-----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, KcEV+xRpymgxBm/KwFikSgOY7G7gcYY4k0IkFWIKtJF/bgcjQsCdm8Fju25kRdkO 2yhoHO5uK9Cd/M2RFeYw/g== 0000950147-98-000153.txt : 19980304 0000950147-98-000153.hdr.sgml : 19980304 ACCESSION NUMBER: 0000950147-98-000153 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980302 SROS: NONE 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: 98554678 BUSINESS ADDRESS: STREET 1: 2025 E FINANCIAL WAY SUITE 101 CITY: GLENDORA STATE: CA ZIP: 91741 BUSINESS PHONE: 8188521033 MAIL ADDRESS: STREET 1: 2025 E FINANCIAL WAY STREET 2: SUITE 101 CITY: GLENDORA STATE: CA ZIP: 91741 N-30D 1 ANNUAL REPORT The Avatar Advantage Equity Allocation Fund Annual Report For the period ended December 31, 1997 Dear Shareholder, In December Avatar launched The Equity Allocation Fund, its first mutual fund designed for the retirement market. Two additional portfolios, The Avatar Balanced Fund and The Avatar International Equity Allocation Fund, followed in January of this year. We are particularly pleased with the initial performance of the Equity Allocation Fund and believe it is positioned to take full advantage of market opportunities. The Equity Allocation Fund follows the Avatar philosophy of participating in market gains during market upswings while protecting those gains against loss during market downturns. This has been the consistent course Avatar has followed for the past 28 years and is based on three core beliefs. One, over the long run, stocks and bonds will continue to rise, delivering solid rates of return. Two, in the short-run stocks and bonds can fall, delivering negative returns. Three, risk-averse investors want to participate in rising markets and preserve capital in periods when markets decline. We have built on this foundation and have developed a flexible asset allocation strategy that strikes a balance between investment risk and reward. Long-term investors, such as individuals saving for their retirement, can benefit most from Avatar's approach. This is especially true when they are willing to exchange maximum return in bull markets for loss limitation in bear market phases. So far in 1998 the market is trending upwards. The stock market shook off its early year worries and sprinted to new highs. Trading in the dollar seems to be having a strong influence on our capital markets. In the past few months we have seen a lot of volatility in the dollar, but it continues to be the currency of choice in a stressed global financial system. Using our proprietary models to discern the market's direction, we will continue to use the investment strategies and techniques developed at Avatar to position the Fund to capture solid returns in up markets and to protect those returns during periods of market stress. We invite you along for the ride. /s/ Elizabeth S. Sonders /s/ Charles M. White SCHEDULE OF INVESTMENTS at December 31, 1997 - -------------------------------------------------------------------------------- Shares COMMON STOCKS: 90.83% Market Value - -------------------------------------------------------------------------------- Aerospace: 1.81% 4,200 Boeing Co..................................... $ 205,538 2,200 United Technologies Corp...................... 160,187 --------- 365,725 --------- Airlines: 1.00% 1,700 Delta Air Lines, Inc.......................... 202,300 --------- Auto/Truck Parts and Equipment: 2.03% 3,700 Federal Mogul Corp............................ 149,850 5,500 Lear Corp.*................................... 261,250 --------- 411,100 --------- Beverages: 1.46% 8,100 PepsiCo, Inc.................................. 295,144 --------- Chemicals: 1.75% 4,400 Great Lakes Chemical Corp..................... 197,450 3,500 Praxair, Inc.................................. 157,500 --------- 354,950 --------- Computer - Software: 2.93% 5,600 Compuware Corp.*.............................. 179,375 3,200 Microsoft Corp.*.............................. 413,500 --------- 592,875 --------- Computer Services: 5.24% 11,054 Cendant Corp.*................................ 379,990 5,500 Ceridian Corp.*............................... 251,969 4,600 Compaq Computer Corp.......................... 259,612 2,400 Intel Corp.................................... 168,525 --------- 1,060,096 --------- Cosmetics and Toiletries: 3.63% 4,800 Colgate Palmolive Co.......................... 352,800 3,800 Gillette Co................................... 381,662 --------- 734,462 --------- Cruise Lines: 1.42% 5,200 Carnival Corp., Class A....................... 287,950 --------- See Notes to Financial Statements. 3 SCHEDULE OF INVESTMENTS at December 31, 1997, Continued - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- Diversified Operations: 1.11% 3,600 Textron....................................... $ 225,000 --------- Electric-Integrated: 0.71% 4,800 Entergy Corp.................................. 143,700 --------- Electronic Components/Semiconductor: 0.62% 2,200 Motorola, Inc................................. 125,538 --------- Entertainment Software: 1.16% 6,200 Electronic Arts*.............................. 234,631 --------- Finance: 5.95% 8,000 Federal National Mortgage Assn................ 456,500 6,300 Mellon Bank Corp.............................. 381,937 6,200 Morgan Stanley Dean Witter.................... 366,575 --------- 1,205,012 --------- Food - Baking: 0.54% 2,900 Interstate Bakeries........................... 108,387 --------- Food - Retail: 4.02% 7,000 Safeway, Inc.*................................ 442,750 6,600 Sara Lee Corp................................. 371,662 --------- 814,412 --------- Insurance: 6.82% 5,666 Allstate Corp................................. 514,898 8,300 SunAmerica, Inc............................... 354,825 9,500 Travelers Group, Inc.......................... 511,785 --------- 1,381,508 --------- Machinery - Construction: 0.72% 2,400 Case Corp..................................... 145,050 --------- Manufacturing: 3.90% 8,000 General Electric Co........................... 587,000 4,300 Olin Corp..................................... 201,563 --------- 788,563 --------- See Notes to Financial Statements. 4 SCHEDULE OF INVESTMENTS at December 31, 1997, Continued - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- Medical: 6.23% 7,600 Biochem Pharma, Inc.*......................... $ 158,650 4,500 Bristol Meyers Squibb Co...................... 425,813 4,100 Pfizer, Inc................................... 305,706 3,000 Warner Lambert Co............................. 372,000 --------- 1,262,169 --------- Money Center Banks: 5.45% 6,300 Bank of New York, Inc......................... 364,219 3,300 Citicorp...................................... 417,244 5,300 NationsBank Corp.............................. 322,306 --------- 1,103,769 --------- Networking Products: 2.03% 7,350 Cisco Systems, Inc.*.......................... 410,222 --------- Oil Company: 9.27% 5,500 Baker Hughes, Inc............................. 239,938 2,000 Cooper Cameron Corp.*......................... 122,000 3,900 Exxon Corp.................................... 238,631 6,100 Falcon Drilling Co., Inc.*.................... 213,881 7,400 Orxy Energy Co.*.............................. 188,700 3,000 Schlumberger, Ltd............................. 241,500 7,100 Texaco, Inc................................... 386,063 7,300 USX Marathon Group............................ 246,375 --------- 1,877,088 --------- Paper: 0.70% 3,700 Fort James Corp............................... 141,525 --------- Physical Therapy: 1.08% 7,900 HealthSouth Corp.*............................ 219,225 --------- Radio: 0.88% 2,400 Chancellor Media Corp.*....................... 179,175 --------- Retail: 5.01% 3,800 Dayton Hudson Corp............................ 256,500 5,400 Home Depot, Inc............................... 317,925 See Notes to Financial Statements. 5 SCHEDULE OF INVESTMENTS at December 31, 1997, Continued - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- Retail, continued 6,600 TJX Companies, Inc............................ $ 226,875 5,400 Wal Mart Stores, Inc.......................... 212,963 --------- 1,014,263 --------- Retail - Restaurants: 0.49% 3,410 Tricon Global Restaurants, Inc.*.............. 99,103 --------- Storage: 0.71% 4,900 Public Storage, Inc........................... 143,938 --------- Telephone - Long Distance: 8.55% 7,900 Airtouch Communications, Inc.*................ 328,344 6,900 AT&T Corp..................................... 422,625 6,400 BellSouth Corp................................ 360,400 5,900 GTE Corp...................................... 308,275 3,900 Lucent Technologies, Inc...................... 311,512 --------- 1,731,156 --------- Tobacco: 2.28% 10,200 Philip Morris Companies, Inc.................. 462,187 --------- Transportation: 1.33% 2,900 Burlington Northern Santa Fe.................. 269,519 --------- Total Common Stocks (cost $18,317,177)........ 18,389,742 ---------- Principal Amount SHORT-TERM INVESTMENTS: 9.15% - -------------------------------------------------------------------------------- $1,500,000 Federal Home Loan Mortgage Corp., 5.70%, due 1/23/1998......................... 1,494,775 357,304 Star Treasury Fund, 5.72% .................... 357,304 --------- Total Short-term Investments (cost $1,852,079).......................... 1,852,079 --------- See Notes to Financial Statements. 6 SCHEDULE OF INVESTMENTS at December 31, 1997, Continued - -------------------------------------------------------------------------------- Market Value - -------------------------------------------------------------------------------- Total Investments in Securities (cost $20,169,256+): 99.98% ............... $20,241,821 Other Assets less Liabilities: 0.02%.......... 4,164 ----------- Total Net Assets: 100.0% ..................... $20,245,985 =========== *Denotes a non-income producing security. +At December 31, 1997, the cost of securities for Federal tax purposes was the same as the basis for financial reporting. Unrealized appreciation and depreciation of securities were as follows: Gross unrealized appreciation................. $ 450,117 Gross unrealized depreciation................. (377,552) ----------- Net unrealized appreciation............... $ 72,565 =========== 7 STATEMENT OF ASSETS AND LIABILITIES at December 31, 1997 - -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (identified cost $20,169,256) .......................... $20,241,821 Dividends and interest receivable.......................... 24,672 Deferred organization costs................................ 34,463 Prepaid expenses........................................... 2,638 ----------- Total assets ........................................ 20,303,594 ----------- LIABILITIES Payables: Advisory fee............................................ 10,019 Administration fee...................................... 2,356 Distribution fees....................................... 3,820 Organization costs payable.............................. 35,000 Accrued expenses........................................... 6,414 ----------- Total liabilities.................................... 57,609 ----------- NET ASSETS ................................................... $20,245,985 =========== Net asset value, offering and redemption price per share ($20,245,985/2,020,959 shares outstanding; unlimited number of shares authorized without par value).......... $10.02 ====== COMPONENTS OF NET ASSETS Paid-in capital ........................................... $20,208,205 Undistributed net investment income........................ 3,528 Accumulated net realized loss on investments............... (38,313) Net unrealized appreciation of investments................. 72,565 ----------- Net assets ............................................. $20,245,985 =========== See Notes to Financial Statements. 8 STATEMENT OF OPERATIONS For the Period from December 3, 1997* through December 31, 1997 - -------------------------------------------------------------------------------- INVESTMENT INCOME Income Dividends............................................... $ 21,714 Interest................................................ 7,683 -------- Total income......................................... 29,397 -------- Expenses Advisory fee (Note 3)................................... 12,099 Distribution fees (Note 3).............................. 3,820 Administration fee (Note 3)............................. 2,356 Custodian and accounting fees........................... 1,627 Transfer agent fees..................................... 997 Professional fees....................................... 1,151 Amortization of deferred organization costs............. 537 Reports to shareholders................................. 537 Trustees' fees.......................................... 460 Miscellaneous........................................... 424 Registration fees....................................... 102 -------- Total expenses....................................... 24,110 Less: expenses reimbursed............................ (2,080) -------- Net expenses......................................... 22,030 -------- Net investment income ............................ 7,367 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss from security transactions............ (38,313) Net change in unrealized appreciation of investments........................................ 72,565 -------- Net gain on investments.............................. 34,252 -------- Net Increase in Net Assets Resulting from Operations ................................ $ 41,619 ======== *Commencement of operations. See Notes to Financial Statements. 9 STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- December 3, 1997* through December 31, 1997 - -------------------------------------------------------------------------------- NET INCREASE IN ASSETS FROM OPERATIONS Net investment income......................................... $ 7,367 Net realized loss from security transactions.................. (38,313) Net change in unrealized appreciation of securities........... 72,565 ---------- Net increase in net assets resulting from operations ......................................... 41,619 ---------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income......................................... (3,839) ---------- CAPITAL SHARE TRANSACTIONS Net increase in net assets derived from net change in outstanding shares (a)................................... 20,208,205 ---------- Total increase in net assets .............................. 20,245,985 NET ASSETS Beginning of period........................................... -0- ---------- End of period (including undistributed net investment income of $3,528)................................ $20,245,985 =========== (a) A summary of capital share transactions is as follows: December 3, 1997* through December 31, 1997 -------------------- Shares Value ------ ----- Shares sold................................ 2,020,575 $20,204,366 Shares issued in reinvestment of distributions......................... 384 3,839 Shares redeemed............................ (0) (0) --------- ----------- Net increase............................... 2,020,959 $20,208,205 ========= =========== *Commencement of operations. See Notes to Financial Statements. 10 FINANCIAL HIGHLIGHTS For a capital share outstanding throughout the period - -------------------------------------------------------------------------------- December 3, 1997* through December 31, 1997 - -------------------------------------------------------------------------------- Net asset value, beginning of period........................ $ 10.00 Income from investment operations: Net investment income.................................... 0.01 Net realized and unrealized gain on investments.......... 0.02 ------- Total from investment operations............................ 0.03 ------- Less distributions: Dividends from net investment income..................... (0.01) ------- Net asset value, end of period.............................. $ 10.02 ======= Total return................................................ 0.22%# Ratios/supplemental data: Net assets, end of period (thousands)....................... $20,246 Ratio of expenses to average net assets: Before expense reimbursement............................. 1.52%+ After expense reimbursement.............................. 1.39%+ Ratio of net investment income to average net assets: Before expense reimbursement............................. 0.33%+ After expense reimbursement.............................. 0.47%+ Portfolio turnover rate..................................... 2.48%# Average commission rate paid per share...................... $0.0598 *Commencement of operations. #Not annualized. +Annualized. See Notes to Financial Statements. 11 NOTES TO FINANCIAL STATEMENTS at December 31, 1997 - -------------------------------------------------------------------------------- NOTE 1 - ORGANIZATION The Avatar Advantage Equity Allocation Fund (the "Fund") is a diversified series of shares of beneficial interest of Advisors Series Trust (the "Trust"), which is registered under the Investment Company Act of 1940 (the "1940 Act") as an open-end management investment company. The Fund's primary investment objective is seeking long-term capital appreciation. The Fund seeks to achieve its objective by investing in equity securities during rising stock markets and limiting losses during declining markets. The Fund began operations on December 3, 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. Investments in securities traded on a national securities exchange or included in the NASDAQ National Market System are valued at the last reported sale price at the close of regular trading on the last business day of the period; securities traded on an exchange or NASDAQ for which there have been no sales and other over-the-counter securities are valued at the last reported bid price. Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees. Short-term investments are stated at cost, which when combined with accrued interest, approximates market value. B. Federal Income Taxes. The Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. C. Security Transactions, Dividends and Distributions. As is common in the industry, security transactions are accounted for on the trade date. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recognized on an accrual basis. Income and capital gains distributions to shareholders are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. 12 NOTES TO FINANCIAL STATEMENTS, Continued - -------------------------------------------------------------------------------- D. Deferred Organization Costs. The Fund has incurred expenses of $35,000 in connection with the organization of the Fund. These costs have been deferred and are being amortized on a straight-line basis through the period ending December 2, 2002. 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, as well as the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS For the period ended December 31, 1997, Avatar Investors Associates Corp. (the "Advisor") provided the Fund with investment management services under an Investment Advisory Agreement. The Advisor furnishes all investment advice, office space and certain administrative services, and provides most of the personnel needed by the Fund. As compensation for its services, the Advisor receives a monthly fee at the annual rate of 0.85% based upon the average daily net assets of the Fund. The Fund is responsible for its own operating expenses. The Advisor has agreed to reduce fees payable to it by the Fund or reimburse the Fund to the extent necessary to limit the Fund's aggregate annual operating expenses to 1.50% of average net assets, annually. Any such reductions made by the Advisor in its fees or payments may be reimbursed by the Fund, subject to approval by the Board of Trustees, if the Fund is able to effect such reimbursement and remain in compliance with any expense limitations in effect. For the period ended December 31, 1997, the Advisor has reimbursed the Fund in the amount of $2,080. Investment Company Administration Corporation (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 Fund expenses and reviews the Fund's expense accruals. For its services, the Administrator receives a monthly fee at the annual rate of 0.20% of net assets, subject to a $30,000 minimum. 13 NOTES TO FINANCIAL STATEMENTS, Continued - -------------------------------------------------------------------------------- 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 and trustees of the Trust are also officers and/or directors of the Administrator and the Distributor. NOTE 4 - DISTRIBUTION COSTS The Fund has adopted a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the 1940 Act. The Plan provides that the Fund may pay a fee to the Distributor at an annual rate of up to 0.25% of the average daily net assets of the Fund. The fee is paid to the Distributor as reimbursement for, or in anticipation of, expenses incurred for distribution-related activity. NOTE 5 - PURCHASES AND SALES OF SECURITIES The cost of purchases and the proceeds from sales of securities, excluding short-term securities, for the period ended December 31, 1997 were $18,812,221 and $456,730, respectively. 14 INDEPENDENT AUDITOR'S REPORT The Board of Trustees The Avatar Advantage Equity Allocation Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Avatar Advantage Equity Allocation Fund as of December 31, 1997, and the related statements of operations, changes in net assets and the financial highlights for the period from December 3, 1997 (commencement of operations) to December 31, 1997. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Avatar Advantage Equity Allocation Fund as of December 31, 1997, the results of its operations, the changes in its net assets, and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. McGLADREY & PULLEN. LLP New York, New York February 18, 1998 15 Advisor Avatar Investors Associates Corp. 900 Third Avenue New York, New York 10022 Distributor First Fund Distributors, Inc. 4455 East Camelback Road, Suite 261E Phoenix, AZ 85018 Custodian Star Bank, N.A. 425 Walnut Street Cincinnati, OH 45202 Transfer Agent American Data Services, Inc. 150 Motor Parkway, Suite 109 Hauppauge, NY 11788 888-263-6452 Auditor McGladrey & Pullen LLP 555 Fifth Avenue, 8th Floor New York, NY 10017-2416 Legal Counsel Paul, Hastings, Janofsky & Walker LLP 345 California Street, 29th Floor San Francisco, CA 94104 This report is intended for shareholders of the Fund and may not be used as sales literature unless preceded or accompanied by a current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Share price and returns will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are dated and are subject to change. -----END PRIVACY-ENHANCED MESSAGE-----