THE AL FRANK FUND
[PHOTO OF AL FRANK]
ANNUAL REPORT
DECEMBER 31, 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.
PUBLISHER OF THE PRUDENT SPECULATOR
P.O. Box 1438, Laguna Beach, CA 92652
Phone 949-497-7657 Fax 949-497-7658
Dear Fund Shareholder,
While the typical "value" mutual fund turned in its second straight year of
lackluster performance, The Al Frank Fund (ticker symbol = VALUX) had a
sensational year as many of the undervalued and out-of-favor stocks selected in
1998 suddenly became "must-have" stocks in 1999. In fact, the Fund was named as
the Best Small Cap Value Fund by Morningstar for 1999 with a gain of 60.42% for
the period 1/1/99 to 12/31/99. The Russell 2000 Index, our most comparative
index, managed only a 19.62% return, and the average Small Cap Value Fund
returned 4.8%, according to Morningstar (see Morningstar.com). Year 2000,
despite its volatility and the negative returns in the large capitalization
averages and indexes thus far, has started off well as the Fund has gained an
additional 11.20% through 2/25/00.
Our time-tested investment strategy of "buying severely undervalued shares
to be held in a widely diversified portfolio for their long-term potential
appreciation" led us to uncover numerous bargains in the technology sector
during 1998 and 1999, fueling the recent performance. Although it did not start
out that way, the tremendous gains in our tech stocks have ballooned the overall
weighting of technology to 50% of the Fund. Of course, our technology
investments are spread over several dozen stocks in industries such as
integrated circuits, semiconductor capital equipment, software, computer &
computer peripherals and networking equipment. While we have been capturing our
profits on portions of many of these positions, we continue to hold the balance
of them, given the market's current fervor for anything with a microchip and the
incredible improvement in the bottom lines of the corporations.
As an example, our largest holding, semiconductor maker Siliconix (SILI),
was purchased in April 1998 at $27. At the time, SILI was trading for 10 times
earnings, 1.5 times book value and 75% of sales, all quite inexpensive
fundamental valuation measures. Siliconix was a cheap stock at that time due to
concerns over the downturn in many Asian economies and fears that a cyclical
downturn in the computer chip industry would continue. Obviously those
short-term worries presented a wonderful buying opportunity for those willing to
invest for the long-term, considering the Asian economies have recovered,
semiconductor sales are booming, thanks to incredible growth in
telecommunications and Internet applications, and SILI now trades for $245 with
a three-for-one stock split imminent. Surprisingly, Siliconix is still
relatively undervalued, in our opinion, as it trades for just 25 times estimated
earnings, having grown profits at better than 200% in 1999.
As most of you know, ours is a long-term investment strategy. The 860
stocks recommended in our investment newsletter, THE PRUDENT SPECULATOR, over
the past 23 years through 12/31/99, gained an average market appreciation of
21.82% (not including dividends) with an average holding period of 6.38 years.
Obviously, some stocks have been held much longer while others reached their
goal prices in a few months or a couple years. Many studies have shown that time
is in our favor and that frequently trading positions leads to much lower total
returns than otherwise.
We believe that our common-sense, bargain-hunting approach to investing
will position us to generate returns over the long-term despite the fact that we
remain in a market that highly favors growth and momentum stocks, with
particular attention to the probability of higher than ever gains in Internet
and technology stocks. Money has rushed into initial public offerings (IPOs) of
companies with little or no earnings and projections of little or no earnings
for several years, with the dubious implication that tremendous future earnings
will make shareholders rich. In this mesmerizing mania, smaller capitalization
<PAGE>
THE AL FRANK FUND
and "old economy" stocks have suffered, even as they have become more and more
valuable in comparison to historical standards.
Despite the elevated levels of the major market indexes, we now have more
undervalued purchase candidates to choose from than at any time in the 23-year
history of THE PRUDENT SPECULATOR. This includes December 1987, October 1990 and
October 1998, all periods associated with major market bottoms. History has
shown that all market cycles reverse sooner or later and that many of those
stocks that were least appreciated often become most appreciated in the fullness
of time. We think that our Fund is well positioned to benefit from the
inevitable return of "value" investing, while also participating in the ongoing
madness for so-called "new economy" stocks.
It is important that shareholders who have invested or contemplate
investing in the Fund have a multiyear commitment. Unfortunately, some of our
"investors" failed to heed this advice in early 1999 as they sold their shares,
locking in losses at prices below $10.00 a share and missing out on our
fantastic recovery. At the risk of sounding self serving, the strategy of choice
should be to acquire more shares of the Fund when it has a significant setback.
We thank you for your continued participation in The Al Frank Fund.
Sincerely,
/s/ John Buckingham /s/ Al Frank
John Buckingham and Al Frank
* Standardized performance figures can be found in the remainder of the
annual report.
* The Fund is distributed by First Fund Distributors, Inc., Phoenix, AZ.
Member NASD.
* Performance figures of the Fund and indexes referenced represent past
performance and are not indicative of future performance of the Fund or the
indexes. Share value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original investment. Indexes
do not incur expenses and are not available for investment.
2
<PAGE>
THE AL FRANK FUND
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
Average Annual Total Return(1)
1 year.......................60.42%
Since inception (1/2/98).....20.69%
The Al Frank Wilshire 5000 Russell 2000 S&P/Barra
Fund Equity Index Index Value Index
---- ------------ ----- -----------
2-Jan-98 $10,000 $10,000 $10,000 10,000
31-Mar-98 $11,190 $11,287 $10,999 11,156
30-Jun-98 $ 9,830 $11,468 $10,695 11,213
30-Sep-98 $ 7,620 $10,052 $ 8,320 9,766
31-Dec-98 $ 9,070 $12,172 $ 9,655 11,468
31-Mar-99 $ 8,450 $12,591 $ 9,099 11,795
30-Jun-99 $11,350 $13,533 $10,473 13,023
30-Sep-99 $11,260 $12,753 $ 9,778 11,821
31-Dec-99 $14,550 $14,855 $11,550 12,881
(1) Average Annual Total Return represents the average change in account value
over the periods indicated.
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 12/99,
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, 1999.
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.
3
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCKS: 98.69% Market Value
- --------------------------------------------------------------------------------
ADVERTISING: 0.24%
1,600 Action Performance Companies, Inc.*...................... $ 18,400
---------
AEROSPACE/DEFENSE: 0.31%
900 Raytheon Company, Class B................................ 23,906
---------
AEROSPACE/DEFENSE - EQUIPMENT: 2.01%
11,000 Allied Research Corporation*............................. 76,312
4,000 BE Aerospace, Inc.*...................................... 33,750
1,200 Lockheed Martin Corporation.............................. 26,250
2,500 SIFCO Industries, Inc.................................... 17,344
---------
153,656
---------
APPLICATIONS SOFTWARE: 1.34%
10,000 American Software, Inc., Class A*........................ 102,500
---------
AUTO - CARS/LIGHT TRUCKS: 0.38%
374 DaimlerChrysler Corporation.............................. 29,265
---------
AUTO/TRUCK - ORIGINAL EQUIPMENT: 0.46%
1,800 Meritor Automotive, Inc.................................. 34,875
---------
AUTO/TRUCK - REPLACEMENT PARTS: 0.26%
1,000 Federal-Mogul Corporation................................ 20,125
---------
AUTO/TRUCK PARTS - ORIGINAL EQUIPMENT MANAGER: 0.27%
1,186 Dura Automotive Systems, Inc.*........................... 20,681
---------
BANKS - MAJOR REGIONAL: 0.35%
819 First Union Corporation.................................. 26,873
---------
BUILDING - MAINTENANCE AND SERVICE: 0.31%
2,500 Building One Services Corporation*....................... 23,594
---------
See Notes to Financial Statements.
4
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THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
BUILDING - MOBILE/MANUFACTURED AND RV: 0.42%
2,500 Champion Enterprises, Inc.*.............................. $ 21,406
1,203 Patrick Industries, Inc.................................. 11,128
---------
32,534
---------
BUILDING - RESIDENTIAL/COMMERCIAL: 1.12%
1,800 D.R. Horton, Inc......................................... 24,863
3,500 Standard Pacific Corp.................................... 38,500
1,200 Toll Brothers, Inc.*..................................... 22,350
---------
85,713
---------
BUILDING AND CONSTRUCTION PRODUCTS - MISCELLANEOUS: 0.72%
3,000 Cameron Ashley Building Products, Inc.*.................. 30,000
900 Nortek, Inc.*........................................... 25,200
---------
55,200
---------
BUILDING - MAINTENANCE AND SERVICE: 1.11%
14,500 C. H. Heist Corp.*....................................... 85,187
---------
BUILDING - MOBILE HOME/MANUFACTURED HOUSES: 1.07%
5,000 Oakwood Homes Corporation................................ 15,938
17,000 SMC Corporation*......................................... 66,406
---------
82,344
---------
BUILDING PRODUCTS - RETAIL/WHOLESALE: 0.24%
6,000 HomeBase, Inc.*......................................... 18,375
---------
BUSINESS SERVICES: 0.09%
600 Right Management Consultants, Inc.*...................... 6,900
---------
CAPACITORS: 1.22%
30,000 Aerovox Incorporated*.................................... 93,750
---------
CHEMICALS - PLASTICS: 0.39%
1,600 Wellman, Inc............................................. 29,800
---------
CHEMICALS - SPECIALTY: 0.30%
2,200 Octel Corp.*............................................. 22,825
---------
See Notes to Financial Statements
5
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
COMPUTER - MICRO: 0.42%
1,200 Compaq Computer Corporation.............................. $ 32,475
---------
COMPUTER - GRAPHICS: 2.92%
3,000 S3 Incorporated*......................................... 34,687
18,475 Trident Microsystems, Inc.*.............................. 189,369
---------
224,056
---------
COMPUTER - MEMORY DEVICES: 0.19%
800 Quantum Corporation - DLT & Storage Systems Group*....... 12,100
400 Quantum Corporation - Hard Disk Drive Group*............. 2,775
---------
14,875
---------
COMPUTER - NETWORKS: 2.09%
2,150 3Com Corporation*........................................ 101,050
3,100 Digi International Inc.*................................. 32,356
2,500 Standard Microsystems Corporation*....................... 27,031
---------
160,437
---------
COMPUTER - PERIPHERAL EQUIPMENT: 2.48%
4,000 MicroTouch Systems, Inc.*................................ 50,500
16,510 Zoom Telephonics, Inc.*.................................. 139,303
---------
189,803
---------
COMPUTER - SERVICES: 0.30%
2,000 Analytical Surveys, Inc.*................................ 22,875
---------
COMPUTER - SOFTWARE: 2.83%
35,000 Netmanage, Inc.*......................................... 172,812
2,500 Software Spectrum, Inc.*................................. 44,219
---------
217,031
---------
COMPUTER - STORAGE DEVICES: 1.95%
4,400 Exabyte Corporation*..................................... 33,000
2,500 Seagate Technology, Inc.*................................ 116,406
---------
149,406
---------
CONSUMER PRODUCTS - MISCELLANEOUS DISC.: 0.47%
3,500 Central Garden & Pet Company, Class A*................... 36,313
---------
See Notes to Financial Statements.
6
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE: 0.61%
7,000 Allou Health & Beauty Care, Inc., Class A*............... $ 46,375
---------
ELECTRONIC - MISCELLANEOUS COMPONENTS: 4.88%
10,000 Circuit Systems, Inc.*................................... 12,500
3,000 Hadco Corporation*....................................... 153,000
2,000 KEMET Corporation*....................................... 90,125
3,750 Vishay Intertechnology, Inc.*............................ 118,594
---------
374,219
---------
ELECTRONIC PRODUCTS - MISCELLANEOUS: 0.65%
8,000 RF Industries, Ltd.*..................................... 14,125
4,000 Recoton Corporation*..................................... 36,000
---------
50,125
---------
ELECTRONIC COMPONENTS - SEMICONDUCTOR: 13.22%
3,334 Atmel Corporation*....................................... 98,561
3,600 Dataram Corporation*..................................... 80,775
10,690 ESS Technology, Inc.*.................................... 237,184
4,000 Integrated Device Technology, Inc.*...................... 116,000
3,500 International Rectifier Corporation*..................... 91,000
3,000 National Semiconductor Corporation*...................... 128,437
1,983 Siliconix Incorporated*.................................. 260,765
---------
1,012,722
---------
ELECTRONICS - MANUFACTURED MACHINERY: 5.99%
5,000 Cohu, Inc................................................ 155,000
1,500 Electroglas, Inc.*....................................... 38,062
3,000 Kulicke and Soffa Industries, Inc.*...................... 127,688
1,000 Lam Research Corporation*................................ 111,563
1,500 Silicon Valley Group, Inc.*.............................. 26,625
---------
458,938
---------
FERTILIZERS: 0.36%
1,700 IMC Global Inc........................................... 27,837
---------
FINANCE - INVESTMENT BANKERS/BROKERS: 1.30%
750 Lehman Brothers Holdings Inc............................. 63,516
840 The Bear Stearns Companies Inc........................... 35,910
---------
99,426
---------
See Notes to Financial Statements.
7
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
FINANCE - SAVINGS & LOAN: 0.50%
2,200 Golden State Bancorp Inc.*............................... $ 37,950
---------
FINANCIAL SERVICES - OTHER: 0.24%
20,800 Prime Capital Corporation*............................... 18,200
---------
FOOD - SUGAR AND REFINING: 0.56%
13,000 Imperial Sugar Company................................... 43,062
---------
FOOTWEAR AND RELATED APPAREL: 0.13%
2,500 R. G. Barry Corporation*................................. 9,844
---------
INSTRUMENTS - SCIENTIFIC: 0.40%
4,002 MTS Systems Corporation.................................. 31,016
---------
INSURANCE - LIFE: 0.50%
2,153 Conseco, Inc............................................. 38,485
---------
INSURANCE - PROPERTY AND CASUALTY: 0.58%
6,000 Frontier Insurance Group, Inc............................ 20,625
1,000 The Allstate Corporation................................. 24,000
---------
44,625
---------
LASERS - SYSTEMS/COMPONENTS: 0.43%
2,850 Summit Technology, Inc.*................................. 33,309
---------
LEISURE AND RECREATION - GAMING: 0.40%
2,000 Mirage Resorts, Incorporated*............................ 30,625
---------
LEISURE AND RECREATION PRODUCTS: 2.17%
2,000 Brunswick Corporation.................................... 44,500
2,200 Callaway Golf Company.................................... 38,913
3,600 Coastcast Corporation*................................... 59,850
3,000 K2 Inc................................................... 22,875
---------
166,138
---------
See Notes to Financial Statements.
8
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
MACHINE - TOOLS AND RELATED PRODUCTS: 0.59%
7,000 P & F Industries, Inc. Class A*.......................... $ 45,063
---------
MACHINERY - CONSTRUCTION/MINING: 0.44%
2,100 JLG Industries, Inc...................................... 33,338
---------
MEDICAL - OUTPATIENT/HOME CARE: 0.42%
2,700 Genesis Health Ventures, Inc.*........................... 5,569
5,000 HEALTHSOUTH Corporation*................................. 26,875
---------
32,444
---------
MEDICAL - WHOLESALE DRUG/SUNDRY: 0.38%
3,500 Bergen Brunswig Corporation.............................. 29,094
---------
MEDICAL - DRUGS: 0.28%
2,100 Rexall Sundown, Inc.*.................................... 21,656
---------
MEDICAL - HEALTH MAINTENANCE ORGANIZATIONS: 0.48%
700 PacifiCare Health Systems, Inc.*......................... 37,100
---------
MEDICAL PRODUCTS: 2.15%
9,000 BioSource International, Inc.*........................... 71,437
13,774 Utah Medical Products, Inc.*............................. 92,975
---------
164,412
---------
METAL ORES - NON FERROUS: 0.79%
899 Phelps Dodge Corporation................................. 60,345
---------
METAL PRODUCTS - FASTENERS: 0.36%
2,500 TransTechnology Corporation.............................. 27,656
---------
NETWORKING PRODUCTS: 4.14%
1,833 Adaptec, Inc.*........................................... 91,421
4,000 Bel Fuse Inc., Class B................................... 95,750
5,000 Cabletron Systems, Inc.*................................. 130,000
---------
317,171
---------
See Notes to Financial Statements.
9
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
OFFICE AUTOMATION AND EQUIPMENT: 1.50%
8,289 Nam Tai Electronics, Inc................................. $ 115,010
---------
OIL - FIELD SERVICES: 0.29%
1,500 Oceaneering International, Inc.*......................... 22,406
---------
OIL AND GAS DRILLING: 0.50%
2,300 Global Marine Inc.*...................................... 38,238
---------
OIL REFINING AND MARKETING: 0.28%
1,600 Holly Corporation........................................ 21,400
---------
OIL SERVICES: 0.18%
1,938 Friede Goldman Hatter International, Inc.*............... 13,445
---------
OIL AND GAS - FIELD SERVICES: 0.33%
2,700 Offshore Logistics, Inc.*................................ 25,313
---------
PAPER AND PAPER PRODUCTS: 1.18%
5,650 Pope & Talbot, Inc....................................... 90,400
---------
PRECIOUS METALS/JEWELRY: 0.95%
2,500 De Beers Consolidated Mines Ltd., ADR.................... 72,344
---------
PROTECTION - SAFETY EQUIPMENT AND SERVICES: 0.47%
6,000 Vicon Industries, Inc.*.................................. 36,000
---------
REITS - MORTGAGE: 0.44%
8,000 Capstead Mortgage Corporation............................ 33,500
---------
RETAIL - APPAREL/SHOE: 2.24%
2,800 Gadzooks, Inc.*.......................................... 27,475
41,800 One Price Clothing Stores, Inc.*......................... 107,113
8,000 Paul Harris Stores, Inc.*................................ 22,000
3,000 Syms Corp.*.............................................. 15,000
---------
171,588
---------
See Notes to Financial Statements.
10
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
RETAIL - DISCOUNT AND VARIETY: 0.38%
2,000 Toys "R" Us, Inc.*....................................... $ 28,625
---------
RETAIL - FOOD AND RESTAURANTS: 0.70%
4,000 CKE Restaurants, Inc..................................... 23,500
3,500 Landry's Seafood Restaurants, Inc.*...................... 30,406
---------
53,906
---------
RETAIL - JEWELRY STORES: 0.39%
4,000 Friedman's Inc........................................... 30,000
---------
RETAIL - MAJOR DEPARTMENT STORES: 0.26%
1,000 J. C. Penney Company, Inc................................ 19,938
---------
RETAIL - MISCELLANEOUS/DIVERSIFIED: 0.97%
4,500 A.C. Moore Arts & Crafts, Inc.*.......................... 26,156
4,000 OfficeMax, Inc.*......................................... 22,000
351 Ryerson Tull, Inc........................................ 6,823
6,230 Tandycrafts, Inc.*....................................... 19,079
---------
74,058
---------
RETAIL/WHOLESALE - AUTO PARTS: 0.49%
6,000 TBC Corporation*......................................... 37,500
---------
RUBBER AND PLASTICS: 1.64%
15,705 Applied Extrusion Technology, Inc.*...................... 96,193
6,000 The Lamson & Sessions Co.*............................... 29,250
---------
125,443
---------
SHOES AND RELATED APPAREL: 3.64%
3,500 Maxwell Shoe Company Inc.*............................... 28,000
15,300 McRae Industries, Inc.................................... 86,062
1,800 Reebok International Ltd.*............................... 14,738
3,199 Saucony, Inc. Class B*................................... 44,386
2,000 The Timberland Company, Class A*......................... 105,750
---------
278,936
---------
See Notes to Financial Statements.
11
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
STEEL - PRODUCERS: 1.36%
9,046 Rouge Industries, Inc., Class A*......................... $ 71,237
8,000 The LTV Corporation...................................... 33,000
---------
104,237
---------
STEEL - SPECIALTY ALLOYS: 0.31%
3,000 Oregon Steel Mills, Inc.................................. 23,813
---------
STEEL PIPE AND TUBE: 2.42%
7,500 Maverick Tube Corporation*............................... 185,156
---------
TELECOMMUNICATIONS EQUIPMENT: 1.48%
10,000 Glenayre Technologies, Inc.*............................. 113,125
---------
TEXTILE - APPAREL MANUFACTURING: 0.38%
1,000 Garan, Incorporated...................................... 28,625
---------
TEXTILE - HOME FURNISHINGS: 0.56%
4,961 Conso Products Company*.................................. 42,789
---------
TEXTILE - MILL PRODUCTS: 0.48%
5,000 The Dixie Group, Inc., Class A*.......................... 36,875
---------
TOBACCO: 0.30%
1,000 Philip Morris Companies Inc.............................. 23,187
---------
TOYS/GAMES/HOBBY PRODUCTS: 1.12%
37,213 First Team Sports, Inc.*................................. 86,055
---------
TRANSPORTATION - AIRLINE: 2.27%
600 AMR Corporation*......................................... 40,200
500 Delta Air Lines, Inc..................................... 24,906
1,275 KLM Royal Dutch Airlines................................. 31,795
1,000 UAL Corporation*......................................... 77,563
---------
174,464
---------
See Notes to Financial Statements.
12
<PAGE>
THE AL FRANK FUND
SCHEDULE OF INVESTMENTS at December 31, 1999, Continued
- --------------------------------------------------------------------------------
Shares Market Value
- --------------------------------------------------------------------------------
TRANSPORTATION - EQUIPMENT AND LEASING: 0.37%
1,000 Trinity Industries, Inc.................................. $ 28,437
---------
TRANSPORTATION - SHIP: 0.85%
1,200 Sea Containers Limited Class A........................... 31,950
1,900 Stolt-Nielsen S.A. ADR................................... 33,250
---------
65,200
---------
TRANSPORTATION - TRUCK: 0.75%
9,800 Cannon Express, Inc.*.................................... 25,725
4,000 Consolidated Freightways Corporation*.................... 31,750
---------
57,475
---------
Total Common Stocks (Cost $6,082,421).................... 7,562,437
---------
Principal
Amount SHORT-TERM INVESTMENTS: 0 .62%
- --------------------------------------------------------------------------------
47,433 Firstar Stellar Treasury Fund (cost $47,433)............. 47,433
---------
Total Investments in Securities (cost $6,129,854+): 99.31% 7,609,870
Other Assets less Liabilities: 0.69%..................... 52,708
---------
TOTAL NET ASSETS: 100.00%................................ 7,662,578
=========
- ----------
* Non-income producing security.
+ At December 31, 1999, the cost of securities for Federal tax purposes was
the same as the basis for financial reporting. Gross unrealized
appreciation and depreciation of securities is as follows:
Gross unrealized appreciation........................ $2,361,618
Gross unrealized depreciation........................ (881,602)
----------
Net unrealized appreciation.......................... $1,480,016
==========
See Notes to Financial Statements.
13
<PAGE>
THE AL FRANK FUND
STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(identified cost of $6,129,854) ................................ $7,609,870
Receivables:
Dividends....................................................... 3,310
Interest........................................................ 379
Fund shares sold................................................ 22,743
Deferred organization costs....................................... 21,037
Prepaid expenses ................................................. 26,768
----------
Total assets.................................................... 7,684,107
----------
LIABILITIES
Payables:
Due to Advisor.................................................. 2,285
Fund shares repurchased......................................... 5,336
Accrued expenses.................................................. 13,908
Total liabilities................................................. 21,529
----------
NET ASSETS ........................................................ $7,662,578
==========
NET ASSET VALUE, OFFERING AND REDEMPTION* PRICE PER SHARE
[$7,662,578 / 526,757 shares outstanding; unlimited
number of shares (par value $0.01) authorized]................. $ 14.55
==========
COMPONENTS OF NET ASSETS
Paid-in capital................................................ $5,340,003
Accumulated net realized gain on investments................... 842,559
Net unrealized appreciation on investments .................... 1,480,016
----------
Net assets............................................... $7,662,578
==========
- ----------
* Redemption of shares held less than 6 months are subject to a 2% redemption
fee payable to the Fund.
See Notes to Financial Statements.
14
<PAGE>
THE AL FRANK FUND
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends....................................................... $ 57,111
Interest........................................................ 1,079
----------
Total income.................................................. 58,190
----------
Expenses
Advisory fees (Note 3).......................................... 65,861
Interest expense (Note 6)....................................... 32,954
Administration fees (Note 3).................................... 29,999
Transfer agent fees............................................. 24,193
Professional fees............................................... 19,035
Distribution fees (Note 4)...................................... 16,465
Fund accounting fees............................................ 15,158
Registration fees............................................... 10,486
Amortization of deferred organization costs..................... 7,001
Reports to shareholders......................................... 5,113
Custody fees.................................................... 3,782
Trustee fees.................................................... 2,788
Miscellaneous expense........................................... 2,402
Insurance expense............................................... 1,966
----------
Total expenses................................................ 237,203
Less, advisory fee waiver and absorption (Note 3)............. (92,010)
----------
Net expenses.................................................. 145,193
----------
NET INVESTMENT LOSS ........................................ (87,003)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions..................... 996,478
Net change in unrealized appreciation on investments............. 2,273,900
----------
Net realized and unrealized gain on investments.................. 3,270,378
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $3,183,375
==========
See Notes to Financial Statements.
15
<PAGE>
THE AL FRANK FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year January 2, 1998*
Ended through
December 31, 1999 December 31, 1998
----------------- -----------------
NET INCREASE/(DECREASE) IN
ASSETS FROM OPERATIONS
Net investment loss ................. $ (87,003) $ (64,518)
Net realized gain (loss) on
security transactions ............. 996,478 (66,916)
Net change in unrealized
appreciation (depreciation)
on investments .................... 2,273,900 (793,884)
----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ......... 3,183,375 (925,318)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Net (decrease) increase in net
assets derived from net change
in outstanding shares (a) ......... (2,562,764) 7,967,285
----------- -----------
TOTAL INCREASE IN NET ASSETS ........ 620,611 7,041,967
NET ASSETS
Beginning of period ................... 7,041,967 0
----------- -----------
END OF PERIOD ......................... $ 7,662,578 $ 7,041,967
=========== ===========
(a) A summary of capital shares transactions is as follows:
Year January 2, 1998*
Ended through
December 31, 1999 December 31, 1998
------------------------- -------------------------
Shares Paid in Capital Shares Paid in Capital
------ --------------- ------ ---------------
Shares sold .............. 155,390 $ 1,691,973 919,730 $ 9,297,418
Shares redeemed .......... (405,050) (4,254,737) (143,313) (1,330,133)
-------- ----------- -------- -----------
Net increase/(decrease) .. (249,660) ($2,562,764) 776,417 $ 7,967,285
======== =========== ======== ===========
*Commencement of operations.
See Notes to Financial Statements.
16
<PAGE>
THE AL FRANK FUND
FINANCIAL HIGHLIGHTS - FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
- --------------------------------------------------------------------------------
Year January 2, 1998*
Ended through
December 31, 1999 December 31, 1998
----------------- -----------------
Net asset value, beginning of period ..... $ 9.07 $10.00
------ ------
Income from investment operations:
Net investment loss ................... (0.21) (0.08)
Net realized and unrealized
gain/(loss) on investments .......... 5.69 (0.85)
------ ------
Total from investment operations ......... 5.48 (0.93)
------ ------
Net asset value, end of period ........... $14.55 $ 9.07
====== ======
TOTAL RETURN ............................. 60.42% (9.30%)++
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (thousands) .... $7,663 $7,042
Ratio of expenses to average net assets:
Before expense reimbursement ........... 3.60% 3.74%+
After expense reimbursement ............ 2.20% 2.25%+
Ratio of net investment loss to
average net assets:
After expense reimbursement ............ (1.32%) (1.28%)+
Portfolio turnover rate .................. 19.00% 5.82%
- ----------
* Commencement of operations.
+ Annualized.
++ Not Annualized.
See Notes to Financial Statements.
17
<PAGE>
THE AL FRANK FUND
NOTES TO FINANCIAL STATEMENTS at December 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
The Al Frank Fund (the "Fund") is a series of shares of beneficial interest
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, which are determined in accordance with
income tax regulations, are recorded on the ex-dividend date.
Distributions which exceed net realized gains for financial reporting
purposes but not for tax purposes are reported as distributions in
excess of net realized gains and are primarily due to differing
treatments for wash sales and realized losses subsequent to October 31
on sale of securities. Realized gains and losses on securities sold
are determined on the basis of identified cost. Discounts and premiums
on securities purchased are amortized over the life of the respective
securities.
D. DEFERRED ORGANIZATION COSTS: The Fund has incurred expenses of $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.
18
<PAGE>
THE AL FRANK FUND
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
For the period ended December 31, 1999, Al Frank Asset Management (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 year ended December 31, 1999, the Fund incurred $65,861 in Advisory
Fees. On November 5, 1999, the shareholders of the Fund approved a new
investment advisory agreement for the Fund as a result of AF Holdings, Inc.
acquiring all of the outstanding stock of Al Frank Asset Management, the former
investment advisor to the Fund. Although there has been an ownership change in
the Advisor, the principals of the Advisor continue in their present capacities
and remain responsible for the day-to-day portfolio management of the Fund. The
Fund's investment objectives and strategies have not changed.
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 year ended
December 31, 1999, the Advisor reduced its fees and absorbed Fund expenses in
the amount of $92,010 which includes fees due to the Advisor as "Distribution
Coordinator"; no amounts were reimbursed to the Advisor. Cumulative expenses
subject to recapture pursuant to the aforementioned conditions amounted to
$167,256 for the Fund at December 31, 1999.
Investment Company Administration, LLC (the "Administrator") acts as the
Fund's Administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the Trustees;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of the Fund's expenses and reviews the
Fund's expense accruals. For its services, the Administrator receives a monthly
fee at the following annual rate:
Fund asset level Fee rate
- ---------------- --------
Less than $15 million $30,000
$15 million to less than $50 million 0.20% of average daily net assets
$50 million to less than $100 million 0.15% of average daily net assets
$100 million to less than $150 million 0.10% of average daily net assets
More than $150 million 0.05% of average daily net assets
19
<PAGE>
THE AL FRANK FUND
NOTES TO FINANCIAL STATEMENTS, Continued
- --------------------------------------------------------------------------------
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers of the Fund are also officers and/or directors of the
Administrator and the Distributor.
NOTE 4 - DISTRIBUTION COSTS
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 (the
"Plan"). The Plan permits the Fund to pay for distribution and related expenses
at an annual rate of up to 0.25% of the Fund's average daily net assets
annually. The expenses covered by the Plan may include the cost of preparing and
distributing prospectuses and other sales material, advertising and public
relations expenses, payments to financial intermediaries and compensation of
personnel involved in selling shares of the Fund. Payments made pursuant to the
Plan will represent compensation for distribution and service activities, not
reimbursements for specific expenses incurred. Pursuant to a distribution
coordination agreement adopted; under the Plan, distribution fees are paid to
the Advisor as "Distribution Coordinator". During the year ended December 31,
1999, the Fund paid the Distribution Coordinator in the amount of $16,465.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1999, the cost of purchases and the
proceeds from sales of securities, excluding short-term securities, were
$1,314,429 and $4,218,529, respectively.
NOTE 6 - LINE OF CREDIT
At December 31, 1999, 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 is 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 December 31, 1999, the Fund had no
loan amounts outstanding.
20
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
THE AL FRANK FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Al Frank Fund, series of
Advisors Series Trust (the "Fund") at December 31, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended, in conformity with accounting principles generally accepted in
the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
financial statements in accordance with auditing standards generally accepted in
the United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The financial statements for the period from January 2, 1998
(commencement of operations) to December 31, 1998, including the financial
highlights for the period then ended, were audited by other independent
accountants whose report dated January 29, 1999 expressed an unqualified opinion
on those financial statements.
PricewaterhouseCoopers LLP
New York, New York
February 4, 2000
21
<PAGE>
CHANGE IN INDEPENDENT ACCOUNTANT
- --------------------------------------------------------------------------------
On August 27, 1999, McGladrey & Pullen, LLP ("McGladrey") resigned as
independent auditors of the Fund pursuant to an agreement by
PricewaterhouseCoopers LLP ("PwC") to acquire McGladrey's investment company
practice. The McGladrey partners and professionals serving the Fund at the time
of the acquisition joined PwC.
The reports of McGladrey on the financial statements of the Fund during the
prior fiscal year contained no adverse opinion or disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audit for the period from January 2, 1998 (commencement
of operations) through December 31, 1998 and through August 27, 1999, there were
no disagreements with McGladrey on any matter of accounting principle or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of McGladrey would have
caused it to make reference to the subject matter of disagreement in connection
with its report.
On September 10, 1999, the Fund, with the approval of its Board of Trustees and
its Audit Committee, engaged PwC as its independent auditors.
22
