ALPHA ANALYTICS INVESTMENT TRUST
================================================================================
SEMI-ANNUAL REPORT
(For the period from January 1, 1999
through January 31, 1999
<PAGE>
ALPHA ANALYTICS INVESTMENT TRUST
Alpha Analytics Value Fund
Alpha Analytics Small Cap Quant Fund
1901 Avenue of the Stars, Suite 1100
Los Angeles, CA 90067
President's Letter
March 15, 1999
Dear Fellow Shareholders:
Welcome to the Alpha Analytics Mutual Fund family. Launching the mutual funds
was a long, drawn-out process, and we are glad to have moved from planning to
implementation. This report covers a very short time period because both the
Alpha Analytics Small Cap Quant Fund and the Alpha Analytics Value Fund did not
become active until December 31, 1998.
Equity investing is for patient money. Because of the volatility of the expected
returns (that is, the size of the expected standard deviation of returns on
equities around the expected return), one month is too short a time period to
judge the performance of either of these equity funds. However, people are
always curious about this, and for your convenience we will summarize the
performance during this period. Both funds started out with a net asset value of
$10.00 on December 31,1998. At January 31, 1999, the unaudited net asset value
was $9.46 for the Small Cap Quant Fund (down 5.4%), and $10.49 for the Value
Fund (up 4.9%). For comparison, the Russell 2000 index increased by 1.2%, and
the Russell 1000/Value index by 0.8% during that same time period. The average
small cap blend fund decreased by -0.2%, and the average large cap value fund
increased by 0.9% during that same time period. Being human we can't help but be
disappointed when our investments lose money and feel elated when they are
making money. The truth of the matter, however, is that one month is too short a
time period from which to draw much significance.
One of our goals at Alpha Analytics is to provide sophisticated investors with
well defined investment products. True to its name, the Small Cap Quant Fund
invests in companies with capitalization between $75 million and $1.5 billion.
By way of contrast, the Value Fund invests in large and mid-cap companies which
are historically cheap based on price-to-book, price-to-sales, and other value
indicators.
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
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mutual funds. Secondly, our goal is to be fully invested (subject to prudent
management of investable funds both inbound and outbound). In pursuit of this
policy, at the end of this quarter, the Small Cap Quant Fund was 99.7% invested,
while the Value Fund was 82.2% invested. We expect the Value Fund to become
fully invested in the coming quarter.
One of the key ways to reduce investment risk and smooth investment returns is
to diversify your investments across assets which have differing investment
characteristics. The month of January provides a text book example of this for
our two funds. The fact that the Value Fund outperformed its index while the
Quant Fund under performed its index is one illustration of the benefits of
diversification. If your assets had been spread equally between the two funds,
your results for the month would have been essentially flat, which is consistent
with the performance of the broad market, that month.
I started out this letter by addressing you as "Fellow Shareholders." I do 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 the Alpha Analytics Investment Funds as one of your
investment vehicles. And don't let the volatility of your investment returns
knock you off your long-term investment plans. In investing, patience has its
rewards.
Best regards,
/s/ ROBERT E. GIPSON
- --------------------
Robert E. Gipson
President
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ALPHA ANALYTICS INVESTMENT TRUST
VALUE FUND
SCHEDULE OF INVESTMENTS
JANUARY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Market
Shares Value
------ -----
<C> <S> <C>
COMMON STOCKS - 82.13%
APPLICATIONS- SOFTWARE- 2.22%
1,500 J.D. Edwards & Co* .................... $ 30,469
-----------
AUTOMOBILES/TRUCKS - 2.29%
2,000 Volkswagon AG- Sponsored ADR .......... 31,389
-----------
BANKING - 3.05%
800 Bank One Corp. ........................ 41,900
-----------
APPAREL MANUFACTURERS - 1.85%
1,000 Warnaco Group, Inc. ................... 25,375
-----------
COMMERCIAL SERVICE- FINANCE - 13.07%
1,000 Computer Associates International, Inc. 50,625
1,700 Electronic Data Systems Corp. ......... 89,144
1,000 Equifax, Inc. ......................... 39,562
-----------
179,331
-----------
DATA PROCESSING - 6.98%
2,500 First Data Corp. ...................... 95,781
-----------
DRUG DELIVERY SYSTEMS - 2.95%
600 Elan Corporation PLC* ................. 40,500
-----------
ELECTRICAL EQUIPMENT - 3.71%
700 Philips Electronics NV ................ 50,969
-----------
FINANCIAL SERVICES - 4.31%
1,000 ING Groep NV- Sponsored ADR ........... 59,188
-----------
INSURANCE - 5.71%
1,100 Allstate Corp. ........................ 41,319
1,100 Everest Reinsurance Holdings, Inc. .... 36,987
-----------
78,306
-----------
MANUFACTURING - 2.87
1,100 Trinity Industries, Inc. .............. 39,325
-----------
MEDICAL - 7.12%
1,000 Genzyme Corp* ......................... 54,500
700 Novo-Nordisk A/S- Sponsored ADR ....... 43,225
-----------
97,725
-----------
MINING - 2.28%
2,200 Debeers Consolidated Mines- ADR 31,350
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ALPHA ANALYTICS INVESTMENT TRUST
VALUE FUND
SCHEDULE OF INVESTMENTS
JANUARY 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Market
Shares Value
------ -----
<C> <S> <C>
MULTIMEDIA - 5.20%
2,100 CBS Corp* ............................. 71,400
-----------
NETWORK SOFTWARE - 4.45%
3,000 Novell, Inc* .......................... 61,125
-----------
OIL, ENERGY & NATURAL GAS - 3.47%
1,000 Schlumberger Limited .................. 47,625
-----------
RETAIL- 4.64%
1,000 Limited, Inc. (The) ................... 34,125
1,200 Neiman Marcus Group, Inc* ............. 29,550
-----------
63,675
SERVICES - 3.06%
2,400 Stewart Enterprises, Inc. Cl A ........ 42,000
-----------
TELECOMMUNICATIONS - 2.90%
1,200 Comsat Corp. .......................... 39,750
-----------
TOTAL COMMON STOCKS
(Cost $1,095,257 1,127,183
-----------
SHORT TERM INVESTMENTS - 28.46%
390,651 Star Treasury Fund ....................
(Cost $390,651) 390,651
-----------
TOTAL INVESTMENTS
(Cost $1,485,908) .............110.59% 1,517,834
LIABILITIES LESS OTHER ASSETS...(10.59%) (145,377)
---------------------
TOTAL NET ASSETS ...............100.00% $1,372,457
=====================
<FN>
*Non income producing
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ALPHA ANALYTICS INVESTMENT TRUST
SMALL CAP QUANT FUND
Schedule of Investments
January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Market
Shares Value
------ -----
<C> <S> <C>
COMMON STOCKS - 99.72%
ADVERTISING - 3.66%
1,400 Advo, Inc* ................................... $ 35,350
---------
AIRLINES - 12.24%
800 Alaska Air Group, Inc* ....................... 40,300
800 Expeditors International Wash, Inc. .......... 36,700
1,900 Intrav, Inc. ................................. 41,325
---------
118,325
---------
AUTO PARTS & EQUIPMENT - 1.00%
300 Strattec Security Corp* ...................... 9,638
---------
COMMUNICATIONS EQUIPMENT - 6.01%
1,800 Anixter International, Inc* .................. 29,138
2,100 Personnel Group* ............................. 29,006
---------
58,144
---------
COMPUTER SYSTEMS - 6.76%
2,100 CHS Electronics, Inc* ........................ 31,369
1,600 Pomeroy Computer Resources, Inc* ............. 34,000
---------
65,369
---------
ELECTRICAL EQUIPMENT - 3.72%
1,600 Harmon Industries, Inc. ...................... 36,000
---------
FOODS - 3.97%
1,600 Ben & Jerry's Homemade Cl A* ................. 38,400
---------
GAMING - 3.86%
1,300 Harvey's Casino Resort ....................... 37,375
---------
HEALTH CARE - 10.79%
1,200 Maxxim Medical, Inc* ......................... 32,550
1,500 Res-care, Inc* ............................... 33,562
1,300 Syncor International Corp* ................... 38,187
---------
104,299
---------
HOMEBUILDING - 14.58%
1,300 Champion Enterprises, Inc* ................... 30,387
1,700 MDC Holdings, Inc. ........................... 35,700
800 NVR, Inc* .................................... 35,700
1,300 Pulte Corp. .................................. 39,244
---------
141,031
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ALPHA ANALYTICS INVESTMENT TRUST
SMALL CAP QUANT FUND
Schedule of Investments
January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Market
Shares Value
------ -----
<C> <S> <C>
HOUSEHOLD FURNISHINGS & APPLIANCES - 7.68%
1,300 Furniture Brands International, Inc* ......... 30,550
3,300 Rowe Furniture Corp. ......................... 43,725
---------
74,275
---------
INSURANCE - 3.30%
1,200 Fidelity National Financial, Inc. ............ 31,950
---------
LEISURE PRODUCTS - 3.47%
2,200 SCP Pool Corp* ............................... 33,550
---------
MANUFACTURING-DIVERSIFIED - 5.91%
1,000 Dayton Superior Corp* ........................ 19,250
1,500 Tower Automotive, Inc* ....................... 37,875
---------
57,125
---------
RETAIL-SPECIALTY - 3.40%
2,300 Brookstone, Inc* ............................. 32,919
---------
SERVICES-COMMERCIAL/CONSUMER - 2.48%
1,000 Advanced Marketing Services .................. 24,000
---------
TEXTILES/APPAREL - 2.96%
1,800 Oshkosh B'gosh, Inc. ......................... 28,575
---------
TRUCKING - 3.93%
2,000 Covenant Transport, Inc* ..................... 38,000
---------
TOTAL COMMON STOCKS
(Cost $1,012,131) ....................... 964,325
SHORT TERM INVESTMENTS - .30%
2,875 Star Treasury Fund
(Cost $2,875) ............................ 2,875
TOTAL INVESTMENTS
(Cost $1,015,006 100.01% 967,200
LIABILITIES LESS OTHER ASSETS (0.01%) (121)
-----------------------
TOTAL NET ASSETS 100.00% $ 967,079
=======================
<FN>
*Non income producing
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ALPHA ANALYTICS INVESTMENT TRUST
Statements of Assets and Liabilities
January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS SMALL CAP
VALUE FUND QUANT FUND
---------- ----------
Investments in securities, at value
(Cost $1,485,908 and $1,015,006, respectively)
<S> <C> <C> <C>
(Note 2) ........................................... $ 1,517,834 $ 967,200
Receivable for securities sold .......................... 53,282 0
Receivable for interest and dividends ................... 1,273 457
------------- ----------
1,572,389 967,657
------------- ----------
LIABILITIES
Payable for securities purchased ................... 199,212 0
Accrued advisory fees (Note 3) ..................... 720 578
------------- ----------
199,932 578
------------- ----------
Net Assets ......................................... $ 1,372,457 $ 967,079
============= ==========
NET ASSETS CONSIST OF:
Paid in capital .................................... $ 1,326,000 $1,015,000
Accumulated net investment income (loss) ........... 559 (115)
Accumulated net realized gain on ................... 13,972 0
security transactions
Net unrealized appreciation (depreciation)
on investments ................................ 31,926 (47,806)
------------- ----------
Net Assets .................................... $ 1,372,457 $ 967,079
============= ==========
Net asset value, offering price, and
redemption price per share
($1,372,457/130,862 and $967,079/102,277 shares
of capital stock outstanding, respectively)
(Note 5) ...................................... $ 10.49 $ 9.46
============= ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ALPHA ANALYTICS INVESTMENT TRUST
Statements of Operations
For the period January 1, 1999* through January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SMALL CAP
VALUE FUND QUANT FUND
---------- ----------
INVESTMENT INCOME
<S> <C> <C>
Interest ........................................... $ 1,279 $ 379
Dividends .......................................... 0 84
-------- --------
Total investment income ....................... 1,279 463
EXPENSES
Advisory fee ....................................... 720 578
-------- --------
Total expenses ................................ 720 578
-------- --------
Net investment income (loss) ....................... 559 (115)
-------- --------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Note 2)
Net realized gain on investments ................... 13,972 0
Net change in unrealized appreciation
(depreciation) on investments ................. 31,926 (47,806)
-------- --------
Net gain (loss) on investments ..................... 45,898 (47,806)
-------- --------
Net increase (decrease) in net assets resulting
from operations ............................... $ 46,457 $(47,921)
======== ========
<FN>
* Commencement of operations
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ALPHA ANALYTICS INVESTMENT TRUST
Statements of Changes in Net Assets
For the period January 1, 1999* through January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
SMALL CAP
VALUE FUND QUANT FUND
---------- ----------
OPERATIONS:
<S> <C> <C>
Net investment income (loss) .................. $ 559 $ (115)
Net realized gain on investments .............. 13,972 0
Net increase in unrealized appreciation
(depreciation) on investments ............ 31,926 (47,806)
---------- ----------
Net increase (decrease) in net assets resulting
from operations .......................... $ 46,457 $ (47,921)
Distributions from net investment income ...... 0 0
Distributions from net gain on investments .... 0 0
Net capital share transactions ................ 1,275,000 964,000
---------- ----------
Net increase in net assets .................... 1,321,457 916,079
NET ASSETS, BEGINNING OF PERIOD .................... 51,000 51,000
---------- ----------
NET ASSETS, END OF PERIOD .......................... $1,372,457 $ 967,079
========== ==========
<FN>
* Commencement of operations
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ALPHA ANALYTICS INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(UNAUDITED)
1. ORGANIZATION
Alpha Analytics Value Fund and Alpha Analytics Small Cap Quant Fund (each a
"Fund" or collectively the "Funds") were organized as diversified series of
Alpha Analytics Investment Trust, an Ohio business trust (the "Trust") on August
18, 1998. The Trust is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended. The Funds commenced
operations on January 1, 1999. Each Fund's investment objective is to provide
long term capital appreciation.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
A. 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 except when, in
the Adviser's opinion, the last bid price does not accurately reflect the
current value of the security. When market quotations are not readily available,
when the Adviser determines the last bid price does not accurately reflect
current value or when restricted securities are being valued, such securities
are valued as determined in good faith by the Adviser, subject to review of the
Board of Trustees of the Trust. 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.
B. SECURITY TRANSACTIONS - Security transactions are accounted for on the trade
date (date the order to buy or sell is executed). Realized gains and losses on
security transactions are determined using the specific identification method.
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily.
-10-
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ALPHA ANALYTICS INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(CONTINUED) - (UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. FEDERAL INCOME TAX STATUS - No provision for federal income taxes is
required since each Fund intends to comply with the requirements of the Internal
Revenue Code that are applicable to regulated investment companies and
distribute all of its taxable income to its shareholders.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Each Fund records dividends and
distributions to shareholders on the ex-dividend date.
E. OTHER - Each Fund may periodically make reclassifications among certain of
its capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulations which may differ from generally accepted accounting
principles.
3. INVESTMENT MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS
Each Fund has an investment advisory and management agreement with Alpha
Analytics Investment Group, LLC ("Adviser"). Under these agreements, the Adviser
provides the Funds with investment advisory and management services for which
each Fund pays a fee equal to an annual rate of 1.50% of the Fund's average
daily net assets. Through November 30, 1999, the Adviser has agreed to waive a
portion of its fees so that the total expenses of each Fund will be 1.30% of
average daily net assets. The Adviser pays all of the operating expenses of each
Fund except brokerage, taxes, interest, fees and expenses of non-interested
person trustees and extraordinary expenses.
Robert Gipson is an owner and officer of Alpha Analytics Investment Group, LLC,
and an officer and Trustee of the Trust.
The Adviser has entered into a Sub-Advisory Agreement with Cambiar Investors,
Inc. to serve as the sub-adviser of the Value Fund.
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ALPHA ANALYTICS INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(CONTINUED) - (UNAUDITED)
4. INVESTMENT TRANSACTIONS
Investment transactions, excluding short-term investments, for the period ended
January 31, 1999 were as follows:
SMALL CAP
VALUE FUND QUANT FUND
---------- ----------
Purchases............................... $1,155,026 $1,012,131
Sales..................................... $ 73,741 $ 0
At January 31, 1999, the cost of securities for federal income tax purposes of
the Value Fund and Small Cap Quant Fund was $1,485,908 and $1,015,006,
respectively. Aggregate gross unrealized appreciation for all securities in
which there was an excess of value over tax cost was $49,628 and $6,217 and
aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $17,702 and $54,023 for the Value Fund and
Small Cap Quant Fund, respectively.
5. FUND SHARE TRANSACTIONS
At January 31, 1999 there were an unlimited number of shares authorized with no
par value.
Value Fund:
For the period
January 1, 1999*
through January 31, 1999
SHARES VALUE
------ -----
Shares sold........................ 125,762 $1,275,000
Dividend reinvestment.............. 0 0
Shares repurchased................. 0 0
-------- ----------
125,762 $1,275,000
======== ==========
*Commencement of operations
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<PAGE>
ALPHA ANALYTICS INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999
(CONTINUED) - (UNAUDITED)
5. FUND SHARE TRANSACTIONS (CONTINUED)
Small Cap Quant Fund:
For the Period
January 1, 1999*
through January 31, 1999
SHARES VALUE
------ -----
Shares sold......................... 97,177 $964,000
Dividend reinvestment............... 0 0
Shares repurchased.................. 0 0
------- --------
97,177 $964,000
====== ========
*Commencement of operations
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ALPHA ANALYTICS INVESTMENT TRUST
VALUE FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
JANUARY 31,1999**
-----------------
<S> <C>
Net asset value, beginning of period ...................... $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) .............................. 0.01
Net realized and unrealized gain on investments ........... 0.48
------------
Total from investment operations .......................... 0.49
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 ............................ $ 10.49
============
Total return .............................................. 4.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ...................... $ 1,372
Ratio of expenses to average net assets.................... 1.30%*
Ratio of net investment income to average net assets ...... 0.95%*
Portfolio turnover rate ................................... 14.15%
<FN>
*Annualized
**Commencement of operations was January 1, 1999.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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<PAGE>
ALPHA ANALYTICS INVESTMENT TRUST
SMALL CAP QUANT FUND
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
JANUARY 31,1999**
-----------------
<S> <C>
Net asset value, beginning of period ............................ $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss) .................................... 0.00
Net realized and unrealized loss on investments ................. (0.54)
----------
Total from investment operations ................................ (0.54)
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 .................................. $ 9.46
==========
Total return .................................................... (5.40)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) ............................ $ 967
Ratio of expenses to average net assets ......................... 1.30%*
Ratio of net investment income to average net assets ............ (0.24)%*
Portfolio turnover rate ......................................... 0.00%
<FN>
*Annualized
**Commencement of operations was January 1, 1999.
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
-15-
