-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UAPZEsr/pd8nyByMZG+zCA3Jcm8Cn+N29WdlJZzQOmsslOiV29xVy9HhT467WiBK 2QI8Nxrwvd5guX4d81TCLQ== 0000898531-07-000124.txt : 20070309 0000898531-07-000124.hdr.sgml : 20070309 20070309163054 ACCESSION NUMBER: 0000898531-07-000124 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20061231 FILED AS OF DATE: 20070309 DATE AS OF CHANGE: 20070309 EFFECTIVENESS DATE: 20070309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVISORS SERIES TRUST CENTRAL INDEX KEY: 0001027596 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07959 FILM NUMBER: 07684889 BUSINESS ADDRESS: STREET 1: U.S BANCORP FUND SERVICES, LLC STREET 2: 615 E MICHIGAN STREET CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 414-765-5340 MAIL ADDRESS: STREET 1: 615 E MICHIGAN STREET STREET 2: MK-WI-LC2 CITY: MILWAUKEE STATE: WI ZIP: 53202 0001027596 S000000024 The Al Frank Dividend Value Fund C000000037 Investor Class VALDX C000033043 Advisor Class VALEX 0001027596 S000005099 Al Frank Fund C000013893 Investor Class VALUX C000033044 Advisor Class VALAX N-CSR 1 aff-ncsra.txt AL FRANK FUNDS ANNUAL 12-31-06 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07959 --------- ADVISORS SERIES TRUST --------------------- (Exact name of registrant as specified in charter) 615 EAST MICHIGAN ST. MILWAUKEE, WI 53202 ------------------- (Address of principal executive offices) (Zip code) ERIC M. BANHAZL ADVISORS SERIES TRUST 615 EAST MICHIGAN ST. MILWAUKEE, WI 53202 ------------------- (Name and address of agent for service) (414) 765-5340 -------------- Registrant's telephone number, including area code Date of fiscal year end: DECEMBER 31, 2006 ----------------- Date of reporting period: DECEMBER 31, 2006 ----------------- ITEM 1. REPORT TO STOCKHOLDERS. - ------------------------------ AL FRANK FUND AL FRANK DIVIDEND VALUE FUND ANNUAL REPORT DECEMBER 31, 2006 AL FRANK FUNDS 32392 COAST HIGHWAY, SUITE 260 LAGUNA BEACH, CA 92651 SHAREHOLDER SERVICES (888) 263-6443 WWW.ALFRANKFUNDS.COM AL FRANK ASSET MANAGEMENT, INC. 32392 Coast Highway, Suite 260, Laguna Beach, CA 92651 www.alfrankfunds.com February 2007 Dear Shareholder: On January 2, 2007, the Al Frank Fund (VALUX) began its 10th year of operation. Despite the milestone, long-time shareholders will note that little has changed in this annual missive. And that's because so little has changed with our investment strategy. Oh sure, we are always trying to perfect our stock selection methodology, but for more than nine years we have simply gone about the business of applying our time-tested strategy of consistently buying and holding broadly diversified portfolios of undervalued stocks for their long-term appreciation potential. Even though you've heard us beat this drum before, we encourage you to read the paragraphs below in order to better understand your existing and/or potential new investment in both our flagship Al Frank Fund and our younger Al Frank Dividend Value Fund. We know that many people are concerned solely with performance, and that's precisely why you should fully understand the methodology that's behind our solid long-term returns. Let's talk about setbacks--something we've never been shy about doing. We know that more than a few Al Frank Fund (VALUX) shareholders have only recently come on board, drawn to our market-beating 5-year and life-of-fund performance figures, but it must be pointed out that those gains were hardly linear in nature, as there have been ups and downs along the way. Alas, we are also not always able to beat the benchmarks in the short run, but those who have remained patient have generally been rewarded in the fullness of time. And we can't repeat it enough. Please, please, please think long-term, as we are buying and holding our undervalued stocks not for what they may do next week, next month or even next year, but for how we expect them to fare over the next three-to-five years, if not longer. We want you to enjoy the potential rewards - and the tranquility - that can accompany a long-term investment philosophy. The table below documents the performance numbers to which I keep referring. Of course, despite the fine long-term returns, we realize that many shareholders will continue to try to time their purchases and sales of our Funds. Sadly, we recognize that quite a few short-term oriented folks have lost money investing in our Funds, even as both are priced near their all-time highs as of this writing. It's worth pointing out that rather than contemplating a sale, I have utilized periods of poor performance to add to my holdings in our Funds, a strategy also employed by many of our long-time shareholders. I mention my commitment to the Funds as just one more example of the confidence we have in our philosophy. Yes, our own money is on the line, right next to yours. FUND PERFORMANCE AL FRANK AL FRANK FUND - DIVIDEND VALUE FUND - INVESTOR CLASS INVESTOR CLASS (INCEPTION 1/2/98) (INCEPTION 9/30/04) RUSSELL 2000 S&P 500 WILSHIRE 5000 ----------------- ------------------ ------------ ------- ------------- RECENT RETURNS THROUGH 1/31/07 January 2007 1.83% 2.55% 1.67% 1.51% 1.90% AVERAGE ANNUAL TOTAL RETURNS THROUGH 12/31/06 1 Year 10.09% 15.05% 18.37% 15.79% 15.87% 3 Years 12.30% n/a 13.56% 10.44% 11.47% 5 Years 13.28% n/a 11.39% 6.19% 7.65% Since 1/2/98* 15.89% n/a 8.11% 5.90% 6.38% Since 9/30/04* 16.44% 15.21% 16.55% 13.38% 14.53%
* Inception date is 1/2/98 for the Al Frank Fund and 9/30/04 for the Al Frank Dividend Value Fund. Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by visiting www.alfrankfunds.com. The Funds impose a 2.00% redemption fee on shares held for less than 60 days. Performance data does not reflect the redemption fee. If reflected, total returns would be reduced. ****** While I recognize that VALUX and VALDX are classified as Small- to Mid-Cap Value Funds, I remind shareholders that we are never constrained by asset allocation style boxes. Take a look at the Top 10 Holdings (as a percentage of total assets on December 31, 2006) of each Fund to see what I mean. In VALUX, CSX, Marathon Oil and Washington Mutual sport market capitalizations of more than $15 billion, not exactly small-cap, while in VALDX, companies like American Eagle Outfitters, Hewlett Packard and Int'l Game Technology could be considered more growth oriented as opposed to value-based. TOP TEN HOLDINGS AS OF DECEMBER 31, 2006 THE AL FRANK FUND (VALUX) THE AL FRANK DIVIDEND VALUE FUND (VALDX) 1. Giant Industries 1.10% 1. Marathon Oil 1.04% 2. Marathon Oil 0.97% 2. Bank of America 0.95% 3. THQ Inc. 0.86% 3. American Eagle Outfitters 0.91% 4. Transocean 0.85% 4. Valero Energy 0.90% 5. Washington Mutual 0.85% 5. Ameron 0.87% 6. American Eagle Outfitters 0.82% 6. Trinity Industries 0.86% 7. Valero Energy 0.81% 7. Ryerson Inc. 0.81% 8. Nvidia 0.78% 8. Hewlett Packard 0.80% 9. CSX 0.77% 9. Merrill Lynch & Co. 0.75% 10. Valueclick 0.75% 10. Int'l Game Technology 0.75%
Top Ten Holdings are subject to change. Fund holdings are subject to change and are not recommendations to buy or sell any security We are style agnostic--we seek bargains wherever they reside. If Blue-Chips are cheap, we buy them. If technology stocks are undervalued, we snap them up. We believe that limiting our investment universe by market-cap or value-versus- growth distinctions likely will only serve to limit our returns. Generally speaking, mid- and large-cap stocks have become more attractive on a relative basis these days, especially as small-cap stocks have performed well, so new purchases in those areas are moving the median market capitalizations of both of our funds higher. Given this 'go-anywhere' style, it is not unusual for our returns to differ materially in the short run from those of the major market averages. For example, we are well aware that performance in 2006 generally did not compare as favorably with the Russell 2000, S&P 500 and Wilshire 5000 indices, even as in 2005 we beat those benchmarks on average by a sizable percentage. Obviously, quarterly and annual performance is important, but our focus has always been on absolute returns over multi-year periods, an emphasis that has led to our superb long-term track record. ****** Given that both of our Funds are broadly diversified, one or two winning or losing stocks do not make or break performance and, as is generally the case, in 2006 favorable earnings comparisons powered the winning stocks while disappointing results drove the losers lower. VALUX benefited in 2006 from strong gains in: energy stocks, like Holly Corp, Marathon Oil and Oceaneering Int'l; commodity stocks, like OM Group, Phelps Dodge and US Steel; retail stocks, like American Eagle Outfitters, J.C. Penney and Steven Madden; technology stocks like Lam Research, Nvidia and THQ Inc.; economically sensitive stocks, like Air France, Ameron International and CSX Corp; and other stocks, like travel services concern Ambassador's International, diagnostic product maker BioVeris, defense giant Lockheed Martin and tobacco titan Reynolds American. Also helping performance were buyout offers received for Aleris International, Applica, Giant Industries, Inco, Maverick Tube, Midwest Air Group and RSA Security. VALDX was powered higher by some of the same VALUX stellar performers such as Ambassador's International, American Eagle Outfitters, Ameron International and Marathon Oil, but also by BellSouth, Empire Resources, Goldman Sachs, Insteel Industries, Nucor and OfficeMax. There were only a handful of acquisitions in VALDX, with a buyout offer for Sabre Group providing the biggest boost to 2006 performance. Of course, not all of our picks were winners. In 2006, VALUX was held back by big losses in Advanced Micro Devices, Beazer Homes, Forgent Networks, Hovnanian Enterprises, KB Home, Optimal Group, Orbit International, Peerless Systems and PXRE Group. In VALDX, AdTran, Beazer Homes, Nam Tai Electronics, PXRE Group Ltd., Standard Pacific and Wellman were among the largest losers. Interestingly, many of these same stocks contributed to our outperformance in 2005, so we can't complain too much about our overall experience with the groups. Remember, however, that our largest holding in either Fund is only slightly greater than 1%. So, we don't necessarily need to agonize over individual losers--our historical experience has proven that our winners win more than our losers lose. We believe our excellent long-term returns are proof that our time- tested approach works and we will always happily take the bad with the good. Make no mistake--we are always working to improve our research, but the same fundamental analysis that gave us the top performers also led us to the laggards. ****** Those who are familiar with our investment approach are likely well aware that we remain very optimistic about the prospects for the securities we hold in our Funds. The reasons for our enthusiasm regarding stocks have changed little. For example, the supply of shares in the U.S. is shrinking as stock buyback activity remains robust and mergers and acquisitions continue to be all the rage, especially with private equity shops. In fact, TrimTabs Investment Research calculated that in 2006 the value of shares outstanding fell by some $600 billion, or 3.1% of the U.S. markets' total value. Since money available to invest is not in decline, simple laws of supply and demand come into play. Valuations also remain attractive. Though today's P/E ratio of 16.4 on the S&P 500 is about average for this metric dating back to the 1930s, a reading of 20 has been the norm since 1988. More interesting, the earnings yield (the inverse of the P/E ratio) of 6.1% on the S&P 500 is still well above the 4.8% yield on the 10-year Treasury, meaning that stocks remain cheap relative to the benchmark government bond. And current forecasts call for S&P 500 profit growth of 8% in 2007, which would be very healthy by historical standards, though it would be down from the double-digit percentage growth rates seen over the past several years. Clearly, the strength of the U.S. economy and the actions of the Federal Reserve remain wildcards. Still, conditions seem to be just about right for those bullish on equities. Certainly, things can change quickly, but the data in recent weeks generally remain not-too-hot to cause the Federal Reserve to further tighten monetary policy, nor not-too-cold for the economy to slip into recession and for corporate profit growth to dramatically slow. Recent comments from Ben Bernanke & Co. in support of the decision to leave the fed funds rate at 5.25% in January defend the argument. The Fed said, "Recent indicators have suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market. Overall, the economy seems likely to expand at a moderate pace over coming quarters." The Commerce Department also recently disclosed that U.S. GDP growth came in at a better-than-expected 3.5% in the fourth quarter thanks to strong consumer spending that helped offset weakness in the housing and automotive sectors. In addition, the latest jobs numbers from the Labor Department confirmed that the economy is in decent shape as non-farm payrolls increased 111,000 in January after growing a revised 206,000 in December and 196,000 in November. The unemployment rate rose to 4.6% from 4.5% and average hourly earnings climbed just three cents, or 0.2%, to $17.09. Almost as important, these economic reports did little to stir fears that inflation was picking up. Consumer prices rose at an annualized rate of 1.5% in Q4, while prices excluding volatile food and energy increased at an annualized 2.1% rate. Also, the Labor Department reported that its employment cost index, a measure of compensation that includes salaries and benefits, increased less than had been expected, inching up 0.8% in Q4 and 3.3% for the year. The Fed is always on inflation watch, hence the second sentence that suggests interest rates are not likely to be cut anytime soon, but we did like this portion of their January statement: "Readings on core inflation have improved modestly in recent months, and inflation pressures seem likely to moderate over time. However, the high level of resource utilization has the potential to sustain inflation pressures." Obviously, we do not know what the future will hold and we must always be concerned about the geopolitical landscape. Nevertheless, we remain as optimistic as ever, even as we are well aware that the markets are always susceptible to a short-term correction. Of course, we would view any sell-off as a buying opportunity, especially since we are now in the statistically auspicious third year of the presidency. Certainly, we recognize that media pundits will continue to find plenty to worry about, but with our broad diversification and emphasis on out-of-favor stocks, we have every expectation that our Funds can continue to perform well over the long-term. Of course, we can never forget that market data dating back to the 1920s from Ibbotson Associates shows that equities in general have historically returned 10% to 12% per annum, with stocks trading for inexpensive fundamental valuation metrics (low price to book value ratios) performing even better. ****** We constantly strive to educate our shareholders and prospective shareholders about our approach and the merits of thinking long-term. While many are already receiving our philosophical musings via their subscriptions to The Prudent Speculator newsletter, we encourage those who are not subscribers to visit www.alfrankfunds.com/ar06 for additional information and to sign up for our free Buckingham Report service. Knowledge will give you confidence, and confidence can help deter you from making rash investment decisions when the going gets tough. Those moments of uncertainty could cost you dearly, so our goal is to provide you with the information you need to confidently ignore the inevitable bumps in the road. We want you to think twice before redeeming, and the Buckingham Reports just might encourage you to stay the course or even add to your holdings. And speaking of adding to holdings, I have done just that for my own retirement account and for my daughter's college fund. It bears repeating: Our money is invested right beside yours. We're very much in this together, which is why all of us at Al Frank Asset Management appreciate the patronage of our long-term oriented shareholders. And we continue to be guided by the motto, "In order to turn ordinary into extraordinary, you put in the extra." On that note, it's back to work for me. Sincerely, /s/John Buckingham John Buckingham Opinions expressed are those of John Buckingham, which are subject to change and are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. INVESTING IN SECURITIES OF SMALL AND MEDIUM-CAPITALIZATION COMPANIES INVOLVES GREATER PRICE VOLATILITY THAN LARGE-CAPITALIZATION COMPANIES. Investment performance reflects voluntary fee waivers. In the absence of such waivers, total returns would be reduced. The S&P 500, Russell 2000 and Wilshire 5000 are unmanaged indices commonly used to measure performance of U.S. stocks. The S&P 500 invests primarily in large- cap stocks; the Wilshire 5000 invests primarily in small-, mid- and large-cap stocks; and the Russell 2000 invests primarily in small-cap stocks. You cannot invest directly in an index. P/E Ratio is the current stock price divided by the earnings per share. Price to Book Value Ratio is the current stock price divided by common stockholders' equity per share. This material must be preceded or accompanied by a current prospectus. Read it carefully before investing. The Al Frank Funds are distributed by Quasar Distributors LLC. (2/07) AL FRANK FUND Comparison of the change in value of a hypothetical $10,000 investment in the Al Frank Fund vs. the Dow Jones Wilshire 5000 (Full Cap) Index, the Russell 2000 Index, the S&P 500 Index, and the S&P MidCap 400 Index Dow Jones S&P Al Russell Wilshire 5000 Midcap Frank 2000 (Full Cap) S&P 500 400 Date Fund Index Index Index Index ---- ----- ------- ------------- ------- ------ 1/2/98 $10,000 $10,000 $10,000 $10,000 $10,000 12/31/98 $9,070 $9,758 $12,309 $12,797 $11,957 12/31/99 $14,550 $11,833 $15,209 $15,489 $13,717 12/31/2000 $15,566 $11,475 $13,553 $14,080 $16,119 12/31/2001 $20,195 $11,761 $12,066 $12,406 $16,022 12/31/2002 $14,945 $9,352 $9,549 $9,664 $13,697 12/31/2003 $26,598 $13,771 $12,570 $12,436 $18,576 12/31/2004 $30,801 $16,296 $14,157 $13,789 $21,638 12/31/2005 $34,217 $17,037 $15,051 $14,466 $24,356 12/31/2006 $37,671 $20,167 $17,440 $16,750 $26,869 AVERAGE ANNUAL TOTAL RETURN1 Al Frank Fund - Al Frank Fund - Dow Jones Wilshire Russell 2000 S&P 500 S&P MidCap Investor Class Advisor Class* 5000 (Full Cap) Index Index Index 400 Index --------------- ------------------ --------------------- ------------ ------- ---------- 1 Year 10.09% N/A 15.87% 18.37% 15.79% 10.32% 5 Year 13.28% N/A 7.65% 11.39% 6.19% 10.89% Since inception (1/2/98) 15.89% 0.52% 6.38% 8.11% 5.90% 11.61%
Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. Performance data for the most recent month end is available at www.alfrankfunds.com. Returns reflect the reinvestment of dividends and capital gains. Fee waivers are in effect. In the absence of fee waivers, returns would be reduced. The performance data and graphs above do not reflect the deduction of taxes that a shareholder may pay on dividends, capital gain distributions, or redemption of Fund shares. Performance data shown does not reflect the 2.00% redemption fee imposed on shares held less than 60 days. If it did, total returns would be reduced. * Commencement of operations on April 30, 2006. 1 Average Annual Total Return represents the average change in account value over the periods indicated. The Dow Jones Wilshire 5000 (Full Cap) Index tracks the performance of all equity securities issued by the U.S. head-quartered companies regardless of exchange. As of 12/31/06, the index was comprised of approximately 6,700 companies. 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 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. The S&P MidCap 400 Index is a capitalization-weighted index which measures the performance of the mid-range sector of the U.S. stock market. Indices do not incur expenses and are not available for investment. AL FRANK DIVIDEND VALUE FUND Comparison of the change in value of a $10,000 investment in the Al Frank Dividend Value Fund vs the Dow Jones Wilshire 5000 (Full Cap) Index, the S&P MidCap 400 Index, and the S&P 500 Index Dow Jones S&P Al Frank Wilshire 5000 MidCap Dividend S&P 500 (Full Cap) 400 Date Value Fund Index Index Index ---- ---------- ------- ------------- ------ 9/30/2004 $10,000 $10,000 $10,000 $10,000 12/31/2004 $11,077 $10,923 $11,033 $11,216 6/30/2005 $11,428 $10,835 $11,036 $11,647 12/31/2005 $11,958 $11,460 $11,731 $12,623 6/30/2006 $12,742 $11,770 $12,143 $13,158 12/31/2006 $13,757 $13,270 $13,594 $13,925 AVERAGE ANNUAL TOTAL RETURN1 Al Frank Dividend Al Frank Dividend Dow Jones Value Fund - Value Fund - Wilshire 5000 S&P MidCap S&P 500 Investor Class Advisor Class* (Full Cap) Index 400 Index Index ----------------- ------------------ ---------------- ---------- ------- 1 Year 15.05% N/A 15.87% 10.32% 15.79% Since inception (9/30/04) 15.21% 3.95% 14.53% 15.84% 13.38%
Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. Performance data for the most recent month end is available at www.alfrankfunds.com. Returns reflect the reinvestment of dividends and capital gains. Fee waivers are in effect. In the absence of fee waivers, returns would be reduced. The performance data and graphs above do not reflect the deduction of taxes that a shareholder may pay on dividends, capital gain distributions, or redemption of Fund shares. Performance data shown does not reflect the 2.00% redemption fee imposed on shares held less than 60 days. If it did, total returns would be reduced. * Commencement of operations on April 30, 2006. 1 Average Annual Total Return represents the average change in account value over the periods indicated. The Dow Jones Wilshire 5000 (Full Cap) Index tracks the performance of all equity securities issued by the U.S. head-quartered companies regardless of exchange. As of 12/31/06, the index was comprised of approximately 6,700 companies. The S&P MidCap 400 Index is a capitalization-weighted index which measures the performance of the mid-range sector of the U.S. stock market. The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to represent the broad domestic economy. Indices do not incur expenses and are not available for investment. AL FRANK FUNDS EXPENSE EXAMPLE AT DECEMBER 31, 2006 (UNAUDITED) Generally, shareholders of mutual funds incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund(s) and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested in both the Investor Class and the Advisor Class at the beginning of the period and held for the entire period (7/1/06 - 12/31/06). ACTUAL EXPENSES The first line of the tables below provides information about actual account values and actual expenses, with actual net expenses being limited to 1.98% and 1.73% per the advisory agreement for the Investor Class and Advisor Class, respectively. Please note that the Al Frank Fund Investor and Advisor Classes operated below the expense cap at 1.68% and 1.43%, respectively. Although the Fund(s) charge no sales load or transaction fees, you will be assessed fees for outgoing wire transfers, returned checks, and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds' transfer agent. The example below includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. You may use the information in the first line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the tables below provides information about hypothetical account values and hypothetical expenses based on the Funds' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. AL FRANK FUND - INVESTOR CLASS BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 7/01/06 12/31/06 7/1/06 - 12/31/06* ------------- ------------- ---------------------- Actual $1,000.00 $1,069.00 $8.76 Hypothetical (5% return $1,000.00 $1,016.74 $8.54 before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 1.68%, multiplied by the average account value over the period, multiplied by 184 (days in most recent fiscal half-year) divided by 365 days to reflect the one-half year expense. AL FRANK FUND - ADVISOR CLASS BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 7/1/06 12/31/06 7/1/06 - 12/31/06* ------------- ------------- ---------------------- Actual $1,000.00 $1,070.60 $7.46 Hypothetical (5% return $1,000.00 $1,018.00 $7.27 before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 1.43%, multiplied by the average account value over the period, multiplied by 184 (days in most recent fiscal half-year) divided by 365 days to reflect the one-half year expense. AL FRANK DIVIDEND VALUE FUND - INVESTOR CLASS BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 7/01/06 12/31/06 7/1/06 - 12/31/06* ------------- ------------- ---------------------- Actual $1,000.00 $1,079.60 $10.38 Hypothetical (5% return $1,000.00 $1,015.22 $10.06 before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 1.98%, multiplied by the average account value over the period, multiplied by 184 (days in most recent fiscal half-year) divided by 365 days to reflect the one-half year expense. AL FRANK DIVIDEND VALUE FUND - ADVISOR CLASS BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 7/1/06 12/31/06 7/1/06 - 12/31/06* ------------- ------------- ---------------------- Actual $1,000.00 $1,081.30 $9.08 Hypothetical (5% return $1,000.00 $1,016.48 $8.79 before expenses)
* Expenses are equal to the Fund's annualized expense ratio of 1.73%, multiplied by the average account value over the period, multiplied by 184 (days in most recent fiscal half-year) divided by 365 days to reflect the one-half year expense. AL FRANK FUNDS ALLOCATION OF PORTFOLIO ASSETS AT DECEMBER 31, 2006 (UNAUDITED) AL FRANK FUND Basic Materials - 5% 5% Consumer Cyclical - 20% 20% Consumer Noncyclical - 3% 3% Energy - 14% 14% Financials - 9% 9% Health Care - 7% 7% Industrials - 14% 14% Technology - 24% 24% Telecommunications - 2% 2% Utilities - 0% 0% Short-Term Investments - 2% 2% AL FRANK DIVIDEND VALUE FUND Basic Materials - 6% 6% Consumer Cyclical - 21% 21% Consumer Noncyclical - 5% 5% Energy - 13% 13% Financials - 15% 15% Health Care - 7% 7% Industrials - 15% 15% Technology - 13% 13% Telecommunications - 2% 2% Short-Term Investments - 3% 3% AL FRANK FUND SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2006 Shares Common Stocks: 98.25% Value ------ --------------------- ----- ADVANCED INDUSTRIAL EQUIPMENT: 0.97% 7,000 Eaton Corp. $ 525,980 45,000 The Lamson & Sessions Co.*+ 1,091,700 76,200 O.I. Corp. 868,680 65,000 Technology Research Corp. 271,700 ------------ 2,758,060 ------------ ADVANCED MEDICAL DEVICES: 0.49% 7,176 Advanced Medical Optics, Inc.* 252,595 15,074 Utah Medical Products, Inc. 497,291 75,000 Vascular Solutions, Inc.* 654,750 ------------ 1,404,636 ------------ AEROSPACE & DEFENSE: 4.49% 24,100 AAR Corp.* 703,479 50,000 The Allied Defense Group, Inc.* 1,062,500 40,000 BE Aerospace, Inc.* 1,027,200 15,500 The Boeing Co. 1,377,020 40,000 Ducommun, Inc.* 915,200 50,000 Kaman Corp. - Class A 1,119,500 129,900 LMI Aerospace, Inc.* 2,010,852 22,000 Lockheed Martin Corp. 2,025,540 143,750 Orbit International Corp.*+ 1,173,000 15,000 Raytheon Co. 792,000 110,700 SIFCO Industries, Inc.* 573,426 ------------ 12,779,717 ------------ AIR FREIGHT / COURIERS: 0.17% 70,000 ABX Air, Inc.* 485,100 ------------ AIRLINES: 1.88% 22,000 Air France ADR 920,920 80,000 Airtran Holdings, Inc.*+ 939,200 17,000 Alaska Air Group, Inc.* 671,500 95,000 Mesa Air Group, Inc.* 814,150 175,000 Midwest Air Group, Inc.* 2,012,500 ------------ 5,358,270 ------------ ALUMINUM: 0.56% 33,000 Alcoa, Inc. 990,330 15,000 BHP Billiton Limited ADR 596,250 ------------ 1,586,580 ------------ AUTOMOBILE MANUFACTURERS: 0.76% 20,000 DaimlerChrysler AG#+ 1,228,200 60,000 Ford Motor Co.+ 450,600 16,000 General Motors Corp.+ 491,520 ------------ 2,170,320 ------------ AUTOMOBILE PARTS & EQUIPMENT: 1.15% 35,000 ArvinMeritor, Inc. 638,050 23,000 Cooper Tire & Rubber Co.+ 328,900 35,000 Lear Corp.+ 1,033,550 60,000 The Goodyear Tire & Rubber Co.*+ 1,259,400 ------------ 3,259,900 ------------ BANKS: 2.25% 31,019 Bank of America Corp. 1,656,104 20,000 BankAtlantic Bancorp, Inc. - Class A 276,200 102,480 BFC Financial Corp. - Class A* 654,847 65,000 Capstead Mortgage Corp. 539,500 22,000 Citigroup, Inc. 1,225,400 13,200 JPMorgan Chase & Co. 637,560 12,500 National City Corp. 457,000 21,000 Sovereign Bancorp, Inc. 533,190 7,357 Wachovia Corp. 418,981 ------------ 6,398,782 ------------ BROKERAGES: 0.98% 20,000 Lehman Brothers Holdings, Inc. 1,562,400 7,500 The Bear Stearns Companies, Inc. 1,220,850 ------------ 2,783,250 ------------ BUILDING MATERIALS: 1.60% 20,000 Ameron International Corp. 1,527,400 16,000 Building Materials Holding Corp.+ 395,040 100,000 Huttig Building Products, Inc.* 529,000 17,000 International Aluminum Corp. 828,750 30,000 Ready Mix, Inc.* 333,000 440,000 Smith-Midland Corp.*^ 946,000 ------------ 4,559,190 ------------ BUSINESS SERVICES: 2.80% 114,300 Analysts International Corp.* 213,741 140,000 Computer Horizons Corp.* 632,800 110,000 Edgewater Technology, Inc.* 672,100 151,100 HealthStream, Inc.* 596,845 42,900 Insweb Corp.* 136,851 30,000 MasTec, Inc.* 346,200 125,000 Onvia.com, Inc.*+ 737,500 102,000 Optimal Group, Inc. - Class A*# 971,040 220,000 Traffix, Inc. 1,205,600 89,999 ValueClick, Inc.* 2,126,676 95,000 Vicon Industries, Inc.* 340,100 ------------ 7,979,453 ------------ CASINOS & CASINO EQUIPMENT: 0.37% 20,000 Bally Technologies, Inc.* 373,600 15,000 International Game Technology 693,000 ------------ 1,066,600 ------------ CHEMICALS, COMMODITY: 1.13% 15,000 E.I. Du Pont de Nemours and Co. 730,650 35,000 Lyondell Chemical Co. 894,950 60,000 Olin Corp. 991,200 15,000 The Dow Chemical Co. 599,100 ------------ 3,215,900 ------------ CHEMICALS, SPECIALTY: 0.59% 20,000 OM Group, Inc.* 905,600 25,000 The Mosaic Co.* 534,000 75,600 Wellman, Inc. 241,164 ------------ 1,680,764 ------------ CLOTHING/FABRICS: 1.53% 50,000 Delta Apparel, Inc. 854,500 120,000 Hartmarx Corp.* 847,200 10,000 Kellwood Co. 325,200 10,000 Oxford Industries, Inc. 496,500 80,000 Quiksilver, Inc.* 1,260,000 240,000 Unifi, Inc.* 588,000 ------------ 4,371,400 ------------ COMMUNICATIONS TECHNOLOGY: 4.74% 100,000 3Com Corp.* 411,000 45,000 Andrew Corp.* 460,350 350,000 APA Enterprises, Inc.* 500,500 150,000 AsiaInfo Holdings, Inc.* 1,152,000 57,500 Avaya, Inc.* 803,850 130,000 Avici Systems, Inc.*+ 1,007,500 122,000 Blonder Tongue Laboratories, Inc.* 207,400 65,000 Communications Systems, Inc. 649,350 30,000 Comverse Technology, Inc.* 633,300 230,000 deltathree, Inc. - Class A* 289,800 66,600 Digi International, Inc.* 918,414 30,000 Motorola, Inc. 616,800 135,000 Network Equipment Technologies, Inc.* 785,700 75,000 Novell, Inc.* 465,000 28,000 Polycom, Inc.* 865,480 100,000 Stratos International, Inc.* 760,000 125,000 Tellabs, Inc.* 1,282,500 355,000 TII Network Technologies, Inc.* 883,950 80,000 TriQuint Semiconductor, Inc.* 360,000 180,000 Wireless Telecom Group, Inc. 459,000 ------------ 13,511,894 ------------ COMPUTERS/HARDWARE: 1.72% 56,650 AU Optronics Corp. ADR+ 782,337 15,000 Apple Computer, Inc.* 1,272,600 40,000 GTSI Corp.* 370,400 20,000 Hewlett Packard Co. 823,800 8,000 International Business Machines Corp. 777,200 20,000 SanDisk Corp.* 860,600 ------------ 4,886,937 ------------ CONTAINERS & PACKAGING: 0.59% 80,000 American Biltrite, Inc.* 734,400 103,043 Rock of Ages Corp.* 420,415 180,000 Rotonics Manufacturing, Inc.* 529,200 ------------ 1,684,015 ------------ COSMETICS/PERSONAL CARE: 0.09% 10,000 Helen of Troy Ltd.* # 242,600 ------------ DATA STORAGE/DISK DRIVES: 0.97% 80,000 Dot Hill Systems Corp.* 314,400 35,000 Seagate Technology# 927,500 75,000 Western Digital Corp.* 1,534,500 ------------ 2,776,400 ------------ ELECTRICAL COMPONENTS & EQUIPMENT: 1.39% 31,000 American Power Conversion Corp. 948,290 50,000 AVX Corp. 739,500 38,500 C&D Technologies, Inc.+ 182,490 200,000 Fedders Corp.* 200,000 55,000 Frequency Electronics, Inc. 657,250 48,000 Kemet Corp.* 350,400 65,000 Vishay Intertechnology, Inc.* 880,100 ------------ 3,958,030 ------------ ELECTRONIC MANUFACTURING SERVICES: 0.42% 65,000 Flextronics International LTD*# 746,200 30,000 Nam Tai Electronics, Inc. # 455,700 ------------ 1,201,900 ------------ FIBER OPTIC COMPONENTS: 0.67% 370,000 Alliance Fiber Optic Products, Inc.* 747,400 75,000 Bookham, Inc.*+ 305,250 45,000 Corning, Inc.* 841,950 ------------ 1,894,600 ------------ FINANCIAL SERVICES, DIVERSIFIED: 0.32% 40,000 H & R Block, Inc. 921,600 ------------ FIXED LINE COMMUNICATIONS: 0.26% 20,000 Verizon Communications, Inc. 744,800 ------------ FOOD MANUFACTURERS: 0.76% 45,000 Archer-Daniels-Midland Co. 1,438,200 43,000 Sara Lee Corp. 732,290 ------------ 2,170,490 ------------ FOOTWEAR: 0.48% 21,000 Steven Madden, Ltd. 736,890 20,000 The Timberland Co. - Class A* 631,600 ------------ 1,368,490 ------------ FOREST PRODUCTS: 0.11% 58,000 Pope & Talbot, Inc.*+ 317,260 ------------ HEALTHCARE PROVIDERS: 2.59% 42,000 Aetna, Inc. 1,813,560 95,000 American Shared Hospital Services 631,750 26,667 Humana, Inc.* 1,474,952 60,000 Res-Care, Inc.* 1,089,000 61,000 United American Healthcare Corp.*+ 511,180 34,667 UnitedHealth Group, Inc. 1,862,658 ------------ 7,383,100 ------------ HEAVY CONSTRUCTION: 0.09% 113,700 Williams Industries, Inc.* 259,236 ------------ HOME CONSTRUCTION: 5.31% 34,000 Beazer Homes USA, Inc. 1,598,340 20,000 Cavco Industries, Inc.* 700,800 22,500 Centex Corp. 1,266,075 46,666 D.R. Horton, Inc. 1,236,182 15,000 Hovanian Enterprises, Inc. - Class A*+ 508,500 25,000 KB Home 1,282,000 17,000 Lennar Corp. - Class A 891,820 12,000 M.D.C. Holdings, Inc. 684,600 11,000 Meritage Homes Corp.* 524,920 14,000 M/I Homes, Inc.+ 534,660 35,000 Orleans Homebuilders, Inc.+ 658,000 40,000 Pulte Homes, Inc. 1,324,800 25,000 Ryland Group, Inc. 1,365,500 40,000 Standard Pacific Corp. 1,071,600 28,000 Toll Brothers, Inc.* 902,440 30,000 WCI Communities, Inc.*+ 575,400 ------------ 15,125,637 ------------ HOME FURNISHINGS: 0.91% 175,000 Applica, Inc.* 1,398,250 32,700 Chromcraft Revington, Inc.* 280,893 33,896 The Dixie Group, Inc.* 428,445 6,000 Whirlpool Corp. 498,120 ------------ 2,605,708 ------------ HOMELAND SECURITY: 0.40% 26,650 Cogent Inc.* 293,417 40,000 OSI Systems, Inc.* 837,200 ------------ 1,130,617 ------------ HOUSE, DURABLE: 0.18% 76,100 Global-Tech Appliances, Inc.*# 210,797 45,000 Lenox Group, Inc.* 288,000 ------------ 498,797 ------------ INDUSTRIAL DIVERSIFIED: 0.32% 35,000 McRae Industries, Inc. - Class A 428,750 44,900 P & F Industries, Inc. - Class A* 493,900 ------------ 922,650 ------------ INDUSTRIAL SERVICES & DISTRIBUTORS: 0.94% 30,000 Avnet, Inc.*+ 765,900 75,000 Nu Horizons Electronics Corp.* 771,750 48,400 Spectrum Control, Inc.* 470,448 60,000 Trio-Tech International 675,000 ------------ 2,683,098 ------------ INSURANCE, FULL LINE: 0.33% 10,000 Hartford Financial Services Group, Inc. 933,100 ------------ INSURANCE, LIFE: 0.53% 2,500 National Western Life Insurance Co. - Class A 575,350 45,000 UnumProvident Corp. 935,100 ------------ 1,510,450 ------------ INSURANCE, PROPERTY & CASUALTY: 2.03% 35,000 Direct General Corp. 722,400 15,000 Endurance Specialty Holdings Ltd.# 548,700 20,000 Merchants Group, Inc. 647,000 10,500 MGIC Investment Corp. 656,670 11,500 Radian Group, Inc. 619,965 25,000 RTW, Inc.* 225,500 20,000 The Allstate Corp. 1,302,200 20,000 The St. Paul Travelers Companies, Inc. 1,073,800 ------------ 5,796,235 ------------ MEDICAL SUPPLIES: 1.23% 25,000 Baxter International, Inc. 1,159,750 30,000 Boston Scientific Corp.* 515,400 36,000 McKesson Corp. 1,825,200 ------------ 3,500,350 ------------ MERCHANT ENERGY PROVIDERS: 0.00% 925 Dynegy Inc. - Class A* 6,697 ------------ OIL, EQUIPMENT & SERVICES: 1.89% 20,000 Bristow Group, Inc.* 721,800 50,000 Key Energy Services, Inc.* 782,500 11,000 Lone Star Technologies, Inc.* 532,510 48,000 Oceaneering International, Inc.* 1,905,600 30,000 Tidewater Inc. 1,450,800 ------------ 5,393,210 ------------ OIL, EXPLORATION & PRODUCTION/DRILLING: 3.09% 20,000 Chesapeake Energy Corp. 581,000 35,000 GlobalSantaFe Corp.# 2,057,300 100,000 Grey Wolf, Inc.* 686,000 36,000 Nabors Industries, Ltd.* # 1,072,080 13,000 Noble Energy, Inc. 637,910 19,000 Patterson-UTI Energy, Inc. 441,370 49,500 Petrohawk Energy Corp.* 569,250 10,000 Rowan Companies, Inc. 332,000 30,000 Transocean, Inc.*# 2,426,700 ------------ 8,803,610 ------------ OIL, INTEGRATED MAJORS: 2.89% 35,000 Anadarko Petroleum Corp. 1,523,200 11,000 Chevron Corp. 808,830 10,000 ConocoPhillips 719,500 10,000 Exxon Mobil Corp. 766,300 30,000 Marathon Oil Corp. 2,775,000 33,600 Occidental Petroleum Corp. 1,640,688 ------------ 8,233,518 ------------ OIL, REFINERS: 3.32% 42,000 Giant Industries, Inc.* 3,147,900 37,333 Holly Corp. 1,918,916 32,000 Tesoro Petroleum Corp. 2,104,640 45,000 Valero Energy Corp. 2,302,200 ------------ 9,473,656 ------------ OIL, SECONDARY: 0.65% 10,000 Apache Corp. 665,100 9,000 Devon Energy Corp. 603,720 12,000 Pogo Producing Co. 581,280 ------------ 1,850,100 ------------ OIL, TRANSPORTATION/SHIPPING: 2.75% 60,000 Dryships, Inc.# 1,080,600 16,000 Frontline LTD.#+ 509,600 15,000 General Maritime Corp.# 527,850 20,000 Nordic American Tanker Shipping LTD.#+ 683,000 90,000 OMI Corp.# 1,905,300 15,000 Overseas Shipholding Group, Inc. 844,500 5,200 Ship Finance International Ltd.#+ 123,552 23,000 Teekay Shipping Corp. # 1,003,260 25,000 Tsakos Energy Navigation LTD.#+ 1,147,500 ------------ 7,825,162 ------------ OTHER NON-FERROUS: 0.67% 16,000 Phelps Dodge Corp. 1,915,520 ------------ PAPER PRODUCTS: 0.20% 17,000 International Paper Co. 579,700 ------------ PHARMACEUTICALS: 3.08% 17,500 Abbott Laboratories 852,425 40,000 Bioveris Corp.* 548,800 30,000 Bristol-Myers Squibb Co. 789,600 11,000 Eli Lilly & Co. 573,100 12,000 Forest Laboratories, Inc.* 607,200 18,500 Johnson & Johnson 1,221,370 50,000 King Pharmaceuticals, Inc.* 796,000 20,000 Merck & Co. Inc. 872,000 30,000 Mylan Laboratories, Inc. 598,800 35,000 Pfizer, Inc. 906,500 20,000 Wyeth 1,018,400 ------------ 8,784,195 ------------ POLLUTION CONTROL/WASTE MANAGEMENT: 0.14% 22,000 American Ecology Corp.+ 407,220 ------------ PRECIOUS METALS: 0.29% 65,000 Stillwater Mining Co.* 811,850 ------------ RAILROADS: 1.93% 64,000 CSX Corp. 2,203,520 40,000 Norfolk Southern Corp. 2,011,600 14,000 Union Pacific Corp. 1,288,280 ------------ 5,503,400 ------------ REAL ESTATE INVESTMENT: 0.43% 60,000 HRPT Properties Trust 741,000 15,000 New Century Financial Corp. 473,850 ------------ 1,214,850 ------------ RECREATIONAL PRODUCTS: 1.31% 15,000 Brunswick Corp. 478,500 30,000 Callaway Golf Co. 432,300 25,000 Eastman Kodak Co. 645,000 30,000 K2, Inc.* 395,700 30,000 The Nautilus Group, Inc.+ 420,000 40,000 The Walt Disney Co. 1,370,800 ------------ 3,742,300 ------------ RESTAURANTS: 0.26% 25,000 Landry's Restaurants, Inc. 752,250 ------------ RETAILERS, APPAREL: 1.46% 16,667 Abercrombie & Fitch Co. - Class A 1,160,523 75,000 American Eagle Outfitters, Inc.+ 2,340,750 20,000 AnnTaylor Stores Corp.* 656,800 ------------ 4,158,073 ------------ RETAILERS, BROADLINE: 1.03% 24,000 J. C. Penney Company, Inc. 1,856,640 10,000 Nordstrom, Inc. 493,400 10,000 Target Corp. 570,500 ------------ 2,920,540 ------------ RETAILERS, SPECIALTY: 1.40% 25,756 AutoNation, Inc.*+ 549,118 16,500 Bed Bath & Beyond, Inc.* 628,650 35,000 Jo-Ann Stores, Inc. - Class B*+ 861,000 16,000 OfficeMax, Inc. 794,400 29,000 The Home Depot, Inc.+ 1,164,640 ------------ 3,997,808 ------------ SAVINGS & LOANS: 2.04% 23,000 Countrywide Financial Corp. 976,350 7,000 Downey Financial Corp. 508,060 16,000 FirstFed Financial Corp.*+ 1,071,520 12,000 IndyMac Bancorp, Inc. 541,920 29,524 PVF Capital Corp. 312,069 53,035 Washington Mutual, Inc. 2,412,562 ------------ 5,822,481 ------------ SEMICONDUCTOR, CAPITAL EQUIPMENT: 3.09% 130,000 Aetrium, Inc.* 462,800 40,000 Brooks Automation, Inc.* 576,000 45,000 Cohu, Inc. 907,200 75,000 Electroglas, Inc.* 186,750 60,000 Kulicke and Soffa Industries, Inc.* 504,000 37,500 Lam Research Corp.* 1,898,250 60,000 Mattson Technology, Inc.* 559,200 25,000 Novellus Systems, Inc.*+ 860,500 25,000 Teradyne, Inc.* 374,000 35,976 Ultratech, Inc.* 448,981 34,500 Varian Semiconductor Equipment Associates, Inc.* 1,570,440 25,000 Veeco Instruments, Inc.* 468,250 ------------ 8,816,371 ------------ SEMICONDUCTOR, GRAPHICS CHIPS: 0.84% 60,000 NVIDIA Corp.* 2,220,600 163,900 Tvia, Inc.*+ 175,373 ------------ 2,395,973 ------------ SEMICONDUCTOR, MICROPROCESSORS: 3.92% 60,000 Advanced Micro Devices, Inc.* 1,221,000 75,000 Ceva, Inc.* 485,250 30,000 Cypress Semiconductor Corp.*+ 506,100 140,000 Dataram Corp. 586,600 59,000 Diodes, Inc.* 2,093,320 45,000 Exar Corp.* 585,000 95,000 Integrated Silicon Solution, Inc.* 546,250 35,000 Intel Corp. 708,750 20,000 International Rectifier Corp.* 770,600 40,000 Micron Technology, Inc.* 558,400 40,000 National Semiconductor Corp. 908,000 70,000 Sigmatel, Inc.* 306,600 125,000 Silicon Storage Technology, Inc.* 563,750 56,649 Taiwan Semiconductor Manufacturing Company Ltd. ADR 619,174 25,000 Texas Instruments, Inc. 720,000 ------------ 11,178,794 ------------ SEMICONDUCTOR, PROGRAMMABLE LOGIC DEVICES: 1.03% 150,000 Applied Micro Circuits Corp.* 534,000 42,500 Genesis Microchip, Inc.*+ 430,950 75,000 Integrated Device Technology, Inc.* 1,161,000 70,000 Pericom Semiconductor Corp.* 802,900 ------------ 2,928,850 ------------ SOFTWARE: 4.75% 140,000 ActivIdentity Corp.* 709,800 170,500 American Software, Inc. - Class A 1,181,565 53,100 CAM Commerce Solutions, Inc. 1,314,756 100,000 Captaris, Inc.* 777,000 145,000 Compuware Corp.* 1,207,850 35,000 Electronics for Imaging, Inc.* 930,300 85,000 iPass, Inc.*+ 499,800 100,000 Keynote Systems, Inc.* 1,060,000 30,000 Microsoft Corp. 895,800 90,000 NetManage, Inc.* 476,100 150,000 Peerless Systems Corp.* 408,000 155,000 Quovadx, Inc.* 437,100 70,000 RealNetworks, Inc.* 765,800 20,000 SafeNet, Inc.* 478,800 119,000 Selectica, Inc.* 210,630 55,000 SonicWALL, Inc.* 463,100 50,000 Symantec Corp.* 1,042,500 45,000 Wayside Technology Group, Inc. 680,400 ------------ 13,539,301 ------------ STEEL: 1.13% 70,000 Ryerson Tull, Inc.+ 1,756,300 20,000 United States Steel Corp. 1,462,800 ------------ 3,219,100 ------------ TOBACCO: 1.50% 90,000 Alliance One International, Inc.* 635,400 10,000 Altria Group, Inc. 858,200 27,000 Reynolds American, Inc. 1,767,690 17,500 UST, Inc. 1,018,500 ------------ 4,279,790 ------------ TOYS: 1.84% 25,000 Hasbro, Inc. 681,250 20,000 JAKKS Pacific, Inc.* 436,800 60,000 Mattel, Inc. 1,359,600 37,000 The Topps Co. 329,300 75,000 THQ, Inc.*+ 2,439,000 ------------ 5,245,950 ------------ TRANSPORTATION EQUIPMENT: 0.60% 23,000 Navistar International Corp.* 768,890 27,000 Trinity Industries, Inc. 950,400 ------------ 1,719,290 ------------ TRUCKING: 0.56% 15,000 Arkansas Best Corp. 540,000 28,000 YRC Worldwide, Inc.* 1,056,440 ------------ 1,596,440 ------------ WIRELESS COMMUNICATIONS: 1.06% 84,000 Brightpoint, Inc.* 1,129,800 40,000 Nokia Corp. ADR 812,800 34,856 Sprint Nextel Corp. 658,430 150,000 Wireless Facilities, Inc.*+ 427,500 ------------ 3,028,530 ------------ Total Common Stocks (Cost $188,059,368) 280,030,445 ------------ Warrants: 0.07% --------------- 20,000 Air France ADR* Expiration 11/5/2007, Exercise Price $20.00 (Acquired 5/5/2004, Cost $18,752) 212,600 ------------ Short-Term Investments: 1.88% ----------------------------- MONEY MARKET FUNDS: 1.88% 3,290,918 AIM STIT-STIC Prime Portfolio 3,290,918 2,060,296 Fidelity Institutional Money Market Portfolio 2,060,296 ------------ Total Short-Term Investments (Cost $5,351,214) 5,351,214 ------------ Investments Purchased as Securities Lending Collateral: 8.58% ------------------------------------------------------------- MONEY MARKET FUNDS: 8.58% 24,354,038 AIM STIT-STIC Prime Portfolio 24,354,038 107,569 Fidelity Institutional Money Market Portfolio 107,569 ------------ Total Investments Purchased as Securities Lending Collateral (Cost $24,461,607) 24,461,607 ------------ Total Investments in Securities (Cost $217,890,941): 108.78% 310,055,866 Liabilities in Excess of Other Assets: (8.78%) (25,028,842) ------------ Net Assets: 100.00% $285,027,024 ------------ ------------ ADR - American Depositary Receipt * Non-income producing security. # U.S. traded security of a foreign issuer. + All or a portion of this security is on loan. See Note 8 in the Notes to Financial Statements. ^ Affiliated Company; the Fund owns 5% or more of the outstanding voting securities of the issuer. See Note 4 in the Notes to Financial Statements. The accompanying notes are an integral part of these financial statements. AL FRANK DIVIDEND VALUE FUND SCHEDULE OF INVESTMENTS AT DECEMBER 31, 2006 Shares Common Stocks: 96.89% Value ------ --------------------- ----- ADVANCED INDUSTRIAL EQUIPMENT: 0.86% 1,800 Eaton Corp. $ 135,252 7,334 Insteel Industries, Inc. 130,472 ----------- 265,724 ----------- ADVANCED MEDICAL DEVICES: 0.38% 2,200 Medtronic, Inc. 117,722 ----------- AEROSPACE & DEFENSE: 1.66% 2,300 The Boeing Co. 204,332 5,500 Kaman Corp. - Class A 123,145 2,000 Lockheed Martin Corp. 184,140 ----------- 511,617 ----------- AIRLINES: 0.54% 6,500 SkyWest, Inc. 165,815 ----------- ALUMINUM: 0.81% 4,500 Alcoa, Inc. 135,045 2,900 BHP Billiton Limited ADR 115,275 ----------- 250,320 ----------- AUTOMOBILE MANUFACTURERS: 1.06% 4,500 General Motors Corp. 138,240 1,400 Toyota Motor Corp. ADR 188,034 ----------- 326,274 ----------- AUTOMOBILE PARTS & EQUIPMENT: 1.07% 9,000 ArvinMeritor, Inc. 164,070 5,500 Cooper Tire & Rubber Co. 78,650 4,500 Superior Industries International, Inc. 86,715 ----------- 329,435 ----------- BANKS: 3.39% 5,504 Bank of America Corp. 293,859 15,000 Capstead Mortgage Corp. 124,500 3,200 Citigroup, Inc. 178,240 3,000 Fifth Third Bancorp 122,790 3,700 JPMorgan Chase & Co. 178,710 4,000 National City Corp. 146,240 ----------- 1,044,339 ----------- BROKERAGES: 2.73% 2,800 Lehman Brothers Holdings, Inc. 218,736 2,500 Merrill Lynch & Co., Inc. 232,750 2,000 Morgan Stanley 162,860 1,150 The Goldman Sachs Group, Inc. 229,252 ----------- 843,598 ----------- BUILDING MATERIALS: 2.08% 3,500 Ameron International Corp. 267,295 3,000 Building Materials Holding Corp. 74,070 3,000 Eagle Materials Inc. 129,690 3,500 International Aluminum Corp. 170,625 ----------- 641,680 ----------- BUSINESS SERVICES: 2.03% 1,988 Fidelity National Information Services, Inc. 79,699 165 Idearc, Inc.* 4,727 13,000 IKON Office Solutions, Inc. 212,810 6,000 Sabre Holdings Corp. 191,340 25,000 Traffix, Inc. 137,000 ----------- 625,576 ----------- CASINOS & CASINO EQUIPMENT: 1.18% 1,625 Harrah's Entertainment, Inc. 134,420 5,000 International Game Technology 231,000 ----------- 365,420 ----------- CHEMICALS, COMMODITY: 1.49% 2,700 E.I. Du Pont de Nemours and Co. 131,517 4,500 Lyondell Chemical Co. 115,065 6,000 Olin Corp. 99,120 2,700 The Dow Chemical Co. 107,838 403 Tronox Inc. - Class B 6,363 ----------- 459,903 ----------- CHEMICALS, SPECIALTY: 0.18% 17,000 Wellman, Inc. 54,230 ----------- CLOTHING/FABRICS: 1.32% 10,600 Delta Apparel, Inc. 181,154 4,000 Kellwood Co. 130,080 4,000 Kenneth Cole Productions, Inc. 95,960 ----------- 407,194 ----------- COAL: 0.29% 4,300 Fording Canadian Coal Trust# 89,225 ----------- COMMUNICATIONS TECHNOLOGY: 2.20% 7,000 ADTRAN, Inc. 158,900 6,900 Applied Signal Technology, Inc. 97,014 8,000 Motorola, Inc. 164,480 3,300 QUALCOMM, Inc. 124,707 52,000 Wireless Telecom Group, Inc.* 132,600 ----------- 677,701 ----------- COMPUTERS/HARDWARE: 1.70% 11,002 AU Optronics Corp. ADR 151,938 6,000 Hewlett Packard Co. 247,140 1,300 International Business Machines Corp. 126,295 ----------- 525,373 ----------- CONSUMER SERVICES: 0.42% 6,000 Time Warner Inc. 130,680 ----------- CONTAINERS & PACKAGING: 0.40% 42,500 Rotonics Manufacturing, Inc.* 124,950 ----------- DATA STORAGE/DISK DRIVES: 0.53% 6,200 Seagate Technology# 164,300 ----------- DISTILLERS & BREWERS: 0.38% 2,400 Anheuser-Busch Companies, Inc. 118,080 ----------- ELECTRICAL COMPONENTS & EQUIPMENT: 1.45% 4,900 American Power Conversion Corp. 149,891 9,700 AVX Corp. 143,463 13,000 Frequency Electronics, Inc. 155,350 ----------- 448,704 ----------- ELECTRONIC MANUFACTURING SERVICES: 0.63% 4,400 Jabil Circuit, Inc. 108,020 5,700 Nam Tai Electronics, Inc.# 86,583 ----------- 194,603 ----------- FINANCIAL SERVICES, DIVERSIFIED: 1.17% 2,300 Fannie Mae 136,597 4,523 Fidelity National Title Group, Inc. - Class A 108,009 5,000 H & R Block, Inc. 115,200 ----------- 359,806 ----------- FIXED LINE COMMUNICATIONS: 1.69% 5,500 AT&T, Inc. 196,625 4,300 BellSouth Corp. 202,573 3,300 Verizon Communications, Inc. 122,892 ----------- 522,090 ----------- FOOD MANUFACTURERS: 1.38% 6,000 Archer-Daniels-Midland Co. 191,760 4,800 Nash Finch Co. 131,040 6,000 Sara Lee Corp. 102,180 ----------- 424,980 ----------- FOOTWEAR: 0.38% 1,200 Nike, Inc. - Class B 118,836 ----------- HEALTHCARE PROVIDERS: 0.37% 17,000 American Shared Hospital Services 113,050 ----------- HEAVY MACHINERY: 1.94% 2,600 Caterpillar, Inc. 159,458 2,000 Deere & Co. 190,140 2,675 Ingersoll-Rand Company Ltd. - Class A# 104,673 3,000 Joy Global Inc. 145,020 ----------- 599,291 ----------- HOME CONSTRUCTION: 3.34% 2,500 Beazer Homes USA, Inc. 117,525 4,400 D.R. Horton, Inc. 116,556 1,900 KB Home 97,432 2,700 Lennar Corp. - Class A 141,642 1,950 M.D.C. Holdings, Inc. 111,248 7,000 Orleans Homebuilders, Inc. 131,600 3,000 Pulte Homes, Inc. 99,360 1,900 Ryland Group, Inc. 103,778 4,200 Standard Pacific Corp. 112,518 ----------- 1,031,659 ----------- HOME FURNISHINGS: 0.62% 3,200 National Presto Industries, Inc. 191,584 ----------- HOUSE, DURABLE: 0.94% 1,585 Fortune Brands, Inc. 135,343 5,300 Newell Rubbermaid, Inc. 153,435 ----------- 288,778 ----------- HOUSE, NON-DURABLE: 0.47% 2,200 Colgate-Palmolive Co. 143,528 ----------- INDUSTRIAL DIVERSIFIED: 0.74% 1,500 3M Co. 116,895 3,000 General Electric Co. 111,630 ----------- 228,525 ----------- INSURANCE, FULL LINE: 1.65% 1,800 Hartford Financial Services Group, Inc. 167,958 2,500 MBIA, Inc. 182,650 3,000 The Chubb Corp. 158,730 ----------- 509,338 ----------- INSURANCE, LIFE: 0.44% 6,500 UnumProvident Corp. 135,070 ----------- INSURANCE, PROPERTY & CASUALTY: 3.59% 5,850 American Financial Group, Inc. 210,074 6,000 Direct General Corp. 123,840 3,300 Endurance Specialty Holdings Ltd.# 120,714 2,000 MGIC Investment Corp. 125,080 2,400 The Allstate Corp. 156,264 3,300 The St. Paul Travelers Companies, Inc. 177,177 5,625 W.R. Berkley Corp. 194,119 ----------- 1,107,268 ----------- MEDICAL SUPPLIES: 1.18% 3,500 Baxter International, Inc. 162,365 4,000 McKesson Corp. 202,800 ----------- 365,165 ----------- OIL, EQUIPMENT & SERVICES: 0.47% 3,000 Tidewater Inc. 145,080 ----------- OIL, EXPLORATION & PRODUCTION/DRILLING: 1.76% 3,500 Chesapeake Energy Corp. 101,675 3,300 GlobalSantaFe Corp.# 193,974 3,000 Noble Energy, Inc. 147,210 3,050 Rowan Companies, Inc. 101,260 ----------- 544,119 ----------- OIL, INTEGRATED MAJORS: 3.30% 3,400 Anadarko Petroleum Corp. 147,968 2,200 Chevron Corp. 161,766 2,800 ConocoPhillips 201,460 2,400 Exxon Mobil Corp. 183,912 3,472 Marathon Oil Corp. 321,160 ----------- 1,016,266 ----------- OIL, REFINERS: 0.90% 5,400 Valero Energy Corp. 276,264 ----------- OIL, SECONDARY: 2.39% 2,400 Apache Corp. 159,624 2,000 Ashland, Inc. 138,360 3,100 Devon Energy Corp. 207,948 2,100 Hess Corp. 104,097 2,600 Pogo Producing Co. 125,944 ----------- 735,973 ----------- OIL, TRANSPORTATION/SHIPPING: 3.84% 11,000 Dryships, Inc.# 198,110 2,500 Frontline LTD.# 79,625 3,300 General Maritime Corp.# 116,127 3,200 Nordic American Tanker Shipping LTD.# 109,280 6,500 OMI Corp.# 137,605 2,000 Overseas Shipbuilding Group, Inc. 112,600 5,375 Ship Finance International LTD# 127,710 3,250 Teekay Shipping Corp.# 141,765 3,500 Tsakos Energy Navigation LTD.# 160,650 ----------- 1,183,472 ----------- PAPER PRODUCTS: 0.39% 3,500 International Paper Co. 119,350 ----------- PHARMACEUTICALS: 4.48% 2,800 Abbott Laboratories 136,388 5,050 Bristol-Myers Squibb Co. 132,916 2,500 Eli Lilly & Co. 130,250 2,300 GlaxoSmithKline plc ADR 121,348 1,900 Johnson & Johnson 125,438 3,900 Merck & Co. Inc. 170,040 7,500 Mylan Laboratories, Inc. 149,700 2,500 Novartis AG ADR 143,600 5,000 Pfizer, Inc. 129,500 2,800 Wyeth 142,576 ----------- 1,381,756 ----------- POLLUTION CONTROL/WASTE MANAGEMENT: 0.48% 8,000 American Ecology Corp. 148,080 ----------- PRECIOUS METALS: 0.34% 3,700 Goldcorp, Inc.# 105,228 ----------- RAILROADS: 2.42% 2,500 Burlington Northern Santa Fe Corp. 184,525 6,400 CSX Corp. 220,352 3,500 Norfolk Southern Corp. 176,015 1,800 Union Pacific Corp. 165,636 ----------- 746,528 ----------- REAL ESTATE INVESTMENT TRUSTS: 0.36% 3,500 New Century Financial Corp. 110,565 ----------- RECREATIONAL PRODUCTS: 2.50% 3,300 Brunswick Corp. 105,270 9,000 Callaway Golf Co. 129,690 4,000 Eastman Kodak Co. 103,200 2,100 Harley-Davidson, Inc. 147,987 8,000 Nautilus Group, Inc. 112,000 5,000 The Walt Disney Co. 171,350 ----------- 769,497 ----------- RESTAURANTS: 0.53% 3,700 McDonald's Corp. 164,021 ----------- RETAILERS, APPAREL: 2.75% 2,000 Abercrombie & Fitch Co. - Class A 139,260 9,000 American Eagle Outfitters, Inc. 280,890 4,500 Deb Shops, Inc. 118,800 6,800 The Finish Line, Inc. - Class A 97,104 5,500 The Gap, Inc. 107,250 4,300 The Talbots, Inc. 103,630 ----------- 846,934 ----------- RETAILERS, BROADLINE: 2.01% 4,100 Family Dollar Stores, Inc. 120,253 2,600 J. C. Penney Company, Inc. 201,136 4,000 Nordstrom, Inc. 197,360 2,170 Wal-Mart Stores, Inc. 100,211 ----------- 618,960 ----------- RETAILERS, SPECIALTY: 3.19% 3,750 Best Buy Co., Inc. 184,462 4,250 Circuit City Stores, Inc. 80,665 5,500 Claire's Stores, Inc. 182,270 3,900 OfficeMax, Inc. 193,635 3,500 The Home Depot, Inc. 140,560 6,500 The Pep Boys - Manny, Moe & Jack 96,590 3,400 Williams-Sonoma, Inc. 106,896 ----------- 985,078 ----------- SAVINGS & LOANS: 1.84% 3,800 Countrywide Financial Corp. 161,310 1,600 Downey Financial Corp. 116,128 3,400 IndyMac Bancorp, Inc. 153,544 3,000 Washington Mutual, Inc. 136,470 ----------- 567,452 ----------- SEMICONDUCTOR, CAPITAL EQUIPMENT: 1.87% 8,500 Applied Materials, Inc. 156,825 5,000 Cognex Corp. 119,100 7,500 Cohu, Inc. 151,200 3,000 KLA-Tencor Corp. 149,250 ----------- 576,375 ----------- SEMICONDUCTOR, MICROPROCESSORS: 2.39% 3,200 Analog Devices, Inc. 105,184 21,000 Dataram Corp. 87,990 5,600 Intel Corp. 113,400 7,100 National Semiconductor Corp. 161,170 10,814 Taiwan Semiconductor Manufacturing Company Ltd. ADR 118,197 5,200 Texas Instruments, Inc. 149,760 ----------- 735,701 ----------- SEMICONDUCTOR, PROGRAMMABLE LOGIC DEVICES: 0.66% 3,000 Maxim Integrated Products, Inc. 91,860 4,700 Xilinx, Inc. 111,907 ----------- 203,767 ----------- SOFT DRINKS: 0.47% 3,000 The Coca-Cola Co. 144,750 ----------- SOFTWARE: 1.44% 23,000 American Software, Inc. - Class A 159,390 5,000 Microsoft Corp. 149,300 9,000 Wayside Technology Group, Inc. 136,080 ----------- 444,770 ----------- STEEL: 2.71% 4,000 Nucor Corp. 218,640 10,000 Ryerson, Inc. 250,900 5,000 The Timken Co. 145,900 3,000 United States Steel Corp. 219,420 ----------- 834,860 ----------- TOBACCO: 1.03% 1,675 Altria Group, Inc. 143,748 3,000 UST, Inc. 174,600 ----------- 318,348 ----------- TOYS: 0.59% 8,000 Mattel, Inc. 181,280 ----------- TRANSPORTATION EQUIPMENT: 1.76% 1,150 Cummins, Inc. 135,907 2,800 Ryder System, Inc. 142,968 7,500 Trinity Industries, Inc. 264,000 ----------- 542,875 ----------- TRUCKING: 0.79% 3,500 Arkansas Best Corp. 126,000 5,600 J.B. Hunt Transport Services, Inc. 116,312 ----------- 242,312 ----------- WIRELESS COMMUNICATIONS: 0.55% 8,400 Nokia Corp. ADR 170,688 ----------- Total Common Stocks (Cost $23,846,521) 29,881,780 ----------- Short-Term Investments: 3.23% ----------------------------- MONEY MARKET FUNDS: 3.23% 776,054 AIM STIT-STIC Prime Portfolio 776,054 220,252 Fidelity Institutional Money Market Portfolio 220,252 ----------- Total Short-Term Investments (Cost $996,306) 996,306 ----------- Total Investments in Securities (Cost $24,842,827): 100.12% 30,878,086 Liabilities in Excess of Other Assets: (0.12%) (36,047) ----------- Net Assets: 100.00% $30,842,039 ----------- ----------- ADR - American Depositary Receipt * Non-income producing security. # U.S. traded security of a foreign issuer. The accompanying notes are an integral part of these financial statements. AL FRANK FUNDS STATEMENTS OF ASSETS AND LIABILITIES AT DECEMBER 31, 2006 AL FRANK AL FRANK DIVIDEND FUND VALUE FUND -------- ---------- ASSETS Investments in securities, at value: Non-affiliates (cost $217,436,493 and $24,842,827, respectively)1 $309,109,866 $30,878,086 Affiliates (cost $454,448 and $0, respectively) 946,000 -- ------------ ----------- Total investments in securities, at value (cost $217,890,941 and $24,842,827, respectively) 310,055,866 30,878,086 ------------ ----------- Cash 3,750 872 Receivables: Fund shares sold 162,197 9,000 Dividends and interest 285,341 50,681 Prepaid expenses 37,236 14,284 ------------ ----------- Total assets 310,544,390 30,952,923 ------------ ----------- LIABILITIES Payables: Collateral on securities loaned 24,461,607 -- Fund shares redeemed 521,822 35,972 Due to advisor 244,814 23,613 Transfer agent fees and expenses 104,091 2,713 Distribution fees 59,832 6,439 Printing and mailing fees 45,299 6,853 Administration fees 25,830 6,115 Audit fees 24,500 18,000 Fund accounting fees 14,660 6,772 Custody fees 13,202 -- Chief Compliance Officer fee 770 548 Accrued expenses 939 3,859 ------------ ----------- Total liabilities 25,517,366 110,884 ------------ ----------- NET ASSETS $285,027,024 $30,842,039 ------------ ----------- ------------ ----------- CALCULATION OF NET ASSET VALUE PER SHARE INVESTOR CLASS Net assets applicable to shares outstanding $278,559,406 $30,170,517 Shares issued and outstanding [unlimited number of shares (par value $0.01) authorized] 8,483,463 2,262,610 ------------ ----------- NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 32.84 $ 13.33 ------------ ----------- ------------ ----------- ADVISOR CLASS Net assets applicable to shares outstanding $ 6,467,618 $ 671,522 Shares issued and outstanding [unlimited number of shares (par value $0.01) authorized] 196,568 50,419 ------------ ----------- Net asset value, offering and redemption price per share $ 32.90 $ 13.32 ------------ ----------- ------------ ----------- COMPONENTS OF NET ASSETS Paid-in capital $190,931,214 $24,756,897 Undistributed net investment income -- 10,783 Accumulated net realized gain on investments 1,930,885 39,100 Net unrealized appreciation on investments 92,164,925 6,035,259 ------------ ----------- Net assets $285,027,024 $30,842,039 ------------ ----------- ------------ ----------- 1 Includes loaned securities with a market value of $ 23,975,215 $ -- ------------ ----------- ------------ -----------
The accompanying notes are an integral part of these financial statements. AL FRANK FUNDS STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006 AL FRANK AL FRANK DIVIDEND FUND VALUE FUND -------- ---------- INVESTMENT INCOME Income Dividends (Net of foreign taxes withheld of $20,940 and $2,968, respectively) $ 3,438,971 $ 667,811 Interest 451,789 52,694 Securities lending 53,585 1,747 ----------- ---------- Total income 3,944,345 722,252 ----------- ---------- Expenses Advisory fees (Note 3) 2,976,356 289,024 Distribution fees - Investor Class (Note 5) 738,831 71,712 Transfer agent fees and expenses (Note 3) 469,541 50,459 Administration fees (Note 3) 305,525 64,637 Fund accounting fees (Note 3) 80,490 42,595 Reports to shareholders 57,656 7,307 Custody fees (Note 3) 54,045 3,874 Registration expense 40,055 25,346 Miscellaneous 38,155 7,683 Professional fees 37,812 25,820 Trustee fees 15,473 8,142 Chief Compliance Officer fee (Note 3) 6,470 1,096 ----------- ---------- Total expenses 4,820,409 597,695 Less: Expenses reimbursed by advisor (Note 3) -- (25,947) ----------- ---------- Net expenses 4,820,409 571,748 ----------- ---------- NET INVESTMENT INCOME/(LOSS) (876,064) 150,504 ----------- ---------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain on investments 5,612,149 587,927 Net change in unrealized appreciation on investments 20,613,619 3,238,294 ----------- ---------- Net realized and unrealized gain on investments 26,225,768 3,826,221 ----------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $25,349,704 $3,976,725 ----------- ---------- ----------- ----------
The accompanying notes are an integral part of these financial statements. AL FRANK FUND STATEMENTS OF CHANGES IN NET ASSETS Year Ended Year Ended December 31, 2006 December 31, 2005 ----------------- ----------------- INCREASE/(DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment loss $ (876,064) $ (1,422,384) Net realized gain on investments 5,612,149 12,531,214 Net change in unrealized appreciation on investments 20,613,619 14,247,744 ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 25,349,704 25,356,574 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS From net realized gain on investments Investor Class (5,902,729) (9,305,640) Advisor Class (133,842) -- ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (6,036,571) (9,305,640) ------------ ------------ CAPITAL SHARE TRANSACTIONS Net increase/(decrease) in net assets derived from net change in outstanding shares (a) 1,527,589 (11,171,607) ------------ ------------ TOTAL INCREASE IN NET ASSETS 20,840,722 4,879,327 ------------ ------------ NET ASSETS Beginning of year 264,186,302 259,306,975 ------------ ------------ END OF YEAR $285,027,024 $264,186,302 ------------ ------------ ------------ ------------
(a) A summary of share transactions is as follows: INVESTOR CLASS Year Ended Year Ended December 31, 2006 December 31, 2005 -------------------------- --------------------------- Shares Paid-in Capital Shares Paid-in Capital ------ --------------- ------ --------------- Shares sold 3,393,682 $109,439,174 2,069,979 $ 60,195,223 Shares issued on reinvestment of distributions 170,624 5,622,162 290,553 8,774,712 Shares redeemed* (3,754,213) (119,673,264) (2,806,014) (80,141,542) ---------- ------------ ---------- ------------ Net decrease (189,907) $ (4,611,928) (445,482) $(11,171,607) ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ * Net of redemption fees of $ 44,777 $ 54,160 ------------ ------------ ------------ ------------
ADVISOR CLASS April 30, 2006** Through Year Ended December 31, 2006 December 31, 2005 -------------------------- --------------------------- Shares Paid-in Capital Shares Paid-in Capital ------ --------------- ------ --------------- Shares sold 222,970 $ 6,967,185 -- $ -- Shares issued on reinvestment of distributions 4,042 133,428 -- -- Shares redeemed* (30,444) (961,096) -- -- ---------- ------------ ---------- ------------ Net increase 196,568 $ 6,139,517 -- $ -- ---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------ * Net of redemption fees of $ 171 $ -- ------------ ------------ ------------ ------------
** Commencement of operations. The accompanying notes are an integral part of these financial statements. AL FRANK DIVIDEND VALUE FUND STATEMENTS OF CHANGES IN NET ASSETS Year Ended Year Ended December 31, 2006 December 31, 2005 ----------------- ----------------- INCREASE/(DECREASE) IN NET ASSETS FROM: OPERATIONS Net investment income $ 150,504 $ 75,039 Net realized gain on investments 587,927 144,757 Net change in unrealized appreciation on investments 3,238,294 1,568,578 ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3,976,725 1,788,374 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income Investor Class (150,205) (59,671) Advisor Class (4,956) -- From net realized gain on investments Investor Class (623,814) (47,992) Advisor Class (14,089) -- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (793,064) (107,663) ----------- ----------- CAPITAL SHARE TRANSACTIONS Net increase in net assets derived from net change in outstanding shares (a) 1,708,033 8,125,945 ----------- ----------- TOTAL INCREASE IN NET ASSETS 4,891,694 9,806,656 ----------- ----------- NET ASSETS Beginning of year 25,950,345 16,143,689 ----------- ----------- END OF YEAR $30,842,039 $25,950,345 ----------- ----------- ----------- ----------- Accumulated net investment income $ 10,783 $ 15,062 ----------- ----------- ----------- -----------
(a) A summary of share transactions is as follows: INVESTOR CLASS Year Ended Year Ended December 31, 2006 December 31, 2005 -------------------------- --------------------------- Shares Paid-in Capital Shares Paid-in Capital ------ --------------- ------ --------------- Shares sold 574,169 $7,307,836 1,262,171 $14,240,295 Shares issued on reinvestment of distributions 55,517 740,038 8,645 102,794 Shares redeemed* (549,106) (6,988,971) (548,968) (6,217,144) -------- ---------- --------- ----------- Net increase 80,580 $1,058,903 721,848 $ 8,125,945 -------- ---------- --------- ----------- * Net of redemption fees of $ 4,935 $ 19,792 ---------- ----------- ---------- -----------
ADVISOR CLASS April 30, 2006** Through Year Ended December 31, 2006 December 31, 2005 -------------------------- --------------------------- Shares Paid-in Capital Shares Paid-in Capital ------ --------------- ------ --------------- Shares sold 50,386 $ 648,770 -- $ -- Shares issued on reinvestment of distributions 630 8,390 -- -- Shares redeemed (597) (8,030) -- -- -------- ---------- --------- ----------- Net increase 50,419 $ 649,130 -- $ -- -------- ---------- --------- ----------- -------- ---------- --------- -----------
** Commencement of operations. The accompanying notes are an integral part of these financial statements. AL FRANK FUND FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR INVESTOR CLASS Year Ended December 31, ---------------------------------------------------------------- 2006 2005 2004 2003 2002 ---- ---- ---- ---- ---- Net asset value, beginning of year $30.46 $28.44 $24.56 $13.80 $18.77 ------ ------ ------ ------ ------ Income from investment operations: Net investment loss (0.09)^ (0.17)^ (0.11) (0.07) (0.23) Net realized and unrealized gain/(loss) on investments 3.16 3.30 3.98 10.81 (4.66) ------ ------ ------ ------ ------ Total from investment operations 3.07 3.13 3.87 10.74 (4.89) ------ ------ ------ ------ ------ Less distributions: From net realized gain on investments (0.70) (1.12) (0.01) -- (0.09) ------ ------ ------ ------ ------ Redemption fees retained 0.01^ 0.01^ 0.02 0.02 0.01 ------ ------ ------ ------ ------ Net asset value, end of year $32.84 $30.46 $28.44 $24.56 $13.80 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Total return 10.09% 11.06% 15.83% 77.97% (25.99%) RATIOS/SUPPLEMENTAL DATA: Net assets, end of year (thousands) $278,559 $264,186 $259,307 $180,380 $48,472 Ratio of expenses to average net assets 1.62% 1.63% 1.61% 1.79% 2.25% Ratio of net investment loss to average net assets (0.29%) (0.57%) (0.41%) (0.74%) (1.34%) Portfolio turnover rate 17.75% 3.84% 24.59% 13.64% 28.14%
^ Based on average shares outstanding. The accompanying notes are an integral part of these financial statements. AL FRANK FUND FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD ADVISOR CLASS April 30, 2006* Through December 31, 2006 ----------------- Net asset value, beginning of period $33.42 ------ Income from investment operations: Net investment loss (0.06)^ Net realized and unrealized gain on investments 0.24 ------ Total from investment operations 0.18 ------ Less distributions: From net realized gain on investments (0.70) ------ Redemption fees retained 0.00^# ------ Net asset value, end of period $32.90 ------ ------ Total return 0.52%+ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $6,468 Ratio of expenses to average net assets 1.45%** Ratio of net investment loss to average net assets (0.28%)** Portfolio turnover rate 17.75%+ * Commencement of operations. ** Annualized. + Not annualized. # Amount is less than $0.01. ^ Based on average shares outstanding. The accompanying notes are an integral part of these financial statements. AL FRANK DIVIDEND VALUE FUND FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD INVESTOR CLASS Year Year September 30, 2004* Ended Ended to December 31, 2006 December 31, 2005 December 31, 2004 ----------------- ----------------- ----------------- Net asset value, beginning of period $11.89 $11.06 $10.00 ------ ------ ------ Income from investment operations: Net investment income 0.07^ 0.04^ 0.02 Net realized and unrealized gain on investments 1.72 0.83 1.06 ------ ------ ------ Total from investment operations 1.79 0.87 1.08 ------ ------ ------ Less distributions: From net investment income (0.07) (0.03) (0.02) From net realized gain on investments (0.28) (0.02) -- ------ ------ ------ (0.35) (0.05) (0.02) ------ ------ ------ Redemption fees retained 0.00^# 0.01^ 0.00# ------ ------ ------ Net asset value, end of period $13.33 $11.89 $11.06 ------ ------ ------ ------ ------ ------ Total return 15.05% 7.95% 10.77%+ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $30,171 $25,950 $16,144 Ratio of expenses to average net assets: Before expense reimbursement/recoupment 2.07% 2.13% 2.84%** After expense reimbursement/recoupment 1.98% 1.98% 1.98%** Ratio of net investment income/(loss) to average net assets: Before expense reimbursement/recoupment 0.43% 0.17% (0.14%)** After expense reimbursement/recoupment 0.52% 0.33% 0.75%** Portfolio turnover rate 7.77% 8.83% 1.57%+
* Commencement of operations. ** Annualized. + Not annualized. # Amount is less than $0.01. ^ Based on average shares outstanding. The accompanying notes are an integral part of these financial statements. AL FRANK DIVIDEND VALUE FUND FINANCIAL HIGHLIGHTS - FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD ADVISOR CLASS April 30, 2006* Through December 31, 2006 ----------------- Net asset value, beginning of period $13.18 ------ Income from investment operations: Net investment income 0.10^ Net realized and unrealized gain on investments 0.42 ------ Total from investment operations 0.52 ------ Less distributions: From net investment income (0.10) From net realized gain on investments (0.28) ------ (0.38) ------ Redemption fees retained 0.00^# ------ Net asset value, end of period $13.32 ------ ------ Total return 3.95%+ RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (thousands) $671 Ratio of expenses to average net assets: Before expense reimbursement/recoupment 1.86%** After expense reimbursement/recoupment 1.73%** Ratio of net investment income to average net assets: Before expense reimbursement/recoupment 1.00%** After expense reimbursement/recoupment 1.13%** Portfolio turnover rate 7.77%+ * Commencement of operations. ** Annualized. + Not annualized. # Amount is less than $0.01. ^ Based on average shares outstanding. The accompanying notes are an integral part of these financial statements. AL FRANK FUNDS NOTES TO FINANCIAL STATEMENTS AT DECEMBER 31, 2006 NOTE 1 - ORGANIZATION The Al Frank Fund and the Al Frank Dividend Value Fund (the "Funds") are each diversified series of Advisors Series Trust (the "Trust"), which is registered under the Investment Company Act of 1940 (the "1940 Act") as an open- end management investment company. The investment objective of the Al Frank Fund is to seek growth of capital, which it attempts to achieve by investing in out of favor and undervalued equity securities. The investment objective of the Al Frank Dividend Value Fund is long-term total return from both capital appreciation and, secondarily, dividend income, which it seeks to achieve by investing in dividend-paying equity securities that it believes are out of favor and undervalued. The Al Frank Fund Investor and Advisor Classes commenced operations on January 2, 1998 and April 30, 2006, respectively. The Al Frank Dividend Value Fund Investor and Advisor Classes commenced operations on September 30, 2004 and April 30, 2006, respectively. Prior to April 30, 2006, the shares of the Funds had no specific class designation. As of that date, all of the then outstanding shares were redesignated as Investor Class Shares. As part of its multiple class plan, the Funds now also offer Advisor Class Shares. Because the fees and expenses vary between the Investor Class Shares and the Advisor Class Shares, performance will vary with respect to each class. Under normal conditions, the Advisor Class shares are expected to have lower expenses than the Investor Class Shares which will result in higher total returns. Advisor Class Shares are offered primarily to qualified registered investment advisors, financial advisors and investors such as pension and profit sharing plans, employee benefit trusts, endowments, foundations and corporations. Advisor Class Shares may be purchased through certain financial intermediaries and mutual fund supermarkets that charge their customers transaction or other fees with respect to their customers' investment in the Funds. The Funds may also be purchased by qualified investors directly through the Funds' Transfer Agent. Wrap account programs established with broker- dealers or financial intermediaries may purchase Advisor Class Shares only if the program for which the shares are being acquired will not require the Funds to pay any type of distribution or administration payment to any third-party. A registered investment advisor may aggregate all client accounts investing in the Funds to meet the Advisor Class Shares investment minimum. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Funds. These policies are in conformity with accounting principles generally accepted in the United States of America. A. Security Valuation: The Funds' 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 Global Market System for which market quotations are readily available shall be valued using the NASDAQ Official Closing Price ("NOCP"). If the NOCP is not available, such securities 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 Global Market System shall be valued at the most recent trade price. Securities for which market quotations are not readily available, or if the closing price doesn't represent fair value, are valued following procedures approved by the Board of Trustees. These procedures consider many factors, including the type of security, size of holding, trading volume, and news events. Short-term investments are valued at amortized cost, which approximates market value. Investments in other mutual funds are valued at their net asset value. B. Federal Income Taxes: It is the Funds' 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 accounting principles generally accepted in the United States of America. To the extent these book/tax differences are permanent such amounts are reclassified within the capital accounts based on their Federal tax treatment. Investment income, expenses (other than those specific to the class of shares), and realized and unrealized gains and losses on investments are allocated to the separate classes of shares based upon their relative net assets on the date income is earned or expensed and realized and unrealized gains and losses are incurred. D. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. E. Reclassification of Capital Accounts: Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting These reclassifications have no effect on net assets or net asset value per share. For the year ended December 31, 2006, the Al Frank Fund decreased accumulated net realized gain on investments by $470,260, and decreased accumulated net investment loss and paid-in capital by $876,064 and $405,804, respectively, due to certain permanent book and tax differences. For the year ended December 31, 2006, the Al Frank Dividend Value Fund increased accumulated net investment income by $378, and decreased paid-in capital by $378 due to certain permanent book and tax differences. F. REITs: The Funds have made certain investments in real estate investment trusts ("REITs") which pay dividends to their shareholders based upon available funds from operations. It is quite common for these dividends to exceed the REIT's taxable earnings and profits resulting in the excess portion being designated as a return of capital. The Funds intend to include the gross dividends from such REITs in its annual distributions to its shareholders and, accordingly, a portion of the Funds' distributions may also be designated as a return of capital. G. Redemption Fees: The Funds charge a 2% redemption fee to shareholders who redeem shares held for less than 60 days. Such fees are retained by the Fund and accounted for as an addition to paid-in capital. H. New Accounting Pronouncements: On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more- likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Application of FIN 48 is required as of the date of the last Net Asset Value ("NAV") calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At this time, management is evaluating the implications of FIN 48 and its impact on the financial statements has not yet been determined. In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement" ("SFAS 157"), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Funds believe the adoption of SFAS 157 will have no material impact on their financial statements. NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER AGREEMENTS For the year ended December 31, 2006, Al Frank Asset Management, Inc. (the "Advisor") provided the Funds 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 Funds. 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 each Fund. For the year ended December 31, 2006, the Al Frank Fund and the Al Frank Dividend Value Fund incurred $2,976,356 and $289,024, respectively, in advisory fees. The Funds are responsible for their own operating expenses. For the year ended December 31, 2006, the Advisor agreed to reduce fees payable to it by the Funds and to pay the Funds' operating expenses to the extent necessary to limit each Fund's Investor Class aggregate annual operating expenses to 1.98% of average daily net assets and each Fund's Advisor Class aggregate annual operating expenses to 1.73% of average daily net assets. Any such reduction made by the Advisor in its fees or payment of expenses which are a 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 each 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, 2006, there were no expenses of the Al Frank Fund subject to recapture pursuant to the aforementioned conditions. For the year ended December 31, 2006, the Advisor reduced its fees and absorbed Fund expenses in the amount of $25,947 for the Al Frank Dividend Value Fund; no amounts were reimbursed to the Advisor. Cumulative expenses subject to recapture pursuant to the aforementioned conditions expire as follows: YEAR AMOUNT ---- ------ 2009 $86,373 U.S. Bancorp Fund Services, LLC (the "Administrator") acts as the Funds' Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Funds; prepares reports and materials to be supplied to the Trustees; monitors the activities of the Funds' custodian, transfer agent and accountants; coordinates the preparation and payment of the Funds' expenses and reviews the Funds' expense accruals. U.S. Bancorp Fund Services, LLC also serves as the fund accountant and transfer agent to the Funds. U.S. Bank, N.A., an affiliate of U.S. Bancorp Fund Services, serves as the Funds' custodian. For the year ended December 31, 2006, the Al Frank Fund and the Al Frank Dividend Value Fund incurred the following expenses for administration, fund accounting, transfer agency, and custody: AL FRANK FUND AL FRANK DIVIDEND VALUE FUND ------------- ---------------------------- Administration $305,525 $64,637 Fund accounting 80,490 42,595 Transfer agency 315,534 35,225 Custody 54,045 3,874 Quasar Distributors, LLC (the "Distributor") acts as the Funds' principal underwriter in a continuous public offering of the Funds' shares. The Distributor is an affiliate of the Administrator. Certain officers of the Funds are also employees of the Administrator. For the year ended December 31, 2006, the Al Frank Fund and the Al Frank Dividend Value Fund were allocated $6,470 and $1,096, respectively, of the Chief Compliance Officer fee. NOTE 4 - OTHER AFFILIATES Investments representing 5% or more of the outstanding securities of a portfolio company result in that company being considered an affiliated company, as defined in the 1940 Act. The aggregate market value of all securities of affiliated companies as of December 31, 2006 amounted to $946,000 representing 0.33% of net assets. Transactions during the year ended December 31, 2006 in the Al Frank Fund in which the issuer was an "affiliated person" are as follows: SMITH-MIDLAND CORP. ------------------ Beginning Shares 440,000 Beginning Cost $454,448 Purchase Cost $ -- Sales Cost $ -- -------- Ending Cost $454,448 -------- -------- Ending Shares 440,000 Dividend Income $ -- Net Realized Gain/(Loss) $ -- NOTE 5 - DISTRIBUTION COSTS The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 (the "Plan") in the Investor Class only. The Plan permits the Funds to pay for distribution and related expenses at an annual rate of up to 0.25% of each 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 Funds. 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, 2006, the Al Frank Fund - Investor Class and the Al Frank Dividend Value Fund - Investor Class paid the Distribution Coordinator $738,831 and $71,712, respectively. NOTE 6 - PURCHASES AND SALES OF SECURITIES For the year ended December 31, 2006, the cost of purchases and the proceeds from sales of securities, excluding short-term securities for the Al Frank Fund, were $50,942,186 and $52,484,276, respectively. For the year ended December 31, 2006, the cost of purchases and the proceeds from sales of securities, excluding short-term securities for the Al Frank Dividend Value Fund, were $2,947,732 and $2,162,310, respectively. NOTE 7 - LINE OF CREDIT The Al Frank Fund and Al Frank Dividend Value Fund have lines of credit in the amounts of $25,000,000 and $8,400,000, respectively. These lines of credit are intended to provide short-term financing, if necessary, subject to certain restrictions, in connection with shareholder redemptions. The credit facility is with the Funds' custodian, U.S. Bank, N.A. During the year ended December 31, 2006, the Funds did not draw upon the lines of credit. NOTE 8 - SECURITIES LENDING Effective September 8, 2006 the Al Frank Funds entered into a securities lending agreement with Morgan Stanley Securities Servicing Inc. (the "Borrower"). Under the terms of the agreement, the Funds are authorized to loan securities to the borrower. In exchange, the Funds receive cash collateral in the amount of at least 102% of the value of the securities loaned. The cash collateral is invested in short-term instruments as noted in the Schedules of Investments. Although risk is mitigated by the collateral, the Funds could experience a delay in recovering their securities and possible loss of income or value if the borrower fails to return them. The agreement provides that the Funds receive a guaranteed amount in securities lending revenue annually. Effective January 3, 2007, the Al Frank Dividend Value Fund is excluded from this agreement. As of December 31, 2006, the Al Frank Fund had loaned securities which were collateralized by cash. The cash collateral received was invested in securities as listed in the Fund's Schedule of Investments. The Al Frank Dividend Value Fund had no loaned securities at this time. Securities lending income is disclosed in the Funds' Statement of Operations. As of December 31, 2006, the value of securities loaned and collateral held by the Al Frank Fund are as follows: MARKET VALUE OF SECURITIES LOANED COLLATERAL ------------- ---------- $23,975,215 $24,461,607 NOTE 9 - INCOME TAXES Net investment income/(loss) and net realized gains/(losses) differ for financial statement and tax purposes due to differing treatments of distributions received from real estate investment trusts, wash sale losses deferred, and losses realized subsequent to October 31 on the sale of securities. The tax character of distributions paid during the years ended December 31 for the Al Frank Fund was as follows: 2006 2005 ---- ---- Long-term capital gains $6,036,571 $9,305,640 The tax character of distributions paid during the years ended December 31 for the Al Frank Dividend Value Fund were as follows: 2006 2005 ---- ---- Ordinary income $332,546 $71,965 Long-term capital gains $460,518 $35,698 Ordinary income distributions may include dividends paid from short-term capital gains. As of December 31, 2006, the components of accumulated earnings/(losses) on a tax basis were as follows: AL FRANK AL FRANK FUND DIVIDEND VALUE FUND ------------- ------------------- Cost of investments $218,038,480 $24,842,826 ------------ ----------- Gross tax unrealized appreciation 104,001,117 6,921,416 Gross tax unrealized depreciation (11,983,731) (886,157) ------------ ----------- Net tax unrealized appreciation $ 92,017,386 $ 6,035,259 ------------ ----------- ------------ ----------- Undistributed ordinary income $ -- $ 10,800 Undistributed long-term capital gain 2,078,424 39,083 ------------ ----------- Total distributable earnings $ 2,078,424 $ 49,883 ------------ ----------- ------------ ----------- Other accumulated gains/(losses) $ -- $ -- ------------ ----------- Total accumulated earnings/(losses) $ 94,095,810 $ 6,085,142 ------------ ----------- ------------ -----------
The Al Frank Dividend Value Fund utilized its capital loss carryforward of $7,995 in the year ended December 31, 2005. AL FRANK FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF TRUSTEES ADVISORS SERIES TRUST AND SHAREHOLDERS OF: AL FRANK FUND AL FRANK DIVIDEND VALUE FUND We have audited the accompanying statements of assets and liabilities of the Al Frank Fund and Al Frank Dividend Value Fund, each a series of Advisors Series Trust (the "Trust"), including the schedules of investments, as of December 31, 2006, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and with respect to the Al Frank Fund, the financial highlights for each of the four years in the period then ended, and with respect to the Al Frank Dividend Value Fund, the financial highlights for each of the two years in the period then ended and for the period September 30, 2004 to December 31, 2004. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended December 31, 2002 have been audited by other auditors, whose report dated February 21, 2003 expressed an unqualified opinion on such financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the above mentioned series of the Advisor Series Trust, as of December 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended and the financial highlights for the periods referred to above, in conformity with accounting principles generally accepted in the United States of America. TAIT, WELLER & BAKER LLP PHILADELPHIA, PENNSYLVANIA FEBRUARY 16, 2007 AL FRANK FUNDS NOTICE TO SHAREHOLDERS AT DECEMBER 31, 2006 (UNAUDITED) For the year ended December 31, 2006, the Al Frank Fund designated $6,036,571 and the Al Frank Dividend Value Fund designated $460,518 as long-term capital gains for purposes of the dividends paid deduction. For the year ended December 31, 2006, the Al Frank Dividend Value Fund designated $332,546 as ordinary income for purposes of the dividends paid deduction. For the year ended December 31, 2006, certain dividends paid by the Al Frank Dividend Value Fund may be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of dividends declared from net investment income designated as qualified dividend income was 100%. For corporate shareholders in the Al Frank Dividend Value Fund, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the period ended December 31, 2006 was 100%. HOW TO OBTAIN A COPY OF THE FUNDS' PROXY VOTING POLICIES A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge upon request by calling (888) 263-6443 or on the U.S. Securities and Exchange Commission's (SEC's) website at http://www.sec.gov. HOW TO OBTAIN A COPY OF THE FUNDS' PROXY VOTING RECORDS FOR THE 12-MONTH PERIOD ENDED JUNE 30, 2006 Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2006 is available without charge, upon request, by calling (888) 263-6443. Furthermore, you can obtain the Funds' proxy voting records on the SEC's website at http://www.sec.gov. - ------------------ QUARTERLY FILINGS ON FORM N-Q The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's website at http://www.sec.gov. The Funds' ------------------ Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC and information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Information included in the Funds' Form N-Q is also available by calling (888) 263-6443. AL FRANK FUNDS INFORMATION ABOUT TRUSTEES AND OFFICERS (UNAUDITED) This chart provides information about the Trustees and Officers who oversee the Funds. Officers elected by the Trustees manage the day-to-day operations of the Funds and execute policies formulated by the Trustees. INDEPENDENT TRUSTEES NAME, AGE ADDRESS POSITION HELD WITH FUNDS TRUSTEE NUMBER OF PORTFOLIOS PRINCIPAL OCCUPATION(S) AND OTHER OF FUNDS OVERSEEN IN DIRECTORSHIPS DURING PAST FIVE YEARS SINCE* FUND COMPLEX** - ------------------------------------ ----------- ------------------- Walter E. Auch, Born 1921 1997 2 615 E. Michigan Street Milwaukee, WI 53202 Trustee Management Consultant, formerly Chairman, CEO of Chicago Board Options Exchange and former President of Paine Webber. Other Directorships: Nicholas-Applegate Funds, Citigroup Funds, Pimco Advisors LLP, Senele Group and UBS Management James Clayburn LaForce, Born 1928 2002 2 615 E. Michigan Street Milwaukee, WI 53202 Trustee Dean Emeritus, John E. Anderson Graduate School of Management, University of California, Los Angeles. Other Directorships: The Payden & Rygel Investment Group, The Metzler/Payden Investment Group, Arena Pharmaceuticals and Cancervax Donald E. O'Connor, Born 1936 1997 2 615 E. Michigan Street Milwaukee, WI 53202 Trustee Financial Consultant, formerly Executive Vice President and Chief Operating Officer of ICI Mutual Insurance Company (until January, 1997). Other Directorships: The Forward Funds George J. Rebhan, Born 1934 2002 2 615 E. Michigan Street Milwaukee, WI 53202 Trustee Retired; formerly President, Hotchkis and Wiley Funds (mutual funds) from 1985 to 1993. Trustee: E*Trade Funds George T. Wofford III, Born 1939 1997 2 615 E. Michigan Street Milwaukee, WI 53202 Trustee Senior Vice President, Information Services, Federal Home Loan Bank of San Francisco. Other Directorships: None
INTERESTED TRUSTEE AND OFFICERS NAME, AGE ADDRESS POSITION HELD WITH FUNDS TRUSTEE NUMBER OF PORTFOLIOS PRINCIPAL OCCUPATION(S) AND OTHER OF FUNDS OVERSEEN IN DIRECTORSHIPS DURING PAST FIVE YEARS SINCE* FUND COMPLEX** - ------------------------------------ ----------- ------------------- Eric M. Banhazl, Born 1957*** 1997 2 615 E. Michigan Street Milwaukee, WI 53202 Interested Trustee, President Retired; formerly Senior Vice President, U.S. Bancorp Fund Services, LLC, the Funds' administrator, from 2001 to 2006; formerly, Executive Vice President, Investment Company Administration, LLC ("ICA"). Robert M. Slotky, Born 1947 N/A N/A 2020 E. Financial Way Glendora, CA 91741 Chief Compliance Officer, Vice President Vice President, U.S. Bancorp Fund Services, LLC, the Funds' administrator (since July 2001); formerly Senior Vice President, ICA. Rodney A. DeWalt, Born 1967 N/A N/A 615 E. Michigan Street Milwaukee, WI 53202 Secretary, AML Officer Senior Counsel, Fund Administration, U.S. Bancorp Fund Services, LLC (since January 2003); Thrivent Financial for Lutherans from 2000 to 2003; Attorney Private Practice, 1997 to 2000. Douglas G. Hess, Born 1967 N/A N/A 615 E. Michigan Street Milwaukee, WI 53202 Treasurer Vice President, Compliance and Administration, U.S. Bancorp Fund Services, LLC (since March 1997).
* The term for each Trustee is indefinite. ** The Trust is comprised of numerous portfolios managed by unaffiliated investment advisors. The term "Fund Complex" applies only to the Funds. The Funds do not hold themselves out as related to any other series within the Trust for investment purposes, nor do they share the same investment advisor with any other series. *** Mr. Banhazl is an "interested person" of the Trust as defined under the 1940 Act. Mr. Banhazl is an interested person of the Trust by virtue of his prior affiliation with U.S. Bancorp Fund Services, LLC. The Statement of Additional Information includes additional information about the Funds' trustees and officers and is available, without charge, upon request by calling (888) 263-6443. AL FRANK FUNDS BOARD REVIEW OF ADVISORY AGREEMENTS At a meeting held on December 12, 2006, the Board, including the Independent Trustees, considered and approved the continuance of the Advisory Agreements for an additional one-year term. Prior to the meeting, the Independent Trustees had requested detailed information from the Advisor and the Administrator regarding the Funds. This information, together with the information provided to the Independent Trustees since each Fund's inception, formed the primary (but not exclusive) basis for the Board's determinations. Below is a summary of certain factors considered by the Board and the conclusions thereto that formed the basis for the Board approving the continuance of the Advisory Agreements: 1. THE NATURE, EXTENT AND QUALITY OF THE SERVICES PROVIDED AND TO BE PROVIDED BY THE ADVISOR UNDER THE ADVISORY AGREEMENTS. The Board considered the Advisor's specific responsibilities in all aspects of the day-to-day investment management of the Funds. The Board considered the qualifications, experience and responsibilities of the portfolio managers, as well as the responsibilities of the key personnel at the Advisor involved in the day-to-day activities of the Funds, including administration, marketing and compliance. The Board noted the Advisor's commitment to responsible Fund growth. The Board also considered the resources and compliance structure of the Advisor, including information regarding its compliance program, its chief compliance officer and the Advisor's compliance record, and the Advisor's business continuity plan. The Board also considered the relationship between the Advisor and the Board, as well as the Board's knowledge of the Advisor's operations, and noted that during the course of the prior two years the Board had met with the Advisor in person to discuss various marketing and compliance topics. The Board concluded that the Advisor had the quality and depth of personnel, resources, investment methods and compliance policies and procedures essential to performing its obligations under the Advisory Agreements and that the nature, overall quality, cost and extent of such investment advisory services were satisfactory and reliable. 2. THE FUNDS' HISTORICAL YEAR-TO-DATE PERFORMANCE AND THE OVERALL PERFORMANCE OF THE ADVISOR. In assessing the quality of the portfolio management services delivered by the Advisor, the Trustees reviewed the short-term and long-term performance of each Fund on both an absolute basis and in comparison to its peer group, as classified by Lipper, Inc., and the Funds' benchmark indices. AL FRANK FUND. The Board noted that the Fund's year-to-date performance as of October 31, 2006 was slightly below the median of its peer group and also slightly trailed its benchmark indices, the S&P 500 Index and the Russell 2000 Index. The Board also noted that, although the Fund's year-to date and one-year performances trailed its benchmark indices and its peer group, it was ranked in the first quartile for the Fund's five-year performance period ended October 31, 2006. The Trustees also noted that during the course of the prior year they had met with the Advisor in person to discuss various performance topics and had been satisfied with the Advisor's reports. The Board concluded that the Advisor's performance overall was satisfactory under current market conditions. AL FRANK DIVIDEND VALUE FUND. The Board noted that the Fund's year-to-date performance as of October 31, 2006 was below the median of its peer group but outperformed its benchmark indices, the S&P MidCap 400 Index, the Dow Jones Wilshire 5000 Index and the S&P 500 Index. The Board also noted that the Fund's year-to-date, one-year and since-inception returns outperformed the S&P 500 Index despite being ranked in the third quartile among its peer group for year-to-date and one-year periods. The Trustees noted that the Advisor's performance since inception included periods when the Fund had very few assets and was in a start-up phase, and therefore impacted performance. The Trustees also noted that during the course of the prior year they had met with the Advisor in person to discuss various performance topics regarding the Fund and had been satisfied with the Advisor's reports. The Board concluded that the Advisor's performance overall was satisfactory under current market conditions. 3. THE COSTS OF THE SERVICES TO BE PROVIDED BY THE ADVISOR AND THE STRUCTURE OF THE ADVISOR'S FEES UNDER THE ADVISORY AGREEMENTS. In considering the advisory fee and total fees and expenses of the Funds, the Board reviewed and compared each Fund's fees and expenses to those funds in their respective peer group, as well as the fees and expenses for similar types of accounts managed by the Advisor. AL FRANK FUND. The Board noted that the Advisor had agreed to cap its annual expense ratio at 1.98% for Investor Class shares and 1.73% for Advisor Class Shares but that the Advisor's management of the Fund had resulted in actual expenses below these caps-- 1.61% and 1.36%, respectively. The Board further noted that the Fund had consistently and clearly disclosed to shareholders the expense ratio that shareholders should expect to experience and the Advisor had honored its agreement to cap expenses. The Trustees noted that the Fund's Investor Class total expense ratio was above its peer group median while Advisor Class total expense ratio was below the median. In both classes of Fund shares, expenses were reasonable. The Board concluded that the expense structure was in line with the fees charged by the Advisor to its other investment management clients and were not excessive. It was noted that the Fund's Investor Class 12b-1 fees of 0.25% were at an acceptable level. The Board concluded that the fee paid to the Advisor was fair and reasonable in light of comparative performance and expense and advisory fee information. AL FRANK DIVIDEND VALUE FUND. The Board noted that the Advisor had agreed to cap its annual expense ratio at 1.98% for Investor Class shares and 1.73% for Advisor Class Shares. The Board further noted that the Fund had consistently and clearly disclosed to shareholders the expense ratio that shareholders should expect to experience and the Advisor had honored its agreement to cap expenses. The Trustees noted that the Fund's Investor Class and Advisor Class total expense ratios were above their peer group median, after considering expense waivers. The Board also noted that, in order to keep the Fund operating within the current expense limitation, the Advisor had reimbursed the Fund for a portion of its operating expenses. The Board reviewed the contractual rate of the advisory fee and concluded that the advisory fee was not excessive. The Board was noted that the Fund's Investor Class 12b-1 fees of 0.25% were at an acceptable level. The Board considered the fees charged by the Advisor to its other investment management clients, recognizing that, due to different account characteristics, the Advisor's expense structure for some accounts would be different from that of the Fund. After taking into account this information and considering all waivers and reimbursements, the Board concluded that the advisory fee was fair and reasonable. 4. ECONOMIES OF SCALE. The Board also considered whether the Funds were experiencing economies of scale and concluded that the Funds were experiencing modest economies of scales which were reflected in lower expenses and each Fund was expected to realize additional economies of scale as Fund assets continued to grow, even though certain Fund expenses would increase with asset growth and assets had to grow beyond the point where subsidization from the Advisor was no longer necessary and/or had been recaptured. The Board therefore determined to revisit the issue of economies of scale at a future date. The Board also noted that, although the Funds did not have advisory fee breakpoints, current asset levels did not warrant the introduction of breakpoints. 5. THE PROFITS TO BE REALIZED BY THE ADVISOR AND ITS AFFILIATES FROM THEIR RELATIONSHIP WITH THE FUNDS. The Board reviewed the Advisor's financial information and took into account both the direct and indirect benefits to the Advisor from advising the Funds. The Board considered that the Advisor benefits from positive reputational value in advising the Funds. The Board noted that the Advisor had subsidized and was continuing to subsidize a portion of the Al Frank Dividend Value Fund's operating expenses and had waived a portion of its advisory fee for the Fund. The Board also considered the Advisor's estimate of the asset level at which the Al Frank Dividend Value Fund would reach a break even level by covering allocated overhead costs. After its review, the Board determined that there was currently profitability to the Advisor from the Advisory Agreements but did not consider the Advisor's profits excessive. More importantly, the Board considered the financial soundness of the Advisor from the perspective of evaluating the Advisor's ability to continue to subsidize the Al Frank Dividend Value Fund until it reached a point where it could generate positive returns to the Advisor. The Board concluded that the Advisor had adequate resources to adequately support the Funds. No single factor was determinative of the Board's decision to approve the continuance of the Advisory Agreements; rather, the Trustees based their determination on the total mix of information available to them. Based on a consideration of all the factors in their totality, the Trustees determined that the advisory arrangement with the Advisor, including advisory fees, is fair and reasonable to the Funds, and that each Fund's shareholders are receiving reasonable value in return for the advisory fees paid. The Board (including a majority of the Independent Trustees) therefore determined that the continuance of the Advisory Agreements was in the best interests of the Funds and their shareholders. ADVISOR Al Frank Asset Management, Inc. 32392 Coast Highway, Suite 260 Laguna Beach, CA 92651 www.alfrankfunds.com DISTRIBUTOR Quasar Distributors, LLC 615 East Michigan Street Milwaukee, WI 53202 TRANSFER AGENT U.S. Bancorp Fund Services, LLC 615 East Michigan Street Milwaukee, WI 53202 (888) 263-6443 CUSTODIAN U.S. Bank, N.A. 1555 North RiverCenter Drive, Suite 302 Milwaukee, WI 53212 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Tait, Weller & Baker LLP 1818 Market Street, Suite 2400 Philadelphia, PA 19103 LEGAL COUNSEL Paul, Hastings, Janofsky & Walker, LLP 55 Second Street, 24th Floor San Francisco, CA 94105 This report is intended for shareholders of the Funds and may not be used as sales literature unless preceded or accompanied by a current prospectus. Statements and other information herein are dated and are subject to change. ITEM 2. CODE OF ETHICS. - ----------------------- The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. A copy of the registrant's Code of Ethics is filed herewith. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. - ---------------------------------------- The registrant's board of trustees has determined that it does not have an audit committee financial expert serving on its audit committee. At this time, the registrant believes that the experience provided by each member of the audit committee together offers the registrant adequate oversight for the registrant's level of financial complexity. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. - ----------------------------------------------- The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. "Audit services" refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. "Tax services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no "other services" provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant. FYE 12/31/2006 FYE 12/31/2005 --------------- --------------- Audit Fees $34,700 $34,100 Audit-Related Fees N/A N/A Tax Fees $4,800 4,400 All Other Fees N/A N/A The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant. All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant. The following table indicates the non-audit fees billed or expected to be billed by the registrant's accountant for services to the registrant and to the registrant's investment adviser (and any other controlling entity, etc.--not sub-adviser) for the last two years. The audit committee of the board of trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant's independence. Non-Audit Related Fees FYE 12/31/2006 FYE 12/31/2005 - ---------------------- --------------- --------------- Registrant N/A N/A Registrant's Investment Adviser N/A N/A ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. - ---------------------------------------------- Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934). ITEM 6. SCHEDULE OF INVESTMENTS. - -------------------------------- Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END - ------------------------------------------------------------------------- MANAGEMENT INVESTMENT COMPANIES. - -------------------------------- Not applicable to open-end investment companies. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. - ------------------------------------------------------------------------- Not applicable to open-end investment companies. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT - --------------------------------------------------------------------------- COMPANY AND AFFILIATED PURCHASERS. - ---------------------------------- Not applicable to open-end investment companies. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------------------------------------------------------------ The registrant's independent trustees serve as its nominating committee, however, they do not make use of a nominating committee charter. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of trustees. ITEM 11. CONTROLS AND PROCEDURES. - --------------------------------- (a) The Registrant's President/Chief Executive Officer and Treasurer/Chief Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant's service provider. (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the fourth fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. - ----------------- (a) (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith. (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith. (3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Advisors Series Trust ------------------------------------------- By (Signature and Title)* /s/ Eric M. Banhazl -------------------------- Eric M. Banhazl, President Date 3/8/07 -------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Eric M. Banhazl -------------------------- Eric M. Banhazl, President Date 3/8/07 -------------------------------------------------- By (Signature and Title)* /s/ Douglas G. Hess -------------------------- Douglas G. Hess, Treasurer Date 3/8/07 -------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 aff-ex99codeeth.txt CODE OF ETHICS EX.99.CODE ETH EXHIBIT A - --------- ADVISORS SERIES TRUST CODE OF ETHICS FOR PRINCIPAL EXECUTIVE OFFICER & PRINCIPAL FINANCIAL OFFICER Advisors Series Trust (the "Trust") requires its Principal Executive Officer, Principal Financial Officer, or other Trust officers performing similar functions (the "Principal Officers"), to maintain the highest ethical and legal standards while performing their duties and responsibilities to the Trust and each of its series (each a "Fund," collectively the "Funds"), with particular emphasis on those duties that relate to the preparation and reporting of the financial information of the Funds. The following principles and responsibilities shall govern the professional conduct of the Principal Officers: 1. HONEST AND ETHICAL CONDUCT. The Principal Officers shall act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships, and shall report any material transaction or relationship that reasonably could be expected to give rise to such conflict between their interests and those of a Fund to the Audit Committee, the full Board of Trustees of the Trust, and, in addition, to any other appropriate person or entity that may reasonably be expected to deal with any conflict of interest in timely and expeditious manner. The Principal Officers shall act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing their independent judgment to be subordinated or compromised. 2. FINANCIAL RECORDS AND REPORTING The Principal Officers shall provide full, fair, accurate, timely and understandable disclosure in the reports and/or other documents to be filed with or submitted to the Securities and Exchange Commission or other applicable body by a Fund, or that is otherwise publicly disclosed or communicated. The Principal Officers shall comply with applicable rules and regulations of federal, state, and local governments, and other appropriate private and public regulatory agencies. The Principal Officers shall respect the confidentiality of information acquired in the course of their work and shall not disclose such information except when authorized or legally obligated to disclose. The Principal Officers will not use confidential information acquired in the course of their duties as Principal Officers. The Principal Officers shall share knowledge and maintain skills important and relevant to the Trust's needs; shall proactively promote ethical behavior of the Trust's employees and as a partner with industry peers and associates; and shall maintain control over and responsibly manage assets and resources employed or entrusted to them by the Trust. 3. COMPLIANCE WITH LAWS, RULES AND REGULATIONS The Principal Officers shall establish and maintain mechanisms to oversee the compliance of the Funds with applicable federal, state or local law, regulation or administrative rule, and to identify, report and correct in a swift and certain manner, any detected deviations from applicable federal, state or local law regulation or rule. 4. COMPLIANCE WITH THIS CODE OF ETHICS The Principal Officers shall promptly report any violations of this Code of Ethics to the Audit Committee as well as the full Board of Trustees of the Trust and shall be held accountable for strict adherence to this Code of Ethics. A proven failure to uphold the standards stated herein shall be grounds for such sanctions as shall be reasonably imposed by the Board of Trustees of the Trust. 5. AMENDMENT AND WAIVER This Code of Ethics may only be amended or modified by approval of the Board of Trustees. Any substantive amendment that is not technical or administrative in nature or any material waiver, implicit or otherwise, of any provision of this Code of Ethics, shall be communicated publicly in accordance with Item 2 of Form N-CSR under the Investment Company Act of 1940. EX-99.CERT 3 aff-ex99cert302.txt CERTIFICATION EX.99.CERT CERTIFICATIONS -------------- I, Eric M. Banhazl, certify that: 1. I have reviewed this report on Form N-CSR of Advisors Series Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the fourth fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 3/8/07 /s/ Eric M. Banhazl ----------- ------------------- Eric M. Banhazl President EX.99.CERT CERTIFICATIONS -------------- I, Douglas G. Hess, certify that: 1. I have reviewed this report on Form N-CSR of Advisors Series Trust; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the fourth fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 3/8/07 /s/ Douglas G. Hess ----------- ------------------- Douglas G. Hess Treasurer EX-99.906 CERT 4 aff-ex99cert906.txt CERTIFICATION EX.99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT --------------------------------------------------------------- Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of the Advisors Series Trust, does hereby certify, to such officer's knowledge, that the report on Form N-CSR of the Advisors Series Trust for the year ended December 31, 2006 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Advisors Series Trust for the stated period. /s/ Eric M. Banhazl /s/ Douglas G. Hess - ------------------- ------------------- Eric M. Banhazl Douglas G. Hess President, Advisors Series Trust Treasurer, Advisors Series Trust Dated: 3/8/07 ------------- This statement accompanies this report on Form N-CSR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by Advisors Series Trust for purposes of Section 18 of the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----