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: 811-21532
Frank Funds
(Exact Name of Registrant as Specified in Charter)
312 East 22nd Street, #2B, New York, NY 10010
(Address of Principal Executive Offices) (Zip Code)
Alfred C. Frank, Frank Capital Partners LLC
312 East 22nd Street, #2B, New York, NY 10010
(Name and Address of Agent for Service)
With copy to:
JoAnn M. Strasser, Thompson Hine LLP
312 Walnut Street, 14th Floor, Cincinnati, Ohio 45202
Registrant’s Telephone Number, including Area Code: 973-887-7698
Date of fiscal year end: June 30
Date of reporting period: December 31, 2009
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
FRANK FUNDS
SEMI-ANNUAL REPORT
FRANK VALUE FUND
LEIGH BALDWIN TOTAL RETURN FUND
December 31, 2009
(Unaudited)
FRANK VALUE FUND
PORTFOLIO ANALYSIS
DECEMBER 31, 2009 (UNAUDITED)
The following chart gives a visual breakdown of the Frank Value Fund (the “Value Fund”) by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.
LEIGH BALDWIN TOTAL RETURN FUND
PORTFOLIO ANALYSIS
DECEMBER 31, 2009 (UNAUDITED)
The following chart gives a visual breakdown of the Leigh Baldwin Total Return Fund (the “Baldwin Fund”) by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.
|
| Value Fund |
| |||
Schedule of Investments | ||||||
|
| December 31, 2009 (Unaudited) |
| |||
Shares | Value | |||||
COMMON STOCKS - 95.09% | ||||||
Apparel & Other Finished Prods of Fabrics & Similar Material - 2.51% | ||||||
2,487 | True Religion Apparel, Inc. * | $ 45,985 | ||||
Communications Equipment, NEC - 2.30% | ||||||
10,417 | Lojack Corp. * | 42,085 | ||||
Computer Communications Equipment - 4.82% | ||||||
3,693 | Cisco Systems, Inc. * | 88,410 | ||||
Electronic Computers - 2.42% | ||||||
3,083 | Dell, Inc. * | 44,272 | ||||
Finance Services - 3.18% | ||||||
3,059 | Americredit Corp. * | 58,243 | ||||
Hospital & Medical Service Plans - 17.07% | ||||||
1,259 | Humana, Inc. * | 55,257 | ||||
5,477 | WellCare Health Plans, Inc. * | 201,335 | ||||
965 | Wellpoint, Inc. * | 56,250 | ||||
312,842 | ||||||
Mens' & Boys' Furnishings, Work Clothing, and Allied Garments - 2.31% | ||||||
1,622 | Cintas Corp. * | 42,286 | ||||
Miscellaneous Furniture & Fixtures - 1.29% | ||||||
2,290 | Knoll, Inc. | 23,656 | ||||
Perfumes, Cosmetics & Other Toilet Preparations - 2.56% | ||||||
3,838 | Bare Escentuals, Inc. * | 46,939 | ||||
Pharmaceutical Preparations - 18.52% | ||||||
2,867 | Forest Laboratories, Inc. * | 92,059 | ||||
1,399 | NBTY, Inc. * | 60,912 | ||||
7,439 | Pfizer, Inc. | 135,316 | ||||
6,521 | Prestige Brands Holdings, Inc. * | 51,255 | ||||
339,542 | ||||||
Retail-Computer & Computer Software Stores - 2.46% | ||||||
2,058 | GameStop Corp. Class A * | 45,153 | ||||
Retail-Drug Stores & Proprietary Stores - 4.84% | ||||||
5,021 | PetMed Express, Inc. | 88,671 | ||||
Retail-Radio, TV & Consumer Electronics Stores - 2.54% | ||||||
1,178 | Best Buy Co., Inc. | 46,484 | ||||
Services-Advertising Agencies - 2.30% | ||||||
4,169 | Valueclick, Inc. * | 42,190 | ||||
Services-Business Services, NEC - 7.40% | ||||||
8,038 | Bidz.com, Inc. * | 16,076 | ||||
3,128 | eBay, Inc. * | 73,602 | ||||
2,439 | Western Union Co. | 45,975 | ||||
135,653 | ||||||
Services-Consumer Credit Reporting, Collection Agencies - 4.42% | ||||||
631 | Dun & Bradstreet | 53,237 | ||||
1,035 | Moody's Corp. | 27,738 | ||||
80,975 | ||||||
Services-Mailing, Reproduction, Commercial Art & Photography - 1.92% | ||||||
5,025 | American Reprographics Co. * | 35,225 | ||||
Services-Management Consulting - 2.05% | ||||||
1,643 | Corporate Executive Board Co. | 37,493 | ||||
Services-Prepackaged Software - 6.06% | ||||||
2,040 | CA, Inc. | 45,818 | ||||
2,143 | Microsoft Corp. | 65,319 | ||||
111,137 | ||||||
Telegraph & Other Message Communications - 4.13% | ||||||
3,724 | J2 Global Communications, Inc. * | 75,783 | ||||
TOTAL FOR COMMON STOCKS (Cost $1,622,211) - 95.09% | 1,743,024 | |||||
SHORT TERM INVESTMENTS - 7.88% | ||||||
144,399 | First American Treasury Obligations Fund Class A 0.30% ** (Cost $144,399) | 144,399 | ||||
TOTAL FOR SHORT TERM INVESTMENTS (Cost $144,399) - 7.88% | 144,399 | |||||
TOTAL INVESTMENTS (Cost $1,766,610) - 102.97% | 1,887,423 | |||||
LIABILITIES LESS OTHER ASSETS - (2.97)% | (54,427) | |||||
NET ASSETS - 100.00% | $ 1,832,996 | |||||
* Non-income producing securities during the period. | ||||||
** Variable rate security; the coupon rate shown represents the yield at December 31, 2009. | ||||||
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: | ||||||
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. | ||||||
| ||||||
Level 2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an active market, price for similar instruments, interest rates, prepayment speeds, yield curves, default rates and similar data. | ||||||
Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available,representing the Fund's own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. | ||||||
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. | ||||||
The following is a summary of inputs used as of December 31, 2009 in valuing the Fund’s investments carried at value: | ||||||
Investments in Securities | Level 1 | Level 2 | Level 3 | Total | ||
Common Stocks | $ 1,743,024 | - | - | $ 1,743,024 | ||
Short-Term Investments: | ||||||
Conservative Deposit Account | $ 144,399 | - | - | $ 144,399 | ||
$ 1,887,423 | - | - | $ 1,887,423 | |||
The accompanying notes are an integral part of these financial statements. | ||||||
|
| Baldwin Fund |
| |||
Schedule of Investments | ||||||
|
| December 31, 2009 (Unaudited) |
| |||
Shares | Value | |||||
COMMON STOCKS - 82.46% | ||||||
Cigarettes - 4.56% | ||||||
2,500 | Philip Morris International, Inc. | $ 120,475 | ||||
Electric Services - 1.42% | ||||||
2,000 | Empire District Electric Co. | 37,460 | ||||
Farm Machinery & Equipment - 0.80% | ||||||
5,000 | Arts-Way Manufacturing Co. | 21,200 | ||||
Finance Services - 1.02% | ||||||
3,000 | Oneida Financial Corp. | 26,850 | ||||
Food & Kindred Products - 4.12% | ||||||
4,000 | Kraft Foods, Inc. | 108,720 | ||||
Grain Mill Products - 8.59% | ||||||
1,700 | General Mills, Inc. | 120,377 | ||||
2,000 | Kellogg Co. | 106,400 | ||||
226,777 | ||||||
Guided Missiles & Space Vehicles & Parts - 3.71% | ||||||
1,300 | Lockheed Martin Corp. | 97,955 | ||||
Malt Beverages - 4.62% | ||||||
2,700 | Molson Coors Brewing, Co. | 121,932 | ||||
National Commercial Banks - 1.54% | ||||||
2,000 | NBT Bancorp, Inc. | 40,740 | ||||
Petroleum Refining - 7.99% | ||||||
1,500 | Chevron Corp. | 115,485 | ||||
1,400 | Exxon Mobil Corp. | 95,466 | ||||
210,951 | ||||||
Pharmaceutical Preparations - 5.15% | ||||||
2,500 | Novartis AG * | 136,075 | ||||
Retail-Drug Stores and Proprietary Stores - 3.89% | ||||||
2,800 | Walgreen Co. | 102,816 | ||||
Retail-Eating Places - 4.73% | ||||||
2,000 | McDonalds Corp. | 124,880 | ||||
Search, Detection, Navagation, Guidance, Aeronautical Systems - 4.23% | ||||||
2,000 | Northrup Grumman Corp. | 111,700 | ||||
Security Brokers, Dealers & Flotation Companies - 3.56% | ||||||
5,000 | Schwab Corp. | 94,100 | ||||
Semiconductors & Related Devices - 4.25% | ||||||
5,500 | Intel Corp. | 112,200 | ||||
Services-Engineering, Accounting, Research, Management - 4.06% | ||||||
3,500 | Paychex, Inc. | 107,240 | ||||
Services-Motion Picture & Video Tape Production - 4.27% | ||||||
3,500 | Disney Enterprises, Inc. | 112,875 | ||||
Telephone Communications (No Radio Telephone) - 4.28% | ||||||
4,000 | AT&T Corp. | 112,120 | ||||
100 | Frontier Communications Corp. | 781 | ||||
112,901 |
| |||||
Trucking & Courier Services (No Air) - 4.34% | ||||||
2,000 | United Parcel Service, Inc. | 114,740 | ||||
Water Supply - 1.33% | ||||||
2,000 | Aqua America, Inc. | 35,020 | ||||
TOTAL FOR COMMON STOCKS (Cost $2,164,350) - 82.46% | 2,177,607 | |||||
EXCHANGE TRADED FUNDS - 3.71% | ||||||
5,000 | Aberdeen Asia Pacific Fund | 31,083 | ||||
2,000 | Direxion Large Cap Bear 3X Shares * | 34,216 | ||||
2,000 | The Gabelli Global Gold, Natural Resources & Income Trust | 32,660 | ||||
TOTAL FOR EXCHANGE TRADED FUNDS (Cost $91,505) - 3.71% | 97,959 | |||||
SPECIAL PURPOSE ENTITIES - 0.98% | ||||||
1,000 | Structured Products Corp Corts Trust for Walt Disney Notes | 25,780 | ||||
TOTAL FOR SPECIAL PURPOSE ENTITIES (Cost $25,726) - 0.98% | 25,780 | |||||
REITS - 3.61% | ||||||
5,500 | Annaly Capital Management, Inc. | 95,425 | ||||
TOTAL FOR REITS (Cost $101,346) - 3.61% | 95,425 | |||||
Underlying Security | ||||||
Expiration Date/Exercise Price | ||||||
PUT OPTIONS - 3.18% | ||||||
Shares Subject | ||||||
to Put | ||||||
Annaly Capital Management, Inc. | ||||||
5,000 | January 2012 Put @ $15.00 | 18,750 | ||||
AT&T Corp. | ||||||
4,000 | January 2011 Put @ $20.00 | 3,400 | ||||
Chevron Corp. | ||||||
800 | January 2011 Put @ $60.00 | 1,960 | ||||
Disney Enterprises, Inc. | ||||||
3,500 | January 2012 Put @ $25.00 | 7,875 | ||||
Exxon Mobil Corp. | ||||||
1,000 | January 2011 Put @ $55.00 | 2,270 | ||||
Frontier Communications Corp. | ||||||
4,000 | February 2010 Put @ $2.50 | 0 | ||||
General Mills, Inc. | ||||||
1,300 | January 2011 Put @ $55.00 | 1,560 | ||||
Intel Corp. | ||||||
5,000 | January 2012 Put @ $15.00 | 7,350 | ||||
Kellogg Co. | ||||||
1,500 | January 2011 Put @ $35.00 | 450 | ||||
Kraft Foods, Inc. | ||||||
3,500 | January 2011 Put @ $20.00 | 1,575 | ||||
Lockheed Martin Corp. | ||||||
1,100 | January 2011 Put @ $65.00 | 4,840 | ||||
McDonalds Corp. | ||||||
1,500 | January 2011 Put @ $45.00 | 1,545 | ||||
Molson Coors Brewing Co. | ||||||
2,500 | January 2011 Put @ $35.00 | 3,125 | ||||
Northrup Grumman Corp. | ||||||
1,800 | January 2011 Put @ $40.00 | 1,980 | ||||
Novartis AG | ||||||
2,500 | January 2011 Put @ $45.00 | 4,250 | ||||
Paychex, Inc. | ||||||
3,000 | January 2011 Put @ $20.00 | 1,200 | ||||
Philip Morris International, Inc. | ||||||
2,500 | January 2012 Put @ $40.00 | 11,750 | ||||
Schwab Corp. | ||||||
4,500 | January 2011 Put @ $12.50 | 2,475 | ||||
United Parcel Service, Inc. | ||||||
1,700 | January 2011 Put @ $45.00 | 3,383 | ||||
Walgreen Co. | ||||||
2,500 | January 2011 Put @ $30.00 | 4,250 | ||||
Total (Premiums Paid $158,425) - 3.18% | 83,988 | |||||
SHORT TERM INVESTMENTS - 7.49% | ||||||
197,694 | Fidelity Government Fund 57 0.07% ** (Cost $197,694) | 197,694 | ||||
TOTAL FOR SHORT TERM INVESTMENTS - (Cost $197,694) 7.49% | 197,694 | |||||
TOTAL INVESTMENTS (Cost $2,739,046) - 101.43% | 2,678,453 | |||||
LIABILITIES LESS OTHER ASSETS - (1.43)% | (37,679) | |||||
NET ASSETS - 100.00% | $ 2,640,774 | |||||
* Non-income producing securities during the period. | ||||||
** Variable rate security; the coupon rate shown represents the yield at December 31, 2009. | ||||||
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below: | ||||||
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. | ||||||
| ||||||
Level 2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an active market, price for similar instruments, interest rates, prepayment speeds, yield curves, default rates and similar data. | ||||||
Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available,representing the Fund's own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. | ||||||
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. | ||||||
The following is a summary of inputs used as of December 31, 2009 in valuing the Fund’s investments carried at value: | ||||||
Investments in Securities | Level 1 | Level 2 | Level 3 | Total | ||
Common Stocks | $ 2,177,607 | - | - | $ 2,177,607 | ||
Exchange Traded Funds | $ 97,959 | - | - | $ 97,959 | ||
Special Purpose Entities | $ 25,780 | - | - | $ 25,780 | ||
Real Estate Investment Trusts | $ 95,425 | - | - | $ 95,425 | ||
Put Options | $ 83,988 | - | - | $ 83,988 | ||
Short-Term Investments: | ||||||
Conservative Deposit Account | $ 197,694 | - | - | $ 197,694 | ||
Total | $ 2,678,453 | - | - | $ 2,678,453 | ||
Investments in Securities Sold Short | Level 1 | Level 2 | Level 3 | Total | ||
(Liabilities) | ||||||
Call Options | $ 53,609 | - | - | $ 53,609 | ||
Total | $ 53,609 | - | - | $ 53,609 | ||
The accompanying notes are an integral part of these financial statements. | ||||||
Baldwin Fund | |||
Schedule of Call Options Written | |||
December 31, 2009 (Unaudited) | |||
CALL OPTIONS WRITTEN | |||
Underlying Security | Shares Subject | ||
Expiration Date/Exercise Price | to Call | Value | |
Annaly Capital Management, Inc. | |||
January 2010 Call @ $19.00 | 5,500 | $ 110 | |
Aqua America, Inc. | |||
January 2010 Call @ $17.50 | 2,000 | 600 | |
AT&T Corp. | |||
February 2010 Call @ $28.00 | 4,000 | 2,560 | |
Chevron Corp. | |||
January 2010 Call @ $75.00 | 1,500 | 3,750 | |
Direxion Large Cap Bear 3X Shares | |||
January 2010 Call @ $22.00 | 2,000 | 300 | |
Disney Enterprises, Inc. | |||
January 2010 Call @ $30.00 | 3,500 | 8,400 | |
Empire District Electric Co. | |||
March 2010 Call @ $17.50 | 2,000 | 3,300 | |
Exxon Mobil Corp. | |||
January 2010 Call @ $70.00 | 1,400 | 504 | |
Frontier Communications Corp. | |||
February 2010 Call @ $7.50 | 100 | 50 | |
General Mills, Inc. | |||
January 2010 Call @ $70.00 | 1,700 | 2,125 | |
Intel Corp. | |||
January 2010 Call @ $20.00 | 4,000 | 3,280 | |
January 2010 Call @ $21.00 | 1,500 | 480 | |
3,760 | |||
Kellogg Co. | |||
February 2010 Call @ $50.00 | 2,000 | 7,600 | |
Kraft Foods, Inc. | |||
January 2010 Call @ $27.50 | 4,000 | 1,000 | |
Lockheed Martin Corp. | |||
January 2010 Call @ $80.00 | 1,300 | 195 | |
McDonalds Corp. | |||
January 2010 Call @ $65.00 | 2,000 | 420 | |
Molson Coors Brewing Co. | |||
January 2010 Call @ $45.00 | 2,700 | 2,025 | |
NBT Bancorp, Inc. | |||
January 2010 Call @ $22.50 | 2,000 | 400 | |
Northrup Grumman Corp. | |||
January 2010 Call @ $55.00 | 2,000 | 2,800 | |
Novartis AG | |||
January 2010 Call @ $55.00 | 2,500 | 1,625 | |
Paychex, Inc. | |||
February 2010 Call @ $30.00 | 3,500 | 4,200 | |
Philip Morris International, Inc. | |||
January 2010 Call @ $49.00 | 2,500 | 1,125 | |
Schwab Corp. | |||
February 2010 Call @ $19.00 | 5,000 | 4,000 | |
United Parcel Service, Inc. | |||
January 2010 Call @ $57.50 | 2,000 | 1,780 | |
Walgreen Co. | |||
January 2010 Call @ $37.50 | 2,800 | 980 | |
Total (Premiums Received $54,184) | $ 53,609 | ||
Frank Funds | |||
Statements of Assets and Liabilities | |||
December 31, 2009 (Unaudited) | |||
Value Fund | Baldwin Fund | ||
Assets: | |||
Investments in Securities, at Value (Cost $1,766,610 and $2,739,046) | $ 1,887,423 | $ 2,678,453 | |
Receivables: | |||
Dividends and Interest | 179 | 6,781 | |
Due from Adviser | - | 35,123 | |
Securities Sold | 29,546 | - | |
Prepaid Expenses | - | 1,066 | |
Total Assets | 1,917,148 | 2,721,423 | |
Liabilities: | |||
Covered Call Options Written at Fair Market Value | |||
(premiums received $0 and $54,184) | - | 53,609 | |
Payables: | |||
Accrued Management Fees | 2,217 | - | |
Securities Purchased | 81,935 | - | |
Other Accrued Expenses | - | 27,040 | |
Total Liabilities | 84,152 | 80,649 | |
Net Assets | $ 1,832,996 | $ 2,640,774 | |
Net Assets Consist of: | |||
Paid In Capital | $ 1,845,412 | $ 2,679,175 | |
Accumulated Undistributed Net Investment Loss | (7,394) | (1,324) | |
Accumulated Undistributed Realized Gain (Loss) on Investments | (125,835) | 22,943 | |
Unrealized Appreciation (Depreciation) in Value of Investments | 120,813 | (60,020) | |
Net Assets, for 195,842 and 295,456 Shares Outstanding | $ 1,832,996 | $ 2,640,774 | |
Net Asset Value Per Share | $ 9.36 | $ 8.94 | |
Minimum Redemption Price Per Share | $ 9.17 | $ 8.76 | |
The accompanying notes are an integral part of these financial statements. | |||
Frank Funds | |||
Statements of Operations | |||
For the six months ended December 31, 2009 (Unaudited) | |||
Value Fund | Baldwin Fund | ||
Investment Income: | |||
Dividends (a) | $ 4,530 | $ 41,772 | |
Interest | 25 | 97 | |
Total Investment Income | 4,555 | 41,869 | |
Expenses: | |||
Advisory Fees (Note 3) | 11,949 | 4,622 | |
Administration Fees | - | 30,246 | |
Transfer Agent Fees | - | 5,972 | |
Miscellaneous Expenses | - | 267 | |
Audit Fees | - | 3,781 | |
12b-1 fees | - | 10,271 | |
Legal Fees | - | 8,533 | |
Custody Fees | - | 9,657 | |
Insurance Expense | - | 556 | |
Trustee Expense | - | 605 | |
Printing and Mailing Expense | - | 406 | |
Registration Fees | - | 2,288 | |
Total Expenses | 11,949 | 77,204 | |
Fees Waived and Reimbursed by the Advisor | - | (59,230) | |
Net Expenses | 11,949 | 17,974 | |
Net Investment Income (Loss) | (7,394) | 23,895 | |
Realized and Unrealized Gain (Loss) on: | |||
Realized Gain on Investments | 48,155 | 140,563 | |
Realized Loss on Options | - | (80,712) | |
Net Change in Unrealized Appreciation (Depreciation) on: | |||
Investments | 262,949 | 31,526 | |
Options | - | (34,390) | |
Realized and Unrealized Gain on Investments | 311,104 | 56,987 | |
Net Increase in Net Assets Resulting from Operations | $ 303,710 | $ 80,882 | |
(a) net of foreign witholding taxes of $164 - Baldwin Fund | |||
The accompanying notes are an integral part of these financial statements. | |||
Value Fund | |||
Statements of Changes in Net Assets | |||
|
|
|
|
(Unaudited) | |||
Six Months | Year | ||
Ended | Ended | ||
12/31/2009 | 6/30/2009 | ||
Increase (Decrease) in Net Assets From Operations: | |||
Net Investment Loss | $ (7,394) | $ (3,599) | |
Net Realized Gain (Loss) on Investments | 48,155 | (174,009) | |
Unrealized Appreciation on Investments | 262,949 | 23,230 | |
Net Increase (Decrease) in Net Assets Resulting from Operations | 303,710 | (154,378) | |
Distributions to Shareholders: | |||
Realized Gains | - | (91,799) | |
Total Distributions Paid to Shareholders | - | (91,799) | |
Capital Share Transactions (Note 5) | 646,041 | 161,471 | |
Total Increase (Decrease) in Net Assets | 949,751 | (84,706) | |
Net Assets: | |||
Beginning of Period | 883,245 | 967,951 | |
End of Period (Including Undistributed Net Investment Income (Loss) | |||
of $(7,394) and $0, respectively) | $ 1,832,996 | $ 883,245 | |
The accompanying notes are an integral part of these financial statements. | |||
Baldwin Fund | ||||
Statement of Changes in Net Assets | ||||
|
|
|
|
|
(Unaudited) | ||||
Six Months | Period | |||
Ended | Ended * | |||
12/31/2009 | 6/30/2009 | |||
Increase (Decrease) in Net Assets From Operations: | ||||
Net Investment Income | $ 23,895 | $ 22,721 | ||
Net Realized Gain on Investments and Options Written | 59,851 | 37,285 | ||
Unrealized Appreciation/(Depreciation) on Investments and Options Written | (2,864) | (57,156) | ||
Net Increase in Net Assets Resulting from Operations | 80,882 | 2,850 | ||
Distributions to Shareholders: | ||||
Net Investment Income | (25,220) | (23,056) | ||
Realized Gains | (73,858) | - | ||
Total Distributions Paid to Shareholders | (99,078) | (23,056) | ||
Capital Share Transactions (Note 5) | 1,028,468 | 1,550,708 | ||
Total Increase in Net Assets | 1,010,272 | 1,530,502 | ||
Net Assets: | ||||
Beginning of Period | 1,630,502 | 100,000 | ||
End of Period (Including Undistributed Net Investment Income | ||||
of ($1,324 and $0, respectively) | $ 2,640,774 | $ 1,630,502 | ||
* For the Period August 1, 2008 (commencement of investment operations) through June 30, 2009. | ||||
The accompanying notes are an integral part of these financial statements. | ||||
Value Fund | |||||||||
Financial Highlights | |||||||||
Selected data for a share outstanding throughout the period. | |||||||||
(Unaudited) | |||||||||
Six Months | Period * | ||||||||
Ended | For the Years Ended | Ended | |||||||
12/31/2009 | 6/30/2009 | 6/30/2008 | 6/30/2007 | 6/30/2006 | 6/30/2005 | ||||
Net Asset Value, at Beginning of Period | $ 7.40 | $ 10.42 | $ 13.61 | $ 11.36 | $ 10.76 | $ 10.00 | |||
Income From Investment Operations: | |||||||||
Net Investment Loss ** | (0.04) | (0.03) | (0.04) | (0.07) | (0.04) | (0.05) | |||
Net Gain (Loss) on Securities (Realized and Unrealized) | 2.00 | (2.16) | (1.74) | 2.90 | 0.92 | 0.81 | |||
Total from Investment Operations | 1.96 | (2.19) | (1.78) | 2.83 | 0.88 | 0.76 | |||
Distributions: | |||||||||
Net Investment Income | - | - | - | - | - | - | |||
Realized Gains | - | (0.83) | (1.41) | (0.58) | (0.28) | - | |||
Total from Distributions | - | (0.83) | (1.41) | (0.58) | (0.28) | - | |||
Net Asset Value, at End of Period | $ 9.36 | $ �� 7.40 | $ 10.42 | $ 13.61 | $ 11.36 | $ 10.76 | |||
Total Return *** | 26.49% | (19.12)% | (14.31)% | 25.41% | 8.30% | 7.60% | (a) | ||
Ratios/Supplemental Data: | |||||||||
Net Assets at End of Period (Thousands) | $ 1,833 | $ 883 | $ 968 | $ 853 | $ 499 | $ 271 | |||
Ratio of Expenses to Average Net Assets | 1.50% | (b) | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% | (b) | |
Ratio of Net Investment Loss to Average Net Assets | (0.93)% | (b) | (0.43)% | (0.35)% | (0.54)% | (0.35)% | (0.49)% | (b) | |
Portfolio Turnover | 54.98% | 47.11% | 63.03% | 72.06% | 45.25% | 18.20% | |||
* For the Period July 21, 2004 (commencement of investment operations) through June 30, 2005. | |||||||||
** Per share net investment loss has been determined on the basis of average shares outstanding during the period. | |||||||||
*** Assumes reinvestment of dividends. | |||||||||
(a) Not Annualized | |||||||||
(b) Annualized | |||||||||
The accompanying notes are an integral part of these financial statements. | |||||||||
Baldwin Fund | |||||
Financial Highlights | |||||
Selected data for a share outstanding throughout the period. | |||||
(Unaudited) | |||||
Six Months | |||||
Ended | Period Ended * | ||||
12/31/2009 | 6/30/2009 | ||||
Net Asset Value, at Beginning of Period | $ 8.94 | $ 10.00 | |||
Income From Investment Operations: | |||||
Net Investment Income ** | 0.11 | 0.26 | |||
Net Gain (Loss) on Securities (Realized and Unrealized) | 0.29 | (1.15) | |||
Total from Investment Operations | 0.40 | (0.89) | |||
Distributions: | |||||
Net Investment Income | (0.10) | (0.17) | |||
Realized Gains | (0.30) | - | |||
Total from Distributions | (0.40) | (0.17) | |||
Net Asset Value, at End of Period | $ 8.94 | $ 8.94 | |||
Total Return *** | 4.51% | (8.80)% | (a) | ||
Ratios/Supplemental Data: | |||||
Net Assets at End of Period (Thousands) | $ 2,641 | $ 1,631 | |||
Before Reimbursement: | |||||
Ratio of Expenses to Average Net Assets | 4.15% | (b) | 16.14% | (b) | |
Ratio of Net Investment Income to Average Net Assets | (1.90)% | (b) | (11.24)% | (b) | |
After Reimbursement: | |||||
Ratio of Expenses to Average Net Assets | 0.97% | (b) | 1.75% | (b) | |
Ratio of Net Investment Income to Average Net Assets | 1.28% | (b) | 3.15% | (b) | |
Portfolio Turnover | 219.00% | 195.12% | |||
* For the Period August 1, 2008 (commencement of investment operations) through June 30, 2009. | |||||
** Per share net investment income has been determined on the basis of average shares outstanding during the period. | |||||
*** Assumes reinvestment of dividends. | |||||
(a) Not Annualized | |||||
(b) Annualized | |||||
The accompanying notes are an integral part of these financial statements. | |||||
FRANK FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009 (UNAUDITED)
Note 1. Organization
Frank Funds (the “Trust”), is an open-end regulated investment company that was organized as an Ohio business trust on February 12, 2004. The Trust is permitted to issue an unlimited number of shares of beneficial interest of separate series, each series representing a distinct fund with its own investment objective and policies. At present, there are two series authorized by the Trust, the Frank Value Fund (the “Value Fund”) and the Leigh Baldwin Total Return Fund (the “Baldwin Fund” each a “Fund” and collectively the “Funds”). Frank Capital Partners LLC (“FCP”) is the adviser to the Value Fund and Leigh Baldwin & Co., LLC (“LBC”) is the adviser to the Baldwin Fund. The Value Fund’s investment objective is to provide long-term capital appreciation. The Value Fund’s principal investment strategy is value investi ng. The Value Fund commenced operations on July 21, 2004. The Baldwin Fund’s investment objective is to provide total return. The Baldwin Fund seeks to achieve its investment objective by purchasing equity securities (including common stock, shares of other investment companies and exchange traded funds) and selling covered calls to generate income to the Baldwin Fund. The Baldwin Fund also utilizes put options in conjunction with the covered calls to limit the risk of ownership of the underlying equity securities. The Baldwin Fund commenced operations on August 1, 2008.
Note 2. Summary of Significant Accounting Policies
Codification: The FASB has issued FASB ASC 105 (formerly FASB Statement No. 168), The “FASB Accounting Standards Codification™” and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”) (“ASC 105”). ASC 105 established the FASB Accounting Standards Codification™ (“Codification” or “ASC”) as the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative.
Following the Codification, the FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates, which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification. GAAP is not intended to be changed as a result of the FASB's Codification project, but it will change the way the guidance is organized and presented. As a result, these changes will have a significant impact on how companies reference GAAP in their financial statements and in their accounting policies for financial statements issued for interim and annual periods ending after September 15, 2009. The Funds have implemented the Codification as of December 31, 2009.
The following are a summary of the significant accounting policies followed by the Funds:
Security Valuation- Equity securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the adviser believes such prices accurately reflect the fair market value of such securities. Securities that are traded on any stock exchange or on the NASDAQ over-the-counter market are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an equity security is generally valued by the pricing service at its last bid price. When market quotations are not readily available, when the adviser determines that the market quotation or the price provided by the pricing service does not accurately reflect the current market value, or when restricted or illiquid securities are being valued, such securities are valued as determined in good faith by the adviser, in conformity with guidelines a dopted by and subject to review by the Board of Trustees.
Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the adviser believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. If the adviser decides that a price provided by the pricing service does not accurately reflect the fair market value of the securities, when prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value.
In accordance with the Trust’s good faith pricing guidelines, the adviser is required to consider all appropriate factors relevant to the value of securities for which it has determined other pricing sources are not available or reliable as described above. No single standard for determining fair value exists since fair value depends upon the circumstances of each individual case. As a general principle, the current fair value of an issue of securities being valued by the adviser would appear to be the amount which the owner might reasonably expect to receive for them upon their current sale. Methods which are in accord with this principle may, for example, be based on (i) a multiple of earnings; (ii) a discount from market of a similar freely traded security (including a derivative security or a basket of securities traded on other markets, exchanges or among dealers); or (iii) yield to m aturity with respect to debt issues, or a combination of these and other methods.
Financial Futures Contracts The Funds may invest in financial futures contracts solely for the purpose of hedging their existing portfolio securities, or securities that the Funds intend to purchase, against fluctuations in fair value caused by changes in market values or interest rates. Upon entering into a financial futures contract, the Funds are required to pledge to the broker an amount of cash, U.S. government securities, or other assets, equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as “variation margin” are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the security. The Funds recognize a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Funds may not achieve t he anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates, and the underlying hedged assets.
Option Writing - The Baldwin Fund may invest in put and call options. When a fund writes an option, an amount equal to the premium received by the fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Baldwin Fund on the expiration date as realized gains. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining if the fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the fund. The Baldwin Fund as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.
Share Valuation - The price (net asset value) of the shares of the Funds are normally determined as of 4:00 p.m., Eastern time on each day the Funds are open for business and on any other day on which there is sufficient trading in the Funds’ securities to materially affect the net asset value. The Funds are normally open for business on every day except Saturdays, Sundays and the following holidays: New Year’s Day, Martin Luther King Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
Redemption Fee - To discourage short-term trades by investors, the Funds will impose a redemption fee of 2% of the total redemption amount (calculated at market value) if shares are redeemed within five days of purchase. There were no redemption fees collected for the Funds for the year ended December 31, 2009.
Security Transaction Timing - Security transactions are recorded on the dates transactions are entered into (the trade dates). Dividend income and distributions to shareholders are recognized on the ex-dividend date. Interest income is recognized on an accrual basis. The Funds use the identified cost basis in computing gain or loss on sale of investment securities. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Withholding taxes on foreign dividends are provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates.
Income Taxes - The Funds intend to continue to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying, the Funds will not be subject to federal income taxes to the extent that it distributes substantially all of their net investment income and any realized capital gains. It is the Funds’ policy to distribute annually, prior to the end of the calendar year, dividends sufficient to satisfy excise tax requirements of the Internal Revenue Service. This Internal Revenue Service requirement may cause an excess of distributions over the book year-end accumulated income.
The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is “more-likely-than-not” (i.e., greater than 50 percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Neither Fund recorded any tax provision in the current period. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., the last 3 tax year ends, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof.
Distributions to Shareholders - The Funds intend to distribute to their shareholders substantially all of their net realized capital gains and net investment income, if any, at year-end. Distributions will be recorded on ex-dividend date.
Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets during the reporting period. Actual results could differ from those estimates.
Note 3. Investment Management, Administration and Underwriting Agreements
Value Fund
The Trust has a Management Agreement with Frank Capital, with respect to the Value Fund. Under the terms of the Management Agreement, Frank Capital manages the investment portfolio of the Value Fund, subject to policies adopted by the Trust’s Board of Trustees. Under the Management Agreement, Frank Capital, at its own expense and without reimbursement from the Trust, furnishes office space and all necessary office facilities, and pays fees and expenses incurred by the Value Fund, including but not limited to, legal, auditing, accounting, and expenses of the custodian, along with equipment and executive personnel necessary for managing the assets of the Value Fund. Frank Capital also pays the salaries and fees of all its officers and employees that serve as officers and trustees of the Trust. Frank Capital pays all ordinary operating expenses of the Value Fund except brokerage fees and commissions, tax es, borrowing costs (such as (a) interest and (b) dividend expenses on securities sold short), acquired fund fees and expenses, and extraordinary expenses. For its services and the payment of Value Fund ordinary operating expenses, Frank Capital receives an annual investment management fee of 1.50% of the average daily net assets of the Value Fund. For the fiscal six months ending December 31, 2009, Frank Capital earned fees of $11,949 from the Value Fund. As of December 31, 2009, the Value Fund owed Frank Capital $2,217.
Baldwin Fund
The Trust has a Management Agreement with LBC with respect to the Baldwin Fund. Under the terms of the Management Agreement, LBC manages the investment portfolio of the Baldwin Fund, subject to policies adopted by the Trust's Board of Trustees. Under the terms of the Management Agreement the LBC pays all of the expenses of the Baldwin Fund except administrative fees, 12b-1 fees, brokerage fees and commissions, taxes, borrowing costs (such as interest and dividend expense of securities sold short) acquired fund fees and expenses and extraordinary expenses. As compensation for its management services, the Baldwin Fund is obligated to pay LBC a fee computed and accrued daily and paid monthly at an annual rate of 0.45% of the average daily net assets of the Baldwin Fund. For the six months ending December 31, 2009, LBC earned a fee of $4,622 from the Baldwin Fund.
LBC has contractually agreed to defer its fees and to reimburse expenses, exclusive of any front-end or contingent deferred loads, taxes, leverage interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, dividend expense on securities sold short, underlying fund fees, 12b-1 fees and expenses or extraordinary expenses such as litigation, at least until October 31, 2019, so that the total annual operating expenses will not exceed 1.75%, subject to possible recoupment from the Baldwin Fund in future years on a rolling three year basis (within the three years after the fees have been deferred or reimbursed) if such recoupment can be achieved within the foregoing expense limits.
LBC reimbursed the Baldwin Fund $59,230 for the six months ending December 31, 2009. LBC owed the Fund $35,123 for reimbursement of expenses at December 31, 2009. At December 31, 2009, the amount subject to future recoupment is as follows:
Fiscal Year Ended | Recoverable Through | Amount | |||
June 30, 2009 |
| June 30, 2012 | $103,914 | ||
June 30, 2010 | June 30, 2013 | $59,230 |
Note 4. Related Party Transactions
Alfred C. Frank and Brian J. Frank are the control persons of Frank Capital. Brian Frank also serves as a trustee and an officer of the Trust. Both Alfred Frank and Brian Frank receive benefits from Frank Capital resulting from management fees paid to Frank Capital by the Value Fund.
The Baldwin Fund pays LBC brokerage commissions for executing securities transactions, which are separate from, and in addition to, the fees paid by the Baldwin Fund to LBC for advisory services. For the six months ending December 31, 2009, LBC was paid $23,851 in brokerage commissions. Frank Capital receives administration fees from the Baldwin Fund of $5,000 per month. Administrative fees paid to Frank Capital for the six months ending December 31, 2009 were $30,246. LBC acts as the distributor of the Baldwin Fund.
Note 5. Capital Share Transactions
The Trust is authorized to issue an unlimited number of shares of separate series. The total paid-in capital as of December 31, 2009 was $1,845,412 and $2,679,175 for the Value Fund and the Baldwin Fund, respectively. Transactions in capital were as follows:
Value Fund | July 1, 2009 through December 31, 2009 | July 1, 2008 through June 30, 2009 | ||
Shares | Amount | Shares | Amount | |
Shares sold | 114,390 | $ 986,339 | 23,908 | $167,576 |
Shares reinvested | - | - | 15,377 | 91,799 |
Shares redeemed | (37,967) | (340,298) | (12,758) | (97,904) |
Net Increase | 76,423 | $646,041 | 26,527 | $161,471 |
Baldwin Fund | August 1, 2008 (commencement of | |||
July 1, 2009 through December 31, 2009 | Investment operations) through June 30, 2009 | |||
Shares | Amount | Shares | Amount | |
Shares sold | 104,112 | $948,381 | 170,034 | $1,529,362 |
Shares reinvested | 9,485 | 85,246 | 2,403 | 21,383 |
Shares redeemed | (574) | (5,159) | (4) | (37) |
Net Increase | (113,023) | $1,028,468 | 172,433 | $1,550,708 |
Note 6. Options
As of December 31, 2009, the Baldwin Fund had outstanding written call options valued at $53,609.
Transactions in written call options during the six months ended December 31, 2009 were as follows:
Number of | Premiums | ||
Contracts | Received | ||
Options outstanding at June 30, 2009 | 502 | $ 41,777 | |
Options written | 3,121 | 299,234 | |
Options exercised | (1,229) | (139,089) | |
Options expired | (578) | (26,935) | |
Options terminated in closing purchase transaction | (1,181) | (120,803) | |
Options outstanding at December 31, 2009 | 635 | $ 54,184 |
As of December 31, 2009, the Baldwin Fund held put options valued at $83,988.
Transactions in put options purchased during the six months ended December 31, 2009 were as follows:
Number of | Premiums | ||
Contracts | Paid | ||
Options outstanding at June 30, 2009 | 420 | $ 132,413 | |
Options purchased | 524 | 128,205 | |
Options expired | (10) | (740) | |
Options Terminated | (402) | (101,453) | |
Options outstanding at December 31, 2009 | 532 | $ 158,425 |
Note 7. Investment Transactions
For the six months ended December 31, 2009, purchases and sales of investment securities other than U.S. Government obligations and short-term investments for the Value Fund aggregated $1,374,694 and $802,120, respectively.
For the six months ended December 31, 2009, purchases and sales of investment securities other than U.S. Government obligations, short-term investments and options for the Baldwin Fund aggregated $4,923,192 and $4,183,807, respectively. Purchases and sales of options for the Baldwin Fund aggregated $429,510 and $336,122, respectively.
Note 8. Tax Matters
As of December 31, 2009, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities for each of the Funds were as follows:
Value Fund
Baldwin Fund
Undistributed ordinary loss
$ (7,394)
$ (1,324)
Capital loss carryforward expiring 6/30/2017+
$ 104,442
$ -0-
Post-October capital loss deferrals realized between
11/1/08 and 6/30/2009*
$ 59,239
$ -0-
Gross unrealized appreciation on investment securities
$ 231,145 $ 64,684
Gross unrealized depreciation on investment securities $ (110,332)
$ (124,702)
Net unrealized depreciation on investment securities
$ 120,813 $ (60,018)
Cost of investment securities, including Short Term investments **
$ 1,766,610
$2,739,046
*These deferrals are considered incurred in the subsequent year.
** The difference between book and tax cost represents disallowed wash sales for tax purposes.
+ The capital loss carryforward will be used to offset any capital gains realized by the Value Fund in future years through the expiration date. The
Value Fund will not make distributions from capital gains while a capital loss carry forward remains.
On September 30, 2009, the Baldwin Fund declared a distribution of $0.0680 per share of net investment income. The distribution was paid on September 30, 2009 to shareholders of record on September 29, 2009.
On November 27, 2009, the Baldwin Fund declared a distribution of $0.2980 per share of short-term capital gain. The distribution was paid on November 27, 2009 to shareholders of record on November 26, 2009.
On December 21, 2009, the Baldwin Fund declared a distribution of $0.0358 per share of net investment income. The distribution was paid on December 21, 2009 to shareholders of record on December 18, 2009.
The tax character of the distributions paid were as follows:
Value Fund | Baldwin Fund | |
Distributions paid from: | ||
Ordinary income | $0 | $25,220 |
Long term capital gain | 0 | 73,858 |
$0 | $99,078 |
Permanent book and tax differences relating to shareholder distributions may result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain/loss. Undistributed net investment income and accumulated undistributed net realized gain/loss on investment transactions may include temporary book and tax differences which reverse in subsequent periods. Any taxable income or gain remaining at fiscal year end is distributed in the following year.
Note 9. Control and Ownership
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under Section 2(a)(9) of the Investment Company Act of 1940, as amended. As of December 31, 2009, NFS, LLC owned approximately 92.34% of the Baldwin Fund, for the benefit of others, and may be deemed to control the Fund.
Note 10. Special Meeting of Shareholders
On August 31, 2009, Alfred Frank resigned his positions as trustee and officer of the Trust. He also agreed to sell to Ms. Monique Weiss his 50% interest in FCP. Ms. Weiss’ acquisition would be considered a “change of control” of FCP.
Pursuant to the Investment Company Act of 1940 (the “1940 Act”), as amended, a transaction which results in a change of control of an investment adviser causes the management agreement to be “assigned”. The 1940 Act further provides that a management agreement will automatically terminate in the event of an assignment. As a result, Value Fund shareholder approval of a new management agreement between the Trust and FCP, with respect to the Value Fund, was required. Ms. Weiss’ acquisition of Alfred Frank’s 50% interest in FCP was made contingent upon shareholder approval of the new management agreement.
On October 30, 2009, the Trust sent to shareholders of the Value Fund and the Baldwin Fund a Notice of Special Meeting of Shareholders (the “Shareholder Meeting”) setting forth two proposals (i) the approval of the new management agreement between the Trust and FCP, which required the approval of only the Value Fund’s shareholders, and (ii) the election of three trustees, Brian Frank (who had been previously appointed by the non-interested trustees), Andrea Goncalves and Hemanshu Patel. The Shareholder Meeting was called for November 20, 2009.
On November 20, 2009, however, the quorum of shareholders required to vote on the Shareholder Meeting proposals was not present in person or by proxy, and the meeting was adjourned until further notice. On December 31, 2009, the Trust sent notice to the shareholders that the Shareholder Meeting would reconvene on January 15, 2010.
As of December 31, 2009, Brian Frank and Alfred Frank each owned 50% of FCP and the Trust’s Board of Trustees consisted of Brian J. Frank, Matthew D. L. Deutsch and Jason W. Frey.
Note 11. Subsequent Events.
A Shareholder Meeting was held on January 15, 2010 to consider and approve the new management agreement between the Trust and FCP and to elect Brian Frank, Andrea Goncalves and Hemanshu Patel as Trustees.
The approval of the new management agreement between the Trust and FCP required the affirmative vote of a “majority of the outstanding voting securities” of the Value Fund as that term is defined under the 1940 Act. This means the affirmative vote of the lesser of (a) 67% or more of the shares of the Value Fund present at the Shareholders Meeting or represented by proxy if the holders of more than 50% of the outstanding shares of the Value Fund are present or represented by proxy at the Shareholders Meeting or (b) more than 50% of the outstanding shares of the Value Fund.
At the Shareholders Meeting, the Value Fund had 59% of shareholders entitled to vote present by proxy. The proposed management agreement between the Trust and FCP was approved by the shareholders of the Value Fund with voting results as follows:
For
Against
Abstain
Broker Non-vote
Value Fund
119,845
0
368
0
Any of the Board of Trustee nominees receiving a plurality of the votes cast, by shareholders of the Value Fund and the Baldwin Fund, in person or by proxy at the Shareholders Meeting, at which a quorum existed, would be elected to the Board of Trustees. Each of the nominees, Brian Frank, Andrea Goncalves and Hemanshu Patel, were elected to the Board of Trustees of the Trust by the following vote of shareholders of the Value Fund and the Baldwin Fund:
Authority Given
Authority Withheld
Brian J. Frank
252,551
1,106
Andrea Goncalves
252,551
1,106
Hemanshu Patel
252,551
1,106
Frank Funds | |||
Expense Illustration | |||
December 31, 2009 (Unaudited) | |||
Expense Example | |||
As a shareholder of the Value Fund, you incur ongoing costs which typically consist solely of management fees. As a shareholder of the Baldwin Fund, you incur two types of costs: (1) transactions costs, including, deferred sales charges (loads) and redemption fees; and (2) ongoing costs, including management fees and distribution and/or service (12b-1) fees. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. | |||
With respect to the Funds the Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period of July 1, 2009 through December 31, 2009. | |||
Actual Expenses | |||
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this 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 table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s 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 these 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. | |||
Value Fund | |||
Beginning Account Value | Ending Account Value | Expenses Paid During the Period * | |
July 1, 2009 | December 31, 2009 | July 1, 2009 to December 31, 2009 | |
Actual | $1,000.00 | $1,264.86 | $8.56 |
Hypothetical (5% Annual | |||
Return before expenses) | $1,000.00 | $1,017.64 | $7.63 |
* Expenses are equal to the Fund's annualized expense ratio of 1.50%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). | |||
Baldwin Fund | |||
Beginning Account Value | Ending Account Value | Expenses Paid During the Period * | |
July 1, 2009 | December 31, 2009 | July 1, 2009 to December 31, 2009 | |
Actual | $1,000.00 | $1,045.11 | $5.00 |
Hypothetical (5% Annual | |||
Return before expenses) | $1,000.00 | $1,020.32 | $4.94 |
* Expenses are equal to the Fund's annualized expense ratio of 0.97%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). | |||
FRANK FUNDS
BOARD OF TRUSTEES
DECEMBER 31, 2009 (UNAUDITED)
TRUSTEES AND OFFICERS
The following table provides information regarding each Trustee who is not an “interested person” of the Trust, as defined in the Investment Company Act of 1940. Each Trustee has an indefinite term.
Name, Address and Age | Position & Length of Time Served with the Trust | Principal Occupations During Past 5 Years and Current Directorships |
Matthew D.L. Deutsch, 6 Stacy Ct. Parsippany, NJ 07054, Age: 28 | Trustee since June 2004. | CEO of Deutsch & Thomas, Inc., a seller of professional business plans, September 2005 to present; Investment Strategist and Director, M.D.L. Deutsch and Company, an investment management company, February 2003 to September 2005. |
Jason W. Frey, 6 Stacy Ct. Parsippany, NJ 07054, Age: 30 | Trustee since June 2004. | Software Developer, ManageIQ, Inc., a virtualization software company, October 2007 to present; Product Developer, Metavante Corporation (f.k.a. Prime Associates, Inc), a banking software development company, September 2002 to October 2007. |
The following table provides information regarding each Trustee who is an “interested person” of the Trust, as defined in the Investment Company Act of 1940, and each officer of the Trust. Each Trustee and Officer of the Trust has an indefinite term.
1 Brian J. Frank is considered an “Interested” Trustee, as defined in the Investment Company Act of 1940, as amended, because he is affiliated with the Adviser. Brian Frank and Monique Weiss are married.
Additional information regarding the Trustees and Officers is available in the Funds’ Statement of Additional Information.
FRANK FUNDS
ADDITIONAL INFORMATION
DECEMBER 31, 2009 (UNAUDITED)
Each Fund’s Statement of Additional Information ("SAI") includes additional information about the trustees and is available, without charge, upon request. You may call toll-free (888) 217-5426 to request a copy of the SAI or to make shareholder inquiries.
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Each Fund files a complete schedule of investments with the SEC for the first and third quarter of each fiscal year on Form N-Q. The Funds’ first and third fiscal quarters end on September 30 and March 31. The Form N-Q filing must be made within 60 days of the end of the quarter. The Funds’ Forms N-Q are available on the SEC’s website at http://sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (call 1-800-732-0330 for information on the operation of the Public Reference Room). You may also obtain copies by calling (888) 217-5426.
Approval of Management Agreement between Trust and FCP
At a meeting of the Board of Trustees held on September 22, 2009, the Board, including the independent trustees, evaluated the proposed new management agreement between the Trust and FCP with respect to the Value Fund, as required by the 1940 Act upon a change of control of the adviser.
Based on its review, the Board of Trustees determined that approval of the new management agreement was in the best interests of the Trust and the Value Fund’s shareholders. Accordingly, the Board of Trustees, including the Independent Trustees, unanimously recommended approval by the shareholders of the Value Fund of the new management agreement. In making this recommendation, the Board of Trustees primarily evaluated (i) their satisfaction with the experience, reputation, qualifications and background of FCP’s investment personnel, (ii) the nature and quality of operations and services including the research tools and overall investment philosophy that FCP will continue to provide the Value Fund with no change in fees, (iii) the benefits of continuity in services to be provided by FCP, and (iv) the fact that Mr. Brian Frank will remain the portfolio manager for the Value Fund after the change in control.
As to the nature, extent and quality of the services to be provided by FCP to the Value Fund, the Trustees considered that, under the terms of the management agreement, FCP would, subject to the supervision of the Board of Trustees of the Trust, provide or arrange to be provided to the Value Fund such investment advice as FCP in its discretion deems advisable and will furnish or arrange to be furnished a continuous investment program for the Value Fund consistent with the Value Fund’s investment objective and policies. The Board considered the experience and resources to be dedicated to the Value Fund by FCP.
FCP reported that its Code of Ethics remains in place, as well as FCP’s Compliance Policies and Procedures. The Board concluded that, overall, the nature, extent and quality of the services provided to the Value Fund by FCP were consistent with the Board’s expectations.
The Trustees considered the investment performance of the Value Fund. It was the consensus of the Trustees that the overall investment philosophy of FCP was satisfactory and that the performance of the Value Fund provided reasonable returns.
As to comparative fees and expenses, the Trustees considered the management fee to be paid by the Value Fund and compared those fees to management fees paid by funds in a peer group comprised of other mutual funds with a value-investing objective. The Trustees noted that they had also compared the total expense ratio of the Value Fund with the expense ratios of the funds in the peer group and had determined that the Value Fund’s contractual management fee and total expense ratio were within the range for the peer group. The Trustees also considered FCP’s agreement to pay all the expenses of the Fund, and that this agreement would be in effect under the new management agreement. The Trustees concluded that the Value Fund’s management fees were acceptable in light of the quality of services the Value Fund expects to receive from FCP and the level of fees paid by funds in the peer group. As to the profits to be realized by FCP, the Trustees noted that they had reviewed FCP’s estimates of its profitability and its financial condition at the June 13, 2009 board meeting. Based on this review, the Trustees concluded that they were satisfied that FCP’s expected level of profitability from its relationship with the Value Fund was reasonable, competitive with that of comparable funds and not excessive under the new management agreement.
As to economies of scale and whether fee levels reflect those economies of scale, the Trustees noted that these factors were not relevant given the small size of the Value Fund; however, it was the consensus of the Board that the issue be revisited as the Value Fund grows.
As a result of their considerations, the Board of Trustees, including all of the Independent Trustees, determined that the proposed new management agreement is in the best interests of the Value Fund and its shareholders. Accordingly, the Board of Trustees, by separate vote of the Independent Trustees and the entire Board of Trustees, unanimously approved the new management agreement and voted to recommend it to shareholders for approval.
Board of Trustees
Brian J. Frank
Matthew D. L. Deutsch
Jason W. Frey
Investment Advisers
Frank Capital Partners, LLC
312 E. 22nd St. #2B
New York, NY 10010
Leigh Baldwin & Co., LLC
112 Albany Street, P.O. Box 660
Cazenovia, NY 13035
Dividend Paying Agent,
Shareholders’ Servicing Agent,
Transfer Agent
Mutual Shareholder Services, LLC
Custodian
Huntington National Bank
Independent Registered Public Accounting Firm
Sanville & Company
Legal Counsel
Thompson Hine LLP
This report is provided for the general information of the shareholders of the Value Fund and the Baldwin Fund. This report is not intended for distribution to prospective investors in the Funds, unless preceded or accompanied by an effective prospectus.
Item 2. Code of Ethics. Not applicable.
Item 3. Audit Committee Financial Expert. Not applicable.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable.
Item 6. Schedule of Investments. Not applicable – schedule filed with Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable.
Item 8. Portfolio Managers of Closed-End Funds. Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant's board of trustees.
Item 11. Controls and Procedures.
(a)
Disclosure Controls & Procedures. Principal executive and financial officers have concluded that Registrant’s disclosure controls & procedures are effective based on their evaluation as of a date within 90 days of the filing date of this report.
(b)
Internal Controls. There were no significant changes in Registrant’s internal controls of in other factors that could significantly effect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 12. Exhibits.
(a)(1)
EX-99.CODE ETH. Not applicable.
(a)(2)
EX-99.CERT. Filed herewith.
(a)(3)
Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b)
EX-99.906CERT. Filed herewith.
SIGNATURES
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.
Frank Funds
By /s/Brian J. Frank, President & Treasurer
Brian J. Frank
President & Treasurer
Date: March 4, 2010
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 /s/Brian J. Frank
Brian J. Frank
President & Treasurer
Date March 4, 2010