-----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, E0dPnqCp9EscHwvdWXUz3fzIWMkckTULC1Z2BkYrF48XTpnv2fyAJgI6M6N6p1A3 4iN3/8mHieSKRx+5eacjFw== 0000950147-99-000394.txt : 19990429 0000950147-99-000394.hdr.sgml : 19990429 ACCESSION NUMBER: 0000950147-99-000394 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990428 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: 99603189 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 FOR THE YEAR ENDED 2/28/99 The American Trust Allegiance Fund One Court Sreet Lebanon, New Hampshire 03766 ANNUAL REPORT FOR THE YEAR ENDED FEBRUARY 28, 1999 AMERICAN TRUST ALLEGIANCE FUND March 30, 1999 Dear Fellow Shareholder, We are pleased to send you the American Trust Allegiance Fund's annual report for the twelve months ending February 28, 1999. Asset growth of the Fund has been encouraging with total assets reaching $13.3 million as of February 28, 1999. The Fund's investment performance continues to be quite competitive, as it ranked in the top 15% of growth mutual funds over the past twelve months according to Lipper Analytic Services, Inc. Based on total return, Lipper ranked the Fund 145 out of 1011 growth funds for the year ending February 28, 1999. In an effort to provide shareholders with more information on the Fund, we established our own website on the Internet, located at www.AllegianceFund.com. Our website is updated each evening with the closing net asset value and on a quarterly basis, investment performance is updated. We also received our "ticker" symbol of "ATAFX" for the Fund from the NASDAQ, which can also be used to obtain current net asset values. The significant correction in the U.S. stock market last summer presented challenges to all investors, as macroeconomic events from Asia and Europe stressed global financial markets. Being long term, "bottom up" investors, our focus continues to be on any changes in the competitive position or the underlying fundamentals of the companies we own, rather than timing the stock market or reacting to perceived valuation levels. Our job is to look through the day to day volatility of the U.S. stock market and track the operating performance of companies in our portfolio. Our research continues to favor predominantly large capitalization, domestic, high quality companies which possess, on average, growth in earnings per share faster than that of the general stock market. In the current market environment, we feel companies that have demonstrated a more predictable, consistent record of growth in earnings per share are the most attractive. Despite inherent shorter term volatility, our research continues to favor companies in the technology sector and consequently, the Fund's portfolio is overweighted, relative to the S&P 500 Index, in this area. 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 The Fund's average annual total return for the year ended March 31, 1999 was 30.35% and since inception (March 11, 1997) to March 31, 1999 was 34.01%. 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. Based on total return, Lipper ranked the Fund in the top 11% of growth funds (109th out of 1022 growth funds) for the year ending March 31, 1999. Total return identifies the return of the Fund taking into consideration changes in the NAV price, accumulation and reinvestment of dividends and the compounding factor over time. During the year ended February 28, 1999, fees were waived and expenses advanced to the 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. Average Annual Total Return Period Ended February 28, 1999 1 Year..............................27.47% Since Inception (3/11/97)...........31.63% [PERFORMANCE CHART] 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 30-Apr-97 $ 9,950 $ 9,902 31-May-97 $10,630 $10,497 30-Jun-97 $11,110 $10,968 31-Jul-97 $12,100 $11,841 31-Aug-97 $11,450 $11,175 30-Sep-97 $12,240 $11,791 31-Oct-97 $11,820 $11,404 30-Nov-97 $12,200 $11,927 31-Dec-97 $12,480 $12,132 31-Jan-98 $12,460 $12,271 28-Feb-98 $13,480 $13,149 31-Mar-98 $14,000 $13,822 30-Apr-98 $14,140 $13,963 31-May-98 $13,620 $13,718 30-Jun-98 $14,670 $14,278 31-Jul-98 $14,330 $14,130 31-Aug-98 $12,110 $12,086 30-Sep-98 $13,378 $12,858 10/31/98 $14,244 $13,910 11/30/98 $15,130 $14,750 12/31/98 $17,081 $15,600 1/31/99 $17,914 $16,256 2/28/99 $17,183 $15,742 Past performance is not predictive of future performance. * 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 TOP 10 HOLDINGS AT FEBRUARY 28, 1999 America Online, Inc. American International Group, Inc. Cintas Corporation Cisco Systems, Inc. EMC Corporation Fifth Third Bancorp The Gap, Inc. The Gillette Company The Home Depot, Inc. Qwest Communications International Inc. AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999 - -------------------------------------------------------------------------------- Shares COMMON STOCKS: 96.17% Market Value - -------------------------------------------------------------------------------- AIRLINES: 0.41% 1,800 Southwest Airlines Co. $ 54,225 --------- BANKS - MAJOR REGIONAL: 8.75% 6,050 Fifth Third Bancorp 400,056 3,650 Mellon Bank Corporation 246,831 2,500 Northern Trust Corporation 223,594 3,850 State Street Corporation 295,247 --------- 1,165,728 --------- COMMUNICATION EQUIPMENT: 2.82% 3,700 Lucent Technologies 375,781 --------- COMPUTER HARDWARE: 7.12% 6,650 Compaq Computer Corporation 234,413 4,250 Dell Computer Corporation* 340,398 2,200 International Business Machines Corporation 374,000 --------- 948,811 --------- COMPUTER SOFTWARE AND SERVICES: 11.00% 7,000 America Online, Inc. 622,562 4,450 BMC Software, Inc.* 182,033 4,300 Computer Sciences Corporation 286,487 2,500 Microsoft Corporation* 375,234 --------- 1,466,316 --------- COMPUTERS - NETWORKING: 2.90% 3,955 Cisco Systems, Inc.* 386,972 --------- COMPUTERS - PERIPHERAL: 3.00% 3,900 EMC Corporation* 399,263 --------- DISTRIBUTOR - FOOD AND HEALTH: 1.74% 8,200 Sysco Corporation 231,650 --------- ELECTRICAL EQUIPMENT: 4.54% 7,250 Solectron Corporation* 323,984 5,300 Symbol Technologies, Inc. 280,900 --------- 604,884 --------- See accompanying Notes to Financial Statements. 4 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- ELECTRONICS - SEMICONDUCTOR: 2.57% 2,850 Intel Corporation $ 341,911 ------------ ENTERTAINMENT: 1.3% 5,100 The Walt Disney Company 179,456 ------------ FINANCIAL - DIVERSIFIED: 2.26% 4,300 Federal National Mortgage Association 301,000 ------------ HOUSEHOLD PRODUCTS: 4.67% 2,875 Colgate-Palmolive Company 244,016 3,200 The Clorox Company 378,600 ------------ 622,616 ------------ INSURANCE - BROKERS: 1.48% 2,775 Marsh & McLennan Companies, Inc. 196,505 ------------ INSURANCE - MULTILINE: 3.40% 3,983 American International Group, Inc. 453,813 ------------ MANUFACTURER - DIVERSE: 1.42% 2,750 Illinois Tool Works 189,062 ------------ OIL AND GAS - DRILL AND EQUIPMENT: 1.87% 5,000 Schlumberger Ltd. 242,812 ------------ OIL - INTERNATIONAL: 2.91% 3,000 Exxon Corporation 199,688 4,300 Royal Dutch Petroleum Company ADR 188,663 ------------ 388,351 ------------ PERSONAL CARE: 2.04% 7,600 The Gillette Company 407,550 ------------ RETAIL - APPAREL: 2.98% 6,150 The Gap, Inc. 397,828 ------------ RETAIL - BUILDING SUPPLY: 3.04% 6,800 The Home Depot, Inc. 405,875 ------------ See accompanying Notes to Financial Statements. 5 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- RETAIL - SPECIALTY: 2.18% 9,900 Bed Bath & Beyond Inc.* $ 291,122 ------------ SERVICES - COMMERCIAL AND CONSTRUCTION: 3.02% 5,700 Cintas Corporation 402,919 ------------ SERVICES - COMPUTER SYSTEMS: 1.69% 5,700 Sungard Data Systems Inc.* 225,862 ------------ SERVICES - DATA PROCESSING: 4.30% 7,750 Automatic Data Processing, Inc. 308,063 6,250 Paychex, Inc. 265,039 ------------ 573,102 ------------ TELECOMMUNICATIONS - LOND DISTANCE: 7.31% 2,300 AT&T Corp. 188,888 4,600 MCI WORLDCOM, Inc.* 379,644 6,600 Qwest Communications International Inc.* 405,694 ------------ 974,226 ------------ TELEPHONE: 4.43% 6,600 BellSouth Corporation 305,250 5,400 SBC Communications Inc. 285,525 ------------ 590,775 ------------ Total Common Stocks (cost $9,146,278) 12,818,415 ------------ See accompanying Notes to Financial Statements. 6 AMERICAN TRUST ALLEGIANCE FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999, CONTINUED Principal Amount SHORT-TERM INVESTMENTS: 2.38% - -------------------------------------------------------------------------------- $316,695 Star Treasury Fund, 4.62% (cost $316,695) $ 316,695 ------------ Total Investments in Securities (cost $9,462,973+): 98.55% 13,135,110 Other Assets less Liabilities: 1.45% 194,300 ------------ TOTAL NET ASSETS: 100.0% $ 13,329,410 ============ * Non-income producing security. + At February 28, 1999, the cost of securities for Federal tax purposes was $9,468,591. Gross unrealized appreciation and depreciation of securities were as follows: Gross unrealized appreciation $ 3,810,399 Gross unrealized depreciation (143,880) ----------- Net unrealized appreciation $ 3,666,519 =========== See accompanying Notes to Financial Statements. 7 AMERICAN TRUST ALLEGIANCE FUND STATEMENT OF ASSETS AND LIABILITIES AT FEBRUARY 28, 1999 - -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (identified cost $9,462,973) $13,135,110 Receivables: Securities sold 417,853 Fund shares sold 75,413 Dividends and interest 6,532 Deferred Organization Costs 11,209 Prepaid expenses 21,702 ----------- Total assets 13,667,819 ----------- LIABILITIES Payables Due to Advisor 4,733 Administration fees 2,301 Fund shares repurchased 500 Securities purchased 321,996 Accrued expenses 8,879 ----------- Total liabilities 338,409 ----------- NET ASSETS $13,329,410 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ($13,329,410/787,167 shares outstanding; unlimited number of shares authorized, par value $.01) $ 16.93 =========== COMPONENTS OF NET ASSETS Paid-in capital $ 9,833,539 Accumulated net realized loss on investments (176,266) Net unrealized appreciation on investments 3,672,137 ----------- Net assets $13,329,410 =========== See accompanying Notes to Financial Statements. 8 AMERICAN TRUST ALLEGIANCE FUND STATEMENT OF OPERATIONS - FOR THE YEAR ENDED FEBRUARY 28, 1999 - -------------------------------------------------------------------------------- INVESTMENT INCOME Income Dividends $ 63,783 Interest 18,521 Total income 82,304 Expenses Advisory fees (Note 3) 88,383 Administration fees (Note 3) 30,000 Custodian and accounting fees 23,613 Transfer agent fees 21,657 Audit fees 12,670 Registration fees 12,490 Miscellaneous 7,985 Trustees' fees 5,077 Reports to shareholders 4,877 Legal fees 4,000 Amortization of deferred organization costs 3,701 ----------- Total expenses 214,453 Less: advisory fee waiver and absorption (79,291) ----------- Net expenses 135,162 ----------- NET INVESTMENT LOSS (52,858) ----------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss from security transactions (94,763) Net change in unrealized appreciation on investments 2,552,998 ----------- Net realized and unrealized gain on investments 2,458,235 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,405,377 =========== See accompanying Notes to Financial Statements. 9 AMERICAN TRUST ALLEGIANCE FUND STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------- Year March 11, 1997* Ended through February 28, 1999 February 28, 1998 ----------------- ----------------- INCREASE IN NET ASSETS FROM: OPERATIONS Net investment loss $ (52,858) $ (15,458) Net realized gain (loss) from security transactions (94,763) 81,313 Net change in unrealized appreciation on investments 2,552,998 1,119,139 ------------ ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,405,377 1,184,994 ------------ ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain on security tranactions(a) (147,358) -- Total dividends and distributions to shareholders (147,358) -- CAPITAL SHARE TRANSACTIONS Net increase in net assets derived from net change in outstanding shares (a) 4,711,269 5,175,128 ------------ ----------- TOTAL INCREASE IN NET ASSETS 6,969,288 6,360,122 NET ASSETS Beginning of period 6,360,122 0 ------------ ----------- END OF PERIOD $ 13,329,410 $ 6,360,122 ============ ===========
(a) A summary of capital shares transactions is as follows:
Year March 11, 1997* Ended through February 28, 1999 February 28, 1998 ----------------------- ----------------------- Shares Value Shares Value ------- ----------- ------- ----------- Shares sold 384,345 $ 5,725,856 480,212 $ 5,272,001 Shares issued in reinvestment of distributions 9,895 144,009 -- -- Shares redeemed (79,048) (1,158,596) (8,237) (96,873) ------- ----------- ------- ----------- Net increase 315,192 $ 4,711,269 471,975 $ 5,175,128 ======= =========== ======= ===========
* Commencement of operations. See accompanying Notes to Financial Statements. 10 AMERICAN TRUST ALLEGIANCE FUND FINANCIAL HIGHLIGHTS - FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD - -------------------------------------------------------------------------------- Year March 11, 1997* Ended through February 28, 1999 February 28, 1998 ----------------- ----------------- Net asset value, beginning of period $ 13.48 $ 10.00 -------- ------- Income from investment operations: Net investment loss (0.07) (0.03) Net realized and unrealized gain on investments 3.74 3.51 -------- ------- Total from investment operations 3.67 3.48 -------- ------- Less distributions: From net realized gain (0.22) -- Net asset value, end of period $ 16.93 $ 13.48 ======== ========= Total return 27.47% 34.80%** RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $ 13,329 $ 6,360 Ratio of expenses to average net assets: Before expense reimbursement 2.30% 4.04%++ After expense reimbursement 1.45% 1.45%++ Ratio of net investment loss to average net assets: (0.57%) (0.42%)++ Portfolio turnover rate 40.99% 27.65% * Commencement of operations. ** Not Annualized. ++ Annualized. See accompanying Notes to Financial Statements. 11 AMERICAN TRUST ALLEGIANCE FUND NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1999 - -------------------------------------------------------------------------------- NOTE 1 - ORGANIZATION The American Trust Allegiance Fund (the "Fund") is a series of shares 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 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: A. SECURITY VALUATION: The Fund's investments are carried at fair value. Securities listed on an exchange or quoted on a National Market System are valued at the last sale price. Other securities are valued at the mean between the last bid and asked prices. 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. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Realized gains and losses on securities sold are determined on the basis of identified cost. Discounts and premiums on securities purchased are amortized over the life of the respective securities. 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, 1999, 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, 1999, the Fund incurred $88,383 in Advisory Fees. 12 NOTES TO FINANCIAL STATEMENTS, CONTINUED - -------------------------------------------------------------------------------- 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 reductions 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' subsequent review and ratification of the reimbursed amounts. Such reimbursement may not be paid prior to the Fund's payment of current ordinary operating expenses. For the year ended February 28, 1999, the Advisor reduced its fees and absorbed Fund expenses in the amount of $79,291; no amounts were reimbursed to the Advisor. Fees waived and expenses absorbed by the Advisor which may be subject to recapture in the future pursuant to the aforementioned conditions totalled $174,965 as of February 28, 1999. 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 annual rate of 0.20% of average daily net assets, subject to a minimum fee of $30,000 annually. 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 February 28, 1999, the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $8,050,361and $3,679,562, respectively. 13 INDEPENDENT AUDITOR'S REPORT THE BOARD OF TRUSTEES AND SHAREHOLDERS THE AMERICAN TRUST ALLEGIANCE FUND We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The American Trust Allegiance Fund as of February 28, 1999, and the related statement of operations for the year then ended, changes in net assets and the financial highlights for the periods indicated in the accompanying financial statements. 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 audits. We conducted our audits 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 February 28, 1999, by correspondence with the custodian and brokers. 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 American Trust Allegiance Fund as of February 28, 1999, 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. /s/ McGladrey & Pullen, LLP McGLADREY & PULLEN, LLP New York, New York March 26, 1999 ADVISOR American Trust Company One Court Street Lebanon, NH 03766 1-800-788-8806 AUDITOR McGladrey & Pullen, LLP 555 Fifth Avenue, 8th Floor New York, NY 10017 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 1-800-385-7003 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. INFORMATIONTECH 100(R) FUND 160 SANSOME STREET SAN FRANCISCO, CA 94104 (415) 705-7777 February 28, 1999 Dear Shareholder, The InformationTech 100(R) Fund gained 22.3% during the fiscal fourth quarter (ending February 28, 1999) and completed the fiscal year with a gain of 47.1%. This compares favorably with a comparable index, the PSE Technology Index, which had fiscal fourth quarter, 1999 and fiscal 1999 total returns of 16.9% and 36.2%, respectively. The Russell 2000 Index total returns were -1.4% and -15.0% for the comparable time periods. The Fund ended the fiscal year with a net asset value of $44.36 and, once again, had no year-end income or capital gain distributions. The stock market, as represented by the S&P 500, continues to be led by its largest 50 companies. The only other areas of strength have been in Internet-related and communications stocks. Though the rise has not been broad-based, our Fund continues to benefit from the strength in technology. The Portfolio: The InformationTech 100(R) Fund's top performers during the fiscal year were Internet, communications, enterprise storage and the mega-cap technology companies. Names like America Online, At Home and Yahoo!, have done extremely well for everyone as the mania for Internet-related stocks has been nothing less than spectacular. The question of sustainability is always present as the current environment reminds us of the biotech frenzy of earlier years - only a few of those companies survive today. We continue to hold solid enterprise and IT-related companies with strong fundamentals. Storage and hardware companies have continued to thrive. These include EMC, Legato, and Network Appliance. Communications and networking companies are starting to crossover. Companies such as Cisco and Lucent are likely to be competitors in the future as much as they are partners today. We still favor the large telecom companies such as MCI-WorldCom and AT&T/TCI as they push the frontiers for additional bandwidth. The convergence of telephony and cable will eventually lead to other opportunities. The laggards within the Fund tended to be company specific. The consulting and IT service companies keep battling for IT budgets but are losing out to Y2K and hardware upgrade expenses in the latter part of 1998 and 1999. Solid companies such as JD Edwards, Cambridge Technology Partners and Gartner Group were not immune. However, we expect most of them to recover by mid-2000 as Y2K expenses decline and alternative projects are initiated. Outlook: We expect the strength in technology to continue favoring the mega-market cap stocks such as Cisco, Lucent, Intel, Dell, and Microsoft. We also see short-term sentiment driving the Internet stocks as there remains too much money chasing too few stocks. This supply/demand equation could change quickly if sentiment changes and investors start focusing on profitability rather than sales growth alone. We expect communications will remain an area of opportunity in 1999 and the IT services and software sector will start recovering by year-end. Despite some short-term price weakness in 1999, our positive long-term outlook for the leading information processing technology companies has not changed; information technology remains the fastest growing sector of the American economy. /s/ William Schaff William F.K. Schaff, CFA Portfolio Manager The PSE Technology Index is a price-weighted, broad-based index of 100 listed and over-the-counter stocks that cover 15 different industry subsectors. The Russell 2000 Index is a widely regarded small cap index of the 2,000 smallest securities of the Russell 3000 Index which is comprised of the 3,000 largest U.S. Securities as determined by total market capitalization. The S&P 500 Composite Stock Price Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. INFORMATIONTECH 100(R) FUND INFORMATIONTECH 100(R) FUND Comparison of the change in value of a $10,000 investment in the InformationTech 100(R) Fund versus the Wilshire 5000 Equity Index. Average Annual Total Return Period ended February 28, 1999.....47.13% Since inception (April 8, 1997)....52.32% [PERFORMANCE CHART] Information Tech 100(R)Fund Wilshire 5000 Equity Index --------------------------- -------------------------- 8-Apr-97 10,000 10,000 31-May-97 11,740 10,292 31-Aug-97 13,095 11,881 28-Nov-97 13,080 12,514 28-Feb-98 15,075 13,697 29-May-98 15,215 14,118 31-Aug-98 13,475 12,891 30-Nov-98 18,130 14,578 28-Feb-99 22,180 15,448 Past performance is not predictive of future performance. *The Wilshire 5000 Equity Index tracks the performance of all equity securities issued by U.S. head-quartered companies regardless of exchange. 3 INFORMATIONTECH 100(R) FUND - -------------------------------------------------------------------------------- Shares COMMON STOCKS: 85.9% Market Value - -------------------------------------------------------------------------------- CABLE TV: 4.9% 2,050 Cox Communications, Inc. - Class A*.............. $ 145,038 5,700 Tele-Communications, Inc. - TCI Group A*......... 358,209 1,240 Viacom Inc. - Class A*........................... 108,267 ----------- 611,514 ----------- COMMUNICATIONS BROADCASTING EQUIPMENT: 1.0% 1,720 Motorola, Inc.................................... 120,830 ----------- COMPUTER INTERNET SERVICES: 10.4% 5,200 America Online, Inc.............................. 462,475 2,100 At Home Corporation - Series A*.................. 223,781 3,600 MindSpring Enterprises, Inc.*.................... 307,575 2,000 Yahoo! Inc.*..................................... 307,063 ----------- 1,300,894 ----------- COMPUTER MISCELLANEOUS: 0.1% 500 Lernout & Hauspie Speech Products NV*............ 14,203 ----------- COMPUTER PERIPHERAL EQUIPMENT: 14.6% 4,516 3Com Corporation*................................ 142,113 3,000 Ascend Communications, Inc.*..................... 231,000 3,900 Cisco Systems, Inc.*............................. 381,591 1,500 Hewlett-Packard Company.......................... 99,656 1,200 International Business Machines Corporation...... 204,000 2,795 NCR Corporation*................................. 114,420 4,325 Sun Microsystems, Inc.*.......................... 421,012 7,400 Unisys Corporation*.............................. 220,612 ----------- 1,814,404 ----------- COMPUTER PROCESSING SERVICES: 6.0% 2,000 Affiliated Computer Services, Inc.*.............. 92,500 2,480 Automatic Data Processing, Inc................... 98,580 900 Ceridian Corporation*............................ 64,462 6,050 First Data Corporation........................... 231,412 593 Hyperion Solutions Corporation*.................. 8,432 200 i2 Technologies, Inc.*........................... 5,000 See accompanying Notes to Financial Statements. 4 INFORMATIONTECH 100(R) FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- COMPUTER PROCESSING SERVICES, CONTINUED 4,800 Legato Systems Inc.*............................. $ 236,550 205 Transaction Systems Architects, Inc.*............ 8,040 ----------- 744,976 ----------- COMPUTER PROGRAMMING SERVICES: 6.9% 170 Adobe Systems Incorporated....................... 6,853 280 American Management Systems, Incorporated*....... 9,301 100 Baan Company*.................................... 941 450 Cambridge Technology Partners (Massachusetts), Inc.*.......................................... 11,391 200 Computer Horizons Corp.*......................... 2,981 1,570 Computer Sciences Corporation*................... 104,601 1,955 Electronic Data Systems Corporation.............. 90,907 400 J.D. Edwards & Company*.......................... 6,362 870 Keane, Inc.*..................................... 26,916 10 Momentum Business Applications, Inc.*............ 87 5,000 Oracle Corporation*.............................. 279,219 6,800 PeopleSoft, Inc.*................................ 128,562 1,400 SAP AG - ADR..................................... 44,800 3,200 Siebel Systems, Inc.*............................ 140,600 330 Wind River Systems, Inc.*........................ 7,518 ----------- 861,039 ----------- COMPUTER SOFTWARE: 1.6% 1,300 Advent Software, Inc.*........................... 60,450 1,200 BEA Systems, Inc.*............................... 20,625 1,800 Mercury Interactive Corporation*................. 116,663 ----------- 197,738 ----------- COMPUTER STORAGE DEVICES: 4.9% 4,500 EMC Corporation*................................. 460,687 1,700 Seagate Technology, Inc.*........................ 49,194 290 Storage Technology Corporation*.................. 10,096 1,300 VERITAS Software Corporation*.................... 92,381 ----------- 612,358 ----------- COMPUTER SYSTEMS & SERVICES: 0.7% 4,800 Novell, Inc.*.................................... 93,150 ----------- See accompanying Notes to Financial Statements. 5 INFORMATIONTECH 100(R) FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- COMPUTER - INTEGRATED SYSTEMS: 0.1% 1,000 Sequent Computer Systems, Inc.*.................. $ 9,531 400 Wang Laboratories, Inc.*......................... 9,563 ----------- 19,094 ----------- CONSULTANTS: 0.1% 1,220 Comdisco, Inc.................................... 14,640 ----------- ELECTRONIC COMPUTERS: 7.0% 7,835 Compaq Computer Corporation...................... 276,184 6,000 Data General*.................................... 82,875 3,400 Dell Computer Corporation*....................... 272,319 9,300 LSI Logic Corporation*........................... 241,219 ----------- 872,597 ----------- FINANCE: 1.0% 4,500 Tele-Communications, Inc. - TCI Ventures Group A* 124,172 ----------- GENERAL INDUSTRIAL MACHINERY: 0.1% 145 Hitachi Ltd. - ADR............................... 9,017 ----------- INTERNET SOFTWARE: 0.6% 2,800 Sterling Commerce, Inc.*......................... 72,800 ----------- NETWORKING PRODUCTS: 3.0% 8,800 Network Appliance, Inc.*......................... 369,600 ----------- OFFICE MACHINES: 0.9% 2,070 Xerox Corporation................................ 114,238 ----------- POWER CONVERSION / SUPPLY EQUIPMENT: 0.9% 3,000 American Power Conversion Corporation*........... 107,438 ----------- PREPACKAGED SOFTWARE: 10.4% 3,300 AXENT Technologies, Inc.*........................ 113,231 250 BMC Software, Inc.*.............................. 10,227 700 CBT Group PLC - ADR*............................. 11,178 See accompanying Notes to Financial Statements. 6 INFORMATIONTECH 100(R) FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- PREPACKAGED SOFTWARE, CONTINUED 200 Check Point Software Technologies Ltd.*.......... $ 7,637 150 Citrix Systems, Inc.*............................ 11,573 1,300 Computer Associates International, Inc........... 54,600 6,000 Compuware Corporation*........................... 335,813 2,000 Documentum, Inc.*................................ 43,000 200 HNC Software Inc.*............................... 5,381 1,500 Intuit Inc.*..................................... 148,313 1,350 Microsoft Corporation*........................... 202,627 100 Network Associates, Inc.*........................ 4,697 397 Platinum Software Corporation*................... 2,891 890 PLATINUM Technology, Inc.*....................... 11,793 600 Policy Management Systems Corporation*........... 21,937 7,300 Rational Software Corporation*................... 216,034 1,000 Sapient Corporation*............................. 66,687 200 Security Dynamics Technologies, Inc.*............ 3,694 420 Sterling Software, Inc.*......................... 10,710 475 Symantec Corporation*............................ 8,565 ----------- 1,290,588 ----------- SEMICONDUCTORS AND DEVICES: 2.5% 875 Intel Corporation................................ 104,973 1,800 Micron Technology, Inc.*......................... 103,725 1,120 Texas Instruments Incorporated................... 99,890 ----------- 308,588 ----------- TELEPHONE APPARATUS: 6.5% 2,800 ADC Telecommunications, Inc.*.................... 113,575 460 LM Ericsson Telephone Company - ADR.............. 11,974 2,400 Lucent Technologies Inc.......................... 243,750 2,000 Nokia Corporation - ADR.......................... 271,250 2,220 Northern Telecom Limited......................... 128,899 500 Tellabs, Inc.*................................... 40,000 ----------- 809,448 ----------- TELEPHONE COMMUNICATIONS: 12.1% 1,600 AirTouch Communications, Inc.*................... 145,700 1,250 AT&T Corporation................................. 102,656 See accompanying Notes to Financial Statements. 7 INFORMATIONTECH 100(R) FUND SCHEDULE OF INVESTMENTS AT FEBRUARY 28, 1999, CONTINUED - -------------------------------------------------------------------------------- Shares Market Value - -------------------------------------------------------------------------------- TELEPHONE COMMUNICATIONS, CONTINUED 3,600 Level 3 Communications, Inc.*.................... $ 201,712 3,800 MCI WORLDCOM, Inc.*.............................. 313,619 3,600 NEXTEL Communications, Inc.*..................... 108,337 5,800 Qwest Communications International Inc.*......... 356,519 7,000 Teligent Inc. - Class A*......................... 273,219 ----------- 1,501,762 ----------- Total Common Stocks (cost $8,659,075)............ 11,985,088 ----------- Principal Amount SHORT-TERM INVESTMENTS: 3.4% - -------------------------------------------------------------------------------- $427,318 Star Treasury Fund, 4.73% (cost $427,318)........ 427,318 Total Investments in Securities (cost $9,086,373+): 99.7%...................... 12,412,406 Other Assets less Liabilities: 0.3%.............. 33,596 ----------- TOTAL NET ASSETS: 100.0% ........................ $12,446,002 =========== * Non-income producing security. + At February 28, 1999, the cost of securities for Federal tax purposes was the same as the basis for financial reporting. Gross unrealized appreciation and depreciation of securities were as follows: Gross unrealized appreciation.................... $3,693,003 Gross unrealized depreciation.................... (366,990) ---------- Net unrealized appreciation.................... $3,326,013 ========== 8 INFORMATIONTECH 100(R) FUND STATEMENT OF ASSETS AND LIABILITIES AT FEBRUARY 28, 1999 - -------------------------------------------------------------------------------- ASSETS Investments in securities, at value (identified cost $9,086,393) ........................................... $12,412,406 Receivables: Fund shares sold ........................................... 19,429 Dividends and interest ..................................... 2,765 Deferred organization costs .................................. 11,493 Prepaid expenses ............................................. 20,514 ----------- Total assets ............................................ 12,466,607 ----------- LIABILITIES Payables Due to Advisor ............................................. 5,558 Administration fees ........................................ 2,301 Fund shares repurchased .................................... 9,657 Accrued expenses ............................................. 3,089 ----------- Total liabilities ....................................... 20,605 ----------- NET ASSETS ..................................................... $12,446,002 =========== NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE ($12,446,002/280,547 shares outstanding; unlimited number of shares authorized, par value $.01) ..... $ 44.36 =========== COMPONENTS OF NET ASSETS Paid-in capital .............................................. $ 9,021,762 Net realized gain on investments ............................. 98,227 Net unrealized appreciation on investments ................... 3,326,013 ----------- Net assets ................................................. $12,446,002 =========== See accompanying Notes to Financial Statements. 9 INFORMATIONTECH 100(R) FUND STATEMENT OF OPERATIONS - FOR THE YEAR ENDED FEBRUARY 28, 1999 - -------------------------------------------------------------------------------- INVESTMENT INCOME Income Dividends .................................................... $ 5,238 Interest ..................................................... 16,768 ----------- Total income ............................................... 22,006 ----------- Expenses Advisory fees (Note 3) ....................................... 68,002 Administration fees (Note 3) ................................. 29,917 Custodian and accounting fees ................................ 25,530 Transfer agent fees .......................................... 19,823 Audit fees ................................................... 16,639 Registration fees ............................................ 12,239 Other ........................................................ 6,482 Trustees' fees ............................................... 5,061 Amortization of deferred organization costs .................. 3,691 Legal fees ................................................... 2,770 Reports to shareholders ...................................... 1,987 ----------- Total expenses ............................................. 192,141 Less: advisory fee waiver and absorption (Note 3) .......... (84,244) ----------- Net expenses ............................................... 107,896 ----------- NET INVESTMENT LOSS ...................................... (85,891) ----------- REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized gain from security transactions ................... 123,091 Net change in unrealized appreciation on investments ........... 2,901,441 ----------- Net realized and unrealized gain on investments .............. 3,024,532 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 2,938,641 =========== See accompanying Notes to Financial Statements. 10 INFORMATIONTECH 100(R) FUND STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------- Year April 8, 1997* Ended through February 28, 1999 February 28, 1998 ----------------- ----------------- NET INCREASE IN ASSETS FROM OPERATIONS Net investment loss .................................. $ (85,891) $ (8,898) Net realized gain (loss) from security transactions .. 123,091 (23,156) Net change in unrealized appreciation on investments . 2,901,441 424,572 ------------ ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,938,641 392,518 ------------ ----------- CAPITAL SHARE TRANSACTIONS Net increase in net assets derived from net change in outstanding shares (a) ............................. 6,833,618 2,281,225 ------------ ----------- TOTAL INCREASE IN NET ASSETS ....................... 9,772,259 2,673,743 NET ASSETS Beginning of period .................................... 2,673,743 -0- ------------ ----------- END OF PERIOD .......................................... $ 12,446,002 $ 2,673,743 ============ =========== (a) A summary of capital shares transactions is as follows: Year April 8,1997* Ended through February 28, 1999 February 28, 1998 -------------------------- ------------------------- Shares Paid In Capital Shares Paid In Capital ------- --------------- ------ --------------- Shares sold.................................. 233,427 $8,406,475 89,946 $2,313,271 Shares redeemed.............................. (41,565) (1,572,857) (1,261) (32,046) Net increase................................. 191,862 $6,833,618 88,685 $2,281,225
* Commencement of operations. See accompanying Notes to Financial Statements. 11 INFORMATIONTECH 100(R) FUND FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ------------------------------------------------------------------------------------------ Year April 8, 1997* Ended through February 28, 1999 February 28, 1998 ----------------- ----------------- Net asset value, beginning of period .............. $ 30.15 $ 20.00 Income from investment operations: Net investment loss ............................. (0.31) (0.10) Net realized and unrealized gain on investments . 14.52 10.25 Total from investment operations .................. 14.21 10.15 Net asset value, end of period .................... $ 44.36 $ 30.15 Total return ...................................... 47.13% 50.75% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) ............. $ 12,446 $ 2,674 Ratio of expenses to average net assets: Before expense reimbursement .................... 2.67% 12.17%+ After expense reimbursement ..................... 1.50% 1.50%+ Ratio of net investment loss to average net assets: After expense reimbursement ..................... (1.19%) (1.01%)+ Portfolio turnover rate ........................... 35.26% 32.78%
* Commencement of operations. + Annualized. See accompanying Notes to Financial Statements. 12 INFORMATIONTECH 100(R) FUND NOTES TO FINANCIAL STATEMENTS AT FEBRUARY 28, 1999 - -------------------------------------------------------------------------------- NOTE 1 - ORGANIZATION The InformationTech 100(R) Fund (the "Fund") is a series of shares 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 Fund began operations on April 8, 1997. The investment objective of the Fund is capital appreciation. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund: A. SECURITY VALUATION: The Fund's investments are carried at fair value. Securities listed on an exchange or quoted on a National Market System are valued at the last sale price. Other securities are valued at the mean between the last bid and asked prices. 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. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Realized gains and losses on securities sold are determined on the basis of identified cost. D. DEFERRED ORGANIZATION COSTS. The Fund has incurred expenses of $18,500 in connection with the organization of the Fund. 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, 1999, Bay Isle Financial Corporation (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, 1999, the Fund incurred $68,002 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 13 INFORMATIONTECH 100(R) FUND NOTES TO FINANCIAL STATEMENTS, CONTINUED - -------------------------------------------------------------------------------- reductions 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, 1999, the Advisor reduced its fees and absorbed Fund expenses in the amount of $84,244; no amounts were reimbursed to the Advisor. Fees waived and expenses absorbed by the Advisor, which may be subject to recapture in the future, pursuant to the aforementioned conditions totalled $178,661 as of February 28, 1999. Investment Company Administration, LLC (the "Administrator") acts as the Fund's Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be supplied to the trustees; monitors the activities of the Fund's custodian, transfer agent and accountants; coordinates the preparation and payment of the Fund's expenses and reviews the Fund's expense accruals. For its services, the Administrator receives a monthly fee at the annual rate of 0.20% of average daily net assets, subject to a minimum fee of $30,000 annually. 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 February 28, 1999 the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $9,151,789 and $2,378,077, respectively. 14 INDEPENDENT AUDITOR'S REPORT THE BOARD OF TRUSTEES AND SHAREHOLDERS THE INFORMATIONTECH 100(R) FUND We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The InformationTech 100(R) Fund as of February 28, 1999, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the periods indicated in the accompanying financial statements. 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 audits. We conducted our audits 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 February 28, 1999, 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The InformationTech 100(R) Fund as of February 28, 1999, 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. /s/ McGladrey & Pullen, LLP McGLADREY & PULLEN, LLP New York, New York March 26, 1999 15 INFORMATIONTECH 100(R) FUND ADVISOR Bay Isle Financial Corporation 160 Sansome Street, 17th Floor San Francisco, CA 94104 (415) 705-7777 AUDITOR McGladrey & Pullen LLP 555 Fifth Avenue, 8th Floor New York, NY 10017-2416 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 (800) 385-7003 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker 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-----