N-30D 1 taff-a.txt [AL FRANK LOGO] THE AL FRANK FUND ANNUAL REPORT DECEMBER 31, 2001 THE AL FRANK FUND P.O. BOX 1438 LAGUNA BEACH, CA 92652 SHAREHOLDER SERVICES (888) 263-6443 WWW.ALFRANK.COM AL FRANK ASSET MANAGEMENT, INC. Publisher of The Prudent Speculator P.O. Box 1438, Laguna Beach, CA 92652 www.alfrank.com Dear Fund Shareholder: Although 2001 was a disappointing year for most investors as measured by the major market averages, it is without much difficulty that we write about the performance of The Al Frank Fund (VALUX). By way of reference, the industry standard S&P 500 Composite Stock Price Index tumbled -11.87%, the Nasdaq Composite Index plunged-21.05%, the Dow Jones Industrial Average fell -5.43% and our traditional benchmark the Russell 2000 Index eked out a small +2.49% total return for 2001. Happily, the Al Frank Fund generated a total return of +22.69% with the maximum sales load deducted and +29.83% on an non-load-adjusted basis as "Value" investing continued its renaissance with many investors coming to understand that the price paid for a stock is of great significance. The "Buy High, Sell to a Greater Fool" theory of investing worked well for many during the late-90s, but we stuck to our knitting, never wavering from our strategy of buying undervalued and out-of-favor stocks. Our handsome returns in 2001, especially relative to the sizable losses put up by the "market", are testament to our disciplined approach. Clearly, 2001 was a year that none of us will soon forget, especially given the tragic events that occurred on September 11th. As I (John Buckingham) was in lower Manhattan, thankfully some three miles from the World Trade Center, on September 11th, the terrorist attacks hit close to home. While the equity markets had to cope with an unprecedented four trading-day shutdown in the aftermath, we trust that many investors have renewed faith in the U.S. capital markets. It is difficult to imagine a more frightening time to be an investor than after the tragic events of September 11th, but we are pleased to report that our stocks are generally worth considerably more today than they were on September 10th. We also are happy to note that assets continued to grow during 2001, even though many mutual funds experienced outflows, with VALUX ending the year with total assets of $47 million, compared to $20 million at the start of the year. We did have a small ($0.15 per share) distribution, but we continue to manage the fund with an eye toward minimizing portfolio turnover and the costs associated with excessive trading. As most are undoubtedly aware, the Fund is broadly diversified across numerous industry groups. In 2001, the excellent performance was primarily derived from three sources. First, because our stocks on average, trade for less than one times sales and for less than book value, we saw many previously unloved and overlooked companies come back to life as investors, corporations and rival companies focused on the inexpensive nature of so many stocks. With so many undervalued companies, we enjoyed a good number of buyouts. These included: Litton (LIT): aerospace Mikasa (MKS): tabletop products MicroTouch Systems (MTSI): touch screen systems Primex Tech (PRMX): ordnance DeBeers (DBRSY): diamonds MyPoints.com (MYPT): "busted" dot.com Bergen Brunswig (BBC): drug distribution Barringer Tech (BARR): explosives detection Minntech (MNTX): medical devices Triton Energy (OIL): energy Springs Industries (SMI): home furnishings We were also aided by substantial recoveries in many micro-, small- and mid-caps which were hit hard during 2000's year-end tax-loss selling. These include stocks like: Adaptec (ADPT): computer peripherals Applied Extrusion (AETC): plastics BankAtlantic (BBX): savings and loan CKE Restaurants (CKR): fast food restaurants Champion Enterprises (CHB): manufactured housing JC Penney (JCP): department stores Storage Tech (STK): data storage TransTechnology (TT): fasteners & aerospace Finally, since September 11th, momentum investors moved into some of our larger holdings as the likelihood that their respective businesses would benefit created significant interest. These companies include: InVision Tech (INVN): explosives detection Forgent (FORG): video conferencing Vicon Industries (VII): surveillance cameras Michaels Stores (MIK): arts and crafts Jo-Ann Stores (JAS.B): arts and crafts ESS Technology (ESST): DVD products Nobody knows what the future will bring for the markets and individual stocks. No investment philosophy can be successful all the time and we will inevitably endure periods of under-performance, but we continue to believe that investing in companies trading for low multiples of earnings, sales and/or book value is the best strategy. Good things will happen and bad things will happen. The wonderful thing about investing in out-of-favor and undervalued stocks is that when positive things occur, the stocks can soar, while the inexpensive nature of the valuations should, in most cases, help to insulate companies on the downside when bad things occur. This has been our experience for nearly 25 years of publishing The Prudent Speculator investment newsletter and for four years of managing The Al Frank Fund. We thank you for your patronage! Sincerely, /S/ John Buckingham John Buckingham Footnotes: Performance figures of the Fund referenced represent past performance and are not indicative of future performance. Share value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original investment. This report is authorized for use when preceded or accompanied by a current prospectus for the Fund. The prospectus contains more information about the risks and on-going expenses of an investment in the Fund. The Fund's total return for the year ending December 31, 2001 was 29.83% and since inception (January 2, 1998) through December 31, 2001 was 19.22% (on an annualized basis). If the maximum sales charge were reflected, the Fund's returns for the same periods would have been 22.69% and 17.57%, respectively. The S&P 500 is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. The NASDAQ Stock Market is the largest electronic, screen-based market in the world with over 5,100 companies listed. The Russell 2000 Index is Frank Russell's small capitalization index that measures the performance of the 2000 smallest companies in the Russell 3000 Index. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally leaders in their respective industries and are listed on the New York Stock Exchange. The Fund is distributed by U.S. Growth Investments, Inc. 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 year 22.69% Since inception (1/2/98) 17.57% The Al Wilshire 5000 Russell 2000 S&P/Barra Date Frank Fund Equity Index Index Value Index ---- ---------- ------------ ------------ ----------- 2-Jan-98 $10,000 $10,000 $10,000 $10,000 31-Mar-98 $10,575 $11,287 $10,999 $11,161 30-Jun-98 $9,289 $11,468 $10,695 $11,219 30-Sep-98 $7,201 $10,052 $8,320 $9,518 31-Dec-98 $8,571 $12,172 $9,655 $11,177 31-Mar-99 $7,985 $12,591 $9,099 $11,496 30-Jun-99 $10,726 $13,533 $10,473 $12,737 30-Sep-99 $10,641 $12,753 $9,778 $11,562 31-Dec-99 $13,750 $14,855 $11,550 $12,599 31-Mar-00 $16,481 $15,423 $12,335 $12,628 30-Jun-00 $15,271 $14,730 $11,835 $12,086 30-Sep-00 $15,668 $14,755 $11,930 $13,151 31-Dec-00 $14,710 $13,237 $11,064 $13,365 31-Mar-01 $15,728 $11,449 $10,309 $12,492 30-Jun-01 $18,077 $12,268 $11,739 $13,043 30-Sep-01 $15,012 $10,285 $9,266 $10,295 31-Dec-01 $19,097 $11,516 $11,178 $11,115 Past performance is no guarantee of future results. Share value will fluctuate, so that an investors shares, when redeemed, may be worth more or less than the original investment. Indices do not incur expenses and are not available for investment. 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 12/00, the index was comprised of 6,590 companies. The valuation calculation for the Wilshire 5000 Equity Index is for the period December 31, 1997 through December 31, 2001. 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. SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2001 Market Shares Common Stocks: 87.42% Value ADVANCED INDUSTRIAL EQUIPMENT: 0.58% 4,002 MTS Systems Corp. $ 40,460 11,600 Stratasys, Inc.* 76,676 30,000 The Lamson & Sessions Co.* 157,500 ----------- 274,636 ----------- ADVANCED MEDICAL DEVICES: 1.14% 2,700 Guidant Corp.* 134,460 37,000 Laserscope* 92,500 15,074 Utah Medical Products, Inc.* 205,157 8,000 VISX, Inc.* 106,000 ----------- 538,117 ----------- AEROSPACE & DEFENSE: 3.14% 16,400 Allied Research Corp.* 228,288 21,000 BE Aerospace, Inc.* 192,570 15,000 Ducommun, Inc.* 166,500 3,000 Kaman Corp. 46,800 14,300 LMI Aerospace, Inc.* 61,776 1,700 Lockheed Martin Corp. 79,339 5,000 Precision Castparts Corp. 141,250 1,500 Raytheon 48,705 1,300 Rockwell Collins 25,350 1,000 Sequa Corp.* 47,520 22,100 SIFCO Industries, Inc. 123,097 3,000 The Boeing Co. 116,340 20,000 TransTechnology Corp. 204,000 ----------- 1,481,535 ----------- AIR FREIGHT/COURIERS: 0.01% 99 FEDEx Corp.* 5,136 ----------- AIRLINES: 0.86% 5,000 AMR Corporation* 110,850 3,700 Delta Air Lines, Inc. 108,262 14,000 KLM Royal Dutch Airlines 155,120 2,500 UAL Corp. 33,750 ----------- 407,982 ----------- ALUMINUM: 0.26% 3,500 Alcoa, Inc. 124,425 ----------- AUTOMOBILE MANUFACTURERS: 0.92% 2,175 DaimlerChrysler Corp. 90,632 14,300 Ford Motor Co. 224,796 2,500 General Motors Corp. 121,500 ----------- 436,928 ----------- AUTOMOBILE PARTS & EQUIPMENT: 1.56% 6,600 ArvinMeritor, Inc. 129,624 6,000 Cooper Tire & Rubber Co. 95,760 11,999 Dura Automotive Systems, Inc.* 131,989 5,400 Goodyear Tire & Rubber 128,574 3,000 Lear Corp.* 114,420 9,000 Visteon Corp. 135,360 ----------- 735,727 ----------- BANKS: 2.24% 2,000 Bank of America Corp. 125,900 2,500 BANK ONE CORP. 97,625 20,000 BankAtlantic Bancorp 183,600 13,872 Bay View Capital Corp. 101,681 8,000 BOH Pacific Century Financial Corp. 207,120 3,000 Capstead Mortgage 70,500 1,100 Citigroup, Inc. 55,528 10,000 Sovereign Bancorp 122,400 3,010 Wachovia Corp. 94,364 ----------- 1,058,718 ----------- BIOTECHNOLOGY: 0.15% 10,000 Zonagen, Inc.* 70,000 ----------- BUILDING MATERIALS: 1.54% 900 Ameron International Corp. 62,280 4,000 Hughes Supply, Inc. 123,480 12,000 JLG Industries, Inc. 127,800 6,000 NCI Building Systems, Inc.* 106,200 4,000 Nortek, Inc.* 111,600 13,000 Omnova Solutions, Inc. 88,400 4,000 Sherwin-Williams Co. 110,000 ----------- 729,760 ----------- BUSINESS SERVICES: 2.35% 20,000 Analysts International Corp. 82,600 105,000 Be Free, Inc.* 222,600 50,000 Computer Horizons Corp.* 160,500 23,000 Encompass Services Corp.* 66,700 7,000 IKON Office Solution 81,830 6,000 Infocus Corp.* 132,120 3,374 Right Management Consultants, Inc. 58,370 110,000 SOS Staffing Service* 122,210 39,720 Vicon Industries, Inc.* 184,698 ----------- 1,111,628 ----------- CASINOS: 0.54% 4,500 MGM Mirage* 129,915 11,000 Station Casinos, Inc.* 123,090 ----------- 253,005 ----------- CHEMICALS - COMMODITY: 0.39% 5,000 Olin Corp. 80,700 3,000 The Dow Chemical Co. 101,340 ----------- 182,040 ----------- CHEMICALS - SPECIALTY: 0.96% 14,000 Crompton Corp. 126,000 8,000 IMC Global, Inc. 104,000 2,200 Octel Corp.* 39,600 8,000 Spartech Corp. 164,400 1,400 Wellman, Inc. 21,686 ----------- 455,686 ----------- CLOTHING/FABRICS: 2.53% 1,000 Garan, Inc. 42,500 10,000 Guess, Inc.* 75,000 15,000 Haggar Corp. 162,750 30,000 Hartmarx Corp.* 49,500 5,075 Kellwood Co. 121,851 5,000 Oxford Industries, Inc. 118,000 10,000 Phillips-Van Heusen 109,000 14,000 Quaker Fabric Corp.* 116,340 7,000 Quiksilver, Inc.* 120,400 5,000 Tommy Hilfiger Corp.* 68,750 5,350 Tropical Sportwear* 100,312 15,000 Unifi, Inc.* 108,750 ----------- 1,193,153 ----------- COMMUNICATIONS TECHNOLOGY: 4.71% 25,000 3Com Corp.* 159,500 15,000 Avanex Corp.* 88,500 186 Avaya, Inc.* 2,260 14,400 Blonder Tongue Labs* 53,136 12,500 Clarent Corp.* 12,500 16,000 Communication Systems, Inc. 120,640 10,000 Datum, Inc.* 138,600 10,800 Davox Corp.* 104,436 20,000 DIGI International, Inc.* 127,400 16,500 Enterasys Network, Inc. 146,025 9,000 IDT Corp. 175,590 35,000 Net2Phone, Inc.* 236,250 34,100 Network Equipment Technologies, Inc.* 185,845 16,346 Novell, Inc.* 75,028 77,000 ScreamingMedia, Inc.* 169,400 100,000 VTEL Corp.* 430,000 ----------- 2,225,110 ----------- COMPUTERS: 2.93% 11,500 Adaptec, Inc. 166,750 6,000 Apple Computer, Inc.* 131,400 249,400 Applied Graphics Technology* 132,182 12,000 Compaq Computer Corp. 117,120 5,000 Hewlett-Packard Co. 102,700 11,000 Maxtor Corp.* 69,740 10,000 Quantum Corporation - DLT & Storage Systems Group* 98,500 20,000 Read-Rite Corp.* 132,200 8,600 SanDisk Corp.* 123,840 1,250 Seagate Technology, Inc.* 100 36,100 SONICblue, Inc.* 145,844 8,000 Storage Technology Corp.* 165,360 ----------- 1,385,736 ----------- CONSUMER SERVICES: 0.24% 2,500 H&R Block, Inc. 111,750 ----------- CONTAINERS & PACKAGING: 0.38% 25,000 Applied Extrusion Technology, Inc.* 178,000 ----------- COSMETICS/PERSONAL CARE: 0.62% 30,000 Allou Health & Beauty Care, Inc.* 168,900 10,000 Helen of Troy, Ltd.* 124,100 ----------- 293,000 ----------- DISTILLERS & BREWERS: 0.24% 3,000 Robert Mondavi - Class A* 114,000 ----------- ELECTRIC & GAS: 0.44% 11,000 Mirant Corp.* 176,220 39,700 Newpower Holdings Inc. 29,378 ----------- 205,598 ----------- ELECTRICAL COMPONENTS & EQUIPMENT: 3.96% 10,000 American Power Conversion Corp.* 144,600 4,000 AVX Corp. 94,360 4,000 Bel Fuse Inc. - Class B 100,200 4,250 C&D Technologies, Inc. 97,113 36,000 Innovex* 121,680 15,075 InVision Technologies, Inc.* 449,084 8,289 Nam Tai Electronics, Inc. 137,432 5,000 PRI Automation, Inc.* 102,250 5,400 Recoton Corp.* 73,440 7,600 RF Industries, Ltd.* 20,824 19,000 Solectron Corp.* 214,320 3,100 Thomas & Betts Corp. 65,565 12,756 Vishay Intertechnology, Inc.* 248,741 ----------- 1,869,609 ----------- FINANCIAL SERVICES, DIVERSIFIED: 1.13% 40,000 Conseco, Inc.* 178,400 100,000 Finova Group 61,000 10,000 Knight Trading Group* 110,200 52,200 Providian Financial Corp. 185,310 ----------- 534,910 ----------- FIXED LINE COMMUNICATIONS: 1.15% 35,000 ADC Telecommunications, Inc.* 161,000 4,000 AT&T Corp. 72,560 15,400 MCI Group 195,580 8,000 Worldcom, Inc. 112,640 ----------- 541,780 ----------- FOOD: 0.50% 10,000 Fleming, Inc. 185,000 2,200 Sara Lee Corp. 48,906 ----------- 233,906 ----------- FOOD RETAILERS: 0.26% 3,850 Albertson's, Inc. 121,237 ----------- FOOTWEAR: 1.37% 28,700 Deckers Outdoor Corp.* 121,975 5,000 Maxwell Shoe Company, Inc.* 70,500 5,000 R. G. Barry Corp.* 31,550 30,000 Saucony, Inc. - Class B* 157,500 11,000 Steve Madden* 154,770 3,000 The Timberland Co.* 111,240 ----------- 647,535 ----------- FOREST PRODUCTS: 0.54% 5,000 Georgia-Pacific Corp. 138,050 8,200 Pope & Talbot, Inc. 116,850 ----------- 254,900 ----------- HEALTHCARE PROVIDERS: 3.04% 4,000 Aetna, Inc. 131,960 5,750 Curative Health Services, Inc.* 77,625 12,000 HEALTHSOUTH Corp.* 177,840 10,000 Humana, Inc.* 117,900 162,061 LCA-Vision, Inc.* 142,614 50,000 Magellan Health* 317,500 3,500 Oxford Health Plans, Inc.* 105,490 15,400 PacifiCare Health Systems, Inc.* 246,400 13,500 Res-Care, Inc.* 119,475 ----------- 1,436,804 ----------- HEAVY CONSTRUCTION: 0.32% 9,000 Dycom Industries, Inc.* 150,390 ----------- HEAVY MACHINERY: 0.22% 1,800 A.O. Smith Corp. 35,100 20,400 Katy Industries, Inc.* 69,768 ----------- 104,868 ----------- HOME CONSTRUCTION: 2.43% 16,000 Cavalier Homes, Inc.* 46,400 10,000 Champion Enterprises, Inc.* 123,100 5,685 D.R. Horton, Inc. 184,535 8,000 Fleetwood Enterprise 90,640 4,000 KB Home 160,400 21,900 Oakwood Homes Corp. 116,070 14,500 Rexhall Industries, Inc.* 104,110 6,000 Standard Pacific Corp. 145,920 4,000 Toll Brothers, Inc.* 175,600 ----------- 1,146,775 ----------- HOME FURNISHINGS: 1.34% 14,000 Applica, Inc.* 126,140 4,000 Chromcraft Revington, Inc.* 43,120 6,000 Craftmade International, Inc. 94,260 3,475 Maytag Corp. 107,829 25,000 The Dixie Group, Inc.* 114,750 2,000 Whirlpool Corp. 146,660 ----------- 632,759 ----------- HOUSE-DURABLE: 0.36% 20,000 Department 56, Inc.* 172,000 ----------- HOUSE-NON-DURABLE: 0.29% 16,000 Central Garden & Pet Co. - Class A* 135,360 ----------- INDUSTRIAL & COMMERCIAL SERVICES: 0.95% 4,850 Avnet, Inc. 123,530 10,000 Nu Horizons Electronics Corp.* 102,800 10,000 Spectrum Control, Inc.* 52,500 60,000 Trio-Tech International* 170,400 ----------- 449,230 ----------- INDUSTRIAL DIVERSIFIED: 0.82% 8,000 Gencorp, Inc. 112,880 14,100 McRae Industries, Inc. 78,255 17,200 Orbit International* 45,236 8,600 P & F Industries, Inc. - Class A* 61,576 5,000 Rockwell International Corp. 89,300 ----------- 387,247 ----------- INSURANCE, LIFE: 0.33% 400 National Western Life Insurance* 44,480 1,500 Torchmark Corp. 58,995 2,000 Unumprovident Corp. 53,020 ----------- 156,495 ----------- INSURANCE, PROPERTY & CASUALTY: 0.92% 800 MGIC Investment Corp. 49,376 2,200 Radian Group, Inc. 94,490 50,000 RTW, Inc.* 56,000 1,000 The Allstate Corp. 33,700 20,000 Trenwick Group, Ltd. 203,400 ----------- 436,966 ----------- LODGING: 0.36% 15,000 RFS Hotel 170,700 ----------- MARINE TRANSPORTATION: 0.91% 46,100 OMI Corp.* 183,478 16,000 Sea Containers Ltd. - Class A 218,880 1,900 Stolt-Nielsen S.A. ADR 29,621 ----------- 431,979 ----------- MEDICAL SUPPLIES: 0.56% 5,000 Boston Scientific* 120,600 2,216 Cantel Medical* 42,303 105,600 Equidyne 100,320 ----------- 263,223 ----------- OIL, DRILLING: 1.47% 4,655 Global Santa Fe Corp. 132,761 16,400 Harken Energy Corp.* 20,336 3,000 Nabors Industries, Inc.* 102,990 7,000 Rowan Companies, Inc.* 135,590 3,300 Transocean Sedco Forex, Inc. 111,606 10,000 Unit Corp.* 129,000 11,300 Wiser Oil Co.* 60,455 ----------- 692,738 ----------- OIL, EQUIPMENT & SERVICES: 2.37% 21,000 Giant Industries, Inc.* 193,830 12,000 Halliburton Co. 157,200 10,000 Holly Corp. 192,500 13,000 Key Energy* 119,600 15,000 Maverick Tube Corp.* 194,250 5,000 Oceaneering International, Inc.* 110,600 2,700 Offshore Logistics, Inc.* 47,952 3,000 Teekay Shipping Corp. 104,550 ----------- 1,120,482 ----------- OIL, SECONDARY: 1.54% 2,310 Apache Corporation 115,223 6,000 Ocean Energy, Inc. 115,200 10,000 Range Resources Corp.* 45,500 1,500 Ultramar Diamon Shamrock Corp. 74,220 5,000 Valero Energy Corp. 190,600 13,000 Vintage Petroleum, Inc. 187,850 ----------- 728,593 ----------- OTHER NON-FERROUS: 0.36% 4,000 Cleveland-Cliffs, Inc. 73,200 3,000 Phelps Dodge Corp. 97,200 ----------- 170,400 ----------- PAPER PRODUCTS: 0.28% 3,275 International Paper Co. 132,146 ----------- PHARMACEUTICALS: 0.46% 2,700 Schering-Plough Corp. 96,687 90,000 Twinlab Corp.* 121,500 ----------- 218,187 ----------- POLLUTION CONTROL/WASTE MANAGEMENT: 0.65% 119,465 Envirogen* 144,534 22,400 IMCO Recycling, Inc. 160,160 ----------- 304,694 ----------- PRECIOUS METALS: 0.10% 3,259 AngloAmerican ADR 49,244 ----------- RAILROADS: 0.48% 3,500 CSX Corp. 122,675 1,800 Union Pacific Corp. 102,600 ----------- 225,275 ----------- REAL ESTATE INVESTMENT: 0.44% 13,000 HRPT Properties Trust 112,580 3,000 LNR Property Corp. 93,540 ----------- 206,120 ----------- RECREATIONAL PRODUCTS: 1.64% 4,000 Brunswick Corp. 87,040 7,000 Callaway Golf Co. 134,050 15,000 CoastCast Corp. 76,950 26,100 Concord Camera Corp.* 206,712 30,000 Huffy Corp. 192,000 11,000 K2, Inc.* 79,310 ----------- 776,062 ----------- RESTAURANTS: 1.04% 18,500 Briazz, Inc. 18,500 15,000 CKE Restaurants, Inc.* 135,750 3,500 Landry's Seafood Restaurants, Inc. 65,275 3,600 Outback Steakhouse, Inc.* 123,300 3,000 TRICON Global Restaurants, Inc.* 147,600 ----------- 490,425 ----------- RETAILERS, APPAREL: 1.65% 6,262 American Eagle Outfitters 163,877 5,000 AnnTaylor Stores Corp.* 175,000 5,000 Burlington Coat Factory Warehouse 84,000 18,000 Gadzooks, Inc.* 247,320 28,572 One Price Clothing Stores, Inc. 60,001 2,500 Pacific Sunwear of California, Inc.* 51,050 ----------- 781,248 ----------- RETAILERS, BROADLINE: 0.92% 5,000 J. C. Penney Company, Inc. 134,500 15,000 Kmart Corp.* 81,900 5,000 Nordstrom, Inc. 101,150 2,500 Sears Roebuck & Co. 119,100 ----------- 436,650 ----------- RETAILERS, SPECIALTY: 3.42% 10,000 AutoNation, Inc.* 123,300 3,800 Barnes & Noble, Inc.* 112,480 18,500 Friedman's, Inc. 155,770 40,000 Jo-Ann Stores, Inc.* 266,000 10,000 Michaels Stores, Inc. 329,500 40,000 OfficeMax, Inc.* 180,000 6,000 Rex Stores Corp. 168,120 8,000 TBC Corp.* 107,120 4,000 The Pep Boys - Manny, Moe & Jack 68,600 4,000 Toys "R" Us, Inc.* 82,960 2,700 TransWorld Entertainment Corp.* 20,520 ----------- 1,614,370 ----------- SAVINGS & LOANS: 0.73% 2,400 FirstFed Financial Corp.* 61,512 2,200 Golden State Bancorp, Inc. 57,530 2,000 Golden West Financial 117,700 3,025 PVF Capital Corp. 33,578 2,250 Washington Mutual, Inc 73,575 ----------- 343,895 ----------- SECURITIES BROKERS: 0.25% 1,000 Lehman Brothers Holdings, Inc. 66,800 882 The Bear Stearns Companies, Inc. 51,720 ----------- 118,520 ----------- SEMICONDUCTOR & RELATED: 7.60% 1,500 Applied Materials, Inc.* 60,150 2,507 ASM Lithography Holding N.V., ADR* 42,744 22,000 Atmel Corp.* 174,240 5,000 Cohu, Inc. 98,750 7,000 Cypress Semiconductor Corp.* 139,510 6,600 Dataram Corp.* 55,110 25,000 Diodes, Inc.* 166,250 10,000 Electroglas, Inc.* 147,700 10,690 ESS Technology, Inc. 227,269 3,000 Integrated Device Technology, Inc.* 79,770 4,000 International Rectifier Corp.* 139,520 12,000 ISSI Integrated Silicon Solution, Inc.* 146,880 10,000 KEMET Corp.* 177,500 3,000 KLA-Tencor Corp.* 148,680 8,000 Kulicke and Soffa Industries, Inc.* 137,200 5,450 Lam Research Corp.* 126,549 8,250 LSI Logic Corp.* 130,185 10,700 Mattson Technology* 94,267 4,375 National Semiconductor Corp.* 134,706 3,000 Novellus Systems, Inc.* 118,350 4,449 Siliconix, Inc.* 121,992 8,550 Standard Microsystems Corp.* 132,696 5,000 Teradyne, Inc.* 150,700 18,400 Tower Semiconductor* 116,472 20,000 Trident Microsystems, Inc.* 153,000 7,000 Tvia, Inc.* 12,250 4,500 Varian Semiconductor Equipment Associates, Inc.* 155,655 162,636 Vialta, Inc. - Class A* 201,669 ----------- 3,589,764 ----------- SOFTWARE: 7.38% 22,000 Aether Systems, Inc.* 202,400 82,500 American Software, Inc. - Class A* 191,400 35,000 Aspect Communication* 135,800 4,425 Autodesk, Inc. 164,920 5,000 Avant! Corp.* 102,450 5,000 BMC Software, Inc.* 81,850 35,700 CAM Commerce Solutions, Inc.* 142,800 50,000 Captaris* 184,500 4,000 Computer Associates International, Inc. 137,960 11,000 Compuware Corp.* 129,690 50,000 Cysive, Inc.* 140,500 1,500 Electronics for Imaging, Inc.* 33,465 13,000 Keynote Systems* 121,550 100,000 Lante Corp.* 121,000 126,000 Net Perceptions, Inc.* 214,200 35,000 Netmanage, Inc.* 35,700 82,700 Peerless Systems Corp.* 103,375 81,400 Previo, Inc.* 134,310 2,800 Progress Software Corp.* 48,384 13,700 Rainbow Technologies, Inc.* 101,380 1,398 Roxio, Inc.* 23,189 132,400 Seec, Inc.* 185,360 2,500 Software Spectrum, Inc.* 39,159 2,400 Symantec Corp. 159,191 3,500 Unisys Corp.* 43,890 200,000 VIA NET.WORKS, Inc.* 206,000 100,000 Viant Corp.* 167,000 75,000 Vicinity Corp.* 135,750 ----------- 3,487,173 ----------- STEEL: 0.58% 10,000 AK Steel 113,800 53,000 Rouge Industries, Inc. - Class A 71,550 1,351 Ryerson Tull, Inc. 14,861 4,000 USX - US Steel Group 72,440 ----------- 272,651 ----------- TOBACCO: 0.41% 1,000 Philip Morris Companies, Inc. 45,850 1,600 R.J. Reynolds Tobacco Holdings, Inc 90,080 1,700 UST, Inc. 59,500 ----------- 195,430 ----------- TOYS: 0.71% 6,800 Hasbro, Inc. 110,364 6,000 Mattel, Inc. 103,200 10,200 The Topps Co.* 123,930 ----------- 337,494 ----------- TRANSPORTATION EQUIPMENT: 0.72% 2,225 Cummins Engine Co. 85,752 3,000 Navistar International Corp. 118,500 433 Sabre Holdings Corp.* 18,338 4,300 Trinity Industries, Inc. 116,831 ----------- 339,421 ----------- TRUCKING: 1.10% 5,000 Arkansas Best Corp.* 144,100 37,300 Cannon Express, Inc.* 19,396 40,000 Consolidated Freightways Corp.* 203,600 3,100 Old Dominion Freight Line, Inc.* 39,308 4,500 Yellow Corp.* 112,950 ----------- 519,354 ----------- WIRELESS COMMUNICATIONS: 0.63% 1,287 AT&T Wireless Corp.* 18,494 30,000 Brightpoint, Inc.* 94,200 20,600 Corning, Inc. 183,752 ----------- 296,446 ----------- Total Common Stocks (Cost $33,194,203) $41,297,125 ----------- Shares/ Market Principal Short-Term Investments: 14.54% Value 1,500,000 American Express, 1.83%, 1/4/02 $ 1,500,000 1,370,042 Federated Cash Trust 1,370,042 1,000,000 Galaxy Funding, 1.84%, 1/2/02 1,000,000 1,000,000 GE Capital, 1.87%, 1/2/02 1,000,000 1,000,000 GE Capital, 1.95%, 1/4/02 1,000,000 1,000,000 US Bancorp, 1.80%, 1/3/02 1,000,000 ----------- Total Short-Term Investments (Cost $6,870,042) $ 6,870,042 ----------- Total Investments in Securities (Cost $40,064,245): 101.96% 48,167,167 Liabilities in Excess of Other Assets: (1.96%) (923,835) ----------- Net Assets: 100.00% $47,243,332 ----------- ----------- * Non-income producing security. See accompanying Notes to Financial Statements. STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2001 ASSETS Investments in securities, at value (cost $40,064,245) $48,167,167 Cash 73,254 Receivables: Dividends and interest 31,259 Fund shares sold 743,675 Deferred organization costs 7,016 Prepaid expenses 12,741 ----------- Total assets 49,035,112 ----------- LIABILITIES Payables: Administration fees 6,883 Distribution fees 8,600 Due to advisor 8,807 Fund shares redeemed 1,056 Securities purchased 1,733,870 Accrued expenses 32,564 ----------- Total liabilities 1,791,780 ----------- NET ASSETS $47,243,332 ----------- ----------- NET ASSET VALUE AND REDEMPTION PRICE PER SHARE [$47,243,332 / 2,516,532 shares outstanding; unlimited number of shares (par value $.01) authorized] $18.77 ----------- ----------- OFFERING PRICE PER SHARE ($18.77 / .9450) $19.86 ----------- ----------- COMPONENTS OF NET ASSETS Paid-in capital $38,831,796 Accumulated net realized gain on investments 308,614 Net unrealized appreciation on investments 8,102,922 ----------- Net assets $47,243,332 ----------- ----------- See accompanying Notes to Financial Statements. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 INVESTMENT INCOME Income Dividends (Net of foreign tax $658) $ 260,382 Interest 59,206 ---------- Total income 319,588 ---------- Expenses Advisory fees (Note 3) 289,843 Administration fees (Note 3) 57,968 Distribution fees (Note 4) 72,460 Transfer agent fees 34,577 Fund accounting fees 35,372 Professional fees 47,500 Registration expense 43,360 Deferred organization expense 7,000 Custody fees 15,730 Reports to shareholders 21,960 Trustee fees 4,638 Miscellaneous 5,313 Insurance expense 2,309 ---------- Total expenses 638,030 Add: expenses recouped by advisor (Note 3) 15,072 ---------- Net expenses 653,102 ---------- NET INVESTMENT LOSS (333,514) ---------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments 575,474 Net change in unrealized appreciation on investments 6,942,070 ---------- Net realized and unrealized gain on investments 7,517,544 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,184,030 ---------- ---------- See accompanying Notes to Financial Statements. STATEMENTS OF CHANGES IN NET ASSETS YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2001 2000 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment loss $ (333,514) $ (104,299) Net realized gain on investments 575,474 362,231 Net change in unrealized appreciation / (depreciation) on investments 6,942,070 (319,164) ----------- ----------- NET INCREASE / (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,184,030 (61,232) DISTRIBUTIONS TO SHAREHOLDERS Net realized gain on security transactions (360,375) (886,353) TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase in net assets derived from net Change in outstanding shares (a) 20,593,559 13,111,125 ----------- ----------- TOTAL INCREASE IN NET ASSETS 27,417,214 12,163,540 NET ASSETS Beginning of period 19,826,118 7,662,578 ----------- ----------- END OF PERIOD $47,243,332 $19,826,118 ----------- ----------- ----------- ----------- (a) A summary of share transactions is as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2001 DECEMBER 31, 2000 ----------------------- --------------------- PAID IN PAID IN SHARES CAPITAL SHARES CAPITAL --------- ------------ ------ ----------- Shares sold 1,607,359 $ 28,053,098 975,413 $15,365,513 Shares issued on reinvestment of distributions 19,627 355,076 55,209 881,129 Shares redeemed (470,186) (7,814,615) (197,647) (3,135,517) --------- ----------- -------- ----------- Net increase 1,156,800 $20,593,559 832,975 $13,111,125 --------- ----------- -------- ----------- --------- ----------- -------- ----------- See accompanying Notes to Financial Statements. FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD JANUARY 2, 1998* YEAR ENDED YEAR ENDED YEAR ENDED THROUGH DECEMBER 31, 2001 DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 ----------------- ----------------- ----------------- -------------------- Net asset value, beginning of period $14.58 $14.55 $ 9.07 $10.00 ------ ------ ------ ------ Income from investment operations: Net investment loss (0.13) (0.08) (0.21) (0.08) Net realized and unrealized gain and (loss) on investments 4.47 1.18 5.69 (0.85) ------ ------ ------ ------ Total from investment operations 4.34 1.10 5.48 (0.93) ------ ------ ------ ------ Less distributions: From net realized gain on investments (0.15) (1.07) -- -- ------ ------ ------ ------ Net asset value, end of period $18.77 $14.58 $14.55 $ 9.07 ------ ------ ------ ------ ------ ------ ------ ------ Total return 29.83% 6.98% 60.42% (9.30)%+ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $47,243 $19,826 $7,663 $7,042 Ratio of expenses to average net assets: Before expense reimbursement 2.25% 2.25% 3.60% 3.74%** After expense reimbursement 2.25% 2.25% 2.20% 2.25%** Ratio of net investment loss to average net assets: After expense reimbursement (1.15)% (0.79)% (1.32)% (1.28)%** Portfolio turnover rate 18.11% 30.17% 19.00% 5.82%+
* Commencement of operations. ** Annualized. + Not Annualized. See accompanying Notes to Financial Statements. NOTES TO FINANCIAL STATEMENTS AT DECEMBER 31, 2001 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 operation 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. Realized gains and losses on securities sold are determined on the basis of identified cost. Dividend income and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions to shareholders from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations which differs from generally accepted accounting principles. To the extent these book/tax differences are permanent such amounts are reclassified within the capital accounts based on their Federal tax treatment. 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 year ended December 31, 2001, 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, 2001, the Fund incurred $289,843 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 reduction 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, 2001, the Advisor recaptured $15,072 of such expenses it previously reimbursed to the Fund. Cumulative expenses subject to recapture pursuant to the aforementioned conditions amounted to $149,580 at December 31, 2001, all of which expires in 2003. U.S. Bancorp Fund Services (formerly ICA, 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 Quasar Distributors, LLC. (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". For the year ended December 31, 2001, the Fund paid the Distribution Coordinator $72,460. NOTE 5 - PURCHASES AND SALES OF SECURITIES For the year ended December 31, 2001, the cost of purchases and the proceeds from sales of securities, excluding short-term securities, were $19,429,384 and $4,953,604 respectively. NOTE 6 - INCOME TAXES Net realized losses differ for financial statement and tax purposes due to differing treatments for wash sale losses deferred. As of December 31, 2001, the components of net assets on a tax basis were as follows: Cost of investments $40,073,303 Gross tax unrealized appreciation $10,244,631 Gross tax unrealized depreciation (2,150,767) ----------- Net tax unrealized appreciation $8,093,864 ----------- ----------- Undistributed realized gains: Long-term capital gain $317,672 The tax composition of dividends was as follows: Long-term capital gains $360,375 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF 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, 2001, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. 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 audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, 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 audits, which included confirmation of securities at December 31, 2001 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. The financial highlights for the period from January 2, 1998 (commencement of operations) to December 31, 1998 were audited by other independent accountants, whose report dated January 29, 1999 expressed an unqualified opinion on those financial highlights. PricewaterhouseCoopers LLP New York, New York April 11, 2002 TRUSTEES AND OFFICERS The business and affairs of the Fund are managed under the direction of the Fund's Board of Trustees. Information pertaining to the Trustees and Officers of the Fund is set forth below. Unless noted otherwise, each person has held the position listed for a minimum of five years. The SAI includes additional information about the Fund's officers and trustees and is available, without charge, upon request by calling 888-263-6443. INDEPENDENT TRUSTEES POSITION # OF FUNDS HELD TERM OF OFFICE IN COMPLEX WITH THE AND LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY OTHER DIRECTORSHIPS NAME, AGE AND ADDRESS TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE HELD BY TRUSTEE --------------------- -------- -------------- ---------------------- ----------- ------------------- Walter E. Auch Trustee Indefinite Management Consultant Fifteen Nicholas-Applegate Funds, (Born 1921) Term Salomon Smith Barney Funds, 4455 E. Camelback Rd., Since 1997 Bayan Strategic Realty Trust, Suite 261-E Legend Properties, Pimco Phoenix, AZ 85018 Advisors LLP, and Senele Group Donald E. O'Connor Trustee Indefinite Financial Consultant; Fifteen The Pamassus Fund (Born 1936) Term fomerly Executive Vice The Pamassus Income Fund 4455 E. Camelback Rd., Since 1997 President and Chief The Forward Funds Suite 261-E Operating Officer of ICI Phoenix, AZ 85018 Mutual Insurance Company (until January, 1997); Vice President, Operations, Investment Company Institute (until July, 1993). George T. Wofford III Trustee Indefinite Senior Vice President, Fifteen Not Applicable (Born 1939) Term Information Services, 4455 E. Camelback Rd., Since 1997 Federal Home Loan Bank of Suite 261-E San Francisco Phoenix, AZ 85018
INTERESTED TRUSTEES AND OFFICERS # OF FUNDS POSITION IN COMPLEX HELD TERM OF OFFICE OVERSEEN BY OTHER DIRECTORSHIPS WITH THE AND LENGTH OF PRINCIPAL OCCUPATION TRUSTEE OR HELD BY TRUSTEE NAME, AGE AND ADDRESS TRUST TIME SERVED DURING PAST FIVE YEARS OFFICER OR OFFICER --------------------- -------- -------------- ---------------------- ----------- ------------------- Eric M. Banhazl Trustee, Indefinite Senior Vice President, U.S. Fifteen Not Applicable (Born 1957) President & Term Bancorp Fund Services, LLC, 2020 E. Financial Way Treasurer Since 1997 the Fund's administrator Glendora, CA 91741 (since July, 2001); Treasurer, Investec Funds; formerly, Executive Vice president, Investment Company Administration, LLC ("ICA") (The Fund's former administrator). Thomas W. Marchel Vice Indefinite Vice President, U.S. Bancorp Fifteen Not Applicable (Born 1970) President & Term Fund Services, LLC since 4455 E. Camelback Rd., Treasurer Since 2000 July, 2001; Vice President, Suite 261-E Advisors Series Trust; Phoenix, AZ 85018 formerly Vice President, ICA (January 2000-July 2001); Assistant Vice President, ICA (October 1995-January 2000).
ADVISOR Al Frank Asset Management, Inc. P.O. Box 1438 Laguna Beach, California 92652 www.alfrank.com DISTRIBUTOR U.S. Growth Investments, Inc. 1550 Utica Avenue South, Suite 950 Minneapolis, Minnesota 55416 CUSTODIAN U.S. Bank, National Association 425 Walnut Street, M/L 6118, Sixth Floor Cincinnati, Ohio 45202 TRANSFER AGENT Orbitex Data Services, Inc. 14707 California Street, Suite 5 Omaha, Nebraska 68154-1952 (888) 263-6443 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker, LLP 55 Second Street, 24th Floor San Francisco, California 94105-3441 FUND ADMINISTRATOR U.S. Bancorp Fund Services, LLC 615 East Michigan Street Milwaukee, Wisconsin 53202