The Al Frank Fund
ANNUAL REPORT
December 31, 1998
The Al Frank Fund
465 Forest Avenue, Suite I
Laguna Beach, CA 92651
(888) 263-6443 (Shareholder Services)
(877) 654-1325 (Daily NAV)
<PAGE>
Al Frank Asset Management, Inc.
Publisher of The Prudent Speculator
P.O. Box 1438, Laguna Beach, CA 92652
Phone 949-497-7657 Fax 949-497-7658
Dear Fund Shareholder,
As we move into our second year of existence, I am reminded that I had said
it would take the Fund a year or two to develop. I meant by that several things,
such as taking time to acquire enough shareholders to qualify for listing in the
open end fund sections of newspapers and magazines. I also meant that our
strategy of buying undervalued, out-of-favor stocks often takes a year or two to
be recognized by a substantial portion of stock market participants as bargains
worth buying. Happily, the beginning of 1998 started off strong, even for our
stocks, so that the Fund rose 18.3% by 4/23/98. Then, as most of you know, the
small cap bargain stocks as well as the general market had selloffs and
downtrending prices. After the market's "bottom" around 10/9/98, the majority of
stocks continued to trade in a sideways to downward range despite the renewed
advances by the big blue chip stocks and those involved in the internet madness.
So much for background.
With the rally from 10/9/98 through most of January 1999, the Fund was able
to recoup all of its unrealized losses and once again trade above its initial
$10.00 per share. The Fund closed at $10.13 on January 11, 1999. Alas, another
wave of selling, stimulated by volatile readjustments to the internet and high
momentum stocks, brought the whole market down on average, including many of the
Fund's shares. By February 12, 1999, the Fund's NAV was $9.06 per share. There
were some redemptions and new purchases dried up. Thus, one of the banes of an
open end fund is that as the market declines and the bargains become bigger,
open end mutual Funds are often constrained from making purchases and sometimes
are required to sell to meet redemptions. So far our redemptions have been
modest.
Now, we believe that we are well positioned for the balance of 1999 and
beyond. Our Fund contains a widely diversified number of positions that are
poised to participate in the improving markets of 1999 and 2000. We have sold a
few positions that have reached fair value and replaced them with some very
undervalued stocks of very good companies. We are on the threshold of the
effectiveness that has been demonstrated over the past 22 years with selections
in our investment advisory letter, The Prudent Speculator. Casually reviewing
performance percentages in other areas while describing Fund activities is not
permitted, lest an unsophisticated investor is led to believe that the Fund
could or would do as well. Past performance, especially in other activities, is
no guarantee of future performance or even profitability. Interestingly enough,
that statement cuts two ways. The fact that the Fund had a poor first year is no
guarantee that it will have a poor second or third year.
Although we do not see the Fund as a "trading vehicle" because of our
long-term orientation, that does not mean one should avoid averaging down or up
in the purchase of additional shares, which may later be redeemed when the
extreme likelihood of a severe market correction seems imminent. As mentioned
before, we are not limited to buying any category or market capitalization
stock. We look forward to picking up some large cap stocks when their valuation
makes them an undervalued bargain. Recent rotational buying in the stock market,
e.g., some of the so-called cyclical stocks which had been out of favor, augurs
well for the small capitalization stock as well.
As part of our effort to continue to reduce Fund expenses, we are working
to enhance our website (alfrank.com), where the Net Asset Value (NAV) is posted
on a daily basis and we have established a new toll-free phone number
(877-654-1325) that will report the daily NAV for those without internet access.
Shareholders who have questions regarding their accounts and would like to speak
to a shareholder services representative may continue to dial 888-263-6443, but
we urge those who are only interested in obtaining the day's NAV to dial the new
phone number as it will save the Fund, and ultimately the Fund's shareholders,
as much as $1.00 a phone call.
Faithfully yours,
/s/
Al Frank
Total return for the Fund from inception on January 2, 1998 through December 31,
1998 was -9.30%.
<PAGE>
THE AL FRANK FUND
Comparison of the change in value of a $10,000 investment in The Al Frank Fund
versus the Russell 2000 Index , the Wilshire 5000 Equity Index and the S &
P/Barra Value Index.
Fund Total return from
commencement of operations
on January 2, 1998 to
December 31, 1998....(9.30%)
<TABLE>
The Al Frank Russell 2000 Wilshire 5000 S&P/Barra
Fund Index Equity Index Value Index
<S> <C> <C> <C> <C>
2-Jan-98 $10,000 $10,000 $10,000 $10,000
31-Jan-98 $10,110 $9,841 $10,046 $9,877
28-Feb-98 $10,890 $10,568 $10,762 $10,618
31-Mar-98 $11,190 $10,999 $11,287 $11,156
30-Apr-98 $11,590 $11,050 $11,410 $11,288
31-May-98 $10,570 $10,448 $11,093 $11,447
30-Jun-98 $9,830 $10,695 $11,468 $11,534
31-Jul-98 $8,930 $9,605 $11,207 $11,284
31-Aug-98 $6,980 $7,733 $9,449 $9,469
30-Sep-98 $7,620 $8,320 $10,052 $10,045
31-Oct-98 $8,440 $8,653 $10,789 $10,831
30-Nov-98 $9,170 $9,101 $11,454 $11,396
31-Dec-98 $9,070 $9,655 $12,172 $11,796
</TABLE>
Past performance is not predictive of future performance.
The Wilshire 5000 Equity Index tracks the performance of all equity securities
issued by the U.S. head-quartered companies regardless of exchange. As of 12/98,
the index was comprised of 7,234 companies. The valuation calculation for the
Wilshire 5000 Equity Index is for the period December 31, 1997 through December
31, 1998.
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/Barra Value Index is an unmanaged capitalization-weighted index that
contains approximately 50% of the stocks in the S&P 500 with lower price-to-book
ratios.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS at December 31, 1998
- ----------------------------------------------------------------------------------------------------
Shares COMMON STOCKS: 102.2% Market Value
- ----------------------------------------------------------------------------------------------------
Aerospace/Defense-Equipment: 1.3%
<S> <C> <C>
11,000 Allied Research Corporation*.................................. $ 90,750
------------
Airlines: 2.5%
600 AMR Corporation*.............................................. 35,625
1,657 KLM Royal Dutch Airlines...................................... 49,710
1,500 UAL Corporation*.............................................. 89,531
------------
174,866
------------
Apparel Manufacturers: 1.1%
2,200 Fruit of the Loom, Inc. Class A*.............................. 30,387
1,700 St. John Knits, Inc........................................... 44,200
------------
74,587
------------
Applications Software: 1.3%
10,000 American Software, Inc. Class A*.............................. 21,562
2,200 Project Software & Development, Inc.*......................... 72,463
------------
94,025
------------
Athletic Equipment: 1.3%
37,213 First Team Sports, Inc.*...................................... 52,331
6,430 Saucony, Inc. Class B*........................................ 39,384
------------
91,715
------------
Athletic Footwear: 0.4%
1,800 Reebok International Ltd.*.................................... 26,775
------------
Auto-Cars/Light Trucks: 0.5%
374 DaimlerChrysler Corporation................................... 35,927
------------
Auto/Truck Parts and Equipment: 3.2%
3,400 Excel Industries, Inc......................................... 59,500
1,800 Meritor Automotive, Inc....................................... 38,137
7,200 OEA, Inc...................................................... 85,050
6,000 TBC Corporation*.............................................. 42,187
------------
224,874
------------
Building and Construction Products-Miscellaneous: 0.3%
1,203 Patrick Industries, Inc....................................... 18,722
------------
See accompanying Notes to Financial Statements.
<PAGE>
Building-Mobile Home/Manufactured Houses: 2.0%
2,900 Cavalier Homes, Inc........................................... $ 32,988
2,100 Oakwood Homes Corporation..................................... 31,894
17,000 SMC Corporation*.............................................. 79,688
------------
144,570
------------
Building-Maintenance and Service: 1.3%
14,500 C.H. Heist Corp.*............................................. 94,250
------------
Building-Residential/Commercial: 0.7%
3,500 Standard Pacific Corp......................................... 49,437
------------
Capacitors: 2.4%
40,000 Aerovox Incorporated*......................................... 87,500
7,100 Kemet Corporation*............................................ 81,206
------------
168,706
------------
Chemicals-Plastics: 0.2%
1,600 Wellman, Inc.................................................. 16,300
------------
Circuits: 2.4%
3,000 Hadco Corporation*............................................ 104,813
10,000 Integrated Device Technology, Inc.*........................... 61,094
------------
165,907
------------
Circuit Boards: 0.5%
10,000 Circuit Systems, Inc.*........................................ 37,500
------------
Communications Software: 0.5%
3,100 Digi International Inc.*...................................... 34,488
------------
Computer Software: 0.3%
1,250 Software Spectrum, Inc.*...................................... 20,078
------------
Computers-Memory Devices: 7.2%
13,734 Applied Magnetics Corporation*................................ 84,979
2,400 Dataram Corporation*.......................................... 22,800
See accompanying Notes to Financial Statements.
<PAGE>
Computers-Memory Devices, continued
4,400 Exabyte Corporation*.......................................... $ 23,787
800 Quantum Corporation*.......................................... 16,975
9,777 Read-Rite Corporation*........................................ 144,516
3,500 Seagate Technology, Inc.*..................................... 105,875
7,200 Western Digital Corporation*.................................. 108,450
------------
507,382
------------
Computers-Micro: 0.8%
4,500 Sequent Computer Systems, Inc.*............................... 54,141
------------
Computers-Peripheral Equipment: 6.9%
19,390 ESS Technology*............................................... 97,556
4,000 MicroTouch Systems, Inc.*..................................... 53,125
3,000 S3 Incorporated*.............................................. 22,078
8,700 SMART Modular Technologies, Inc.*............................. 240,881
18,475 Trident Microsystems, Inc.*................................... 75,055
------------
488,695
------------
Consulting-Services: 0.1%
600 Right Management Consultants, Inc.*........................... 8,737
------------
Consumer Products-Miscellaneous: 0.6%
12,000 THT Inc.*..................................................... 40,500
------------
Diamonds/Precious Stones: 0.5%
2,500 Debeers Consolidated Mines Ltd. ADR........................... 31,797
------------
Disposable Medical Products: 1.3%
13,774 Utah Medical Products, Inc.*.................................. 90,392
------------
Distribution/Wholesale: 0.5%
3,400 Allou Health & Beauty Care, Inc.*............................. 36,550
------------
Diversified Operator/Commercial Service: 1.4%
15,300 McRae Industries, Inc. Class A................................ 95,625
------------
See accompanying Notes to Financial Statements.
<PAGE>
Electric Products-Miscellaneous: 1.6%
6,450 Kulicke & Soffa Industries, Inc.*............................. $ 114,084
------------
Electronic Components-Miscellaneous: 1.4%
8,289 Nam Tai Electronics, Inc...................................... 95,842
------------
Electronic Components-Semiconductor: 8.4%
1,100 Applied Materials, Inc.*...................................... 46,991
7,000 Atmel Corporation*............................................ 106,969
6,500 Elantec Semiconductor, Inc.*.................................. 23,969
1,500 Electroglas, Inc.*............................................ 17,531
3,500 International Rectifier Corporation*.......................... 34,125
3,800 Lam Research Corporation*..................................... 68,044
7,650 National Semiconductor Corporation*........................... 103,275
6,500 Silicon Valley Group, Inc.*................................... 82,672
4,983 Siliconix Incorporated*....................................... 107,134
------------
590,710
------------
Electronic Measuring Instruments: 2.4%
3,950 Cohu, Inc..................................................... 87,641
5,000 DSP Technology Inc.*.......................................... 35,469
3,000 Vishay Intertechnology, Inc.*................................. 43,500
------------
166,610
------------
Electronic Security Devices: 0.4%
3,800 Vicon Industries, Inc.*....................................... 28,025
------------
Finance-Investment Bankers/Brokers: 0.9%
750 Lehman Brothers Holdings Inc.................................. 33,047
800 The Bear Stearns Companies Inc................................ 29,900
------------
62,947
------------
Finance-Leasing Companies: 0.8%
20,800 Prime Capital Corporation*.................................... 53,950
------------
Finance-Mortgage Loan/Banker: 1.2%
10,000 Aames Financial Corporation................................... 31,875
819 First Union Corporation....................................... 49,805
------------
81,680
------------
See accompanying Notes to Financial Statements.
<PAGE>
Footwear and Related Apparel: 1.0%
2,500 R.G. Barry Corporation*....................................... $ 27,500
1,000 The Timberland Company*....................................... 45,562
------------
73,062
------------
Golf: 0.8%
2,200 Callaway Golf Company......................................... 22,550
3,600 Coastcast Corporation*........................................ 31,500
------------
54,050
------------
Industrial Automated/Robot: 1.3%
3,450 PRI Automation, Inc.*......................................... 89,053
------------
Leisure and Recreation Products: 0.7%
2,000 Brunswick Corporation......................................... 49,500
------------
Life / Health Insurance: 0.9%
2,153 Conseco, Inc.................................................. 65,801
------------
Medical-Hospitals: 0.4%
2,000 Integrated Health Services, Inc.*............................. 28,250
------------
Medical Information Systems: 0.6%
10,000 HCIA Inc.*.................................................... 43,125
------------
Medical Instruments: 0.9%
2,500 Empi, Inc.*................................................... 62,969
------------
Medical Laser Systems: 0.2%
3,800 Summit Technology, Inc.*...................................... 16,625
------------
Medical-Nursing Homes: 0.3%
2,700 Genesis Health Ventures, Inc.*................................ 23,625
------------
Medical Products: 0.4%
9,000 BioSource International, Inc.*................................ 26,578
------------
See accompanying Notes to Financial Statements.
<PAGE>
Metal-Diversified: 2.2%
5,100 ASARCO Incorporated........................................... $ 76,819
7,487 Cyprus Amax Minerals Company.................................. 74,870
------------
151,689
------------
Metal Processors and Fabrication: 0.4%
2,500 SIFCO Industries, Inc......................................... 31,094
------------
Miscellaneous Manufacturing: 0.5%
1,000 Trinity Industries, Inc....................................... 38,500
------------
Money Center Banks: 0.7%
600 Bankers Trust Corporation..................................... 51,263
------------
Network Software: 1.3%
50,000 Netmanage, Inc.*.............................................. 92,969
------------
Networking Products: 6.3%
2,150 3Com Corporation*............................................. 96,414
6,500 Adaptec, Inc.*................................................ 113,953
2,000 Bel Fuse Inc. Class B......................................... 68,625
9,500 Cabletron Systems, Inc.*...................................... 79,562
2,500 Standard Microsystems Corporation*............................ 19,297
16,510 Zoom Telephonics, Inc.*....................................... 67,072
------------
444,923
------------
Oil and Gas Drilling: 0.3%
2,300 Global Marine Inc.*........................................... 21,131
------------
Oil-Field Services: 0.6%
3,000 Oceaneering International, Inc.*.............................. 45,000
------------
Oil Refining and Market: 0.4%
2,700 Giant Industries, Inc......................................... 25,313
------------
Paper and Related Products: 0.7%
5,650 Pope & Talbot Inc............................................. 47,319
------------
See accompanying Notes to Financial Statements.
<PAGE>
Physical Therapy/Rehabilitation Centers: 0.7%
3,300 HEALTHSOUTH Corporation*...................................... $ 50,944
------------
Property/Casualty Insurance: 0.4%
2,200 Frontier Insurance Group, Inc................................. 28,325
------------
REITS-Mortgage: 0.2%
4,000 Capstead Mortgage Corporation................................. 16,500
------------
Restaurants: 0.4%
3,500 Landry's Seafood Restaurants, Inc.*........................... 25,867
------------
Retail-Apparel/Shoe: 6.1%
2,800 Gadzooks, Inc.*............................................... 21,875
71,800 One Price Clothing Stores, Inc.*.............................. 354,512
3,000 Syms Corp.*................................................... 27,000
4,000 The Gymboree Corporation*..................................... 25,375
------------
428,762
------------
Retail-Miscellaneous/Diversified: 1.4%
26,230 Tandycrafts, Inc.*............................................ 96,723
------------
Rubber and Plastics: 2.2%
15,705 Applied Extrusion Technology, Inc.*........................... 127,603
6,000 The Lamson & Sessions Co.*.................................... 30,750
------------
158,353
------------
S&L/Thrifts-Western US: 0.5%
2,200 Golden State Bancorp Inc.*.................................... 36,575
------------
Shipbuilding: 0.2%
3,400 Halter Marine Group, Inc.*.................................... 16,575
------------
Steel Pipe and Tube: 0.6%
7,500 Maverick Tube Corporation*.................................... 41,836
------------
See accompanying Notes to Financial Statements.
<PAGE>
Steel-Producers: 2.5%
3,700 Bethlehem Steel Corporation*.................................. $ 30,987
351 Inland Steel Industries, Inc.................................. 5,923
9,046 Rouge Industries Inc. Class A................................. 79,152
10,477 The LTV Corporation........................................... 60,898
------------
176,960
------------
Sugar: 1.5%
13,000 Imperial Holly Corporation.................................... 105,625
------------
Telecommunications Equipment: 1.0%
5,000 Advanced Fibre Communications, Inc.*.......................... 54,688
8,000 RF Industries, Ltd.*.......................................... 15,500
------------
70,188
------------
Textile-Home Furnishings: 0.4%
4,961 Conso Products Company*....................................... 29,456
------------
Textile Products: 0.6%
5,000 The Dixie Group, Inc.......................................... 40,000
------------
Tobacco: 1.9%
4,500 RJR Nabisco Holdings Corporation.............................. 133,594
------------
Tools-Hand Held: 1.0%
7,000 P&F Industries, Inc. Class A*................................. 69,562
------------
Transport-Marine: 0.8%
1,200 Sea Containers Limited Class A................................ 35,925
1,900 Stolt-Nielsen S.A. ADR........................................ 19,356
------------
55,281
------------
Wireless Equipment: 0.3%
5,000 Glenayre Technologies, Inc.*.................................. 22,031
------------
Total Investments in Securities (cost $7,990,024+): 102.2% ... 7,196,140
Liabilities in excess of Other Assets: (2.2%)................. (154,173)
------------
See accompanying Notes to Financial Statements.
<PAGE>
Total Net Assets: 100.0% ..................................... $7,041,967
------------
*Non-income producing security.
+At December 31, 1998, 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................................. $ 938,073
Gross unrealized depreciation................................. (1,731,957)
------------
Net unrealized depreciation............................. $ (793,884)
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES at December 31, 1998
- -----------------------------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (identified cost $7,990,024) ............ $7,196,140
Receivables:
Dividends.............................................................. 4,731
Deferred organization costs.................................................. 28,038
Prepaid expenses............................................................. 23,419
------------
Total assets .................................................... 7,252,328
------------
LIABILITIES
Payables:
Administration fees.................................................... 2,548
Due to Advisor......................................................... 805
Fund shares repurchased................................................ 123,617
Loan payable (Note 6).................................................. 72,636
Accrued expenses............................................................. 10,755
------------
Total liabilities................................................ 210,361
------------
NET ASSETS $7,041,967
============
Net asset value, offering and redemption* price per share
($7,041,967/776,417 shares outstanding;
unlimited number of shares (par value $.01) authorized) ............... $9.07
============
COMPONENTS OF NET ASSETS
Paid-in capital ............................................................. $7,967,285
Accumulated net investment loss.............................................. (64,518)
Accumulated net realized loss on investments................................. (66,916)
Net unrealized depreciation on investments................................... (793,884)
------------
Net assets ............................................................ $7,041,967
============
*Redemption of shares held less than 6 months are subject to a 2% redemption fee payable to the Fund.
See accompanying Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
For the Period from January 2, 1998* through December 31, 1998
- -----------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends.............................................................. $ 39,776
Interest............................................................... 8,563
- -----------------------------------------------------------------------------------------------------
Total income..................................................... 48,339
- -----------------------------------------------------------------------------------------------------
Expenses
Advisory fee (Note 3).................................................. 50,113
Administration fee (Note 3)............................................ 29,835
Custodian and accounting fees.......................................... 23,295
Transfer agent fees.................................................... 20,135
Professional fees...................................................... 15,667
Distribution fees (Note 4)............................................. 12,528
Registration fees...................................................... 8,604
Reports to shareholders................................................ 7,962
Amortization of deferred organization costs............................ 6,962
Trustees' fees......................................................... 5,173
Other ................................................................. 3,979
Insurance expense...................................................... 2,490
Interest expense (Note 6).............................................. 1,360
- -----------------------------------------------------------------------------------------------------
Total expenses................................................... 188,103
Less, advisory fee waiver and absorption (Note 3)................ (75,246)
- -----------------------------------------------------------------------------------------------------
Net expenses..................................................... 112,857
- -----------------------------------------------------------------------------------------------------
Net investment loss ....................................... (64,518)
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from security transactions........................... (66,916)
Net change in unrealized depreciation on investments................... (793,884)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments.................. (860,800)
- -----------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations ...... $ (925,318)
============
</TABLE>
*Commencement of operations.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
January 2, 1998*
through
December 31, 1998
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN ASSETS FROM
OPERATIONS
<S> <C>
Net investment loss................................................................ $ (64,518)
Net realized loss from security transactions....................................... (66,916)
Net change in unrealized depreciation on investments............................... (793,884)
-----------
Net decrease in net assets resulting from operations ........................ (925,318)
-----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change in outstanding shares (a)....... 7,967,285
-----------
Total increase in net assets ................................................ $7,041,967
===========
NET ASSETS
Beginning of period................................................................ -0-
-----------
End of period ..................................................................... $7,041,967
===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
<TABLE>
January 2, 1998*
through
December 31, 1998
----------------------------
Shares Paid in Capital
----------------------------
<S> <C> <C>
Shares sold................................................... 919,730 $9,297,418
Shares redeemed............................................... (143,313) (1,330,133)
---------- ------------
Net increase.................................................. 776,417 $7,967,285
========== =============
</TABLE>
*Commencement of operations.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - For a capital share outstanding throughout the period
- --------------------------------------------------------------------------------
January 2, 1998*
through
December 31, 1998
- --------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................... $10.00
Income from investment operations:
Net investment loss...................................... (0.08)
Net realized and unrealized loss on investments.......... (0.85)
- --------------------------------------------------------------------------------
Total from investment operations............................... (0.93)
- --------------------------------------------------------------------------------
Net asset value, end of period................................. $ 9.07
================================================================================
Total return................................................... (9.30%)++
Ratios/supplemental data:
Net assets, end of period (000)................................ $7,042
Ratio of expenses to average net assets:
Before expense reimbursement............................. 3.74%+
After expense reimbursement.............................. 2.25%+
Ratio of net investment loss to average net assets:
After expense reimbursement.............................. (1.28%)+
Portfolio turnover rate........................................ 5.82%
</TABLE>
*Commencement of operations.
+Annualized.
++Not annualized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS at December 31, 1998
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Al Frank 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 January 2, 1998. The investment objective of the Fund is to seek
growth of capital. The Fund seeks to achieve its objective by investing in
out-of-favor and undervalued equity securities.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. Security Valuation. The Fund's investments are carried at fair value.
Securities 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
identified cost basis.
D. Use of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
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 period ended December 31, 1998, Al Frank Asset Management, Inc.
(the "Advisor") provided the Fund with investment management services under an
Investment Advisory Agreement. The Advisor furnished all investment advice,
office space, facilities, and provides most of the personnel needed by the Fund.
As compensation for its services, the Advisor is entitled to a monthly fee at
the annual rate of 1.00% based upon the average daily net assets of the Fund.
For the period ended December 31, 1998, the Fund incurred $50,113 in Advisory
fees.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce fees payable to it by the Fund and to pay Fund operating
expenses to the extent necessary to limit the Fund's aggregate annual operating
expenses to 2.25% 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 review and approval at
the time the reimbursement is made. Such reimbursement may not be paid prior to
the Fund's payment of current ordinary operating expenses. For the period ended
December 31, 1998, the Advisor reduced its fees and absorbed Fund expenses in
the amount of $75,246; no amounts were reimbursed to the Advisor.
<PAGE>
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 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 - DISTRIBUTION COSTS
The Trust 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 Advisor, acting as Distribution Coordinator, at an annual rate of up to
0.25% of the average daily net assets of the Fund. The fee is paid to the
Distribution Coordinator as a reimbursement for, or in anticipation of, expenses
incurred for distribution-related activity. During the period ended December 31,
1998, the Fund paid the Distribution Coordinator $12,528.
NOTE 5 - SECURITIES TRANSACTIONS
For the period ended December 31, 1998, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$8,331,639 and $274,700, respectively.
NOTE 6 - Line of Credit
At December 31, 1998, the Fund has established an uncommitted line of
credit agreement in the amount of $750,000 with Star Bank, N.A., the Fund's
custodian bank. The current annual interest rate on any borrowing under the
agreement is equal to the Broker Call Rate, plus 0.50%, payable monthly, in
arrears. The purpose of the agreement is to either meet temporary or emergency
cash needs, including redemption requests that might otherwise require the
untimely disposition of securities from the Fund's portfolio, or for leverage
purposes. Borrowing money by the Fund involves special risk considerations that
are more fully outlined in the Fund's prospectus. At December 31, 1998, the Fund
has borrowed $72,636 under the agreement.
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INDEPENDENT AUDITOR'S REPORT
The Board of Trustees and Shareholders
The Al Frank Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of The Al Frank Fund, series of Advisors Series
Trust, as of December 31, 1998, and the related statements of operations,
changes in net assets, and the financial highlights for the period 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 audit.
We conducted our audit in accordance with the 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, 1998, 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 Al
Frank Fund, series of Advisors Series Trust, as of December 31, 1998, the
results of its operations, the changes in its net assets and the financial
highlights for the period indicated, in conformity with generally accepted
accounting principles.
/s/
MCGLADREY & PULLEN, LLP
New York, New York
January 29, 1999
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Advisor
Al Frank Asset Management, Inc.
465 Forest Avenue, Suite I
Laguna Beach, California 92651
www.alfrank.com
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue, 8th Floor
New York, NY 10017-2416
Distributor
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261-E
Phoenix, Arizona 85018
Custodian
Star Bank, N.A.
425 Walnut Street, M/L 6118
Cincinnati, Ohio 45202
Transfer Agent
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, New York 11788
Legal Counsel
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104
