N-30D 1 e-6878.txt ANNUAL REPORT FOR YEAR ENDED 02/28/2001 The American Trust Allegiance Fund One Court Street Lebanon, New Hampshire 03766 ANNUAL REPORT FEBRUARY 28, 2001 AMERICAN TRUST ALLEGIANCE FUND April 24, 2001 Dear Fellow Shareholder, We are pleased to send you the American Trust Allegiance Fund's annual report for the twelve months ending February 28, 2001. The Fund's total assets equaled $31.9 million as of February 28, 2001. The Fund's investment performance has been disappointing over the past year due to the general decline in the U.S. stock market and the sharp fall in technology stocks. The U.S. stock market has been in the throes of the worst bear market since the punishing bear of 1972-1974. Few stocks have escaped from the grinding declines that have occurred over the past year and the technology sector has been especially hard hit. The financial market weakness can be attributed to the fairly sudden decline in the U.S. economy, compounded by a dramatic deceleration in technology capital spending. The impact to corporate profits has been pervasive, with disappointing earnings across virtually all sectors of the economy. As a consequence, the Federal Reserve has aggressively lowered interest rates in an effort to avoid a recession. Our investment discipline of focusing on companies with attractive long-term growth potential lead to a significant weighting in technology stocks for the Fund. That technology exposure has hurt the performance of the Fund over the past year. We remain convinced that some of the best investment opportunities for investors will be in the technology sector and therefore, we intend to maintain a meaningful weighting in this sector. However, we have broadened the diversification of the Fund's portfolio and have invested in attractive non-technology growth opportunities. Investors are certainly faced with challenging times and we expect the financial markets to remain choppy. Our job is to look ahead and position the Fund's portfolio for long- term growth. We thank you for your support and look forward to helping you achieve your financial goals. /s/ Jeffrey M. Harris Jeffrey M. Harris, CFA /s/ Paul H. Collins Paul H. Collins Remember past performance is not a guarantee of future results. Fund share values and returns fluctuate and investors may have a gain or a loss when shares are redeemed. During the year ended February 28, 2001, a portion of the advisory fee was waived. 1 AMERICAN TRUST ALLEGIANCE FUND American Trust Allegiance Fund Comparison of the change in value of a $10,000 investment in the American Trust Allegiance Fund versus the S&P 500 Composite Stock Price Index American Trust S&P 500 Composite Allegiance Fund Stock Price Index --------------- ----------------- 11-Mar-97 $10,000 $10,000 31-Mar-97 $ 9,210 $9,342 31-May-97 $10,630 $10,497 31-Aug-97 $11,450 $11,175 30-Nov-97 $12,200 $11,927 28-Feb-98 $13,480 $13,149 29-May-98 $13,620 $13,718 31-Aug-98 $12,110 $12,086 30-Nov-98 $15,130 $14,750 28-Feb-99 $17,183 $15,742 31-May-99 $17,842 $16,600 31-Aug-99 $17,893 $16,892 30-Nov-99 $20,765 $17,829 29-Feb-00 $25,942 $17,585 31-May-00 $23,536 $17,329 31-Aug-00 $28,337 $18,564 30-Nov-00 $20,887 $16,129 28-Feb-01 $17,463 $15,253 AVERAGE ANNUAL TOTAL RETURN(1) ------------------------------ 1 Year (32.68%) Since Inception (3/11/97) 15.07% Past performance is no guarantee of future results. Share value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than the original investment. Indices do not incur expenses and are not available for investment. (1) Average Annual Total Return represents the average change in account value over the periods indicated. The S&P 500 Composite Stock Price Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. 2 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 2001 -------------------------------------------------------------------------------- Shares COMMON STOCKS: 84.91% Market Value -------------------------------------------------------------------------------- AIR FREIGHT: 1.81% 9,900 Expeditors International of Washington, Inc........ $ 577,912 ------------ AIRLINES: 0.99% 17,100 Southwest Airlines Co.............................. 318,060 ------------ BANKS - MAJOR REGIONAL: 3.19% 6,100 Fifth Third Bancorp................................ 328,256 9,700 Northern Trust Corp................................ 689,912 ------------ 1,018,168 ------------ BROADCAST MEDIA: 1.83% 13,500 Comcast Corp. - Special Class A*.................. 584,719 ------------ COMMUNICATIONS EQUIPMENT: 4.76% 4,100 CIENA Corp.*....................................... 275,469 8,850 Corning, Inc....................................... 239,835 21,500 Lucent Technologies, Inc........................... 249,185 11,100 Nokia Corp., ADR, Class A #........................ 244,200 11,200 Nortel Networks Corp............................... 207,088 7,000 Tellabs, Inc.*..................................... 304,938 ------------ 1,520,715 ------------ COMPUTER SOFTWARE AND SERVICES: 4.16% 5,900 Adobe Systems, Inc................................. 171,469 10,350 Microsoft Corp.*................................... 610,650 15,700 Oracle Corp.*...................................... 298,300 6,500 Siebel Systems, Inc.*.............................. 248,625 ------------ 1,329,044 ------------ COMPUTERS - HARDWARE: 0.90% 14,400 Sun Microsystems, Inc.*............................ 286,200 ------------ See accompanying Notes to Financial Statements. 3 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 2001, CONTINUED -------------------------------------------------------------------------------- Shares Market Value -------------------------------------------------------------------------------- COMPUTERS - NETWORKING: 2.43% 10,520 Cisco Systems, Inc.*............................... $ 249,192 3,500 Juniper Networks, Inc.*............................ 225,969 430 McDATA Corp.*...................................... 7,686 9,900 Network Appliance, Inc.*........................... 294,525 ------------ 777,372 ------------ COMPUTERS - PERIPHERAL: 1.07% 8,600 EMC Corp.* 341,936 ------------ ELECTRICAL EQUIPMENT: 4.64% 4,600 Celestica, Inc.*................................... 225,400 7,400 Emerson Electric Co................................ 495,060 8,400 Flextronics International Ltd.*.................... 222,600 7,900 Sanmina Corp.*..................................... 235,519 6,550 Symbol Technologies, Inc........................... 303,593 ------------ 1,482,172 ------------ ELECTRONICS - SEMICONDUCTOR: 3.93% 4,300 Applied Micro Circuits Corp.*...................... 115,025 2,800 Broadcom Corp. - Class A*.......................... 137,900 15,700 Intel Corp......................................... 448,431 8,440 JDS Uniphase Corp.*................................ 225,770 5,000 Texas Instruments, Inc............................. 147,750 4,600 Vitesse Semiconductor Corp.*....................... 181,413 ------------ 1,256,289 ------------ ELECTRONICS - SEMICONDUCTOR EQUIPMENT: 0.83% 6,300 Applied Materials, Inc.*........................... 266,175 ------------ ELECTRONICS EQUIPMENT: 0.70% 8,200 Solectron Corp.*................................... 223,450 ------------ EQUIPMENT - SEMICONDUCTOR: 0.87% 4,600 Cabot Microelectronics Corp.*...................... 278,587 ------------ See accompanying Notes to Financial Statements. 4 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 2001, CONTINUED -------------------------------------------------------------------------------- Shares Market Value -------------------------------------------------------------------------------- FINANCIAL - DIVERSIFIED: 5.32% 15,300 American Express Co................................ $ 671,364 9,900 Fannie Mae......................................... 789,030 2,400 State Street Corp.................................. 241,080 ------------ 1,701,474 ------------ FOOD DISTRIBUTION: 2.91% 7,800 Performance Food Group Co.*........................ 413,400 18,900 Sysco Corp......................................... 515,214 ------------ 928,614 ------------ HOUSEHOLD PRODUCTS: 6.09% 19,250 Colgate-Palmolive Co............................... 1,136,713 22,500 The Clorox Co...................................... 809,100 ------------ 1,945,813 ------------ INSURANCE - BROKERS: 2.94% 8,775 Marsh & McLennan Companies, Inc.................... 938,925 ------------ INSURANCE - MULTILINE: 3.17% 12,367 American International Group, Inc.................. 1,011,621 ------------ LEISURE: 2.28% 16,800 Harley-Davidson, Inc............................... 728,280 ------------ OIL - INTERNATIONAL: 2.76% 10,900 Exxon Mobil Corp................................... 883,445 ------------ OIL AND GAS - DRILL AND EQUIPMENT: 2.15% 10,800 Schlumberger Ltd................................... 688,500 ------------ RETAIL - APPAREL: 0.94% 11,000 The Gap, Inc....................................... 299,640 ------------ RETAIL - DEPARTMENT STORES: 3.28% 15,900 Kohls Corp.*....................................... 1,047,969 ------------ See accompanying Notes to Financial Statements. 5 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 2001, CONTINUED -------------------------------------------------------------------------------- Shares Market Value -------------------------------------------------------------------------------- RETAIL - SPECIALTY: 3.25% 42,200 Bed Bath & Beyond, Inc.*............................ $ 1,039,175 ------------ SERVICES - COMM & CONSUMER: 1.16% 10,300 Cintas Corp......................................... 370,961 ------------ SERVICES - COMPUTER SERVICES: 1.41% 8,100 Sungard Data Systems, Inc.*......................... 451,170 ------------ SERVICES - DATA PROCESSING: 4.98% 13,400 Automatic Data Processing........................... 790,600 20,025 Paychex, Inc........................................ 799,748 ------------ 1,590,348 ------------ TELECOMMUNICATIONS - LONG DISTANCE: 0.99% 19,000 MCI WorldCom, Inc.*................................. 315,875 ------------ TELEPHONE: 2.56% 8,700 BellSouth Corp...................................... 365,052 9,500 SBC Communications, Inc............................. 453,150 ------------ 818,202 ------------ UTILITIES - NATURAL GAS: 2.68% 12,500 Enron Corp.......................................... 856,250 ------------ UTILITIES - POWER PRODUCTS: 3.93% 15,000 Calpine Corp.*...................................... 667,350 21,300 NRG Energy, Inc.*................................... 590,010 ------------ 1,257,360 ------------ Total Common Stocks (Cost $28,950,291)+............. $ 27,134,421 ------------ See accompanying Notes to Financial Statements. 6 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 2001, CONTINUED -------------------------------------------------------------------------------- Principal Amount Short-Term Investments: 14.99% Market Value -------------------------------------------------------------------------------- 4,789,394 Firstar Stellar Treasury Fund (Cost $4,789,394)..... $ 4,789,394 ------------ Total Investments in Securities (Cost $33,739,685): 99.90%............................................. 31,923,815 Other Assets less Liabilities: 0.10%............... 33,456 ------------ NET ASSETS: 100%................................... $ 31,957,271 ============ * Non-income producing security. # ADR - American Depository Receipt + At February 28, 2001, the cost of securities for Federal tax purposes was $34,287,481. Gross unrealized appreciation and depreciation is as follows: Gross unrealized appreciation....................... 2,990,207 Gross unrealized depreciation....................... (5,353,873) ------------ Net unrealized depreciation.................... $ (2,363,666) ============= See accompanying Notes to Financial Statements. 7 AMERICAN TRUST ALLEGIANCE FUND STATEMENT OF ASSETS AND LIABILITIES AT FEBRUARY 28, 2001 -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (cost $33,739,685) ...... $ 31,923,815 Receivables: Fund shares sold .......................................... 23,104 Dividends and interest .................................... 23,992 Prepaid expenses ............................................ 9,094 Deferred organization costs ................................. 3,797 ------------ Total assets ........................................... 31,983,802 ------------ LIABILITIES Payables: Due to advisor ............................................ 4,332 Administration fees ....................................... 5,409 Accrued expenses ............................................ 16,790 ------------ Total liabilities ...................................... 26,531 ------------ NET ASSETS .................................................... $ 31,957,271 ============ Net asset value, offering and redemption price per share ($31,957,271 / 1,906,548 shares outstanding; unlimited number of shares (par value $0.01) authorized) ............. $ 16.76 ============ COMPONENTS OF NET ASSETS Paid-in capital ............................................. $ 33,611,747 Accumulated net realized gain on investments ................ 161,394 Net unrealized depreciation on investments .................. (1,815,870) ------------ Net assets ............................................. $ 31,957,271 ============ See accompanying Notes to Financial Statements. 8 AMERICAN TRUST ALLEGIANCE FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 28, 2001 -------------------------------------------------------------------------------- INVESTMENT INCOME Income Dividends .................................................. $ 155,973 Interest ................................................... 119,883 ------------ Total income ............................................. 275,856 ------------ Expenses Advisory fees (Note 3) ..................................... 383,815 Administration fees (Note 3) ............................... 80,803 Transfer agent fees ........................................ 52,638 Fund accounting fees ....................................... 31,408 Registration fees .......................................... 20,391 Audit fees ................................................. 21,890 Custody fees ............................................... 12,832 Reports to shareholders .................................... 6,842 Legal fees ................................................. 5,749 Trustees' fees ............................................. 4,300 Amortization of deferred organization costs ................ 3,701 Insurance expense .......................................... 3,618 Miscellaneous .............................................. 2,744 ------------ Total expenses ........................................... 630,731 Less: Advisory fee waiver (Note 3) ....................... (44,373) ------------ Net expenses ............................................. 586,358 ------------ Net investment loss ................................... (310,502) ------------ REALIZED AND UNREALIZED GAIN / (LOSS) ON INVESTMENTS Net realized gain on investments ........................... 164,480 Net change in unrealized depreciation on investments ....... (15,142,450) ------------ Net realized and unrealized loss on investments .......... (14,977,970) ------------ Net decrease in net assets resulting from operations .. $(15,288,472) ============ See accompanying Notes to Financial Statements. 9 AMERICAN TRUST ALLEGIANCE FUND STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Year Ended Year Ended February 28, February 29, 2001 2000 ------------ ------------ INCREASE / (DECREASE) IN NET ASSETS FROM: Net investment loss ...................................... $ (310,502) $ (157,537) Net realized gain on investments ......................... 164,480 1,178,889 Net change in unrealized (depreciation) / appreciation on investments ........................... (15,142,450) 9,654,443 ------------ ------------ Net (decrease)/increase in net assets resulting from operations ......................................... (15,288,472) 10,675,795 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net realized gain on security transactions ............... (1,001,777) -- ------------ ------------ TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase in net assets derived from net change in outstanding shares (a) ................................ 11,315,499 12,926,816 ------------ ------------ Total (decrease)/increase in net assets ............ (4,974,750) 23,602,611 NET ASSETS Beginning of year ......................................... 36,932,021 13,329,410 ------------ ------------ End of year ............................................... $ 31,957,271 $ 36,932,021 ============ ============
(a) A summary of share transactions is as follows:
Year Ended Year Ended February 28, 2001 February 29, 2000 --------------------------- --------------------------- Shares Value Shares Value --------- ------------ --------- ------------ Shares sold ...................... 622,931 $ 15,165,103 743,011 $ 14,552,043 Shares issued on reinvestment of distributions ................ 47,738 974,814 -- -- Shares redeemed .................. (209,050) (4,824,418) (85,249) (1,625,227) --------- ------------ --------- ------------ Net increase ..................... 461,619 $ 11,315,499 657,762 $ 12,926,816 ========= ============ ========= ============
See accompanying Notes to Financial Statements. 10 AMERICAN TRUST ALLEGIANCE FUND FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD --------------------------------------------------------------------------------
Mar. 11, 1997* Year Ended Year Ended Year Ended through Feb. 28, 2001 Feb. 29, 2000 Feb. 28, 1999 Feb. 28, 1998 ------------- ------------- ------------- ------------- Net asset value, beginning of period ................ $ 25.56 $ 16.93 $ 13.48 $ 10.00 -------- -------- -------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment loss ............................... (0.16) (0.11) (0.07) (0.03) Net realized and unrealized (loss)/gain on investments ...................... (8.10) 8.74 3.74 3.51 -------- -------- -------- -------- Total from investment operations .................... (8.26) 8.63 3.67 3.48 -------- -------- -------- -------- Less distributions: From net realized gain ............................ (0.54) -- (0.22) -- -------- -------- -------- -------- Net asset value, end of period ...................... $ 16.76 $ 25.56 $ 16.93 $ 13.48 ======== ======== ======== ======== Total return ........................................ (32.68)% 50.97% 27.47% 34.80%++ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) .............. $ 31,957 $ 36,932 $ 13,329 $ 6,360 Ratio of expenses to average net assets: Before fee waived ................................. 1.56% 1.75% 2.30% 4.04%+ After fee waived .................................. 1.45% 1.45% 1.45% 1.45%+ Ratio of net investment loss to average net assets: After fee waived .................................. (0.77)% (0.73)% (0.57)% (0.42)%+ Portfolio turnover rate ............................. 86.13% 39.81% 40.99% 27.65%++
* Commencement of operations. + Annualized. ++ Not Annualized. See accompanying Notes to Financial Statements. 11 AMERICAN TRUST ALLEGIANCE FUND NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- NOTE 1 - ORGANIZATION The American Trust Allegiance 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 capital appreciation. The Fund began operations on March 11, 1997. 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 12 AMERICAN TRUST ALLEGIANCE FUND NOTES TO FINANCIAL STATEMENTS, Continued -------------------------------------------------------------------------------- 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. DEFERRED ORGANIZATION COSTS: The Fund has incurred expenses of $18,500 in connection with its organization. These costs have been deferred and are being amortized on a straight-line basis over a period of sixty months from the date the Fund commenced investment operations. E. 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 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 February 28, 2001, American Trust Company (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 0.95% based upon the average daily net assets of the Fund. For the year ended February 28, 2001, the Fund incurred $383,815 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 1.45% 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 Fund's operations. Any such reimbursement is also contingent upon Board of Trustees review and approval at the time the reimbursement is made. Such reimbursement may not be paid prior to the Fund's payment of current ordinary operating expenses. For the year ended February 28, 2001, the 13 AMERICAN TRUST ALLEGIANCE FUND NOTES TO FINANCIAL STATEMENTS, Continued -------------------------------------------------------------------------------- Advisor reduced its fees and absorbed Fund expenses in the amount of $44,373; no amounts were reimbursed to the Advisor. Cumulative expenses subject to recapture pursuant to the aforementioned conditions amounted to $284,221 at February 28, 2001. Cumulative expenses subject to recapture expire as follows: Year Amount ---- -------- 2003 174,965 2004 109,256 -------- $284,221 ======== 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 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 5 - PURCHASES AND SALES OF SECURITIES For the year ended February 28, 2001, the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $38,161,074 and $32,462,047, respectively. 14 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Trustees and Shareholders Of American Trust Allegiance Fund In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of American Trust Allegiance Fund, series of Advisor Series Trust (the "Fund") at February 28, 2001, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for each of the two years in the period then ended, 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 February 28, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. The financial highlights presented for the periods prior March 1, 1999 were audited by other independent accountants whose report dated March 26, 1999 expressed an unqualified opinion on those statements. /s/ PricewaterhouseCoopers LLP New York, New York April 12, 2001 15 ADVISOR American Trust Company One Court Street Lebanon, NH 03766 DISTRIBUTOR First Fund Distributors, Inc. 4455 East Camelback Road, Suite 261E Phoenix, AZ 85018 CUSTODIAN Firstar Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 TRANSFER AGENT American Data Services, Inc. 150 Motor Parkway, Suite 109 Hauppauge, NY 11788 1-800-385-7003 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker, LLP 345 California Street, 29th Floor San Francisco, CA 94104 INDEPENDENT PUBLIC ACCOUNTANTS PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 This report is intended for shareholders of the Fund and may not be used as sales literature unless preced or accompanied by a current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Share price and returns will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are dated and are subject to change.