ALPHA ANALYTICS
---------------
INVESTMENT TRUST
----------------
ALPHA ANALYTICS SMALL CAP QUANT FUND
ALPHA ANALYTICS VALUE FUND
ANNUAL REPORT
JULY 31, 1999
<PAGE>
August 31, 1999
Dear Fellow Shareholders:
Welcome to the Alpha Analytics Mutual Fund family. The funds became active in
late December, 1998, and the first stocks were bought in early January. This
report covers the period from inception until July 31, 1999-- about 7 months.
Launching the mutual funds was a long, drawn out-process, and we are glad we
have moved from planning to implementation.
Investment money should be patient money, and our time horizon is measured in
years, not in months. When we were thinking about what kinds of mutual funds to
offer, we investigated which investment styles work well over the long term.
Numerous studies show that over a long time horizon a value orientation does
better than a growth orientation, and small cap stocks do better than large cap
stocks. We decided to initially offer two mutual funds exploiting strategies,
and allowing our shareholders to diversify between two portfolios, if they
should desire. As you will read in the remaining part of this letter, the actual
performance of the two funds has dramatically demonstrated the importance of
diversification of your investment assets.
The Alpha Analytics Value Fund focuses on mid- and large-cap companies which we
believe are undervalued based on price/earnings, price/sales, book/market and
other value measures. This fund is sub-advised by Cambiar Investors, who have
had 25 years experience managing money. This fund has done well year-to-date,
returning 19.20% net of fees from inception through July 31, 1999. This places
it in the top 2% of Large-Cap Value funds in the Morningstar database for this
period. For comparison, the Russell 1000/Value Index returned 9.56%, and the
S&P500 returned 8.87% for the period December 31, 1998-July 31, 1999. The
average Large Cap Value fund returned 7.21% for this period.
The assets in the Alpha Analytics Value Fund have increased from about $540
thousand in the beginning of January to about $2.4 million on July 31, 1999.
The Alpha Analytics Small Cap Quant fund focuses on companies with market
capitalizations between $75 million and $1.5 billion. It uses a quantitative
model to pick a portfolio of stocks which we believe should increase in price in
the next 12 months based on our proprietary model. This model has both value and
growth characteristics. This fund started at a time when both small cap stocks
and value stocks were out of favor and its record reflects this. In part because
of this, the NAV of the Quant fund declined steadily during its first three
months. On March 31, 1999, the Quant fund was down 23%, and it reached its
lowest point a few days later. Since then the fund has been recovering nicely,
although the NAV is still lower than when it began. At the end of the fiscal
year, July 31, 1999, the Quant fund was down 11.40%. This places it in the
bottom 2% of Small Cap Blend funds in the Morningstar database for this period.
For comparison, the Russell 2000 Index returned 6.29% and the S&P Small Cap 600
4.1%. Much of the return in these larger indices was driven by a few Internet
and "dot-com" stocks. In spite of the disappointments of the first quarter of
this year, we remain committed to a disciplined, quantitative approach to
investing.
The assets in the Quant fund increased from about $540 thousand in the beginning
of January to close to $997 thousand on July 31, 1999.
As a mutual fund company, we leave the asset allocation decisions to our
shareholders. This has two consequences. We are committed to maintaining the
style and market capitalization of our mutual funds. Secondly, our goal is to be
fully invested (subject to prudent management of funds both inbound and
outbound) at all times. In pursuit of this policy at the end of the fiscal year,
the Small Cap Quant Fund was 99.9% invested, while the Value fund was 82.3%
invested. We expect the Value Fund to become fully invested in the coming year.
<PAGE>
I started out this letter by addressing you as "Fellow Shareholders". I own
substantial shares in both funds. We invest this money like our own because in
fact our own money is invested along side yours.
Thanks again for choosing Alpha Analytics Investment Funds as one of your
investment vehicles. Don't let short term market volatility knock you off your
long-term investment plans. In investing patience has its rewards.
Best regards
/S/ ROBERT E. GIPSON
- --------------------
Robert E. Gipson
President
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC VALUE FUND
SCHEDULE OF INVESTMENTS
July 31, 1999
MARKET
SHARES VALUE
- ---------------- -------------
COMMON STOCKS - 82.84%
AUTOMOBILES - 1.00%
2,000 Volkswagen AG-Sponsored ADR.................. $ 23,974
-------------
APPAREL MANUFACTURERS - 2.20%
2,000 Warnaco Group, Inc........................... 52,375
-------------
BANKING - 3.18%
800 Bank One Corporation......................... 43,650
700 First Union Corporation...................... 32,200
-------------
75,850
-------------
BASIC MATERIALS - 2.28%
2,200 DeBeers Consolidated Mines ADR............... 54,450
-------------
COMMERCIAL SERVICES - 8.02%
1,000 Equifax, Inc................................. 32,875
2,500 First Data Corporation....................... 123,906
1,500 Manpower, Inc................................ 34,688
-------------
191,469
-------------
COMPUTER AND RELATED - 22.89%
2,700+ 3Com Corporation............................. 65,137
250+ Chemdex Corporation.......................... 7,500
600 Electronic Data Systems Corporation.......... 36,188
2,000+ J.D. Edwards & Company....................... 30,250
1,500+ Newbridge Networks Corporation............... 39,844
5,000+ Novell, Inc.................................. 128,750
4,000+ Oracle Corporation........................... 152,250
1,100+ Silicon Graphics, Inc........................ 19,456
2,200+ Symantec Corporation......................... 66,550
-------------
545,925
-------------
CONSUMER SERVICES - 1.25%
2,400 Stewart Enterprises, Inc, Class A............ 29,850
-------------
ELECTRICAL EQUIPMENT - 2.73%
644 Knoninklijke Philips Electronics N.V......... 65,124
-------------
FINANCIAL SERVICES - 4.08%
1,011 ING Groep N.V. Sponsored ADR................ 51,435
800 MBIA, Inc.................................... 45,800
-------------
97,235
-------------
INSURANCE - 4.42%
2,000 Allstate Corporation......................... 71,000
1,100 Everest Reinsurance Holdings, Inc............ 34,375
-------------
105,375
-------------
MANUFACTURING - 4.15%
2,500 + Owens-Illinois, Inc.......................... 62,344
1,100 Trinity Industries, Inc...................... 36,575
-------------
98,919
-------------
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC VALUE FUND
SCHEDULE OF INVESTMENTS
July 31, 1999
(Continued)
MARKET
Shares VALUE
- ---------------- -------------
MEDIA AND ENTERTAINMENT - 4.50%
1,500 + CBS Corporation.............................. 65,906
1,500 + Infinity Broadcating Corporation ............ 41,344
-------------
107,250
-------------
MEDICAL AND RELATED - 1.66%
700 + Genzyme Corporation ......................... 39,594
-------------
OIL ENERGY AND NATURAL GAS - 2.54%
1,000 Schlumbeger Limited ......................... 60,562
-------------
PHARMACEUTICALS - 4.79%
2,000 + Elan Corporation PLC Sponsored ADR .......... 58,125
700 Novo-Nordisk, A/S Sponsored ADR ............. 38,850
500 + Watson Pharmaceuticals, Inc. ................ 17,219
-------------
114,194
-------------
RETAIL - 8.62%
2,100 + Borders Group, Inc.................... 27,825
3,000 CKE Restaurants, Inc.................. 42,000
800 Limited, Inc.......................... 36,550
1,200 + Neiman Marcus Group, Inc.............. 30,000
3,700 + Office Depot, Inc..................... 69,375
-------------
205,750
-------------
TELECOMMUNICATIONS - 3.05%
2,000 COMSAT Corporation.................... 72,750
-------------
TRANSPORTATION - 1.48%
1,500 Ryder System, Inc..................... 35,344
-------------
TOTAL COMMON STOCK
(Cost $1,839,869) 1,975,990
-------------
SHORT TERM INVESTMENTS - 4.49%
107,000 Firstar Treasury Fund.................
(Cost $107,000) 107,000
-------------
TOTAL INVESTMENTS
(Cost $1,946,869)..................... 87.33% 2,082,990
Other assets in excess of liabilities 12.67% 302,259
------- -------------
TOTAL NET ASSETS......................100.00% $ 2,385,249
======= =============
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC VALUE FUND
SCHEDULE OF INVESTMENTS
July 31, 1999
(Continued)
(1) Federal Tax Information: At July 31, 1999 the net unrealized
appreciation based on cost for Federal Income tax purposes of
$1,946,869 was as follows:
Aggregate gross unrealized appreciation for all investments for
which there was an excess of value over cost................... $ 256,330
Aggregate gross unrealized depreciation for all investments for
which there was an excess of cost over value................... (120,209)
-------------
Net unrealized appreciation.................................... $ 136,121
=============
+ Non-income producing security
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC SMALL CAP QUANT FUND
SCHEDULE OF INVESTMENTS
July 31, 1999
MARKET
SHARES VALUE
- ---------------- ------------
COMMON STOCKS - 99.91%
ADVERTISING/MARKETING - 10.51%
2,400 Advanced Marketing Services, Inc............. $ 39,000
1,400 + ADVO, Inc.................................... 26,775
1,900 INTRAV, Inc.................................. 38,712
-------------
104,487
-------------
APPAREL MANUFACTURERS- 3.08%
1,800 Oshkosh B'Gosh, Inc.......................... 30,600
-------------
AUTO & AUTOMOTIVE PRODUCTS- 7.89%
1,200 + Strattec Security Corporation................ 42,750
1,500 + Tower Automotive, Inc........................ 35,719
-------------
78,469
-------------
BUILDING & CONSTRUCTION - 16.70%
1,300 + Champion Enterprises, Inc.................... 17,794
1,900 + Dayton Superior Corporation.................. 38,475
1,700 MDC Holdings, Inc............................ 35,275
800 + NVR, Inc..................................... 45,000
1,300 Pulte Corporation............................ 29,494
-------------
166,038
-------------
CAPITAL EQUIPMENT - 2.75%
800 + Astec Industries, Inc........................ 27,300
-------------
COMMERCIAL SERVICES - 1.99%
2,100 + Personnel Group of America, Inc.............. 19,819
-------------
COMPUTER AND RELATED - 6.70%
1,800 + Anixter International, Inc................... 35,550
2,100 + CHS Electronics, Inc......................... 8,006
1,600 + Pomeroy Computer Resources, Inc............ 23,100
-------------
66,656
-------------
CONSUMER CYCLICALS - 12.80%
1,300 + Furniture Brands International, Inc.......... 35,100
3,300 The Rowe Companies........................... 37,331
2,400 + SCP Pool Corporation......................... 54,900
-------------
127,331
-------------
CONSUMER STAPLE - 7.24%
1,600 + Ben & Jerry's Homemade, Inc - Class A...... 33,600
1,600 + J & J Snack Foods Corporation................ 38,400
-------------
72,000
-------------
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC SMALL CAP QUANT FUND
SCHEDULE OF INVESTMENTS
July 31, 1999
(Continued)
MARKET
SHARES VALUE
- ---------------- -------------
ELECTRICAL EQUIPMENT - 2.88%
1,600 Harmon Industries, Inc....................... 28,600
-------------
HEALTHCARE - 3.17%
1,500 + Res-Care, Inc................................ 31,500
-------------
INSURANCE - 2.10%
1,200 Fidelity National Financial, Inc............. 20,925
-------------
MEDICAL AND RELATED - 6.69%
1,200 + Maxxim Medical, Inc.......................... 28,050
1,300 + Syncor International Corporation (Del)....... 38,513
-------------
66,563
-------------
RETAIL - 3.30%
2,100 + Brookstone, Inc.............................. 32,812
-------------
TRANSPORTATION - 12.11%
800 + Alaska Air Group, Inc........................ 35,500
2,000 + Covenant Transport, Inc...................... 35,250
1,600 Expeditors International of Washington, Inc.. 49,700
-------------
120,450
-------------
TOTAL COMMON STOCK
(Cost $1,094,790) 993,550
-------------
SHORT TERM INVESTMENTS - 0.19%
1,876 Firstar Treasury Fund........................
(Cost $1,876) 1,876
-------------
TOTAL INVESTMENTS
(Cost $1,096,666).....................100.10% 995,426
Liabilities in excess of other assets..(0.10)% (1,032)
-------- -------------
TOTAL NET ASSETS...................... 100.00% $ 994,394
======= =============
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC SMALL CAP QUANT FUND
SCHEDULE OF INVESTMENTS
July 31, 1999
(Continued)
(1) Federal Tax Information: At July 31, 1999 the net unrealized
appreciation based on cost for Federal Income tax purposes of
$1,096,666 was as follows:
Aggregate gross unrealized appreciation for all investments for
which there was an excess of value over cost.................$53,642
Aggregate gross unrealized depreciation for all investments for
which there was an excess of cost over value................(154,882)
----------
Net unrealized depreciation................................$(101,240)
==========
+ Non-income producing security
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
ALPHA ANALYTIC FUNDS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
<TABLE>
<CAPTION>
SMALL CAP
VALUE QUANT
PORTFOLIO PORTFOLIO
-----------------------------------
ASSETS:
<S> <C> <C>
Investments in securities, at value (Cost $1,946,869
and $1,096,666, respectively) (Note 2) ........ $ 2,082,990 $ 995,426
Cash ................................................. 311,522 0
Receivable for securities sold ....................... 17,124 0
Dividends and interest receivable .................... 244 91
----------- -----------
----------- -----------
TOTAL ASSETS .................................. 2,411,880 995,517
----------- -----------
LIABILITIES:
Payable for securities purchased ..................... 24,265 0
Accrued expenses (Note 3) ........................... 2,366 1,123
-----------
TOTAL LIABILITIES ............................. 26,631 1,123
----------- -----------
NET ASSETS .................................... $ 2,385,249 $ 994,394
=========== ===========
NET ASSETS CONSIST OF:
Additional paid in capital (Note 6) .......... $ 2,122,711 $ 1,095,634
Undistributed net investment income (Note 6) .. 1,162 0
Accumulated undistributed net realized
gain from investment transactions (Note 6) .. 125,255 0
Net unrealized appreciation (depreciation) on
investments ................................. 136,121 (101,240)
----------- -----------
NET ASSETS .................................... $ 2,385,249 $ 994,394
=========== ===========
Net asset value, redemption price per share
($2,385,249/200,105 and $994,394/112,208 shares
of capital stock outstanding, respectively)
(Note 4) ...................................... $ 11.92 $ 8.86
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
ALPHA ANALYTIC FUNDS
STATEMENT OF OPERATIONS
For the period January 1, 1999 (Commencement of operations)
to July 31, 1999
<TABLE>
<CAPTION>
SMALL CAP
VALUE QUANT
PORTFOLIO PORTFOLIO
----------- ----------
INVESTMENT INCOME:
<S> <C> <C>
Dividends ............................................ $ 9,279 $ 1,754
Interest ............................................. 4,094 470
--------- ---------
13,373 2,224
EXPENSES:
Investment advisory fee (Note 3) ..................... 14,090 7,782
Trustees fees ........................................ 9,000 9,000
--------- ---------
TOTAL EXPENSES ............................... 23,090 16,782
Less: Expense reimbursement and waivers (Note 3) .... (10,879) (10,038)
--------- ---------
NET EXPENSES ................................. 12,211 6,744
--------- ---------
NET INVESTMENT INCOME (LOSS) ................. 1,162 (4,520)
--------- ---------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
(Note 2)
Net realized gain from investment
transactions ................................. 125,255 470
Unrealized appreciation (depreciation) of
investments for the period ................... 136,121 (101,240)
--------- ---------
Net realized and unrealized gain (loss)
on investments ............................... 261,376 (100,770)
--------- ---------
Net increase (decrease) in net assets resulting
from operations .............................. $ 262,538 $(105,290)
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
ALPHA ANALYTIC FUNDS
STATEMENT OF CHANGES IN NET ASSETS
For the period January 1, 1999 (Commencement of operations)
to July 31, 1999
<TABLE>
<CAPTION>
SMALL CAP
VALUE QUANT
PORTFOLIO PORTFOLIO
-------------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income (gain/loss) ............................. $ 1,162 $ (4,520)
Net realized gain from investment transactions ................ 125,255 470
Unrealized appreciation (depreciation) for the period ......... 136,121 (101,240)
---------- ----------
Net increase (decrease) in net assets resulting from operations 262,538 (105,290)
---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Distributions from net investment income ...................... 0 0
Distributions from net gain on investments .................... 0 0
CAPITAL SHARE TRANSACTIONS (NOTE 4) ........................... 2,071,711 1,048,684
---------- ----------
NET INCREASE IN NET ASSETS .................................... 2,334,249 943,394
NET ASSETS:
Beginning of period ........................................... 51,000 51,000
---------- ----------
End of period ................................................. $2,385,249 $ 994,394
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout each period)
<TABLE>
<CAPTION>
For the period
January 1, 1999
(Commencement of operations)
to
July 31, 1999
-----------------------------
<S> <C>
Net asset value, beginning of period ........................... $ 10.00
---------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income .......................................... 0.01
Net realized and unrealized gain on
investments ............................................... 1.91
---------
TOTAL FROM INVESTMENT OPERATIONS ............................... 1.92
---------
LESS DISTRIBUTIONS
Dividends from net investment income ........................... 0.00
Distribution from realized gains from security
transactions .............................................. 0.00
---------
TOTAL DISTRIBUTIONS ............................................ 0.00
---------
NET ASSET VALUE, END OF PERIOD ................................. $ 11.92
=========
Total return* .................................................. 19.20%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (in 000's) ............................ 2,385
Ratio of expenses to average net assets,
before reimbursement ...................................... 2.45% **
Ratio of expenses to average net assets,
net of reimbursement ...................................... 1.3% **
Ratio of net investment income (loss) to average net
assets before reimbursement ............................... (1.03)% **
Ratio of net investment income to average net assets,
net of reimbursement ...................................... 0.12% **
Portfolio turnover rate ........................................ 32.98%
<FN>
* Based on net asset value per share ** Ratios for this period of operations are
annualized.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
ALPHA ANALYTIC FUNDS
ALPHA ANALYTIC SMALL CAP QUANT PORTFOLIO
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
For the period
January 1, 1999
(Commencement of operations)
to
July 31, 1999
-----------------------------
<S> <C>
Net asset value, beginning of period .......................... $ 10.00
----------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income ......................................... (0.04)
Net realized and unrealized gain on
investments .............................................. (1.10)
----------
TOTAL FROM INVESTMENT OPERATIONS .............................. (1.14)
----------
LESS DISTRIBUTIONS
Dividends from net investment income .......................... 0.00
Distribution from realized gains from security
transactions ............................................. 0.00
----------
TOTAL DISTRIBUTIONS ........................................... 0.00
----------
NET ASSET VALUE, END OF PERIOD ................................ $ 8.86
==========
Total return* ................................................. (11.40)%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (in 000's) ........................... 994
Ratio of expenses to average net assets,
before reimbursement ..................................... 3.23% **
Ratio of expenses to average net assets,
net of reimbursement ..................................... 1.3% **
Ratio of net investment income (loss) to average
net assets, before reimbursement ......................... (2.80)% **
Ratio of net investment income (loss) to average
net assets, net of reimbursement ......................... (0.87)% **
Portfolio turnover rate ....................................... 3.90%
<FN>
* Based on net asset value per share
** Ratios for this period of operations are annualized.
</FN>
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
<PAGE>
THE ALPHA ANALYTICS FUNDS
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999
NOTE 1. ORGANIZATION
Alpha Analytics Value Fund and Alpha Analytics Quant Fund (each a "Fund" or
collectively the "Funds") were organized as series of Alpha Analytics Investment
Trust, an Ohio business trust (the "Trust") on August 18, 1998 and commenced
operations on January 1, 1999. The Trust is an open-end, diversified management
investment company under the Investment Company Act of 1940, authorized to issue
an unlimited number of shares of capital stock , and each share represents an
undivided, proportionate interest in each Fund, each with its own investment
objectives and policies.
Both Funds' investment objective is to provide shareholders with long term
capital appreciation. The Value Fund seeks to achieve its objective by pursuing
a relative value philosophy, investing in stocks of companies that possess
above-average financial characteristics and that are attractively priced
relative to the market and to the prices at which stocks have sold on a
historical basis. The Quant Fund seeks to achieve its objective by investing in
stocks which have characteristics empirically associated with growth in share
price. It is anticipated that the Quant Fund will invest primarily in equity
securities of U.S. and Canadian companies with smaller market capitalizations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed
by the Fund in the preparation of its financial statements. These policies are
in conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the period. Actual results could differ from these estimates.
SECURITY VALUATION-Securities which are traded on any exchange or on the
NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking
a last sale price, a security is valued at its last bid price on such exchanges,
or at the last bid price in the over-the-counter market except when, in the
Adviser's opinion, the last bid price does not accurately reflect the current
value of the security. Securities for which market quotations are not readily
available, or when the Adviser determines the last bid price does not accurately
reflect the current value, or when restricted securities are being valued, are
valued as determined in good faith by the Adviser, subject to review by the
Board of Trustees of the Trust.
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by an independent pricing
service which uses prices based upon yields or prices of comparable securities,
indications as to values from dealers, and general market conditions, when the
Adviser believes such prices accurately reflect the fair market value of the
security.
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.
FEDERAL INCOME TAXES- The Funds intend to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its net investment income and any realized
capital gain. Therefore, no federal income tax provision is required.
<PAGE>
THE ALPHA ANALYTICS FUNDS
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999
DIVIDENDS AND DISTRIBUTIONS-Each Fund intends to distribute substantially
all of its net investment income as dividends to its shareholders on an annual
basis. Each Fund intends to distribute its net long term capital gains and its
net short term capital gains at least once a year. Income and capital gain
distributions to shareholders are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Those differences are primarily due to differing treatments for net operating
losses and deferral of wash sale losses.
ORGANIZATION EXPENSES- During its organization and initial registration
with the Securities and Exchange Commission (the "SEC"), the Funds incurred
organization expenses. The Adviser was obligated to incur these expenses.
SECURITY TRANSACTIONS- The Funds follow industry practice and records
security transactions on the trade date. The first in first out identification
method is used for determining gains or losses for financial statements and
income tax purposes. Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Discount and premium on
securities purchased are amortized over the life of the respective securities.
NOTE 3. INVESTMENT ADVISORY AGREEMENT AND OTHER RELATED PARTY TRANSACTIONS
The Trust retains Alpha Analytics Investment Group, LLC (the "Adviser"), to
manage the assets of each Fund. Under the terms of the agreement, a monthly fee
is paid to the Adviser at an annual rate of 1.50% of the average daily net
assets of each Fund. The Adviser pays all of the operating expenses for each of
the Funds except brokerage, taxes, interest, fees and expenses of non-interested
person trustees and extraordinary expenses. Through November 30, 1999, the
Adviser has agreed to waive 0.20% of average net assets from its fees so that
the fee would be 1.30% of average daily net assets.
For the year ended July 31, 1999, the Adviser earned advisory fees of
$18,956. The Advisor earned $12,211 from the Value Portfolio, and $6,745 from
the Small Cap Quant Portfolio, respectively. For this same time period, the
Adviser paid all fees and expenses relating to non-interested person trustees,
and will not seek reimbursement from the Funds.
The Advisor has entered into a sub-advisory agreement with Cambiar
Investors, Inc. to serve as the sub-advisor to the Value Fund.
The Trust has an agreement with American Data Services, Inc. (the
"Administrator") to provide shareholder servicing , fund accounting and
administrative services to the Funds. The services to be provided under the
agreements include day-to-day administration of matters related to the corporate
existence of the Funds (other than rendering investment advice), maintenance of
its records, preparation of reports, supervision of the Fund's arrangement with
its custodian and assistance in the preparation of the Fund's registration
statement under federal and state laws. For its services as Administrator and
Transfer Agent, American Data Services, Inc. receives a monthly fee from the
Adviser equal to an annual average rate based upon assets and the number of
shareholder accounts serviced subject to an annual minimum fee of $43,200 per
Fund.
<PAGE>
THE ALPHA ANALYTICS FUNDS
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999
Certain officers and trustees of the Funds are also officers and owners of
Alpha Analytics Investment Group, L.L.C. and American Data Services. Beneficial
ownership of more than 25% of the voting securities of the Funds creates a
presumption of control of this Fund under Section 2(a)(9) of the Investment
Company Act of 1940. As of July 31, 1999 Robert Gipson, President of the Fund,
and Wildwood Enterprises each owned more than 25% of the Funds.
The Trust has an agreement with ADS Distributors, Inc. (the "Distributor")
to act as the principal distributor of the Funds' shares. The services of the
Administrator, Transfer Agent and Distributor are operating expenses paid by the
Adviser.
NOTE 4. FUND SHARE TRANSACTIONS
At July 31, 1999 there were an unlimited number of shares of capital stock
authorized. Paid in capital at July 31, 1999 was $2,122,711 and $1,095,634,
respectively. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
VALUE PORTFOLIO SMALL CAP QUANT PORTFOLIO
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 1999 JANUARY 1, 1999
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) OPERATIONS)
TO JULY 31,1999 TO JULY 31, 1998
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 195,006 $2,071,723 107,108 $1,048,684
Shares issued for reinvestment
dividends and distribution
from realized gains ........ 0 0 0 0
Shares redeemed .............. (1) (12) (0) (0)
------- ---------- ------- ----------
Net increase ................. 195,005 $2,071,711 107,108 $ 1,048,68
======= ========== ======= ==========
</TABLE>
<PAGE>
THE ALPHA ANALYTICS FUNDS
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999
NOTE 5. INVESTMENTS
<TABLE>
<CAPTION>
VALUE SMALL CAP
PORTFOLIO QUANT PORTFOLIO
<S> <C> <C>
Purchases of investment securities $ 2,242,695 $ 1,131,674
=========== ===========
Sales of investment securities $ 528,081 $ 37,355
=========== ===========
Accumulated unrealized appreciation-January 1, 1999 $ 0 $ 0
Add: Gross unrealized appreciation 256,330 53,642
Less: Gross unrealized depreciation (120,209) (154,882)
----------- -----------
Accumulated unrealized appreciation-July 31, 1999 $ 136,121 $ (101,240)
=========== ===========
Aggregate cost of securities, Federal income tax purposes $ 1,946,869 $ 1,096,666
=========== ===========
</TABLE>
NOTE 6. RECLASSIFICATIONS
In accordance with SOP 93-2, the Alpha Analytic Small Cap Quant Fund has
recorded a reclassification in the capital accounts. As of July 31, 1999 the
Fund recorded permanent book/tax differences of ($4520), from undistributed net
investment income to realized capital gains and paid in capital. This
reclassification has no impact on the net asset value of the Fund and is
designed generally to present undistributed income and realized gains on a tax
basis which is considered to be more informative to shareholders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
Alpha Analytics Funds
We have audited the accompanying statement of assets and liabilities of the
Alpha Analytics Funds (comprising, respectively, the Alpha Analytics Value Fund
and the Alpha Analytics Small Cap Quant Fund), including the schedule of
portfolio investments, as of July 31, 1999, and the related statement of
operations, statement of changes in net assets and financial highlights for the
period from January 1, 1999 (commencement of operations) to July 31, 1999 in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held as
of July 31, 1999 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Alpha Analytics Funds as of July 31, 1999, the results of its operations, the
changes in its net assets, and the financial highlights for the period from
January 1, 1999 (commencement of operations) to July 31, 1999 in the period then
ended, in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
August 23, 1999
<PAGE>
INVESTMENT ADVISER INVESTMENT SUB-ADVISER (TO THE
ALPHA ANALYTICS INVESTMENT GROUP, LLC VALUE FUND)
1901 Avenue of the Stars, Suite 1100 Cambiar Investors, Inc.
Los Angeles, CA 90067 8400 East Prentice Avenue, Suite 460
Englewood, CO 80111
LEGAL COUNSEL ADMINISTRATOR
Brown, Cummins & Brown Co., L.P.A. American Data Services, Inc.
3500 Carew Tower, 441 Vine Street 150 Motor Parkway
Cincinnati, OH 45202 Hauppauge, New York 11788-5108
CUSTODIAN DISTRIBUTOR
Firstar Bank ADS Distributor, Inc.
425 Walnut Street, M.L. 6118 150 Motor Parkway
Cincinnati, Ohio 45202 Hauppauge, New York 11788-5108
TRANSFER AGENT (ALL PURCHASES AND INDEPENDENT AUDITORS
ALL REDEMPTION REQUESTS) McCurdy & Associates, CPA's
American Data Services, Inc. 27955 Clemens Road
P.O. Box 5536 Westlake, Ohio 44145
Hauppauge, New York 11788-0132
This report is intended for shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
