THE AL FRANK FUND
SEMI-ANNUAL REPORT
JUNE 30, 1999
THE AL FRANK FUND
465 FOREST AVENUE, SUITE I
LAGUNA BEACH, CA 92651
SHAREHOLDER SERVICES: (888) 263-6443
DAILY NAV: (877) 654-1325
WWW.ALFRANK.COM
<PAGE>
AL FRANK ASSET MANAGEMENT, INC.
P.O. Box 1438, Laguna Beach, CA 92652
Phone 949-497-7657 Fax 949-497-7658
Dear Fund Shareholder,
The Spanish have a saying that is particularly appropriate to successful
investing and to our Fund. With patience, everything is possible. Never mind
that what is possible is not always feasible or practical. Still, instant
gratification is the enemy of development and fruition. In our newsletter,
articles, books and seminars, we point out that simple value investing takes
time to succeed, in many instances years. Stocks that are generally deeply
undervalued--underpriced in the market--are usually so because their
corporations are out of favor or some periodic market trauma has turned off many
investors. No one knows how much an unloved stock will decline. Rarely obvious
is when investors discover its intrinsic value and begin buying and bidding up a
heretofore "dead money" stock. Likewise, no one knows how much a "discovered"
bargain will advance or how long it will take to reach fair value, although
fundamental analysis usually yields a reasonable fair-value price.
Happily, our Fund had a terrific second quarter, after struggling for five
quarters to overcome the major sell off of the Summer of 1998 and to come back
to profitability. I am often surprised at how strong a move undervalued stocks
can make, which turns a poor record into a worthwhile one. Here is a brief
review of the Fund's history through 6/30/99. We compare our Fund's average
annual total return with a baseline, The Russell 2000 Index (R2K):
<TABLE>
<CAPTION>
Fund's Change
Date NAV from 1/2/98 R2K Index R2K's Change
<S> <C> <C> <C> <C> <C>
Fund begins operations: 1/2/98 $10.00 437.02
Fund's high so far: 4/22/98 11.83 +18.30% 491.14 12.38%
Fund's low so far: 10/8/98 6.54 -34.60 310.25 -29.01
Fund's first year: 12/31/98 9.07 - 9.30 421.96 - 3.45
Through First quarter 1999: 3/31/99 8.45 -15.50 397.63 - 9.01
Through Second quarter 1999: 6/30/99 11.35 +13.50 457.67 + 4.73
For the Second quarter 1999: +34.32% +15.10%
</TABLE>
One of the heartaches of managing an open-end mutual fund, is to see Fund
shareholders redeem shares when the Fund is down. Removing money from a fund
near its low (and a market low) often causes a Fund to have to sell shares at a
loss to meet redemptions. The table shows our Fund's low (NAV) of $6.54 on
10/8/98 and its close on 12/31/98 at $9.07. While down 9.30% for 1998, the Fund
was up 38.69% from its low by year end. A shareholder who redeemed shares on
10/8/98 would have taken a 34.60% loss from the initial NAV of $10.00, or an
even greater loss from buying at a higher price as its NAV hit $11.83 on
4/22/98. On the other hand, holding the Fund shares until 6/30/99, the
shareholder realized a 73.55% gain from the Fund's low. For the same period, the
R2K gained 47.52%.
Just think, locking in a 34.60% or greater loss on 10/8/98 versus holding
and seeing a 73.55% advance from that low, in just nine months, leading to a
profit of 13.50%! This example does not intend to represent the gains that a
typical investor might expect from the fund, but rather, is used merely to
illustrate the idea that a long-term investor may ultimately be rewarded more so
than an investor who attempts to "time" the market by selling shares. While we
cannot recommend when you should buy or sell shares of the Fund, we certainly
advocate a long-term approach to investing.
<PAGE>
THE AL FRANK FUND
This real example is the kind of experience we have had for over 22 years,
speculating and investing our own money as well as others', and why we claim
that patience is probably the most important attribute one can have to be a
successful value investor. We look forward to the balance of this year and next
to see if we can't "catch up" to what we would consider a handsome total return
for a 2-3 year investment.
We do not see the Fund as a "trading vehicle" because of our long-term
orientation. However, that does not mean one should avoid dollar-cost averaging
down or up in the purchase of additional shares. We are not limited to buying
any category or market capitalization size stock. We look forward to buying more
large cap stocks when their valuation makes them undervalued bargains. 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
stocks as well.
Faithfully yours,
/s/ Al Frank
Al Frank
Past performance is not predictive of future performance. Fund share values will
fluctuate so that you may have a gain or loss when shares are redeemed. The Fund
utilizes leverage which involves special risk considerations not prevalent in
other Funds.
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 Fund is distributed by First Fund Distributors, Inc., Phoenix, AZ.
2
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 106.83% Market Value
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE - EQUIPMENT: 0.96%
11,000 Allied Research Corporation* ........................ $ 66,000
----------
AIRLINES: 2.23%
600 AMR Corporation*..................................... 40,950
1,657 KLM Royal Dutch Airlines............................. 47,328
1,000 UAL Corporation*..................................... 65,000
----------
153,278
----------
APPAREL MANUFACTURERS: 0.31%
2,200 Fruit of the Loom, Inc. Class A*..................... 21,450
----------
APPLICATIONS SOFTWARE: 1.64%
10,000 American Software, Inc. Class A*..................... 44,375
2,200 Project Software & Development, Inc.*................ 68,750
----------
113,125
----------
ATHLETIC EQUIPMENT: 3.27%
37,213 First Team Sports, Inc.*............................. 116,291
4,823 Saucony, Inc. Class B................................ 109,120
----------
225,411
----------
ATHLETIC FOOTWEAR: 0.49%
1,800 Reebok International Ltd............................. 33,525
----------
AUTO - CARS/LIGHT TRUCKS: 0.48%
374 DaimlerChrysler Corporation.......................... 33,239
----------
AUTO/TRUCK PARTS - ORIGINAL EQUIPMENT MANAGER: 0.57%
1,186 Dura Automotive Systems, Inc.*....................... 39,435
----------
AUTO/TRUCK PARTS AND EQUIPMENT: 2.21%
1,800 Meritor Automotive, Inc.............................. 45,900
7,200 OEA, Inc............................................. 63,900
6,000 TBC Corporation*..................................... 42,375
----------
152,175
----------
BUILDING - MAINTENANCE AND SERVICE: 1.39%
14,500 C. H. Heist Corp.*................................... 96,063
----------
See Notes to Financial Statements.
3
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
BUILDING - MOBILE HOME/MANUFACTURED HOUSES: 2.01%
2,900 Cavalier Homes, Inc.................................. $ 23,744
2,100 Oakwood Homes Corporation............................ 27,563
17,000 SMC Corporation*..................................... 87,125
----------
138,432
----------
BUILDING - RESIDENTIAL/COMMERCIAL: 0.66%
3,500 Standard Pacific Corp................................ 45,281
----------
BUILDING AND CONSTRUCTION PRODUCTS - MISCELLANEOUS: 0.27%
1,203 Patrick Industries, Inc.............................. 18,797
----------
CAPACITORS: 3.89%
40,000 Aerovox Incorporated*................................ 105,000
7,100 KEMET Corporation*................................... 162,856
----------
267,856
----------
CHEMICALS - PLASTICS: 0.37%
1,600 Wellman, Inc ........................................ 25,500
----------
CIRCUIT BOARDS: 0.36%
10,000 Circuit Systems, Inc.* .............................. 24,688
----------
CIRCUITS: 3.31%
3,000 Hadco Corporation* .................................. 119,250
10,000 Integrated Device Technology, Inc.* ................. 108,750
----------
228,000
----------
COMMUNICATIONS SOFTWARE: 0.47%
3,100 Digi International Inc.* ............................ 32,356
----------
COMPUTER SOFTWARE: 0.29%
1,250 Software Spectrum, Inc.* ............................ 20,313
----------
See Notes to Financial Statements.
4
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
COMPUTERS - MEMORY DEVICES: 2.68%
2,400 Dataram Corporation*.................................. $ 23,700
4,400 Exabyte Corporation*.................................. 17,050
800 Quantum Corporation*.................................. 19,300
9,777 Read-Rite Corporation*................................ 60,648
2,500 Seagate Technology, Inc............................... 64,063
----------
184,761
----------
COMPUTERS - MICRO: 1.16%
4,500 Sequent Computer Systems, Inc. ....................... 79,875
----------
COMPUTERS - PERIPHERAL EQUIPMENT: 8.77%
19,390 ESS Technology, Inc.*................................. 260,553
4,000 MicroTouch Systems, Inc.*............................. 59,500
3,000 S3 Incorporated*...................................... 27,281
5,000 SMART Modular Technologies, Inc.*..................... 86,875
18,475 Trident Microsystems, Inc.*........................... 169,739
----------
603,948
----------
CONSULTING - SERVICES: 0.14%
600 Right Management Consultants, Inc.*................... 9,300
----------
DIAMONDS/PRECIOUS STONES: 0.87%
2,500 De Beers Consolidated Mines Ltd. ADR.................. 59,688
----------
DISPOSABLE MEDICAL PRODUCTS: 1.55%
13,774 Utah Medical Products, Inc.*.......................... 106,749
----------
DISTRIBUTION/WHOLESALE: 0.35%
3,400 Allou Health & Beauty Care, Inc.*..................... 24,013
----------
DIVERSIFIED OPERATOR/COMMERCIAL SERVICE: 1.31%
15,300 McRae Industries, Inc.*............................... 89,888
----------
ELECTRIC PRODUCTS - MISCELLANEOUS: 1.17%
3,000 Kulicke and Soffa Industries, Inc..................... 80,438
----------
See Notes to Financial Statements.
5
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - MISCELLANEOUS: 1.52%
8,289 Nam Tai Electronics, Inc. ............................ $ 104,649
----------
ELECTRONIC COMPONENTS - SEMICONDUCTOR: 10.84%
4,000 Atmel Corporation*.................................... 104,750
1,500 Electroglas, Inc.*.................................... 30,000
3,500 International Rectifier Corporation*.................. 46,594
2,000 Lam Research Corporation*............................. 93,375
7,650 National Semiconductor Corporation*................... 193,641
6,500 Silicon Valley Group, Inc.*........................... 109,281
4,983 Siliconix Incorporated*............................... 170,668
----------
748,309
----------
ELECTRONIC MEASURING INSTRUMENTS: 2.43%
2,500 Cohu, Inc............................................. 88,438
3,750 Vishay Intertechnology, Inc.*......................... 78,750
----------
167,188
----------
ELECTRONIC SECURITY DEVICES: 0.50%
3,800 Vicon Industries, Inc.*............................... 34,200
----------
FINANCE - INVESTMENT BANKERS/BROKERS: 1.25%
840 The Bear Stearns Companies Inc........................ 39,270
750 Lehman Brothers Holdings Inc.......................... 46,688
----------
85,958
----------
FINANCE - LEASING: 0.57%
20,800 Prime Capital Corporation*............................ 39,000
----------
FINANCE - MORTGAGE LOAN/BANKER: 0.56%
819 First Union Corporation............................... 38,493
----------
FOOD - MISCELLANEOUS/DIVERSIFIED: 0.71%
2,500 Nabisco Group Holdings Corp.*......................... 48,906
----------
FOOD - SUGAR AND REFINING: 1.31%
13,000 Imperial Holly Corporation............................ 90,188
----------
See Notes to Financial Statements.
6
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
FOOTWEAR AND RELATED APPAREL: 1.29%
2,500 R. G. Barry Corporation* ............................. $ 20,625
1,000 The Timberland Company* .............................. 68,063
----------
88,688
----------
GOLF: 1.13%
2,200 Callaway Golf Company ................................ 32,175
3,600 Coastcast Corporation* ............................... 45,900
----------
78,075
----------
INSTRUMENTS - SCIENTIFIC: 0.71%
4,002 MTS Systems Corporation .............................. 48,774
----------
LEISURE AND RECREATION PRODUCTS: 0.81%
2,000 Brunswick Corporation ................................ 55,750
----------
LIFE/HEALTH INSURANCE: 0.95%
2,153 Conseco, Inc. ........................................ 65,532
----------
MEDICAL - HOSPITALS: 0.23%
2,000 Integrated Health Services, Inc. 16,000
----------
MEDICAL INFORMATION SYSTEMS: 1.30%
10,000 HCIA Inc.* 89,375
----------
MEDICAL INSTRUMENTS: 0.88%
2,500 Empi, Inc.*........................................... 60,938
----------
MEDICAL LASER SYSTEMS: 0.91%
2,850 Summit Technology, Inc.*.............................. 62,700
----------
MEDICAL PRODUCTS: 0.64%
9,000 BioSource International, Inc.*........................ 44,156
----------
MEDICAL/OUTPATIENT - HOME CARE: 0.12%
2,700 Genesis Health Ventures, Inc.*........................ 8,100
----------
See Notes to Financial Statements.
7
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
METAL - DIVERSIFIED: 3.04%
5,100 ASARCO Incorporated................................... $ 95,944
7,487 Cyprus Amax Minerals Company.......................... 113,709
----------
209,653
----------
METAL PROCESSORS AND FABRICATION: 0.30%
2,500 SIFCO Industries, Inc................................. 20,625
----------
MISCELLANEOUS MANUFACTURING: 0.49%
1,000 Trinity Industries, Inc............................... 33,500
----------
NETWORK SOFTWARE: 1.57%
50,000 Netmanage, Inc.* ..................................... 107,812
----------
NETWORKING PRODUCTS: 6.49%
2,150 3Com Corporation*..................................... 57,378
3,000 Adaptec, Inc.*........................................ 105,938
2,000 Bel Fuse Inc. Class B*................................ 52,000
9,500 Cabletron Systems, Inc.*.............................. 123,500
2,500 Standard Microsystems Corporation*.................... 18,906
16,510 Zoom Telephonics, Inc.*............................... 89,257
----------
323,479
----------
OIL - FIELD SERVICES: 0.70%
3,000 Oceaneering International, Inc.*...................... 48,375
----------
OIL AND GAS DRILLING: 0.52%
2,300 Global Marine Inc.*................................... 35,506
----------
OIL REFINING AND MARKETING: 0.39%
2,700 Giant Industries, Inc................................. 26,831
----------
PAPER AND RELATED PRODUCTS: 0.99%
5,650 Pope & Talbot, Inc.................................... 68,153
----------
PHYSICAL THERAPY/REHABILITATION CENTERS: 0.72%
3,300 HEALTHSOUTH Corporation*.............................. $ 49,293
----------
See Notes to Financial Statements.
8
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE: 0.49%
2,200 Frontier Insurance Group, Inc.*....................... 33,825
----------
REITS - MORTGAGE: 0.32%
4,000 Capstead Mortgage Corporation......................... 21,750
----------
RESTAURANTS: 0.41%
3,500 Landry's Seafood Restaurants, Inc.*................... 28,000
----------
RETAIL - APPAREL/SHOE: 4.50%
2,800 Gadzooks, Inc.*....................................... 44,800
41,800 One Price Clothing Stores, Inc.*...................... 198,550
3,000 Syms Corp............................................. 24,375
4,000 The Gymboree Corporation*............................. 42,000
----------
309,725
----------
RETAIL - MISCELLANEOUS/DIVERSIFIED: 1.50%
351 Ryerson Tull, Inc..................................... 7,919
26,230 Tandycrafts, Inc.*.................................... 95,084
----------
103,003
----------
RUBBER AND PLASTICS: 2.26%
15,705 Applied Extrusion Technology, Inc.*................... 119,751
6,000 The Lamson & Sessions Co.*............................ 36,000
----------
155,751
----------
S & L/THRIFTS - WESTERN: 0.70%
2,200 Golden State Bancorp Inc.*............................ 48,400
----------
SHIPBUILDING: 0.33%
3,400 Halter Marine Group, Inc.*............................ 22,525
----------
STEEL - PRODUCERS: 2.69%
3,700 Bethlehem Steel Corporation*.......................... 28,444
9,046 Rouge Industries, Inc. Class A........................ 87,068
10,477 The LTV Corporation................................... 70,065
----------
185,577
----------
STEEL PIPE AND TUBE: 1.52%
7,500 Maverick Tube Corporation*............................ $ 104,531
----------
See Notes to Financial Statements.
9
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS AT JUNE 30, 1999 (UNAUDITED), CONTINUED
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
TELECOM EQUIPMENT: 1.13%
5,000 Advanced Fibre Communications, Inc.*.................. 78,125
----------
TELECOMMUNICATIONS EQUIPMENT: 0.22%
8,000 RF Industries, Ltd.*.................................. 15,000
----------
TEXTILE - HOME FURNISHINGS: 0.41%
4,961 Conso Products Company*............................... 28,526
----------
TEXTILE PRODUCTS: 0.62%
5,000 The Dixie Group, Inc.................................. 42,422
----------
TOBACCO: 0.38%
833 R.J. Reynolds Tobacco Holdings, Inc.*................. 26,240
----------
TOOLS - HAND HELD: 0.98%
7,000 P & F Industries, Inc. Class A*....................... 67,594
----------
TRANSPORT - MARINE: 1.06%
1,200 Sea Containers Limited Class A*....................... 40,275
1,900 Stolt-Nielsen S.A. ADR*............................... 32,530
----------
73,113
----------
WIRELESS EQUIPMENT: 0.26%
5,000 Glenayre Technologies, Inc.*.......................... 17,969
----------
Total Common Stocks (cost $6,908,486): 106.83%........ 7,357,058
Liabilities in excess of other assets: (6.83%)........ (470,594)
----------
Total Net Assets: 100.00%............................. $6,886,464
==========
*Non-income producing security.
See accompanying Notes to Financial Statements.
10
<PAGE>
THE AL FRANK FUND
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (identified
cost of $6,908,486) ....................................... $ 7,357,058
Cash ........................................................ 7,188
Receivables:
Dividends ............................................. 1,392
Due from Advisor ...................................... 4,321
Fund shares sold ...................................... 100,000
Deferred organization costs ................................. 24,566
Prepaid expenses ............................................ 26,496
-----------
Total assets ....................................... 7,521,021
-----------
LIABILITIES
Payables:
Administration fees ................................... 2,466
Loan payable (Note 6) ................................. 612,726
Accrued expenses ............................................ 19,365
-----------
Total liabilities .................................. 634,557
-----------
NET ASSETS .................................................... $ 6,886,464
===========
Net asset value, offering and redemption price per share
($6,886,464/606,724 shares outstanding; unlimited
number of shares authorized, par value $0.01) ............... $ 11.35
===========
COMPONENTS OF NET ASSETS
Paid-in capital ............................................. $ 6,445,646
Accumulated net investment loss ............................. (110,573)
Accumulated net realized gain on investments ................ 102,819
Net unrealized appreciation on investments .................. 448,572
-----------
Net assets ............................................ $ 6,886,464
===========
See accompanying Notes to Financial Statements.
11
<PAGE>
THE AL FRANK FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends .................................................. $ 22,875
-----------
Total income ......................................... 22,875
-----------
Expenses
Advisory fees (Note 3) ..................................... 30,855
Interest expense (Note 6) .................................. 24,911
Administration fees (Note 3) ............................... 14,876
Transfer agent fees ........................................ 11,591
Professional fees .......................................... 8,653
Distribution fees (Note 4) ................................. 7,714
Fund accounting fees ....................................... 7,091
Registration fees .......................................... 4,436
Custody fees ............................................... 3,761
Amortization of deferred organization costs ................ 3,472
Reports to shareholders .................................... 3,096
Miscellaneous expense ...................................... 1,645
Trustee fees ............................................... 1,528
Insurance expense .......................................... 1,469
-----------
Total expenses ........................................... 125,098
Less, advisory fee waiver and absorption (Note 3) ........ (56,169)
-----------
Net expenses ............................................. 68,929
-----------
NET INVESTMENT LOSS .................................... (46,054)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions ................ 169,734
Net change in unrealized appreciation on investments ........ 1,242,456
-----------
Net realized and unrealized gain on investments ........... 1,412,190
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... $ 1,366,136
===========
See Notes to Financial Statements.
12
<PAGE>
THE AL FRANK FUND
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------
Six Months January 2, 1998*
Ended through
June 30, 1999# December 31, 1998
-------------- -----------------
<S> <C> <C>
NET INCREASE (DECREASE) IN ASSETS FROM
OPERATIONS
Net investment income (loss) ............................. $ (46,054) $ (64,518)
Net realized gain (loss) on security transactions ........ 169,734 (66,916)
Net change in unrealized appreciation (depreciation)
on investments ........................................ 1,242,456 (793,884)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,366,136 (925,318)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from net change
in outstanding shares (a) ............................. (1,521,639) 7,967,285
----------- -----------
TOTAL INCREASE IN NET ASSETS ............................. (155,503) 7,041,967
NET ASSETS
Beginning of period ............................................ 7,041,967 0
----------- -----------
END OF PERIOD .................................................. $ 6,886,464 $ 7,041,967
=========== ===========
</TABLE>
(a) A summary of capital shares transactions is as follows:
Six Months January 2, 1998*
Ended through
June 30, 1999# December 31, 1998
-------------------------- --------------------------
Shares Paid in Capital Shares Paid in Capital
------ --------------- ------ ---------------
Shares sold .......... 75,450 $ 733,857 919,730 $9,297,418
Shares redeemed....... (245,143) (2,255,496) (143,313) (1,330,133)
-------- ----------- ------- ----------
Net increase.......... (169,693) $(1,521,639) 776,417 $7,967,285
======== =========== ======= ==========
*Commencement of operations.
#Unaudited.
See Notes to FInancial Statements.
13
<PAGE>
THE AL FRANK FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS - FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- ---------------------------------------------------------------------------------------
Six Months January 2, 1998*
Ended through
June 30, 1999# December 31, 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period................. $ 9.07 $10.00
------ ------
Income from investment operations:
Net investment gain (loss)......................... 0.01 (0.08)
Net realized and unrealized gain on investments.... 2.27 (0.85)
------ ------
Total from investment operations..................... 2.28 (0.93)
------ ------
Net asset value, end of period....................... $11.35 $ 9.07
====== ======
Total return......................................... 25.14%++ (9.30%)++
Ratios/supplemental data:
Net assets, end of period (thousands)................ $6,886 $7,042
Ratio of expenses to average net assets:
Before expense reimbursement....................... 4.05%+ 3.74%+
After expense reimbursement........................ 2.25%+ 2.25%+
Ratio of net investment loss to average net assets
After expense reimbursement........................ (1.49%)+ (1.28%)+
Portfolio turnover rate.............................. 0.61% 5.82%
</TABLE>
*Commencement of operations.
+Annualized.
++Not Annualized.
#Unaudited.
See Notes to Financial Statements.
14
<PAGE>
THE AL FRANK FUND
NOTES TO FINANCIAL STATEMENTS AT JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
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 that are primarily traded on a national securities exchange
shall be valued at the last sale price on the exchange on which they are
primarily traded on the day of valuation or, if there has been no sale on
such day, at the mean between the bid and asked prices. Securities
primarily traded in the NASDAQ National Market System for which market
quotations are readily available shall be valued at the last sale price on
the day of valuation, or if there has been no sale on such day, at the mean
between the bid and asked prices. Over-the-counter ("OTC") securities which
are not traded in the NASDAQ National Market System shall be valued at the
most recent trade price. Securities for which market quotations are not
readily available, if any, are valued following procedures approved by the
Board of Trustees. Short-term investments are valued at amortized cost,
which approximates market value.
B. Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its taxable
income to its shareholders. Therefore, no federal income tax provision is
required.
C. Security Transactions, Dividends and Distributions: Security transactions
are accounted for on the trade date. 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 $35,000 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 period ended June 30, 1999, 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
15
<PAGE>
THE AL FRANK FUND
NOTES TO FINANCIAL STATEMENTS AT JUNE 30, 1999 (UNAUDITED) CONTINUED
- --------------------------------------------------------------------------------
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
June 30, 1999, the Fund incurred $30,855 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
June 30, 1999, the Advisor reduced its fees and absorbed Fund expenses in the
amount of $56,169; no amounts were reimbursed to the Advisor.
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 - 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 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 June 30, 1999, the Fund
paid Distribution Coordinator in the amount of $7,713.
NOTE 5 - SECURITIES TRANSACTIONS
For the period ended June 30, 1999, the cost of purchases and the proceeds
from sales of securities, excluding short-term securities, were $41,293 and
$1,292,565, respectively.
16
<PAGE>
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 Firstar Bank, N.A., the Fund's
custodian of assets. The current annual interest rate on any borrowing under the
agreement in equal to the Broker Call Rate, as published in the Wall Street
Journal as the Call Money 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 June 30, 1999, the Fund has borrowed
$612,726 under the agreement.
17
<PAGE>
ADVISOR
Al Frank Asset Management, Inc.
465 Forest Avenue, Suite I
Laguna Beach, California 92651
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261-E
Phoenix, Arizona 85018
CUSTODIAN
Firstar 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
