text:
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
Investment Company Act file number: 811-21532
FRANK FUNDS
(Exact Name of Registrant as Specified in Charter)
781 Crandon Blvd. Unit 602
Key Biscayne, FL 33149
Brian J. Frank, Frank Capital Partners LLC
(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: June 30, 2019
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.
Item 2. Code of Ethics.
FRANK VALUE FUND
Investor Class – FRNKX
Class C – FNKCX
Institutional Class – FNKIX
LEIGH BALDWIN TOTAL RETURN FUND – LEBOX
CAMELOT EVENT DRIVEN FUND
Class A - EVDAX
Institutional Class - EVDIX
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds' shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds' websites www.frankfunds.com, www.leighbaldwin.com, and www.cameloteventdrivenfund.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by following the instructions included with paper Fund documents that have been mailed to you.
SHAREHOLDER LETTER
JUNE 30, 2019 (UNAUDITED)
To our Fellow Shareholders,
Frank Funds is well positioned to lead active managers into a new paradigm. As US stocks remain near record valuations and passive investment vehicles gain market share, a large opportunity exists for Frank Funds to remain focused on its strategies and reap the long-term rewards of discipline. We are optimistic about the future for our Trust and thankful for our shareholders, employees, and stakeholders.
Frank Value Fund Portfolio Performance
Frank Capital Partners LLC continues to position the Frank Value Fund defensively. This paid off significantly in the fourth calendar quarter of 2018 when the S&P 500 declined (-13.52%) and the Frank Value Fund lost (-2.93%.) Those three months of declines in an otherwise rising market caught most of our peers being too aggressive, and the Frank Value Fund ended calendar 2018 as the #1 performing fund in its Morningstar Category, Mid-Cap Blend. Frank Capital Partners LLC believes extreme valuations and slowing growth justify material future declines in the S&P 500.
The first two quarters of calendar 2019 have again been an uptrend for stocks, and the Frank Value Fund's holdings have lagged the S&P 500. Specifically, Fund holding Liberty Latin America (NYSE: LILA) declined 13.4% in the fiscal year ending June 30, 2019, yet the company produced over $1.3 billion in pre-tax cashflow. At the current valuation the company trades around a 6x EV/EBITDA ratio which is roughly a 60% discount to the average S&P 500 company. Numerous value stocks the Fund is avoiding trade at a discount due to lack of revenue growth. Liberty Latin America, however, enjoys a mid-single digit sales growth, and in the second calendar quarter of 2019, LILA grew its operating profit over 10% from the previous year. The company's target markets in Latin America have less than 50% of households using broadband Internet connections, giving Liberty Latin America much more room for growth than its US peers. The Frank Value Fund remains invested in Liberty Latin America.
Towards the end of the Fund's fiscal year, gold and the Fund's gold mining holdings experienced increases and outperformance relative to the index. Both Frank Value Fund holdings Barrick Gold (NYSE: GOLD) and Newmont Goldcorp (NYSE: NEM) completed mergers in 2019, making them the largest holders of gold deposits in the world. The Federal Reserve halted its increases in the Fed Funds Rate in 2019 and has since embarked on an interest rate lowering cycle. Globally, nearly all developed markets outside of the US trade with negative government bond yields. Lower US rates and negative rates in Europe and Japan vastly increase the attractiveness of gold and gold miners. Institutions in Europe are now charged interest to deposit money at the European Central Bank – creating an urgent need for a store of value like gold. Frank Capital Partners LLC believes an economic slowdown in the US would result in the Fed cutting rates to zero or negative, creating the same drivers for gold in the US marketplace. The Frank Value Fund remains invested in Barrick Gold and Newmont Goldcorp.
While Frank Capital Partners LLC is disappointed with the relative performance of the Frank Value Fund, the investment manger remains confident that its strategy will prevail in the long-term. US stock valuations are at near all-time record levels yet large swaths of macro and company-level data are deteriorating. As Central Banks around the world exhaust their
SHAREHOLDER LETTER (CONTINUED)
abilities to ease and passive strategies run out of flows from active, Frank Capital Partners LLC believes it has positioned the Frank Value Fund to significantly outperform all asset classes.
The Frank Value Fund ("Value Fund") Investor Class lost -0.99% for the fiscal year ended June 30, 2019, compared to a gain of 10.42% for its benchmark, the S&P 500 Index.
Leigh Baldwin Total Return Fund Portfolio Performance
The Leigh Baldwin Total Return Fund (LEBOX) begins fiscal year 2019-2020 after finishing its second year in a row of positive returns. In fact, the fund has outperformed the HFRX EH (Equity Market Neutral Index) for the past 6-month, 1-year, and 3-year time periods. As he begins his twelfth year at the helm since inception, manager Leigh Baldwin continues to adhere to his market neutral roots of investing into high quality companies or indexes that represent these companies, with a nod to potential dividends. Additionally, the fund seeks to limit downside risk by simultaneously using options to protect these investments from downward moves. The stated goal is to outperform traditional equity and fixed income investments during periods of high volatility, high interest rates, and bearish equity prices.
2018 proved to be a challenging year for investors, with the major averages trading at or near all-time highs on two separate occasions, only to fall in violent fashion shortly thereafter. The fund performed as designed as higher interest rates, higher volatility, and lower stock prices accelerated a sharp sell-off into the end of the year. In fact, during the last quarter of 2018, LEBOX gained 0.88% while the Vanguard S&P 500 Index (VFINX) fell 13.55% and the Vanguard Market Neutral Fund (VMNFX) fell 2.48%. With 10 of the past 11 years (including 2019 year to date) positive for stocks, it has arguably been difficult for a market neutral fund, with an emphasis on outperformance in times of financial stress, to shine. The manager believes our systematic process to capture equity appreciation and dividend income while mirroring the same position for the downside will continue to be a complement to a well-designed, diverse portfolio.
The Baldwin Fund returned 1.20% for the year ending June 30, 2019 which compares to a loss of -4.37% in the HFRX market neutral index during the same time period.
Camelot Event Driven Fund Portfolio Performance
The Camelot Event-Driven Fund Institutional Class returned 5.77% for the fiscal year ended June 30, 2019, compared to 10.42% for the S&P 500 Index.
Thank you for your investments. We look forward to continuing to work with you.
Brian Frank
Frank Funds Trust
VALUE FUND – INVESTOR CLASS
PERFORMANCE ILLUSTRATION
AVERAGE ANNUAL RATE OF RETURN (%)
FOR PERIODS ENDED JUNE 30, 2019
Cumulative Performance Comparison $10,000 Investment Since Inception
FUND/INDEX
VALUE AS OF 6/30/19
Frank Value Fund - Investor Class
This chart assumes an initial investment of $10,000 made on 7/21/2004 for the Investor Class (commencement of investment operations). Total return is based on the net change in NAV and assumes reinvestment of all dividends and other distributions. Performance figures represent past performance which is not predictive of future performance. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.
The Standard & Poor's 500 Index ("S&P 500") is a market value-weighted index, representing the aggregate market value of the common equity of 500 stocks primarily traded on the New York Stock Exchange. The S&P 500 is a widely recognized, unmanaged index of common stock prices. The figures for the S&P 500 reflect all dividends reinvested but do not reflect any deductions for fees, expenses or taxes.
Per the fee table in the November 1, 2018 Prospectus, the Fund's total annual operating expense ratio was 1.52% for Investor Class Shares.
The returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares.
Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month end, please call (888)-217-5426.
VALUE FUND – CLASS C
Frank Value Fund - Class C
This chart assumes an initial investment of $10,000 made on 9/23/2010 for Class C (commencement of investment operations). Total return is based on the net change in NAV and assumes reinvestment of all dividends and other distributions. Performance figures represent past performance which is not predictive of future performance. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.
Per the fee table in the November 1, 2018 Prospectus, the Fund's total annual operating expense ratio was 2.27% for Class C Shares.
VALUE FUND – INSTITUTIONAL CLASS
Frank Value Fund - Institutional Class
This chart assumes an initial investment of $10,000 made on 11/03/2010 for the Institutional Class (commencement of investment operations). Total return is based on the net change in NAV and assumes reinvestment of all dividends and other distributions. Performance figures represent past performance which is not predictive of future performance. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.
Per the fee table in the November 1, 2018 Prospectus, the Fund's total annual operating expense ratio was 1.27% for Institutional Class Shares.
BALDWIN FUND
Leigh Baldwin Fund
HFRX Equity Market Neutral Index
This chart assumes an initial investment of $10,000 made on 8/1/2008 (commencement of investment operations). Total return is based on the net change in NAV and assumes reinvestment of all dividends and other distributions. Performance figures represent past performance which is not predictive of future performance. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.
Equity Market Neutral strategies employ sophisticated quantitative techniques of analyzing price data to ascertain information about future price movement and relationships between securities, select securities for purchase and sale. These can include both Factor-based and Statistical Arbitrage/Trading strategies. Factor-based investment strategies include strategies in which the investment thesis is predicated on the systematic analysis of common relationships between securities. In many but not all cases, portfolios are constructed to be neutral to one or multiple variables, such as broader equity markets in dollar or beta terms, and leverage is frequently employed to enhance the return profile of the positions identified. Statistical Arbitrage/Trading strategies consist of strategies in which the investment thesis is predicated on exploiting pricing anomalies which may occur as a function of expected mean reversion inherent in security prices; high frequency techniques may be employed and trading strategies may also be employed on the basis on technical analysis or opportunistically to exploit new information the investment manager believes has not been fully, completely or accurately discounted into current security prices.
Hedge Fund Research, Inc. (HFR) utilizes a UCITSIII compliant methodology to construct the HFRX Hedge Fund Indices. The methodology is based on defined and predetermined rules and objective criteria to select and rebalance components to maximize representation of the Hedge Fund Universe. HFRX Indices utilize state-of-the-art quantitative techniques and analysis; multi-level screening, cluster analysis, Monte-Carlo simulations and optimization techniques ensure that each Index is a pure representation of its corresponding investment focus.
Per the fee table in the November 1, 2018 Prospectus the Fund's total annual operating expenses ratio was 4.95%. The Adviser has contractually agreed to limit its fees and reimburse expenses, subject to certain limitations, until at least October 31, 2024. After waiver the Fund's net expense ratio in the November 1, 2018 Prospectus was 1.05%.
CAMELOT FUND - CLASS A
- Class A (with load)
- Class A (without load)
This chart assumes an initial investment of $10,000 made on 11/21/2003 for Class A (commencement of investment operations). Total return is based on the net change in NAV and assumes reinvestment of all dividends and other distributions. Performance figures represent past performance which is not predictive of future performance. Investment return and principal value will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.
Class A shares of the Fund have a maximum sales charge of 5.50%.
Current performance may be lower or higher than the performance data quoted. To obtain performance data current to the most recent month end, please call (866) 706-9790.
CAMELOT FUND - INSTITUTIONAL CLASS
Camelot Event Driven Fund - Institutional Class
Per the fee table in the November 1, 2018 Prospectus the Fund's total annual operating expenses ratio was 2.80%. The Adviser has contractually agreed to limit its fees and reimburse expenses, subject to certain limitations, until at least June 30, 2019. After waiver the Fund's net expense ratio in the November 1, 2018 Prospectus was 1.75%.
The following chart gives a visual breakdown of the Frank Value Fund (the "Value Fund") by the industry sectors, while the underlying securities represent a percentage of the portfolio of investments.
Sectors are based on Morningstar® classifications.
Portfolio composition subject to change.
The following chart gives a visual breakdown of the Leigh Baldwin Total Return Fund (the "Baldwin Fund") by the industry sectors or investment type, while the underlying securities represent a percentage of the portfolio of investments.
The above chart excludes Written Options. Purchased options are represented by the underlying security sector.
CAMELOT FUND
The following chart gives a visual breakdown of the Camelot Event Driven Fund (the "Camelot Fund") by the industry sectors or investment type, while the underlying securities represent a percentage of the portfolio of investments.
Categorizations above are made using Morningstar® classifications.
Portfolio composition is subject to change.
Excludes securities sold short and written options. Purchased options are represented by the underlying security sector.
SCHEDULE OF INVESTMENTS
COMMON STOCKS - 27.43%
Cable & Other Pay Television Services - 4.34%
Liberty Latin America Ltd. Class A *
Liberty Latin America Ltd. Class C *
Fire, Marine & Casualty Insurance - 5.24%
Berkshire Hathaway, Inc. Class B *
Gold and Silver Ores - 6.45%
Barrick Gold Corp.
Newmont Goldcorp Corp.
Patent Owners & Lessors - 4.98%
Liberty Tax, Inc. Class A
Wholesale-Drugs, Propietaries - 6.42%
McKesson Corp.
AmerisourceBergen Corp.
TOTAL FOR COMMON STOCKS (Cost $2,910,831) - 27.43%
CORPORATE BONDS - 4.77% (●)
Asset-Backed Securities - 1.21%
Harley-Davidson Financial Services, Inc., 2.40%, 09/15/2019
Retail-Computer & Computer Software Stores - 3.56%
GameStop Corp. 6.75%, 03/15/2021
TOTAL FOR CORPORATE BONDS (Cost $600,163) - 4.77%
EXCHANGE TRADED FUNDS - 3.45%
Sprott Physical Gold Trust *
TOTAL FOR EXCHANGE TRADED FUNDS (Cost $401,863) - 3.45%
SCHEDULE OF INVESTMENTS (CONTINUED)
U.S. GOVERNMENT AGENCIES AND OBLIGATIONS - 32.14% (●)
U.S. Treasury Note Bonds - 32.14%
U.S. Treasury Bill 0.75%, 07/15/2019
U.S. Treasury Note 1.125%, 12/31/2019
TOTAL FOR U.S. GOVERNMENT AGENCIES AND OBLIGATIONS
(Cost $3,972,089) - 32.14%
MONEY MARKET FUND - 31.76%
Morgan Stanley Institutional Liquidity Funds - Treasury
Securities Portfolio 2.07% **
TOTAL FOR MONEY MARKET FUND (Cost $3,933,337) - 31.76%
TOTAL INVESTMENTS (Cost $11,818,283) *** - 99.55%
OTHER ASSETS LESS LIABILITIES - 0.45%
NET ASSETS - 100.00%
* Non-income producing securities during the period.
** Variable rate security; the coupon rate shown represents the yield at June 30, 2019.
*** Refer to Note 10 for tax cost.
● Level 2 Security.
Air Transportation, Scheduled - 1.23%
Delta Airlines, Inc.
Electronic Computers - 5.13%
Pharmaceutical Preparations - 4.81%
Retail-Grocery Stores - 1.63%
Sprout Farmers Market, Inc. *
Security Brokers, Dealers & Flotation Companies - 1.89%
Semiconductors & Related Devices - 3.60%
Micron Technology, Inc. *
Surgical & Medical Instruments & Apparatus - 2.99%
TOTAL FOR COMMON STOCKS (Cost $533,313) - 21.28%
EXCHANGE TRADED FUNDS - 24.93%
Invesco QQQ Trust Series 1
SPDR Dow Jones Industrial Average ETF Trust
SPDR S&P 500 ETF Trust
TOTAL FOR EXCHANGE TRADED FUNDS (Cost $569,908) - 24.93%
INVESTMENTS IN PURCHASED OPTIONS, AT VALUE (Premiums Paid $94,991) - 3.57%
Fidelity Institutional Government Money Market Fund Class I 2.27% **
TOTAL FOR MONEY MARKET FUND (Cost $947,113) - 40.88%
TOTAL INVESTMENTS (Cost $2,145,325) *** - 90.66%
INVESTMENTS IN WRITTEN OPTIONS, AT VALUE
(Premiums Received $15,683) - (0.54)%
$ (12,529)
ASSETS IN EXCESS OF LIABILITIES, NET - 9.88%
SCHEDULE OF PURCHASED OPTIONS
PUT OPTIONS - 3.57% *
Underlying Security
Notional Amount**
Exercise Price
Fidelity National Financial Services Corp.
Sprout Farmers Market, Inc.
Total Put Options (Premiums Paid $94,991) - 3.57%
TOTAL PURCHASED OPTIONS (Premiums Paid $94,991) - 3.57%
** The notional value is the total amount of the underlying security's market price at June 30, 2019. The notional value distinguishes between the amount of money invested and the amount associated with the whole transaction. The notional value is calculated by multiplying the units in one contract by the market price of the underlying security at June 30, 2019.
SCHEDULE OF WRITTEN OPTIONS
CALL OPTIONS - (0.54)% *
$(118,752)
$ (4,092)
Total Call Options (Premiums Received $15,683) - (0.54)%
TOTAL WRITTEN OPTIONS (Premiums Received $15,683) - (0.54)%
$(12,529)
Agriculture - 0.00%
Black Earth Farming Ltd. ADR ^ † *
Automotive - 0.03%
Exide Technologies ^ *
Bakery Products - 0.86%
Bab, Inc.
Biotech & Pharma - 2.45%
Akorn, Inc. (b) *
Bristol-Myers Squibb Co. (a) (b)
Inyx, Inc. ● *
Perrigo Co. Plc (Ireland)
Chemicals - 2.11%
GCP Applied Technologies, Inc. (a) *
Consumer Products - 2.55%
Conagra Brands, Inc. (a)
Containers & Packaging - 1.92%
Berry Global Group, Inc. (a) *
Distributors-Consumer Staples - 1.11%
Bunge Ltd. (a) (b)
Drilling Oil & Gas Wells - 0.53%
Transocean Ltd. *
Engineering & Construction Services - 0.76%
Quanta Services, Inc. (a)
Gaming, Lodging & Restaurants - 2.80%
Guoco Group Ltd. (Hong Kong)
Red Robin Gourmet Burgers, Inc. (a) *
Hardware - 2.29%
IEC Electronics Corp. *
Medion AG (Germany)
Healthcare Facilities & Services - 7.26%
Acadia Healthcare Co., Inc. (a) *
Brookdale Senior Living, Inc. *
Centene Corp. (a) *
Cigna Corp. (a) (b)
DaVita, Inc. (a) (b) *
Humana, Inc. (a)
Magellan Health, Inc. (a) *
McKesson Europe AG (Germany)
Holding Companies - 0.00%
Stoneleigh Partners Acquisition Corp. ^ † *
Home & Office Products - 1.41%
Newell Brands, Inc. (a)
Industrial Services - 0.94%
HD Supply Holdings, Inc. (a) *
Insurance - 0.27%
Genworth Financial, Inc. *
IT Services - 0.00%
Computer Horizons Corp. ^ † *
Media - 4.78%
30DC, Inc. ● *
Axel Springer SE (Germany)
Cars.com, Inc. (a) *
CBS Corp. Class B
Clear Channel Outdoor Holdings, Inc. *
Eventbrite, Inc. Class A (a) *
iHeartMedia, Inc. Class A *
Scout24 AG (Germany) *
Uber Technologies, Inc. (a) *
Metals & Mining - 1.01%
AngloGold Ashanti Ltd. ADR (a) (b)
Sacre-Coeur Minerals Ltd. (Canada) ^ † *
Turquoise Hill Resources Ltd. (Canada) *
Oil, Gas & Coal - 4.62%
Anadarko Petroleum Corp.
Chevron Corp. (a)
Devon Energy Corp. (a)
Dommo Energia SA ADR ● *
Occidental Petroleum Corp. (a)
QEP Resources, Inc. *
Roan Resources, Inc. Class A *
Seadrill Ltd. (United Kingdom) *
Real Estate - 1.40%
Conwert Immobilien Invest SE (Austria) ^
CA Immobilien Anlagen AG (Austria)
Retail-Discretionary - 2.01%
Lowe's Companies, Inc. (a)
Semiconductors - 1.01%
Qualcomm, Inc. (a) (b)
Software - 10.91%
Carbonite, Inc. (a) *
Citrix Systems, Inc. (a)
CommVault Systems, Inc. (a) *
LogMeIn, Inc. (a)
Playtech PLC (Isle of Man)
Symantec Corp. (a)
Specialty Finance - 1.12%
Alliance Data Systems Corp. (a)
Technology Services - 3.70%
comScore, Inc. *
Conduent, Inc. *
DXC Technology Co. (a)
Nielsen Holdings PLC (a)
Telecom - 1.28%
NII Holdings, Inc. *
Oi SA ADR *
Telecom Italia SpA ADR
Utilities - 0.39%
Innogy SE (Germany)
Waste & Environmental Services & Equipment - 0.01%
Strategic Environmental & Energy Resources, Inc. ^ *
TOTAL FOR COMMON STOCKS (Cost $20,018,213) - 59.53%
ESCROW SHARES - 0.00%
Exide Technologies ^ † *
Petrocorp., Inc. ^ † *
TOTAL FOR ESCROW SHARES (Cost $1,687) - 0.00%
AFC Home Equity Loan Trust Series 2000-02 Class 1A, 3.19438%
(1 Month LIBOR USD + 0.79%), 6/25/2030 ** + ●
Citigroup Mortgage Loan Trust Inc. Series 2005-OPT1 Class M3,
3.10938% (1 Month LIBOR USD + 0.71%), 2/25/2035 ** + ●
Countrywide Asset-Backed Certificates Series 2007-11 Class 2M2,
Countrywide Home Equity Loan Trust Series 2005-A Class 2A,
Countrywide Alternative Loan Series 07-0A7 Class A3, 0.5017%
(1 Month LIBOR USD + 0.30%) 5/25/2047 ** + ^
TOTAL FOR ASSET-BACKED SECURITIES (Cost $156,046) - 0.54%
CONTINGENT VALUE RIGHT - 0.00%
Medical-Drugs - 0.00%
Corium International, Inc. Exp. 3/31/2019 0.50/share (b)
TOTAL FOR CONTINGENT VALUE RIGHT (Cost $0) - 0.00%
CONVERTIBLE BONDS - 1.36%
Banking - 1.36%
BNP Paribas Fortis SA (France) 1.679% (3 Month EURIBOR +
2.000%), Perpetual ** + ● €
TOTAL FOR CONVERTIBLE BONDS (Cost $561,620) - 1.36%
CORPORATE BONDS - 5.04%
Exide Technologies 7.00%, 4/30/2025 ●
Exide Technologies 11.00%, 4/30/2022 ● # †
Engineering and Construction Services - 1.02%
Astaldi SpA ADR 7.125%, 12/01/2020 ●
Financial Services - 0.03%
Hellas Telecommunication Luxembourg II SCA (United Kingdom)
6.054%, (3 Month LIBOR USD + 5.75% ) 1/15/2015 + ^ # †
Lehman Brothers Holdings, Inc. 0.00%, 2/17/2015 + ●
iHeart Communications, Inc., 6.375%, 5/01/2026 ●
OGX Austria GMBH 8.50%, 6/01/2018 + ^ †
Seadrill New Finance Private Placement Series 144A (United Kingdom)
12.00%, 7/15/2025 ●
Radio Telephone Communications - 0.35%
Digicel Group Ltd. 9.125%, 4/01/2024 ●
Retail - 1.23%
The Neiman Marcus Group LLC. 7.125%, 6/01/2028 ●
Venture Capital - 0.00%
Infinity Capital Group 7.00%, 12/31/2049 + ^ †
TOTAL FOR CORPORATE BONDS (Cost $2,180,423) - 5.04%
ESCROW NOTES - 0.00%
NewPage Corp. + ^ †
TOTAL FOR ESCROW NOTES (Cost $196,568) - 0.00%
MORTGAGE-BACKED SECURITIES - 0.37%
GSR Mortgage Loan Trust Series 2005-5F Class B2 5.74079%, 6/25/2035 ● ~
TOTAL FOR MORTGAGE-BACKED SECURITIES (Cost $520,031) - 0.37%
MUNICIPAL BONDS - 3.41%
Puerto Rico - 3.41%
Puerto Rico Electric Power Authority Series CCC 4.25%, 7/01/2021 + ●
Puerto Rico Electric Power Authority Series DDD 3.50%, 7/01/2020 + ●
Puerto Rico Electric Power Authority Series DDD 3.625%, 7/01/2021 + ●
Puerto Rico Electric Power Authority Series TT 5.00%, 7/01/2020 + ●
Puerto Rico Electric Power Authority Series WW 5.50%, 7/01/2019 + ●
Puerto Rico Electric Power Authority Series ZZ 4.75%, 7/01/2027 + ●
Puerto Rico Public Buildings Authority Series U 5.00%, 7/01/2018 + ●
Puerto Rico Public Buildings Authority Series C 5.75%, 7/01/2019 + ●
Puerto Rico Public Buildings Authority Series N 5.50%, 7/01/2027 + ●
Puerto Rico Public Buildings Authority Series D 5.25%, 7/01/2036 + ●
Puerto Rico Sales Tax Financing Corp. Series A-1 0.00%, 7/01/2024 ●
University of Puerto Rico Series P 5.00%, 6/01/2020 ∞ ●
TOTAL FOR MUNICIPAL BONDS (Cost $690,112) - 3.41%
PREFERRED STOCKS - 3.42%
Government Agencies - 3.29%
Federal Home Loan Mortgage Corp. Series F 0.00%, Perpetual
Federal Home Loan Mortgage Corp. Series M 0.00%, Perpetual
Federal Home Loan Mortgage Corp. Series Q 0.00%, Perpetual **
Federal Home Loan Mortgage Corp. Series S 0.00%, (3 Month
LIBOR USD + 0.50%) Perpetual ● **
Federal Home Loan Mortgage Corp. Series V 5.57%, Perpetual
Federal Home Loan Mortgage Corp. Series W 5.66%, Perpetual ●
Federal Home Loan Mortgage Corp. Series X 6.02%, Perpetual
MBIA Insurance Corp. 4.707%, Perpetual ^ # †
Seadrill Ltd.(United Kingdom)
TOTAL FOR PREFERRED STOCKS (Cost $1,099,271) - 3.42%
STOCK CERTIFICATE - 1.39%
Retail Discretionary - 1.39%
eHi Car Services Ltd. ^ *
TOTAL FOR STOCK CERTIFICATE (Cost $419,228) - 1.39%
STRUCTURED NOTE - 2.85%
Financial Services 2.85%
Lehman Brothers Holdings, Inc. 7.27%, (1 Month CPI YOY + 2.25%)
7/08/2014 + ● **
Lehman Brothers Holdings, Inc. 7.00%, 1/28/2020 + ● **
Twin Reefs Pass-Through Trust 0.00% (1 Month LIBOR USD + 2.00%)
Perpetual + ^ # †**
TOTAL FOR STRUCTURED NOTE (Cost $485,000) - 2.85%
WARRANTS - 0.03%
FGL Holdings (Bermuda) Exp. 12/2022 (Notional Value $47,880)
TOTAL FOR WARRANTS (Cost $9,132) - 0.03%
TERM LOAN - 0.38%
iHeart Communications, Inc., Term Loan Exit (3 Month LIBOR
USD + 4.00%) 5/01/2026 ●
TOTAL FOR TERM LOAN - (Cost $153,413) - 0.38%
INVESTMENTS IN PURCHASED OPTIONS, AT VALUE (Premiums Paid $639,502) - 1.44%
BANK DEPOSIT ACCOUNTS - 22.01%
Collateral Huntington Conservative Deposit Account 2.20% ** (b)
Huntington Conservative Deposit Account 2.20% **
TOTAL FOR BANK DEPOSIT ACCOUNTS - (Cost $6,623,751) - 22.01%
TOTAL INVESTMENTS (Cost $33,753,997) *** - 101.77%
(Premiums Received $902,563) - (2.66)%
ADR - American Depositary Receipt.
(a) Subject to written option contracts.
(b) All or a portion of this security is held as collateral for securities sold short. Total value of collateral for securities sold short is $2,626,583.
+ Default Bonds
∞ Distressed Bonds
● Level 2 Security
~ Variable Rate Security. The coupon is based on an underlying pool of loans.
^ Indicates a fair valued security. Total market value for fair valued securities is $1,326,457 representing 4.40% of net assets and Level 3 securities.
# Indicates securities that may be sold to "qualified institutional buyers" pursuant to the conditions of Rule 144A under the Securities Act of 1933, as amended, is $1,329,472 representing 4.42% of net assets.
† Indicates an illiquid security. Total market value for illiquid securities is $1,330,308 representing 4.41% of net assets.
€ Principal denominated in Euros.
CALL OPTIONS - 0.04% *
Devon Energy Corp. ●
Newell Brands, Inc.
Total Call Options (Premiums Paid $47,745) - 0.04%
Acadia Healthcare Co., Inc. ●
AngloGold Ashanti Ltd. ADR
Berry Global Group, Inc. ●
Bristol-Myers Squibb Co. ●
Citrix Systems, Inc. ●
CommVault Systems, Inc.
Conagra Brands, Inc. ●
Conagra Brands, Inc.
Deckers Outdoor Corp. ●
DXC Technology Co. ●
GCP Applied Technology, Inc. ●
HD Supply Holdings, Inc.
Hologic, Inc. ●
Invesco CurrencyShares Euro
Currency Trust ●
Logmeln, Inc.
Lowe's Companies, Inc.
SCHEDULE OF PURCHASED OPTIONS (CONTINUED)
PUT OPTIONS - (CONTINUED) *
Magellan Health, Inc.
Nielsen Holdings PLC
QualComm, Inc.
Quanta Services, Inc. ●
Red Robin Gourmet Burgers, Inc. ●
Red Robin Gourmet Burgers, Inc.
Symantec Corp. ●
The Home Depot, Inc.
Vanguard Real Estate ETF
Yum China Holdings, Inc. (China) ●
Total Put Options (Premiums Paid $591,757) - 1.40%
TOTAL PURCHASED OPTIONS (Premiums Paid $639,502) - 1.44%
Alliance Data Systems Corp. ●
AngloGold Ashanti Ltd. ADR ●
Bunge Ltd.
Carbonite, Inc. ●
Cars.com, Inc.
CBS Corp. Class B ●
Centene Corp. ●
Cigna Corp.
CommVault Systems, Inc. ●
DaVita, Inc.
Eventbrite, Inc. Class A
SCHEDULE OF WRITTEN OPTIONS (CONTINUED)
CALL OPTIONS - (CONTINUED) *
Humana, Inc.
Invesco CurrencyShares Euro Currency Trust ●
Logmeln, Inc. ●
Occidental Petroleum Corp.
Symantec Corp.
Total Call Options (Premiums Received $628,588) - (2.01)%
PUT OPTIONS - (0.65)% *
AbbVie, Inc.
$ (810)
$ (267,150)
CBS Corp. ●
Centene Corp.
HD Supply Holdings, Inc. ●
Magellan Health, Inc. ●
Newell Brands, Inc. ●
Red Robin Gourmet Burgers, Inc.●
Total Put Options (Premiums Received $273,975) - (0.65)%
TOTAL WRITTEN OPTIONS (Premiums Received $902,563) - (2.66)%
STATEMENT OF ASSETS AND LIABILITIES
Investments in Securities, at Value (Cost $11,818,283,
$2,145,325 and $33,753,997, respectively)
Deposit with Broker for Securities Sold Short and Options Written
Receivables:
Dividends and Interest
Due from Adviser
Shareholder Subscriptions
Portfolio Securities Sold
Liabilities:
Short Cash Denominated in Foreign Currencies (Premiums
$1,351, $0, and $0, respectively)
Covered Call Options Written at Value (Premiums received
$0, $15,683 and $902,563, respectively)
Payables:
Advisory Fees
Shareholder Redemptions
Portfolio Securities Purchased
Chief Compliance Officer Fees
Distribution Fees
Net Assets Consist of:
Paid In Capital
Distributable Earnings (Deficit)
Shares outstanding (unlimited number of shares authorized with no par value)
Net Asset Value Per Share
Redemption Price Per Share ($6.87 x 0.98) *
Investor Class:
Redemption Price Per Share ($11.91 x 0.98) *
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
Class A:
Offering Price Per Share ($14.24/ 94.50%) (Note 2)
Class C:
Institutional Class:
* The Funds will impose a 2% redemption fee on shares redeemed within 5 business days of purchase for the Value and Baldwin Funds.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2019
Investment Income:
Dividends (a)
Total Investment Income
Administration Fees
Accounting Fees
Servicing Account Fees
Transfer Agent Fees
Custody Fees
Trustee Fees
Printing and Mailing Expense
Litigation Fees
Insurance Fees
Fees Waived and Reimbursed by the Adviser
Net Expenses
Realized Gain (Loss) on:
Proceeds from Securities Litigation
Written Options
Securities Sold Short
Net Realized Gain (Loss) on Investments, Proceeds from Litigation,
Written Options, Securities Sold Short and Foreign Currency Transactions
Net Change in Unrealized Appreciation (Depreciation) on:
Net Change in Unrealized Appreciation (Depreciation) on Investments,
Options, Securities Sold Short and Foreign Currency Transactions
Realized and Unrealized Gain (Loss) on Investments, Proceeds from Litigation,
Net Increase (Decrease) in Net Assets Resulting from Operations
(a) Foreign withholding taxes on dividends/tax reclaims/interest.
STATEMENT OF CHANGES IN NET ASSETS
Years Ended
Increase (Decrease) in Net Assets From Operations:
Net Realized Gain (Loss) on:
Unrealized Appreciation (Depreciation) on:
Net Decrease in Net Assets Resulting from Operations
Distributions to Shareholders:
Total Distributions Paid to Shareholders
Capital Share Transactions
Total Decrease in Net Assets
Net Assets:
Beginning of Year
(a) As of June 30, 2018, Accumulated Undistributed Net Investment Income was $0.
Net Increase in Net Assets Resulting from Operations
Class C *
Institutional Class
Total Increase (Decrease) in Net Assets
* For the Period July 1, 2017 to June 22, 2018. Class C merged into Class A on June 22, 2018.
Selected data for a share outstanding throughout each year.
Net Asset Value, at Beginning of Year
Income (Loss) From Investment Operations:
Net Investment Income (Loss) *
Net Gain (Loss) on Securities
(Realized and Unrealized)
Total from Investment Operations
Realized Gains
Total from Distributions
Redemption Fees ***
- (a)
Net Asset Value, at End of Year
Total Return **
(0.99)%
Ratios/Supplemental Data:
Net Assets at End of Year (Thousands)
Ratio of Expenses to Average Net Assets
Ratio of Net Investment Income (Loss) to
Average Net Assets
Portfolio Turnover
* Per share net investment income (loss) has been determined on the basis of average shares outstanding during the period.
** Assumes reinvestment of dividends.
*** The Fund will impose a 2% redemption fee on shares redeemed within 5 business days of purchase.
(a) Amount calculated is less that $0.005
Net Investment Loss *
Ratio of Net Investment Loss to Average Net Assets
Income From Investment Operations:
Return of Capital
Before Reimbursement:
Ratio of Net Investment Income (Loss) to Average
After Reimbursement:
* Per share net investment income has been determined on the basis of average shares outstanding during the period.
5.46%(f)
Ratio of Expenses to Average Net Assets (a) (b)
Net Assets (a) (d)
Ratio of Expenses to Average Net Assets (a) (c)
2.16%(e)
Ratio of Net Investment Income to Average Net
Assets (a) (d)
(a) Expense waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred.
(b) Expenses before reimbursements (excluding dividend and interest expense for securities sold short) were 2.85%, 3.01%, 2.78%, 2.40%, and 2.16% for the years ended June 30, 2019, 2018, 2017, 2016, and 2015, respectively.
(c) Expenses after reimbursements (excluding dividend and interest expense for securities sold short) were 2.15%, 1.97%, 1.98%,1.98%, and 1.98% for the years ended June 30, 2019, 2018, 2017, 2016, and 2015, respectively.
(d) The net investment income (loss) ratios include dividends on short positions, if applicable.
(e) Expense includes 0.17% of litigation fees. After reimbursement ratio of expenses to average net assets excluding litigation fees is 1.99%.
(f) The Fund's total return for the year ended June 30, 2019, would have been 3.91% if it had not received proceeds from securities litigation in the amount of $444,232.
(c) Expenses after reimbursements (excluding dividend and interest expense for securities sold short) were 1.87%, 1.71%, 1.73%, 1.73%, and 1.73% for the years ended June 30, 2019, 2018, 2017, 2016, and 2015, respectively.
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 three series authorized by the Trust, the Frank Value Fund (the "Value Fund"), the Leigh Baldwin Total Return Fund (the "Baldwin Fund"), and the Camelot Event Driven Fund (the "Camelot Fund") (each a "Fund" and collectively the "Funds"). Frank Capital Partners LLC ("FCP") is the adviser to the Value Fund, Leigh Baldwin & Co., LLC ("LBC") is the adviser to the Baldwin Fund, and Camelot Event Driven Advisors, LLC ("Camelot Advisors") is the adviser to the Camelot Fund.
The Value Fund's investment objective is to provide long-term capital appreciation. The Value Fund's principal investment strategy is value investing. 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. The Camelot Fund's investment objective is to provide long-term growth of capital. The Camelot Fund seeks to achieve its investment objective by investing in the securities of publicly traded companies involved in mergers, takeovers, tender offers, leveraged buyouts, spin-offs, liquidations, or similar events ("corporate reorganizations"). The Camelot Fund acquired all of the assets and liabilities of the Quaker Event Arbitrage Fund ("Predecessor Fund"), a series of Quaker Investment Trust, in a tax-free reorganization on June 22, 2018. In connection with this acquisition, Class A, Class C and Institutional Class shares of the Predecessor Fund were exchanged for Class A, Class A and Institutional Class shares of the Fund, respectively. The Camelot Fund commenced operations on June 7, 2010 in conjunction with the reorganization of the Pennsylvania Avenue Event Driven Fund ("Event Driven Fund"). The predecessor to the Predecessor Fund, the Pennsylvania Avenue Event Driven Fund, commenced operations on November 21, 2003. Class C merged into Class A on June 22, 2018.
The Value Fund currently has 3 classes of shares; Investor Class shares, Class C shares, and Institutional Class shares. The share classes vary in distribution (12b-1) fee accruals and minimum initial investment required.
The Camelot Fund currently has 2 classes of shares; Class A shares and Institutional shares. Class A shares are charged a front-end sales charge and a distribution and servicing fee; and Institutional Class shares bear no front-end sales charge or CDSC, but have higher minimum investment thresholds.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 2. Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. The Funds are each a series of an investment company that follows the accounting and reporting guidance of Accounting Standards Codification Topic 946 and Accounting Standards Update 2013-08 applicable to investment companies.
Securities Valuations - All investments in securities are recorded at their estimated fair value, as described in Note 3.
Share Valuation - The price (net asset value) of the shares of each Fund is 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.
Short Sales of Investments - Certain Funds may make short sales of investments, which are transactions in which a Fund sells a security it does not own in anticipation of a decline in the fair value of that security. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund is then obligated to replace the security borrowed by purchasing it at the market price at the time of replacement. The broker retains the proceeds of short sales to the extent necessary to meet margin requirements until the short position is closed out.
If a security pays a dividend while the Fund holds it short, the Fund will need to pay the dividend to the original owner of the security. Since the Fund borrowed the shares and sold them to a third party, the third party will receive the dividend from the security and the Fund will pay the original owner the dividend directly. The Fund is not entitled to the dividend because it does not own the shares. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale.
Futures Contracts - Certain Funds may enter into financial futures contracts, to the extent permitted by their investment policies and objectives, for bona fide hedging and other permissible risk management purposes including protecting against anticipated changes in the value of securities a Fund intends to purchase. Upon entering into a financial futures contract, a Fund is required to deposit cash or securities as initial margin.
Additional securities are also segregated as collateral up to the current market value of the financial futures contracts. Subsequent payments, known as variation margin, are made or received by the Fund, depending on the fluctuation in the value of the underlying financial instruments. The Fund recognizes an unrealized gain or loss equal to the variation margin. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing
transactions and the Fund's basis in the contracts. The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Fund could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
Foreign Currency Transactions - Securities and other assets and liabilities denominated in foreign currencies are converted each business day into U.S. dollars based on the prevailing rates of exchange. Purchases and sales of portfolio securities and income and expenses are converted into U.S. dollars on the respective dates of such transactions.
Gains and losses resulting from changes in exchange rates applicable to foreign securities are not reported separately from gains and losses arising from movements in securities prices.
Net realized foreign exchange gains and losses include gains and losses from sales and maturities of foreign currency exchange contracts, gains and losses realized between the trade and settlement dates of foreign securities transactions, and the difference between the amount of dividends, interest and foreign withholding taxes on the Funds' books and the U.S. dollar equivalent of the amounts actually received. Net unrealized foreign exchange gains and losses include gains and losses from changes in the fair value of assets and liabilities denominated in foreign currencies other than portfolio securities, resulting from changes in exchange rates.
Forward Foreign Currency Contracts - Certain Funds may enter into forward foreign currency contracts to hedge against foreign currency exchange rate risk on their non-U.S. dollar denominated securities or to facilitate settlement of foreign currency denominated portfolio transactions. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The contract is marked-to-market daily and the change in value is recorded by a Fund as an unrealized gain or loss. When a forward foreign currency contract is extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished.
Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
Redemption Fee - To discourage short-term trades by investors, the Value, Baldwin, and Camelot Funds will impose a redemption fee of 2.00% of the total redemption amount (calculated at market value) if shares are redeemed within five business days of purchase.
There was $5 of redemption fees collected for the Value Fund and $84 of redemption fees collected for the Camelot Fund during the year ended June 30, 2019.
Security Transactions 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.
Federal Income Taxes - The Funds make no provision for federal income or excise tax. The Funds intend to qualify each year as "regulated investment companies" ("RIC") under subchapter M of the Internal Revenue Code of 1986, as amended, by complying with the requirements applicable to RICs and by distributing substantially all of their taxable income. The Funds also intend to distribute sufficient net investment income and net capital gains, if any, so that they will not be subject to excise tax on undistributed income and gains. If the required amount of net investment income or gains is not distributed, the Funds could incur a tax expense. Therefore, no federal income tax or excise provision is required.
The Funds recognize the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities. Management has analyzed the Funds' tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (2016-2019) or expected to be taken in the Funds' 2019 tax returns. The Funds identify their major tax jurisdiction as U.S. Federal, however the Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period ended June 30, 2019, the Funds did not incur any interest or penalties.
Distributions to Shareholders - The Value Fund and Camelot Fund intend to distribute to their shareholders substantially all of their net realized capital gains and net investment income, if any, at year-end; the Baldwin Fund distributes net investment income quarterly and net realized capital gains, if any, annually. Distributions will be recorded on ex-dividend date.
Foreign Currency - Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based on the exchange rate of such currencies against U.S. dollars on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies
are translated into U.S. dollar amounts at the exchange rate in effect on the respective dates of such transactions.
The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds' books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
Derivative Transactions - The Funds 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 Funds 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 Fund(s) as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.
The Camelot Fund may invest in structured notes. A structured note is a type of derivative security for which the amount of principal repayments and/or interest payments is based upon the movement of one or more "factors." The impact of the movements of these factors may increase or decrease through the use of multipliers or deflators. Structured notes may be designed to have particular quality and maturity characteristics and may vary from money market quality to below investment grade.
The Camelot Fund may also invest in warrants. Warrants provide the Camelot Fund with exposure and potential gains upon equity appreciation of the underlying company's share price. The value of a warrant has two components: time value and intrinsic value. A warrant has a limited life and expires on a certain date. As the expiration date of a warrant approaches, the time value of a warrant will decline. In addition, if the stock underlying the warrant declines in price, the intrinsic value of an in-the-money warrant will decline. Further, if the price of the stock underlying the warrant does not exceed the strike price of the warrant on the expiration date, the warrant will expire worthless. As a
result, the Camelot Fund could potentially lose its entire investment in a warrant. See Note 8 for additional information on derivative transactions in the Funds.
Share class accounting – Investment income, common expenses and realized/unrealized gains (losses) on investments are allocated to the three classes of shares of the Value Fund on the basis of the daily net assets of each class. Investment income, common expenses and realized/unrealized gains (losses) on investments are allocated to the two classes of shares of the Camelot Fund on the basis of the daily net assets of each class. Fees relating to a specific class are charged directly to that share class.
Use of Estimates - The preparation of financial statements in conformity with GAAP 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.
Subsequent events: Management has evaluated the impact of all subsequent events on the Funds through the issuance date of these financial statements and has noted no such events requiring disclosure.
Note 3. Securities Valuations
Processes and Structure
The Trust's Board of Trustees has adopted guidelines for valuing securities including in circumstances in which market quotes are not readily available and has delegated to the respective adviser the responsibility for determining fair value prices, subject to review by the Board of Trustees.
In accordance with the Trust's good faith pricing guidelines, the respective 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 maturity with respect to debt issues, or a combination of these and other methods.
Hierarchy of Fair Value Inputs
The Funds utilize various methods to measure the fair value of most of their investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows:
Level 1. Unadjusted quoted prices in active markets for identical assets or liabilities that the company 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 inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.
Level 3. Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the company's own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
A Fund may hold securities, some of which are classified as Level 3 investments (as defined below). Level 3 investments have significant unobservable inputs, as they trade infrequently. In determining the fair value of these investments, management uses the market approach which includes as the primary input the capital balance reported; however, adjustments to the reported capital balance may be made based on various factors, including, but not limited to, the attributes of the interest held, including the rights and obligations, and any restrictions or illiquidity of such interests, and the fair value of these securities.
Fair Value Measurements
A description of the valuation techniques applied to the company's major categories of assets and liabilities measured at fair value on a recurring basis follows.
Equity securities (common stock, closed-end and exchange traded funds). Securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded, and valuation adjustments are not applied, they are
categorized in Level 1 of the fair value hierarchy. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as american depositary receipts, financial futures, exchange traded funds, and the movement of the certain indexes of securities based on a statistical analysis of the historical relationship and that are categorized in Level 2. Preferred stock and other equities traded on inactive markets or valued by reference to similar instruments are also categorized in Level 2.
Debt and other fixed - income securities are valued at the last quoted bid price and/or by using a combination of daily quotes and matrix evaluations provided by an independent pricing service (which reflect such factors as security prices, yields, maturities, ratings, and dealer and exchange quotations), the use of which has been approved by the Board.
U.S. government obligations - U.S. government securities are normally valued using a model that incorporates market observable data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. U.S. government securities are categorized in Level 1 or Level 2 of the fair value hierarchy, depending on the inputs used and market activity levels for specific securities.
Short term investments - Short term investments are valued using amortized cost, which approximates fair value. These securities will be categorized in Level 1 of the fair value hierarchy.
Derivative instruments (structured notes, warrants and options) – Derivative transactions which are actively traded, and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Derivative transactions traded on inactive markets or valued by reference to similar instruments are categorized in Level 2 of the fair value hierarchy. Options are valued at the last sales prices on the valuation date if the last sales price is between the closing bid and asked prices. Otherwise, options are valued at the closing bid price. These securities will be categorized in Level 2 of the fair value hierarchy if valued at other than closing price.
The following tables summarize the inputs used to value each Fund's assets and liabilities measured at fair value as of June 30, 2019:
Financial Instruments - Assets
Common Stocks *
Corporate Bonds *
U.S. Government Agencies & Obligations
Purchased Options
Financial Instruments - Liabilities
Escrow Shares
Contingent Value Rights
Escrow Notes
Preferred Stocks *
Stock Certificate
Term Loan
Bank Deposit Accounts
Written Options:
Call Options
Put Options
*Industry classifications for these categories are detailed on the Schedule of Investments of each Fund.
The Value Fund did not hold any Level 3 assets during the year ended June 30, 2019. The Baldwin Fund did not hold any Level 3 assets during the year ended June 30, 2019. It is the Funds policy to recognize transfers into and out of Level 1, Level 2 and Level 3 at the end of the reporting period. There have been no transfers in and out of Level 1 and Level 2 fair value measurements as of June 30, 2019.
The following is a reconciliation of Camelot Fund's Level 3 investments for which significant unobservable inputs were used in determining value. See Schedules of Investments for industry breakouts:
Balance as of June 30, 2018
Realized Gain/
Net Unrealized Appreciation/
(Depreciation)
Amortized discounts/
Transfers in to Level 2
Balance as of June 30,
Corporate Bonds*
* During year ended June 30, 2019, $850,000 of Level 3 Corporate Bonds was reclassified to Structured Notes.
The following presents information about significant unobservable inputs related to Level 3 investments at June 30, 2019:
Fair Value at
Unobservable
Increase in Inputs
Impact on Valuation*
Market approach
Uncertainty of any
additional future payout
Last traded price of
pre-conversion bonds
Profitability expected
Waste & Environmental
Last traded price of non-
Services & Equip.
restricted shares less a discount
Asset-Backed
Vendor pricing
Single broker quote
Oil, Gas & Coal
Retail Discretionary
Note 4. Investment Management and Administrative Agreements
The Trust has a "Management Agreement" with FCP, with respect to the Value Fund. Under the terms of the Management Agreement, FCP manages the investment portfolio of the Value Fund, subject to policies adopted by the Trust's Board of Trustees. Under the Management Agreement, FCP, 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. FCP also pays the salaries and fees of all its officers and employees that serve as officers and trustees of the Trust. FCP pays all ordinary operating expenses of the Value Fund except brokerage fees and commissions, taxes, borrowing costs (such as (a) interest and (b) dividend expenses on securities sold short), Rule 12b-1 fees, acquired fund fees and expenses, and extraordinary expenses. For its services and the payment of Value Fund ordinary operating expenses, FCP receives an annual investment management fee of 0.99% of the
average daily net assets of the Value Fund. For the year ended June 30, 2019, FCP earned management fees of $145,040 from the Value Fund. As of June 30, 2019, the Value Fund owed FCP $10,016 for management fees.
FCP also provides administrative services to the Value Fund under an Administration Agreement and receives a fee equal to 0.25% of the Value Fund's average daily net assets for those services. Under the Administration Agreement, FCP pays all of the operating expenses of the Value Fund except management fees, Rule 12b-1 fees, brokerage, taxes, borrowing costs (such as interest and dividend expense of securities sold short), and extraordinary expenses. For the year ended June 30, 2019, the Value Fund accrued $36,626 in administrative fees. At June 30, 2019, the Value Fund owed $2,529 in administrative fees.
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 Baldwin Fund is authorized to pay LBC a management fee computed and accrued daily and paid monthly at an annual rate of 0.45% of the Baldwin Fund's average daily net assets. For the year ended June 30, 2019, LBC's fee of $10,519 was accrued by the Baldwin Fund for advisory fees.
Prior to November 1, 2018, LBC contractually agreed to waive its advisory fees and/or to reimburse the Baldwin Fund's expenses to 1.75% of the Baldwin Fund's average daily net assets. Effective of November 1, 2018, LBC has contractually agreed to waive its advisory fees and/or to reimburse the Baldwin Fund's expenses, at least until October 31, 2024, to the extent necessary to limit the Baldwin Fund's ordinary operating 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 expenses on securities sold short, underlying fund fees, Rule 12b-1 fees and expenses, or extraordinary expenses such as litigation) to 1.00% of the Baldwin Fund's average daily net assets, 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 waived $10,519 of advisory fees and reimbursed the Baldwin Fund $65,592 for expenses during the year ended June 30, 2019. As of June 30, 2019, the LBC owed the Baldwin Fund $11,685 in reimbursement fees. At June 30, 2019, the amounts subject to future recoupment total $232,912 and are as follows:
Fiscal Year Ended
Recoverable Through
Prior to February 24, 2018, the Fund's advisor was Quaker Funds, Inc. ("QFI"). As compensation for its management services, the Fund was obligated to pay the QFI a fee computed and accrued daily and paid monthly at an annual rate of 1.30% of the average daily net assets of the Fund. On February 24, 2018, the Trustees selected Camelot Advisors as the adviser to the Camelot Fund. Under the terms of the management agreement, and subject to the Board of Trustees of Frank Funds, Camelot will be responsible for formulating the Fund's investment policies, making ongoing investment decisions and engaging in portfolio transactions. Under the terms of the "Management Agreement" the Adviser manages the Fund's investments subject to approval of the Board of Trustees; furnishes investment advice to the Fund on the basis of a continuous review of the portfolio; and recommends to the Fund when and to what extent securities should be purchased or sold. As compensation for its management services, the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.30% of the average daily net assets of the Fund. The Management Agreement was approved for an initial term of two years, and will continue on a year to year basis thereafter, provided that continuance is approved at least annually by specific approval of the Board of Trustees of the Fund or by vote of the holders of a majority of the outstanding voting securities of the Fund. For the year ended June 30, 2019, Camelot Advisors earned management fees of $301,986 from the Camelot Fund. As of June 30, 2019, the Camelot Fund owed Camelot Advisors $44,882 for management fees.
Prior to February 24, 2018, QFI contractually agreed to waive its management fee to the extent that the total operating expenses of Camelot Fund's Predecessor Fund (exclusive of interest, taxes, brokerage commissions and other costs incurred in connection with the purchase or sale of portfolio securities, and extraordinary items) exceed the annual rate of 1.99% for Class A shares, and 1.74% for Institutional Class shares of the average net assets of each class, respectively. If, at any time, the annualized expenses of Camelot Fund's Predecessor Fund were less than the annualized expense ratio, the Trust, on behalf of Camelot Fund's Predecessor Fund, would reimburse QFI for any fees previously waived and/or expenses previously assumed; provided, however, that repayment would be payable only to the extent that it (a) can be made during the three (3) years following the time at which the adviser waived fees or assumed expenses for Camelot Fund's Predecessor Fund, and (b) can be repaid without causing the expenses of Camelot Fund's Predecessor Fund to exceed the annualized expense ratio. This fee waiver agreement shall continue in effect from October 28, 2016 until November 1, 2017. This agreement shall automatically terminate upon termination of the advisory agreement between QFI and the Trust or, with respect to Camelot Fund's Predecessor Fund, in the event of its merger or liquidation. As of February 24, 2018, Camelot Advisors have contractually agreed to waive its management fees and/or assume expenses to the extent necessary to reduce the Total Annual Fund Operating Expenses (exclusive of any front-end or contingent deferred loads, taxes, all interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, dividend expense


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Technology for the production of walnut oil - "Sharlan"
Baking - The oven is partitioned diagonally into two parts. The place, where the fire is stirred, occupies one third of the oven. When the oven is heated enough, the craftsman spreads the nuts in its other half and nurses the fire again. He stirs the nuts continuously with a shovel and twirls them in a semicircle by the fire. When a nut becomes yellow it's ready for grinding.
Grinding - It is done between two mill - stones, driven by a horse. Sixty-seventy kilograms of nuts have to be ground for 1 "nibet" /dose/ of oil.
Boiling -10l. water, 1-2kg sea-salt and 15k yeast of walnut oil are put in the cauldron for the production of one dose. After boiling up, the ground mash is added. The master stirs it without a break and watches until it turns. Water helps extracting the oil. If there's sufficient quantity water, the oil comes out on top and the mash remains at the bottom. The boiling continues for another 1h. The walnut oil has to be yellow in colour. Then the fire is taken out of the little oven in order the oil to cool down.
Pressing - The paste is put in buckets and brought to the wooden press, where it is emptied into burlap, set in a cut stone. The worker wraps the burlap up in four sides, puts the cover and tightens the wooden screw. The oil flows in a copper, placed in a stone trough. The oil-cake left after pressing is called "kyuspe" in Bulgarian.
Maturing - The ready oil is kept in big earthenware vessels, built in the ground, in order to maintain equal temperature.
The whole procedure takes 10-12 hours. In strong pressing 1k pure oil is extracted from 3k nuts. In 1928 Mr. Beyalov replaced the horse in its workshop with a dieselengine.