taking into account the reimbursement) does not exceed the applicable limitation on Fund expenses. The Advisor is permitted to be reimbursed only for fee reductions and expense payments made in the previous three fiscal years, but is permitted to look back five years and four years, respectively, during the initial six years and seventh year of the Funds operations. Any such reimbursement is also contingent upon Board of Trustees review and approval at the time the reimbursement is made. Such reimbursement may not be paid prior to the Fund's payment of current ordinary operating expenses. For the period ended November 30, 2000, the Advisor reduced its fee by $10,858; no amounts were reimbursed to the Advisor. Cumulative expenses subject to recapture pursuant to the aforementioned conditions amounted to $113,646 at November 30, 2000. Investment Company Administration, L.L.C. (the "Administrator") acts as the Fund's Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the trustees; monitors the activities of the Fund's custodian, transfer agent and accountants; coordinates the preparation and payment of the Fund's expenses and reviews the Fund's expense accruals. For its services, the Administrator receives a monthly fee at the following annual rate: Fund asset level Fee rate ---------------- -------- Less than $15 million $30,000 $15 million to less than $50 million 0.20% of average daily net assets $50 million to less than $100 million 0.15% of average daily net assets $100 million to less than $150 million 0.10% of average daily net assets More than $150 million 0.05% of average daily net assets 11 HOWARD EQUITY FUND NOTES TO FINANCIAL STATEMENTS, CONTINUED - -------------------------------------------------------------------------------- The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 (the "Plan"). The Plan permits the Fund to pay for distribution and related expenses at an annual rate of up to 0.50% of the Fund's average daily net assets annually. The expenses covered by the Plan may include the cost of preparing and distributing prospectuses and other sales material, advertising and public relations expenses, payments to financial intermediaries and compensation of personnel involved in selling shares of the Fund. Payments made pursuant to the Plan will represent compensation for distribution and service activities, not reimbursements for specific expenses incurred. Pursuant to a distribution coordination agreement adopted under the Plan, distribution fees are paid to the Advisor as "Distribution Coordinator". For the year ended November 30, 2000, the Fund paid the Distribution Coordinator $57,549. First Fund Distributors, Inc. (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 Fund are also officers and/or directors of the Administrator and the Distributor. NOTE 4 - SECURITIES TRANSACTIONS For the year ended November 30, 2000, the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $33,739,810 and $23,868,574, respectively. The Fund has capital loss carryovers for tax purposes of $177,758 expiring in 2007 which can be used to offset future capital gains. Additionally the Fund incurred post-October losses of $767,807 which have been deferred and will be reflected in the year ending November 30, 2001. 12 REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders Howard Equity Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statement of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Howard Equity Fund (the "Fund") at November 30, 2000, the results of its operations for the year then ended, the changes in its net assets and financial highlights for the year then ended and for the period from December 29, 1998 (commencement of operations) through November 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at November 30, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York December 22, 2000 13 [LOGO] ADVISOR HOWARD CAPITAL MANAGEMENT 45 ROCKFELLER PLAZA SUITE 1440 NEW YORK, NY 10111 (212) 586-4800 DISTRIBUTOR FIRST FUND DISTRIBUTORS, INC. 4455 EAST CAMELBACK ROAD SUITE 261E PHOENIX, AZ 85018 CUSTODIAN FIRSTAR INSTITUTIONAL CUSTODY SERVICES 425 WALNUT STREET CINCINNATI, OH 45202 SHAREHOLDER SERVICING AGENT AMERICAN DATA SERVICES, INC. 150 MOTOR PARKWAY SUITE 109 HAUPPAUGE, NY 11788-0132 (888) 229-2105 LEGAL COUNSEL PAUL, HASTINGS, JANOFSKY & WALKER LLP 345 CALIFORNIA STREET SAN FRANCISCO, CA 94014 INDEPENDENT ACCOUNTANTS PRICEWATERHOUSECOOPERS LLP 1177 AVENUE OF THE AMERICAS NEW YORK, NY 10036 -----END PRIVACY-ENHANCED MESSAGE-----