Milestone Treasury Obligations Fund
EXPENSE EXAMPLE (Unaudited)
November 30, 2012
As
a shareholder of the Fund, you incur ongoing costs, including advisory fees;
administration fees; shareholder service fees; distribution fees (Premium
Shares); and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The
example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period from June 1, 2012 through November 30,
2012.
Actual Expenses
The
“Actual Expenses” line in the table below provides information about actual
account values and actual expenses. You may use the information below, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the table under the heading entitled “Expenses Paid During Period” to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The
“Hypothetical” line in the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund’s actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund’s actual return. The hypothetical account values and expenses may
not be used to estimate the actual ending account balances or expenses you paid
for the period. You may use this information to compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of other funds.
Please
note that the expenses shown in the table are meant to highlight your ongoing
costs only and do not reflect any transactional costs, such as sales charges
(loads), or redemption fees. Therefore, the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were
included, your costs would have been higher.
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Actual
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Hypothetical
(5% return before expenses
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Portfolio’s
Annualized
Expense Ratio
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Beginning
Account Value
6/1/12
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Ending
Account Value
11/30/12*
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Expenses
Paid During
Period***
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Ending
Account Value
11/30/12**
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Expenses
Paid During
Period***
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Milestone Treasury Obligations Fund:
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Investor Class
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0.12
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%
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$
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1,000.00
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$
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1,000.00
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$
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0.90
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$
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1,024.10
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$
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0.92
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Institutional Class
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0.11
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%
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$
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1,000.00
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$
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1,000.00
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$
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0.72
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$
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1,024.28
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$
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0.73
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Financial Class
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0.12
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%
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$
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1,000.00
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$
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1,000.10
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$
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0.69
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$
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1,024.31
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$
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0.70
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Premium Class
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0.12
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%
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$
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1,000.00
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$
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1,000.00
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$
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0.93
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$
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1,024.07
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$
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0.95
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*Expenses are equal to the average account value over the period,
multiplied by the Fund’s annualized expense ratio, multiplied by the number of
days in the period (183) divided by the number of days in the fiscal year
(366).
**Expenses are equal to the average account value over the period,
multiplied by the Fund’s annualized expense ratio, multiplied by the number of
days in the period (183) divided by the number of days in the fiscal year
(366).
***Annualized.
23
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVAL OF THE INTERIM
INVESTMENT ADVISORY AGREEMENT *
At
a special meeting of the Board of Trustees (the “Board”) of the AdvisorOne
Funds (the “Trust”) held on November 21, 2012 the Board, including the
disinterested Trustees (the “Independent Trustees”), considered the approval of
an Interim Investment Advisory Agreement (“Interim Agreement”) between the
Trust and CLS Investments, LLC (“CLS” or the “Adviser”) with respect to the
Milestone Treasury Obligations Fund (the “Milestone Fund” or “Fund”).
The
Board discussed the written materials that were provided in advance of the Meeting,
CLS’s oral presentation and other information that the Board received at the
Meeting, and deliberated on the approval of the Interim Agreement with respect
to the Fund, in light of this information. The Board relied upon the advice of
independent legal counsel and their own business judgment in determining the
material factors to be considered in evaluating the Interim Agreement and the
weight to be given to each such factor. The conclusions reached by the Trustees
were based on a comprehensive evaluation of all of the information provided and
were not the result of any one factor. Moreover, each Trustee may have afforded
different weight to the various factors in reaching his conclusions with
respect to the Interim Agreement
Nature,
Extent and Quality of Services
. The Board reviewed materials provided by CLS related to the Interim
Agreement with the Trust, including CLS’s ADV, a description of the manner in
which investment decisions are made and executed, a review of the professional
personnel performing services for the CLS Funds, including the team of
individuals that primarily monitor and execute the investment process, and an
organization chart of CLS and its parent company. The Board discussed the
extent of CLS’s research capabilities, and the emphasis placed on research, and
well as the firm’s team approach to portfolio management. The also reviewed and
discussed the quality of its compliance personnel and the experience of its
fund management personnel. They noted with satisfaction the addition of a new
chief investment officer in 2012, and the adviser’s use of both internal and
external resources to delivery its services. A representative of CLS noted that
CLS had not made any material changes to its Code of Ethics, proxy voting policy,
or compliance procedures since the last renewal of the Advisory Agreement. The
Board received satisfactory written responses from CLS with respect to a series
of important questions, including whether CLS was involved in any lawsuits or
pending regulatory actions; and whether CLS has procedures in place to
adequately allocate trades among its respective clients. The Board reviewed the
description provided by CLS of its practices for monitoring compliance with the
Funds’ investment limitations. The Board reviewed the financial information
provided by CLS and concluded that CLS has the financial resources to meet its
obligations to the Fund. The Board concluded that CLS has provided quality and
professional advisory services to the Fund.
Performance.
The Board reviewed information on the
investment performance of the Fund since inception versus a securities
index and noted that, year-to-date, the Fund had underperformed its benchmark.
The Board discussed this relative underperformance in the context of fund
turnover, volatility, long term track record, and other considerations, noting
that the Fund had positive year-to-date, one year and three year returns. With
respect to the Fund, the Board reviewed Milestone’s historical performance and
concluded that performance, in light of current interest
rates and the adviser’s waiver of fees, was reasonable.
24
Fees
and Expenses
. The
Board reviewed the advisory fee and expense ratio of the Milestone Fund and
noted that this is the only money market fund managed by CLS, that the ten
basis point advisory fee is lower than any advisory fee charged currently by
CLS to any of its clients, and that CLS has been waiving its fee due to
historically low interest rates. The Board concluded that the advisory fee paid
by the Fund is reasonable.
Economies
of Scale
. The Board
considered whether economies of scale have been attained with respect to the
management of the Fund, and whether there is potential for realization of any
further economies of scale. After discussion, it was the consensus of the Board
that, because of the current size of the Fund, CLS continues to waive its
advisory fee, and therefore the Board will not request any changes to the
management fee structure. The Board concluded that economies of scale would be
re-evaluated in the future.
Profitability.
The Board considered the profits realized by
CLS in connection with the operation of the Fund, and whether the amount of
profit is a fair entrepreneurial profit for the management of the Fund. It also
considered the income and other benefits realized by CLS affiliates from
activities and services provided to the Fund. As stated in the materials
provided, CLS reported it did not receive payments from the Fund other than for
advisory fees paid pursuant to the Advisory Agreement. The Board reviewed CLS’s
balance sheet as of September 30, 2012 and noted there were no adverse material
changes in the financial condition of CLS since the renewal of the Advisory
Agreement at the April 26, 2012 meeting. The Trustees reviewed the
profitability analysis provided by CLS, and the officers confirmed that CLS did
not include marketing and distribution related expenses when it analyzed the
cost of providing its services to the Funds. After further discussion, the
Board concluded that to the extent CLS earned a profit from a CLS Fund, the
profits appeared reasonable and not excessive.
Conclusion
. Having requested and received such
information from CLS as the Board believed to be reasonably necessary to
evaluate the terms of the Interim Agreement, and as assisted by the advice of
independent counsel, the Board, including a majority of the Independent
Trustees, determined that approval of the Interim Agreement was in the best
interests of the Fund and its shareholders.
*Due to the timing of the contract schedule, these deliberations may or
may not relate to the current performance results of the Fund.
25
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Milestone Treasury Obligations Fund
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TRUSTEES AND OFFICERS (Unaudited)
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November
30, 2012
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Trustees
and officers of the Trust, together with information as to their principal
business occupations during the last five years, are shown below. The term of office of each Trustee listed
below will continue indefinitely.
Unless otherwise noted, the address of each Trustee and Officer is 17605
Wright Street, Suite 2, Omaha, Nebraska 68130.
Independent Trustees
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Name, Address
and Age (Year of
Birth)_
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Position/Term
of Office*
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Principal Occupation
During the Past Five Years
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Number of
Portfolios in Fund
Complex**
Overseen by
Trustee
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Other
Directorships held
by Trustee
During the Past
Five Years
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Anthony J. Hertl
1950
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Trustee
Since 2004
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Consultant to small and
emerging businesses (since 2000).
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11
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Northern Lights Fund Trust
and Northern Lights Variable Trust (96 portfolios); Satuit Capital Management
Trust; Ladenburg Thalmann Alternative Strategies Fund, The World Funds Trust,
Global Real Estate Fund (2008-2011), The Z Seven Fund, Inc., (2007-May
2010), Greenwich Advisors Trust (2007 – February 2011).
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Gary W. Lanzen
1954
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Trustee
Since 2003
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President, Orizon
Investment Counsel, LLC (since 2000); Chief Investment Officer, Orizon
Investment Counsel, LLC, (2000-2010); Partner, Orizon Group, Inc. (a
financial services company) (2002-2006).
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11
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Northern Lights Fund Trust and Northern
Lights Variable Trust (96 portfolios), Ladenburg Thalmann Alternative
Strategies Fund
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Larry A. Carter
1952
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Trustee
Since February
2012
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Consultant to private
equity clients on grain processing industry (since 2004).
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11
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NONE
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John W. Davidson
1946
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Trustee
Since February
2012
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Director, President &
Chief Economist of PartnerRe Asset Management Corporation; Chief Investment
Officer of Partner Reinsurance Company of the US (2001-2008); Creator, author
and founder of
John Davidson’s
Economic Comments
(2009-Present).
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11
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PartnerRe Asset Management
Corporation, PartnerRe Reinsurance Company of the US
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26
Milestone Treasury Obligations Fund
TRUSTEES AND OFFICERS (Unaudited) (Continued)
November 30, 2012
Independent Trustees (cont.)
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Name, Address and
Age (Year of
Birth)_
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Position/Term of
Office*
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Principal Occupation
During the Past Five Years
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Number of
Portfolios in Fund
Complex**
Overseen by
Trustee
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Other
Directorships
held by Trustee
During the Past
Five Years
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Edward D. Foy
1952
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Trustee
Since February
2012
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President and Chief
Investment Officer of Foy Financial Services, Inc. (1987-Present).
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11
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NONE
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Interested Trustees and Officers
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Name, Address
and Age
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Position/Term of
Office*
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Principal Occupation
During the Past Five Years
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Number of
Portfolios in Fund
Complex **
Overseen by Trustee
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Other
Directorships
held by Trustee
During the Past
Five Years
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Todd Clarke***
1969
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Trustee since
November 2012
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Chief Executive Officer
and Manager, CLS Investments, LLC (since September 2012); President, CLS
Investments, LLC (2004-2012).
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11
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NONE
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Eric Clarke****
1973
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Trustee since
November 2012
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President and Manager,
Orion Advisor Services, LLC (since 2004); President and Director,
Constellation Trust Company, (since 2004).
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11
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NONE
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Ryan Beach
1977
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President since
November 2012
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President of the Trust
(since November 2012), President, CLS Investments, LLC (since September
2012); Associate General Counsel, NorthStar Financial Services Group, LLC
(2011-2012); Attorney, Scudder Law Firm, P.C., L.L.O. (2005-2011).
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N/A
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N/A
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Brian
Nielsen*****
1972
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Secretary and
Chief Legal
Officer
since 2003
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Secretary and Chief Legal
Officer of the Trust; Secretary and General Counsel for NorthStar Financial
Services Group, LLC (since 2003), CLS Investments, LLC (since 2001), Orion
Advisor Services, LLC (since 2001), Gemcom, LLC (since 2004); Gemini Fund
Services, LLC (since 2012); President, Manager, Secretary and General Counsel
for Northern Lights Distributors, LLC (since 2003); Director, Secretary and
General Counsel for Constellation Trust Company (since 2004); Manager,
Secretary and General Counsel for Northern Lights Compliance Services, LLC
(since 2004); Assistant Secretary to Northern Lights Fund Trust (since 2011);
and Assistant Secretary of Gemini Fund Services, LLC (2003-2012); Manager,
NorthStar Financial Services Group, LLC (since 2012); Manager, Arbor Point
Advisors, LLC (since 2012).
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N/A
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N/A
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27
Milestone Treasury Obligations Fund
TRUSTEES AND OFFICERS (Unaudited) (Continued)
November 30, 2012
Interested Trustees and Officers (cont.)
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Name, Address
and Age
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Position/Term of
Office*
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Principal Occupation
During the Past Five Years
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Number of
Portfolios in Fund
Complex **
Overseen by
Trustee
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Other
Directorships held
by Trustee
During the Past
Five Years
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Michael J. Wagner
80 Arkay Drive
Hauppauge, NY
11788
1950
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Chief Compliance
Officer
Since 2006
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President (4/2006-present)
and Chief Operating Officer (9/2004–3/2006) of Northern Lights Compliance
Services, LLC.
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N/A
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N/A
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Dawn Borelli
80 Arkay Drive
Hauppauge, NY
11788
1972
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Treasurer
Since April 2012
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Assistant Vice President,
of Fund Administration, Gemini Fund Services, LLC since 2010, Assistant Vice
President of Global Fund Administration, Legg Mason & Co. LLC (financial
service company) from 2003 to 2010.
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N/A
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N/A
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* The term of office for each Trustee and officer
listed above will continue indefinitely.
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** The term “Fund Complex” refers to the AdvisorOne
Funds trust.
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*** Todd Clarke is an “interested person” of the
Trust as that term is defined under the 1940 Act, because of his affiliation
with CLS Investments, LLC (investment adviser to certain funds of the
Trust). Mr. Clarke is the brother of
Eric Clarke and the brother-in-law of Brian Nielsen.
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**** Eric Clarke is an “interested person” of the
Trust as that term is defined under the 1940 Act, because of his affiliation
with Orion Advisers, LLC an affiliate of CLS Investments, LLC and is the
brother of Todd Clarke and brother-in-law of Brian Nielsen.
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*****
Brian Nielsen is the brother-in-law of
Todd Clarke and Eric Clarke.
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The Fund’s Statement of
Additional Information includes additional information about the Trustees and
is available free of charge, upon request, by calling toll-free at
1-866-811-0225.
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28
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Rev. June 2011
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FACTS
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WHAT DOES ADVISORONE FUNDS (“ADVISORONE”) DO WITH YOUR PERSONAL INFORMATION?
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Why?
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Financial companies choose how
they share your personal information. Federal law gives consumers the right
to limit some but not all sharing. Federal law also requires us to tell you
how we collect, share, and protect your personal information. Please read
this notice carefully to understand what we do.
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What?
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The types of personal
information we collect and share depend on the product or service you have
with us. This information can include:
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•
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Social
Security number
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Account transactions
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•
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Employment
information
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•
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Income
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•
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Account
balances
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•
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Investment experience
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When you are no longer our
customer, we continue to share your information as described in this notice.
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How?
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All financial companies need to
share a customer’s personal information to run their everyday business - to
process transactions, maintain customer accounts, and report to credit
bureaus. In the section below, we list the reasons financial companies can
share their customer’s personal information; the reasons AdvisorOne chooses to
share; and whether you can limit this sharing.
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Reasons we can share your personal
information
|
Does
AdvisorOne
share?
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Can you limit
this sharing?
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For our everyday business purposes --
such as to process your transactions, maintain your account(s),
respond to
court orders and legal investigations, or report to credit bureaus
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Yes
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No
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For our marketing purposes --
to offer our products and services to you
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Yes
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No
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For joint marketing with other financial companies
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Yes
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No
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For our affiliates’ everyday business purposes --
information about your transactions and experiences
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Yes
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No
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For our affiliates’ everyday business purposes --
information about your creditworthiness
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No
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We don’t share
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For nonaffiliates to market to you
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No
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We don’t share
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Questions?
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Call (866) 811-0225 or go to www.advisoronefunds.com
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29
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Who we are
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Who is providing this notice?
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AdvisorOne Funds
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What we do
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How does AdvisorOne protect my personal information?
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To protect your personal
information from unauthorized access and use, we use security measures that
comply with federal law. These measures include computer safeguards and
secured files and buildings.
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How does AdvisorOne collect my personal information?
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We
collect your personal information, for example, when you
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open an
account
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•
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give us
your income information
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•
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provide account information
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•
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provide
employment information
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•
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give us your contact information
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We also collect your personal
information from others, such as credit bureaus, affiliates, or other
companies.
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Why can’t I limit all sharing?
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Federal
law gives you the right to limit only
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•
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sharing for affiliates’ everyday
business purposes—information about your creditworthiness
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•
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affiliates from using your
information to market to you
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•
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sharing
for nonaffiliates to market to you
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State laws and individual
companies may give you additional rights to limit sharing.
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Definitions
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Affiliates
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Companies related by common
ownership or control. They can be financial and nonfinancial companies.
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The following companies may be considered affiliates of AdvisorOne:
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•
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CLS Investments, LLC
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•
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NorthStar Financial Services Group, LLC
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•
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Gemcom, LLC
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•
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Gemini Fund Services, LLC
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•
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Northern Lights Compliance Services, LLC
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•
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Northern Lights Distributors, LLC
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•
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Orion Advisor Services, LLC
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•
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Constellation Trust Company
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Nonaffiliates
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Companies
not related by common ownership or control. They can be financial and
nonfinancial companies.
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•
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AdvisorOne does not share with nonaffiliates so
they can market to you.
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Joint marketing
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A formal
agreement between nonaffiliated financial companies that together market
financial products and services to you.
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•
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Our joint marketing partners
include other financial service companies.
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30
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Adviser
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CLS Investments, LLC
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17605 Wright Street, Suite 2
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Omaha, NE 68130
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Administrator
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Gemini Fund Services, LLC
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80 Arkay Drive
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Hauppauge, NY 11788
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Distributor
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Northern Lights Distributors, LLC
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17605 Wright Street, Suite 2
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Omaha, NE 68130
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1-866-811-0225
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Transfer Agent
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Gemini Fund Services, LLC
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17605 Wright Street, Suite 2
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Omaha, NE 68130
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1-866-811-0225
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Custodian
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The Bank of New York Mellon
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One Wall Street
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New York, NY 10286
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Legal Counsel
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Thompson Hine LLP
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|
41 South High Street, Suite 1700
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Columbus, OH 43215
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Independent Registered Public Accounting
Firm
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Tait, Weller & Baker LLP
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1818 Market Street, Suite 2400
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Philadelphia, PA 19103
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This report is authorized for distribution
only to current shareholders and to others
who have received a copy of The Milestone Funds prospectus.
A description of the Funds proxy voting
policies and procedures is available without charge and
Upon request by calling 1-866-811-0225 or by accessing the
Securities and Exchange Commission’s (“Commission”) website at
http://www.sec.gov
.
Information regarding how the Fund voted
proxies for portfolio securities, if applicable, during the most recent
12-month period ended June 30, is also available, without charge and upon request,
by calling 1-866-811-0225 or accessing the Funds’ Form N-PX on the Commission’s
website at
http://www.sec.gov
.
The Fund files its complete schedule of
portfolio holdings with the commission for the first and third quarters of each
fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC website at
http://www.sec.gov
. The Fund’s Form N-Q may also be reviewed and copied
at the Commission’s Public Reference Room in Washington, D.C.; information on
the operation of the Public Reference Room may be obtained by calling
(800)-SEC-0330.
Milestone Treasury Obligations Fund
17605 Wright Street, Suite 2, Omaha, NE 68130
1-866-811-0225