PROSPECTUS DECEMBER 30, 1998
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
For Information, Shareholder Services and Requests:
(877) 257-4240
ALPHA ANALYTICS VALUE FUND: The investment objective of Alpha Analytics Value
Fund is to provide long term capital appreciation. The Fund seeks to achieve its
objective by pursuing a relative value philosophy, investing in stocks of
companies that possess above-average financial characteristics in terms of
balance sheet strength and profitability measures and that are attractively
priced relative to the market and to the prices at which such stocks have sold
on a historical basis. The Fund's sub-adviser uses fundamental analysis to
select quality companies that are selling at the low end of their historical
relative valuation levels based on price/earnings, price/book, price/sales, and
price/cash flow analysis.
ALPHA ANALYTICS SMALL CAP QUANT FUND: The investment objective of Alpha
Analytics Small Cap Quant Fund is to provide long term capital appreciation. The
Fund seeks to achieve its objective by investing in stocks which have
characteristics empirically associated with growth in share price. The Fund's
adviser uses a computer-driven quantitative investment model developed by the
Fund's portfolio manager to evaluate stocks based on value and momentum
indicators.
The Funds are "no-load," which means that investors incur no sales
charges, commissions or deferred sales charges on the purchase or redemption of
their shares. Shareholders are charged a redemption fee in some cases. Each Fund
is one of the mutual funds comprising Alpha Analytics Investment Trust, an
open-end management investment company.
This Prospectus provides the information a prospective investor ought
to know before investing and should be retained for future reference. A
Statement of Additional Information dated December 30, 1998 has been filed with
the Securities and Exchange Commission (the "SEC"), is incorporated herein by
reference, and can be obtained without charge by calling the Fund at the phone
number listed above. The SEC maintains a Web Site (http://www.sec.gov) that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding Alpha Analytics Investment Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding
the direct and indirect expenses that an investor may incur as a shareholder in
each Fund. The expense information is based on estimated amounts for the current
fiscal year. The expenses are expressed as a percentage of average net assets.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE FUND PERFORMANCE
OR EXPENSES, BOTH OF WHICH MAY VARY.
Shareholders should be aware that each Fund is a no-load fund and,
accordingly, a shareholder does not pay any sales charge or commission upon
purchase or redemption of shares of the Fund. The Funds do impose a redemption
fee on shares redeemed less than one year from the date of purchase. Unlike most
other mutual funds, the Funds do not pay directly for transfer agency, pricing,
custodial, auditing or legal services, nor do they pay directly any general
administrative or other significant operating expenses. The Adviser pays all of
the expenses of each Fund except brokerage, taxes, interest, fees and expenses
of non-interested person trustees and extraordinary expenses.
ALPHA ALPHA
ANALYTICS ANALYTICS
SHAREHOLDER TRANSACTION EXPENSES VALUE FUND SMALL CAP QUANT
FUND
----------- ----------------
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Maximum Redemption Fees
(as a % of redemption amount)(1) 2.00% 2.00%
Exchange Fees None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after fee waiver)(2) 1.30% 1.30%
12b-1 Charges None None
Other Expenses(3) 0.00% 0.00%
Total Fund Operating Expenses
(after fee waiver)(2) 1.30% 1.30%
(1) EACH FUND CHARGES A REDEMPTION FEE OF 2% ON SHARES REDEEMED LESS THAN 90
DAYS, AND 1% ON SHARES REDEEMED BETWEEN 91 AND 364 DAYS, FROM THE DATE OF
PURCHASE.
(2) EACH FUND'S TOTAL OPERATING EXPENSES ARE EQUAL TO THE MANAGEMENT FEE
PAID TO THE ADVISER BECAUSE THE ADVISER PAYS ALL OF THE FUND'S OPERATING
EXPENSES (EXCEPT AS DESCRIBED BELOW). THROUGH NOVEMBER 30, 1999, THE ADVISER HAS
AGREED TO WAIVE 0.20% OF AVERAGE NET ASSETS FROM ITS FEES SO THAT THE MANAGEMENT
FEE OF EACH FUND WILL BE 1.30% OF AVERAGE DAILY NET ASSETS. WITHOUT FEE WAIVER,
THE MANAGEMENT FEE OF EACH FUND WOULD BE 1.50% OF AVERAGE DAILY NET ASSETS.
(3) EACH FUND ESTIMATES THAT OTHER EXPENSES (FEES AND EXPENSES OF THE TRUSTEES
WHO ARE NOT "INTERESTED PERSONS" AS DEFINED IN THE INVESTMENT COMPANY ACT) WILL
BE LESS THAN OF .01% OF AVERAGE NET ASSETS FOR THE FIRST FISCAL YEAR.
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EXAMPLE As a shareholder in a Fund, you would pay the following expenses on a
- -------
$1,000 investment, assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
1 YEAR 3 YEARS
------ -------
Alpha Analytics Value Fund $13 $41
Alpha Analytics Small Cap Quant Fund $13 $41
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THE FUNDS
Alpha Analytics Value Fund and Alpha Analytics Small Cap 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. This prospectus offers shares of each Fund and each share represents an
undivided, proportionate interest in a Fund. The investment adviser to each Fund
is Alpha Analytics Investment Group, LLC (the "Adviser"). The Adviser has
retained Cambiar Investors, Inc. to serve as sub-adviser to the Alpha Analytics
Value Fund (the "Sub-Adviser").
Neither Fund will invest in companies which derive more than 4% of
their gross revenues from the manufacture of tobacco products; or own directly
more than a 4% interest in or operate nuclear power plants or derive more than
4% of gross revenues from sales to the nuclear power industry.
INVESTMENT OBJECTIVE AND STRATEGIES
ALPHA ANALYTICS VALUE FUND: The investment objective of Alpha Analytics Value
Fund (the "Value Fund") is to provide long term capital appreciation. The Fund
seeks to achieve its objective by pursuing a relative value philosophy, I.E., by
investing in stocks of companies that possess above-average financial
characteristics in terms of balance sheet strength and profitability measures
and that are attractively priced relative to the market and to the prices at
which such stocks have sold on a historical basis. The Sub-Adviser uses
fundamental analysis to select quality companies that are selling at the low end
of their historical relative valuation levels based on price/earnings,
price/book, price/sales, and price/cash flow analysis.
In addition to using these quantitative factors, the Sub-Adviser seeks
to identify companies experiencing positive developments not yet recognized by
the market and having the potential to increase 50% in market value within 12 to
18 months (although it is not always realized). It is anticipated that the Value
Fund will invest primarily in equity securities of well established U.S.
companies that are relatively large in terms of revenues, assets and market
capitalization. A security may be sold if positive developments are realized
(for example, a target price is achieved), if the price moves too far too fast,
if the security becomes overweighted or if positive developments fail to unfold.
Market timing is not a part of the Sub-Adviser's investment strategy.
ALPHA ANALYTICS SMALL CAP QUANT FUND: The investment objective of Alpha
Analytics Small Cap Quant Fund (the "Small Cap Quant Fund") is to provide long
term capital appreciation. The Fund seeks to achieve its objective by investing
in stocks which have characteristics empirically associated with growth in share
price. The Adviser uses a computer-driven quantitative investment model
developed by the Fund's portfolio manager to evaluate stocks based on value and
momentum indicators. The Adviser believes that it will be able to maximize
expected return while minimizing risks by purchasing stocks selected by the
model. A security may be sold when it achieves its targeted price, or when it
declines significantly in value from its peak or purchase price, with respect to
the market. The Adviser may deviate from the model for liquidity needs.
It is anticipated that the Fund will invest primarily in equity
securities of U.S. companies with smaller market capitalizations. Under normal
circumstances, at least 65% of the Small Cap Quant Fund's assets will be
invested in smaller capitalization stocks, defined by the Adviser as those
stocks with market capitalization of less than $1.5 billion. By investing in
smaller capitalization companies, the Fund will be subject to the risks
associated with such companies. Smaller capitalization companies may experience
higher growth rates and higher failure rates than do larger capitalization
companies. Companies in which the Fund is likely to invest may have limited
product lines, markets or financial resources and may lack management depth. The
trading volume of securities of smaller capitalization companies is normally
less than that of larger capitalization companies, and therefore may
disproportionately affect their market price, tending to make them rise more in
response to buying demand and fall more in response to selling pressure than is
the case with larger capitalization companies. Shareholders should be aware that
the share price of the Fund may be volatile because of its emphasis on smaller
capitalization companies.
GENERAL: Although each Fund intends to invest primarily in common stocks, each
Fund may invest in other types of securities and utilize various investment
techniques. See "Investment Policies and Techniques and Risk Considerations" on
page __ for a more detailed discussion of each Fund's investment practices. For
temporary defensive purposes under abnormal market or economic conditions, each
Fund may hold all or a portion of its assets in money market instruments
(including money market funds) or U.S. government repurchase agreements. Each
Fund may also invest in such instruments at any time to maintain liquidity or
pending selection of investments in accordance with its policies. If a Fund
acquires securities of a money market fund, the shareholders of the Fund will be
subject to additional management fees.
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As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, neither Fund can give any assurance that its investment objective
will be achieved. Shareholders should be aware that the Adviser is a newly
formed company and has not previously managed assets organized as a mutual fund,
and that the Small Cap Quant Fund's portfolio manager has no portfolio
management experience. In addition, it should be noted that the Funds have no
operating history. Rates of total return quoted by a Fund may be higher or lower
than past quotations, and there can be no assurance that any rate of total
return will be maintained.
HOW TO INVEST IN THE FUNDS
Each Fund is "no-load" and shares of each Fund are sold directly to
investors on a continuous basis, subject to a minimum initial investment of
$5,000 ($2,000 for an IRA or other tax sheltered retirement plans) and minimum
subsequent investments of $250. These minimums may be waived or reduced by the
Adviser for accounts participating in an automatic investment program. Investors
choosing to purchase or redeem their shares through a broker/dealer or other
institution may be charged a fee by that institution. Investors choosing to
purchase or redeem shares directly from a Fund will not incur charges on
purchases or redemptions, except as described below under "How To Redeem Shares
- - Redemption Fee".
INITIAL PURCHASE
BY MAIL - You may purchase shares of a Fund by completing and signing
the investment application form which accompanies this Prospectus and mailing
it, in proper form, together with a check (subject to the above minimum amounts)
made payable to the appropriate fund, and sent to American Data Services, Inc.,
the Funds' transfer agent (the "Transfer Agent") at the P.O. Box listed below.
If you prefer overnight delivery, use the overnight address listed below.
U.S. Mail: Overnight:
Alpha Analytics Funds Alpha Analytics Funds
American Data Services, Inc. American Data Services, Inc.
P.O. Box 5536 Hauppauge Corporate Center
Hauppauge, New York 11788-0132 150 Motor Parkway
Hauppauge, New York 11788-5108
Your purchase of shares of a Fund will be effected at the next share
price calculated after receipt of your investment.
BY WIRE - You may also purchase shares of a Fund by wiring federal
funds from your bank, which may charge you a fee for doing so. If money is to be
wired, you must call the Transfer Agent at 877-257-4240 to set up your account
and obtain an account number. You should be prepared at that time to provide the
information on the application. Then, you should provide your bank with the
following information for purposes of wiring your investment:
Star Bank, N.A. Cinti/Trust for: ALPHA ANALYTICS VALUE FUND
ABA #0420-0001-3 D.D.A.#488-922-568
Attn: Mutual Fund ALPHA ANALYTICS SMALL CAP QUANT FUND
Account Name _________________ D.D.A.#488-922-477
(write in shareholder name)
For the Account # ______________
(write in account number)
You are required to mail a signed application to the Custodian at the
above address in order to complete your initial wire purchase. Wire orders will
be accepted only on a day on which the Fund, Custodian and Transfer Agent are
open for business. A wire purchase will not be considered made until the wired
money is received and the purchase is accepted by the Fund. Any delays which may
occur in wiring money, including delays which may occur in processing by the
banks, are not the responsibility of the Fund or the Transfer Agent. There is
presently no fee for the receipt of wired funds, but the right to charge
shareholders for this service is reserved by the Fund.
ADDITIONAL INVESTMENTS
You may purchase additional shares of any Fund at any time (subject to
minimum investment requirements) by mail, wire, or automatic investment. Each
additional mail purchase request must contain your name, the name of your
account(s), your account number(s), and the name of the Fund. Checks should be
made payable to the appropriate fund and should be sent to the address listed
above. A bank wire should be sent as outlined above.
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AUTOMATIC INVESTMENT PLAN
You may make regular investments in a Fund with an Automatic Investment
Plan by completing the appropriate section of the account application and
attaching a voided personal check. Investments may be made monthly to allow
dollar-cost averaging by automatically deducting $100 or more from your bank
checking account. You may change the amount of your monthly purchase at any
time. Please contact the Transfer Agent to obtain withdrawal dates and the date
your request must be received to be included in the next withdrawal.
TAX SHELTERED RETIREMENT PLANS
Since the Funds are oriented to longer term investments, shares of the
Funds may be an appropriate investment medium for tax sheltered retirement
plans, including: individual retirement plans (IRAs); simplified employee
pensions (SEPs); SIMPLE plans; 401(k) plans; qualified corporate pension and
profit sharing plans (for employees); tax deferred investment plans (for
employees of public school systems and certain types of charitable
organizations); and other qualified retirement plans. You should contact the
Transfer Agent for the procedure to open an IRA or SEP plan, as well as more
specific information regarding these retirement plan options. Consultation with
an attorney or tax adviser regarding these plans is advisable. Custodial fees
for an IRA will be paid by the shareholder by redemption of sufficient shares of
the Fund from the IRA unless the fees are paid directly to the IRA custodian.
You can obtain information about the IRA custodial fees from the Transfer Agent.
EXCHANGE PRIVILEGE
Shares of either Fund may be exchanged for shares of the other Fund or
for any other Fund of Alpha Analytics Investment Trust. Shareholders may request
an exchange by sending a written request to the Transfer Agent. The request must
be signed exactly as the shareholder's name appears on the Trust's account
records. Exchanges may also be requested by telephone. If a shareholder is
unable to execute a transaction by telephone (for example during times of
unusual market activity) the shareholder should consider requesting the exchange
by mail. An exchange will be effected at the next determined net asset value
after receipt of a request by the Transfer Agent.
Exchanges may only be made for shares of funds then offered for sale in
the shareholder's state of residence and are subject to the applicable minimum
initial investment requirements. The exchange privilege may be modified or
terminated by the Board of Trustees upon 60 days' prior notice to shareholders.
An exchange results in a sale of shares, which may cause the shareholder to
recognize a capital gain or loss. Before making an exchange, contact the
Transfer Agent to obtain more information about exchanges. See "Redemption Fee"
on page __ for more information.
OTHER PURCHASE INFORMATION
Dividends begin to accrue after you become a shareholder. The Funds do
not issue share certificates. All shares are held in non-certificate form
registered on the books of each of the Funds and the Funds' Transfer Agent for
the account of the shareholder. The rights to limit the amount of purchases and
to refuse to sell to any person are reserved by the Funds. If your check or wire
does not clear, you will be responsible for any loss incurred by the Funds. If
you are already a shareholder, the Funds can redeem shares from any identically
registered account in the Funds as reimbursement for any loss incurred. You may
be prohibited or restricted from making future purchases in the Funds.
HOW TO REDEEM SHARES
All redemptions will be made at the net asset value determined after
the redemption request has been received by the Transfer Agent in proper order.
Shareholders may receive redemption payments in the form of a check or federal
wire transfer. The proceeds of the redemption may be more or less than the
purchase price of your shares, depending on the market value of the Fund's
securities at the time of your redemption. Presently there is no charge for wire
redemptions; however, the Funds reserve the right to charge for this service.
Any charges for wire redemptions will be deducted from the shareholder's Fund
account by redemption of shares. Investors choosing to purchase or redeem their
shares through a broker/dealer or other institution may be charged a fee by that
institution.
5
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BY MAIL - You may redeem any part of your account in a Fund at no
charge by mail. Your request should be addressed to:
Alpha Analytics Funds
American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
"Proper order" means your request for a redemption must include your
letter of instruction, including the Fund name, account number, account name(s),
the address and the dollar amount or number of shares you wish to redeem. This
request must be signed by all registered share owner(s) in the exact name(s) and
any special capacity in which they are registered. For all redemptions, the
Funds require that signatures be guaranteed by a bank or member firm of a
national securities exchange. Signature guarantees are for the protection of
shareholders. At the discretion of each of the Funds or American Data Services,
Inc., a shareholder, prior to redemption, may be required to furnish additional
legal documents to insure proper authorization.
BY TELEPHONE - You may redeem any part of your account in a Fund by
calling the Transfer Agent 877-257-4240. You must first complete the Optional
Telephone Redemption and Exchange section of the investment application to
institute this option. The Fund, the Transfer Agent and the Custodian are not
liable for following redemption or exchange instructions communicated by
telephone that they reasonably believe to be genuine. However, if they do not
employ reasonable procedures to confirm that telephone instructions are genuine,
they may be liable for any losses due to unauthorized or fraudulent
instructions. Procedures employed may include recording telephone instructions
and requiring a form of personal identification from the caller.
The telephone redemption and exchange procedures may be terminated at
any time by the Funds or the Transfer Agent. During periods of extreme market
activity it is possible that shareholders may encounter some difficulty in
telephoning the Funds, although neither the Funds nor the Transfer Agent has
ever experienced difficulties in receiving and in a timely fashion responding to
telephone requests for redemptions or exchanges. If you are unable to reach the
Funds by telephone, you may request a redemption or exchange by mail.
REDEMPTION FEE - Shares held less than 90 days, and shares held between
91 and 364 days, and redeemed (excluding exchanges) from a Fund are subject to a
short term redemption fee equal to 2.0% and 1.0%, respectively, of the net asset
value of shares redeemed. A redemption fee will not be charged when shares of a
Fund are exchanged for another Alpha Analytics Investment Trust mutual fund;
however, the one-year holding period of the exchanged shares will be calculated
from the exchange date. Solely for purposes of calculating the one-year holding
period, each Fund uses the "first-in, first out" (FIFO) method. That is, the
date of any redemption or exchange will be compared to the earliest purchase
date. If this holding period is less than one year, the applicable fee will be
assessed. The fee will be prorated if a portion of the shares being redeemed or
exchanged has been held for more than one year, or the shares are subject to
more than one fee level. Shares acquired through reinvested dividend or capital
gain distributions are exempt from the fee.
ADDITIONAL INFORMATION - If you are not certain of the requirements for
a redemption please call the Transfer Agent at 877-257-4240. Redemptions
specifying a certain date or share price cannot be accepted and will be
returned. You will be mailed the proceeds on or before the fifth business day
following the redemption. However, payment for redemption made against shares
purchased by check will be made only after the check has cleared, which normally
may take up to fifteen days. Also, when the New York Stock Exchange is closed
(or when trading is restricted) for any reason other than its customary weekend
or holiday closing or under any emergency circumstances, as determined by the
Securities and Exchange Commission, the Funds may suspend redemptions or
postpone payment dates.
Because the Funds incur certain fixed costs in maintaining shareholder
accounts, each Fund reserves the right to require any shareholder to redeem all
of his or her shares in the Fund on 30 days' written notice if the value of his
or her shares in the Fund is less than $5,000 due to redemption, or such other
minimum amount as the Fund may determine from time to time. An involuntary
redemption constitutes a sale. You should consult your tax adviser concerning
the tax consequences of involuntary redemptions. A shareholder may increase the
value of his or her shares in the Fund to the minimum amount within the 30 day
period. Each share of each Fund is subject to redemption at anytime if the Board
of Trustees determines in its sole discretion that failure to so redeem may have
materially adverse consequences to all or any of the shareholders of the Funds.
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SHARE PRICE CALCULATION
The value of an individual share in each Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is open
for business, and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The net asset value
per share of the Fund will fluctuate.
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. All other securities for which over-the-counter market
quotations are readily available are valued at their last bid price. When market
quotations are not readily available, when the Adviser determines the last bid
price does not accurately reflect the 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.
Fixed income securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data processing
techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, or when restricted or illiquid
securities are being valued, securities are valued at fair value as determined
in good faith by the Adviser, subject to review of the Board of Trustees. Short
term investments in fixed income securities with maturities of less than 60 days
when acquired, or which subsequently are within 60 days of maturity, are valued
by using the amortized cost method of valuation, which the Board has determined
will represent fair value.
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DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to distribute substantially all of its net investment
income as dividends to its shareholders on an annual basis, and intends to
distribute its net long term capital gains and its net short term capital gains
at least once a year.
Income dividends and capital gain distributions are automatically
reinvested in additional shares at the net asset value per share on the
distribution date. An election to receive a cash payment of dividends and/or
capital gain distributions may be made in the application to purchase shares or
by separate written notice to the Transfer Agent. Shareholders will receive a
confirmation statement reflecting the payment and reinvestment of dividends and
summarizing all other transactions. If cash payment is requested, a check
normally will be mailed within five business days after the payable date. If you
withdraw your entire account, all dividends accrued to the time of withdrawal,
including the day of withdrawal, will be paid at that time. You may elect to
have distributions on shares held in IRAs and 403(b) plans paid in cash only if
you are 59 1/2 years old or permanently and totally disabled or if you otherwise
qualify under the applicable plan.
TAXES
Each Fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended. By
so qualifying, a Fund will not be subject to federal income taxes to the extent
that it distributes substantially all of its net investment income and any
realized capital gains.
For federal income tax purposes, dividends paid by each Fund from
ordinary income are taxable to shareholders as ordinary income, but may be
eligible in part for the dividends received deduction for corporations. Pursuant
to the Tax Reform Act of 1986 (the "Tax Reform Act"), all distributions of net
short term capital gains to individuals are taxed at the same rate as ordinary
income. All distributions of net capital gains to corporations are taxed at
regular corporate rates. Any distributions designated as being made from net
realized long term capital gains are taxable to shareholders as long term
capital gains regardless of the holding period of the shareholder.
Each Fund will mail to each shareholder after the close of the calendar
year a statement setting forth the federal income tax status of distributions
made during the year. Dividends and capital gains distributions may also be
subject to state and local taxes. Shareholders are urged to consult their own
tax advisers regarding specific questions as to federal, state or local taxes
and the tax effect of distributions and withdrawals from the Fund.
On the application or other appropriate form, each of the Funds will
request the shareholder's certified taxpayer identification number (social
security number for individuals) and a certification that the shareholder is not
subject to backup withholding. Unless the shareholder provides this information,
each Fund will be required to withhold and remit to the U.S. Treasury 31% of the
dividends, distributions and redemption proceeds payable to the shareholder.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, a Fund may be fined $50 annually for each account for which a
certified taxpayer identification number is not provided. In the event that such
a fine is imposed with respect to a specific account in any year, the applicable
Fund may make a corresponding charge against the account.
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OPERATION OF THE FUNDS
Each Fund is a diversified series of Alpha Analytics Investment Trust,
an open-end management investment company organized as an Ohio business trust on
August 18, 1998. The Board of Trustees supervises the business activities of the
Funds. Like other mutual funds, the Funds retain various organizations to
perform specialized services. The Trust retains Alpha Analytics Investment
Group, LLC, 1901 Avenue of the Stars, Suite 1100, Los Angeles, CA 90067 (the
"Adviser") to manage the assets of each Fund. The Adviser was established in
July 1998 and is controlled by Robert E. Gipson. Mr. Gipson is an attorney (of
counsel at Gipson, Hoffman & Pancione), an officer of Corporate Management
Group, Inc. (a business and financial consulting company) and serves as an
officer or director of various public and non-public companies. The Advisor is
responsible for determining the securities to be held or sold by each Fund, and
the portion of each Fund's assets to be held uninvested, subject always to the
Fund's investment objective, policies and restrictions, and subject further to
such policies and instructions as the Board of Trustees may establish.
Each Fund is authorized to pay the Adviser a fee equal to an annual
average 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. In this regard, it should be noted that most investment companies pay
their own operating expenses directly, while the Funds' expenses, except those
specified above, are paid by the Adviser.
John M. Gipson, Vice President of the Adviser, is primarily responsible
for the day-to-day management of the Small Cap Quant Fund's portfolio. Mr.
Gipson received his Ph.D. in theoretical physics from Yale University in 1982.
He subsequently persued a career in science. Since January 1992, he was worked
as the senior scientist for NVI, Inc. at NASA's Goddard Spaceflight Center, and
has resigned effective February 1, 1999. He has been an active and successful
individual investor. Mr. Gipson joined the Adviser at its formation in 1998.
The Adviser has entered into a Sub-Advisory Agreement with Cambiar
Investors, Inc., 8400 East Prentice Avenue, Suite 460, Englewood, CA 80111
("Cambiar") to serve as the sub-adviser of the Value Fund. Cambiar, a Colorado
corporation, was formed in 1973. It is a wholly-owned subsidiary of United Asset
Management Corporation, a holding company established in 1980 for the purpose of
acquiring and owning firms engaged primarily in institutional investment
management. Cambiar provides investment management services to corporations,
foundations, endowments, pension and profit-sharing plans, trusts, estates and
other institutions and individuals. As of November 30, 1998, Cambiar had over $2
billion in assets under management. The investment decisions of the Value Fund
are made by a committee of Cambiar, which is primarily responsible for the
day-to-day management of the Fund's portfolio. The Adviser has agreed to pay
Cambiar a sub-advisory fee equal to an annual average rate of 0.50% of the
average daily net assets of the Value Fund.
Each Fund retains American Data Services, Inc., 150 Motor Parkway,
Hauppauge, New York 11788-5108 (the "Administrator") to manage the Funds'
business affairs and provide the Funds with administrative services, including
all regulatory reporting and necessary office equipment, personnel and
facilities. Each Fund also retains American Data Services, Inc. (the "Transfer
Agent") to serve as transfer agent, dividend paying agent and shareholder
service agent. For its services as Administrator and Transfer Agent, American
Data Services, Inc. receives a monthly fee from the Adviser based on assets and
the number of shareholder accounts serviced, subject to an annual minimum fee of
$42,000.
Each Fund retains ADS Distributors, Inc., P.O. Box 5536, Hauppauge, New
York 11788-0132 (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.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Adviser may give consideration to sales of shares of
a Fund as a factor in the selection of brokers and dealers to execute portfolio
transactions. The Adviser (not the Funds) may pay certain financial institutions
(which may include banks, brokers, securities dealers and other industry
professionals) a fee for providing distribution related services and/or for
performing certain administrative functions for Fund shareholders to the extent
these institutions are allowed to do so by applicable statute, rule or
regulation.
9
<PAGE>
HISTORICAL PERFORMANCE OF SUB-ADVISER TO VALUE FUND
Set forth below are certain performance data provided by the
Sub-Adviser relating to the composite of separately managed accounts of clients
of the Sub-Adviser. The composite is entirely composed of those accounts with
the same investment objective as the Value Fund and managed using substantially
similar, though not in all cases identical, investment strategies, techniques
and policies as those contemplated for use by the Sub-Adviser in managing the
Value Fund. The performance data for the managed accounts is net of all fees and
expenses. The investment returns of the Value Fund may differ from those of the
separately managed accounts because such separately managed accounts will have
fees and expenses that differ from those of the Value Fund. Further, the
separately managed accounts are not subject to investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
Internal Revenue Code; such conditions, if applicable, may have lowered the
returns for the separately managed accounts. The results presented are not
intended to predict or suggest the return to be experienced by the Value Fund or
the return an investor might achieve by investing in the Value Fund.
CAMBIAR INVESTORS, INC. -- COMPOSITE RETURNS
FOR INDIVIDUAL YEARS ENDED DECEMBER 31
(PERCENTAGE RETURNS NET OF MANAGEMENT FEES)
<TABLE>
<CAPTION>
CALENDAR YEARS CAMBIAR INVESTORS, INC. S&P 500 INDEX
- -------------- ----------------------- -------------
<S> <C> <C> <C>
1975 .......................... 34.80% 37 .20 %
1976 .......................... 32.40% 23 .80 %
1977 .......................... 14.40% (7 .20)%
1978 .......................... 22.50% 6 .60 %
1979 .......................... 24.00% 18 .40 %
1980 .......................... 25.50% 32 .40 %
1981 .......................... 9.80% (4 .90)%
1982 .......................... 33.30% 21 .60 %
1983 .......................... 22.60% 22 .40 %
1984 .......................... 2.90% 6 .10 %
1985 .......................... 29.30% 31 .57 %
1986 .......................... 23.67% 18 .21 %
1987 .......................... 6.10% 5 .17 %
1988 .......................... 17.11% 16 .50 %
1989 .......................... 23.23% 31 .43 %
1990 .......................... 2.83% (3 .19)%
1991 .......................... 31.51% 30 .55 %
1992 .......................... 9.56% 7 .68 %
1993 .......................... 13.66% 10 .00 %
1994 .......................... 1.00% 1 .33 %
1995 .......................... 33.54% 37 .50 %
1996 .......................... 23.92% 23 .25 %
1997 .......................... 33.69% 33 .36 %
Cumulative (1/1/75-12/31/97) ........................ 6,517.30% 3,299.40%
1-year period ended 12/31/97 (average annual) ....... 33.69% 33.36%
5-year period ended 12/31/97 (average annual) ....... 20.49% 20.30%
10-year period ended 12/31/97 (average annual)....... 18.44% 18.04%
23-Year Mean (1/1/75-12/31/97)................20.50% 17 .40 %
Value of $1 invested during (1/1/75-12/31/97)......$65.17 $32.99
<FN>
Notes:
1. The annualized return is calculated from monthly data, allowing for
compounding. This methodology of calculating returns is different than the SEC
Standard, which may produce different results.
2. The cumulative return means that $1 invested in the account on January 1,
1975 had grown to $65.17 by December 31, arithmetic average of the annual
returns for the calendar years listed.
4. The S&P 500 Index is an unmanaged index which assumes reinvestment of
dividends and is generally considered representative of securities similar to
those invested in by the Adviser for the purpose of the composite performance
numbers set forth above.
5. During the period shown (1/1/75-12/31/97), fees on the Adviser's individual
accounts ranged from 0.25% to 2.0% (25 basis points to 200 basis points). The
Adviser's returns presented above are net of the maximum fee of 2.0%. Net
returns to investors vary depending on the management fee.
</FN>
</TABLE>
10
<PAGE>
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS
This section contains general information about various types of securities
and investment techniques that the Funds may purchase or employ. The Statement
of Additional Information provides more information.
EQUITY SECURITIES. Equity securities include common stock, rights and warrants.
Common stocks, the most familiar type, represent an equity (ownership) interest
in a corporation. Warrants are options to purchase equity securities at a
specified price for a specific time period. Rights are similar to warrants, but
normally have a short duration and are distributed by the issuer to its
shareholders. Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's financial
condition and on overall market and economic conditions.
Each Fund may invest up to 25% of its assets in foreign equity securities by
purchasing American Depository Receipts ("ADRs"). ADRs are certificates
evidencing ownership of shares of a foreign-based issuer held in trust by a bank
or similar financial institution. They are alternatives to the direct purchase
of the underlying securities in their national markets and currencies. The Small
Cap Quant Fund may also purchase the equity securities of Canadian companies
listed on Canadian exchanges. To the extent that a Fund does invest in foreign
securities, such investments may be subject to special risks. Purchases of
foreign securities are usually made in foreign currencies and, as a result, the
Fund may incur currency conversion costs and may be affected favorably or
unfavorably by changes in the value of foreign currencies against the U.S.
dollar. In addition, there may be less information publicly available about a
foreign company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. Other risks associated with
investments in foreign securities include changes in restrictions on foreign
currency transactions and rates of exchanges, changes in the administrations or
economic and monetary policies of foreign governments, the imposition of
exchange control regulations, the possibility of expropriation decrees and other
adverse foreign governmental action, the imposition of foreign taxes, less
liquid markets, less government supervision of exchanges, brokers and issuers,
difficulty in enforcing contractual obligations, delays in settlement of
securities transactions and greater price volatility. In addition, investing in
foreign securities will generally result in higher commissions than investing in
similar domestic securities.
Investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the Adviser. As a result, the return and net asset value
of a Fund will fluctuate. Securities in a Fund's portfolio may not increase as
much as the market as a whole and some undervalued securities may continue to be
undervalued for long periods of time. Although profits in some Fund holdings may
be realized quickly, it is not expected that most investments will appreciate
rapidly.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Fund may purchase securities
on a when-issued or delayed delivery basis. Delivery of and payment for these
securities may take place as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Fund until
settlement takes place. The Fund maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments. In when-issued and delayed delivery transactions, the Fund
relies on the seller to complete the transaction. The seller's failure to
complete the transaction may cause the Fund to miss a price or yield considered
to be advantageous. A Fund may engage in these types of purchases in order to
buy securities that fit within its investment objective at attractive prices,
not to increase its investment leverage.
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements fully
collateralized by U.S. Government obligations. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Fund) acquires ownership
of a U.S. Government obligation (which may be of any maturity) and the seller
agrees to repurchase the obligation at a future time at a set price, thereby
determining the yield during the purchaser's holding period (usually not more
than seven days from the date of purchase). Any repurchase transaction in which
the Fund engages will require full collateralization of the seller's obligation
during the entire term of the repurchase agreement. In the event of a bankruptcy
or other default of the seller, the Fund could experience both delays in
liquidating the underlying security and losses in value. However, each Fund
intends to enter into repurchase agreements only with Star Bank, N.A. (the
Fund's Custodian), other banks with assets of $1 billion or more and registered
securities dealers determined by the Adviser (subject to review by the Board of
Trustees) to be creditworthy. The Adviser monitors the creditworthiness of the
banks and securities dealers with which the Fund engages in repurchase
transactions.
11
<PAGE>
SHORT SALES. The Small Cap Quant Fund may sell a security short in anticipation
of a decline in the market value of the security. When the Fund engages in a
short sale, it sells a security which it does not own. To complete the
transaction, the Fund must borrow the security in order to deliver it to the
buyer. The Fund must replace the borrowed security by purchasing it at the
market price at the time of replacement, which may be more or less than the
price at which the Fund sold the security. The Fund will incur a loss as a
result of the short sale if the price of the security increases between the date
of the short sale and the date on which the Fund replaces the borrowed security.
The Fund will realize a profit if the security declines in price between those
dates.
In connection with its short sales, the Small Cap Quant Fund will be
required to maintain a segregated account with the Custodian of cash or high
grade liquid assets equal to the market value of the securities sold less any
collateral deposited with its broker. The Fund will limit its short sales so
that no more than 10% of its net assets (less all its liabilities other than
obligations under the short sales) will be deposited as collateral and allocated
to the segregated account. However, the segregated account and deposits will not
necessarily limit the Fund's potential loss on a short sale, which is unlimited.
FUTURES AND OPTIONS. The Small Cap Quant Fund may buy and write put and call
options, and may invest in futures contracts, provided the Fund's investment in
each does not exceed 5% of its assets. The Statement of Additional Information
provides information about these securities and the risks involved.
BORROWING. Each Fund may borrow up to one third of the value of its total assets
as a temporary measure for extraordinary or emergency purposes (including to
meet redemption requests). Neither Fund will purchase any securities while
borrowings representing more than 5% of its assets are outstanding.
GENERAL INFORMATION
FUNDAMENTAL POLICIES. The investment limitations set forth in the Statement of
Additional Information as fundamental policies may not be changed without the
affirmative vote of the majority of the outstanding shares of the applicable
Fund. The investment objective of each Fund may be changed without the
affirmative vote of a majority of the outstanding shares of the Fund. Any such
change may result in the Fund having an investment objective different from the
objective which the shareholders considered appropriate at the time of
investment in the Fund.
PORTFOLIO TURNOVER. Neither of the Funds intends to purchase or sell securities
for short term trading purposes. However, if the objective of a Fund would be
better served, short-term profits or losses may be realized from time to time.
It is anticipated that the portfolio turnover will not exceed 50% annually for
the Value Fund and 200% annually for the Small Cap Quant Fund. The brokerage
commissions incurred by the Small Cap Quant Fund will generally be higher than
those incurred by a fund with a lower portfolio turnover rate. The Small Cap
Quant Fund's higher turnover rate may result in the realization, for federal tax
purposes, of more net capital gains, and any distributions derived from such
gains may be ordinary income.
SHAREHOLDER RIGHTS. Any Trustee of the Trust may be removed by vote of the
shareholders holding not less than two-thirds of the outstanding shares of the
Trust. The Trust does not hold an annual meeting of shareholders. When matters
are submitted to shareholders for a vote, each shareholder is entitled to one
vote for each whole share he owns and fractional votes for fractional shares he
owns. All shares of a Fund have equal voting rights and liquidation rights.
Prior to the offering made by this Prospectus, Robert E. Gipson and Corporate
Management Group Retirement Plan purchased for investment all of the outstanding
shares of each Fund and each may be deemed to control the Funds.
Each Fund acknowledges that it is solely responsible for the information or
any lack of information about it in this joint Prospectus and in the joint
Statement of Additional Information, and no other Fund is responsible therefor.
There is a possibility that one Fund might be deemed liable for misstatements or
omissions regarding another Fund in this Prospectus or in the joint Statement of
Additional Information; however, the Funds deem this possibility slight.
YEAR 2000. Like other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the Adviser, Administrator or other service providers
to the Funds do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Issue." The Adviser does not anticipate that the move to Year 2000 will have a
material impact on its operations or the operations of the Funds; however, the
Adviser cannot make any assurances that the steps it has taken to ensure Year
2000 compliance will be successful. In addition, there can be no assurance that
Year 2000 Issues will not affect the companies in which the Funds invest or
worldwide markets and economies.
12
<PAGE>
PERFORMANCE INFORMATION
Each Fund may periodically advertise "average annual total return." The
"average annual total return" of a Fund refers to the average annual compounded
rate of return over the stated period that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment. The calculation of "average annual total return" assumes the
reinvestment of all dividends and distributions.
Each Fund may also advertise performance information (a "non-standardized
quotation") which is calculated differently from "average annual total return."
A non-standardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A non-standardized quotation may
also be an average annual compounded rate of return over a specified period,
which may be a period different from those specified for "average annual total
return." In addition, a non-standardized quotation may be an indication of the
value of a $10,000 investment (made on the date of the initial public offering
of the Fund's shares) as of the end of a specified period. A non-standardized
quotation will always be accompanied by the Fund's "average annual total return"
as described above.
Each Fund may also include in advertisements data comparing performance with
other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the Standard &
Poor's (S&P) 500 Index and the Dow Jones Industrial Average.
13
<PAGE>
THE ADVERTISED PERFORMANCE DATA OF EACH FUND IS BASED ON HISTORICAL
PERFORMANCE AND IS NOT INTENDED TO INDICATE FUTURE PERFORMANCE. RATES OF TOTAL
RETURN QUOTED BY A FUND MAY BE HIGHER OR LOWER THAN PAST QUOTATIONS, AND THERE
CAN BE NO ASSURANCE THAT ANY RATE OF TOTAL RETURN WILL BE MAINTAINED. THE
PRINCIPAL VALUE OF AN INVESTMENT IN EACH FUND WILL FLUCTUATE SO THAT A
SHAREHOLDER'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
SHAREHOLDER'S ORIGINAL INVESTMENT.
INVESTMENT SUB-ADVISER
INVESTMENT ADVISER (TO THE VALUE FUND)
Alpha Analytics Investment Group, LLC Cambiar Investors, Inc.
Corporate Management Group, Inc. 8400 East Prentice Avenue, Suite 460
1901 Avenue of the Stars, Suite 1100 Englewood, CO 80111
Los Angeles, CA 90067
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
Star Bank, N.A. ADS Distributors, 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
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by a
Fund. This Prospectus does not constitute an offer by any of the Funds to sell
its shares in any state to any person to whom it is unlawful to make such offer
in such state.
14
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY OF FUND EXPENSES.....................................................
THE FUNDS....................................................................
INVESTMENT OBJECTIVE AND STRATEGIES..........................................
HOW TO INVEST IN THE FUNDS...................................................
HOW TO REDEEM SHARES.........................................................
SHARE PRICE CALCULATION......................................................
DIVIDENDS AND DISTRIBUTIONS..................................................
TAXES........................................................................
OPERATION OF THE FUNDS........................................................
HISTORICAL PERFORMANCE........................................................
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS.....................
GENERAL INFORMATION...........................................................
PERFORMANCE INFORMATION.......................................................
15
<PAGE>
ALPHA ANALYTICS INVESTMENT TRUST
ALPHA ANALYTICS VALUE FUND
ALPHA ANALYTICS SMALL CAP QUANT FUND
STATEMENT OF ADDITIONAL INFORMATION
December 30, 1998
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of Alpha Analytics Value Fund and
Alpha Analytics Small Cap Quant Fund dated December 30, 1998. A copy of the
Prospectus can be obtained by writing the Transfer Agent, American Data
Services, Inc., at P.O. Box 5536, Hauppauge, New York 11788-0132, or by calling
1-877-257-4240.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRUST......................................................1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS...............................................................1
INVESTMENT LIMITATIONS........................................................5
INVESTMENT ADVISORY ARRANGEMENTS..............................................8
TRUSTEES AND OFFICERS.........................................................8
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................9
DETERMINATION OF SHARE PRICE.................................................10
INVESTMENT PERFORMANCE.......................................................11
CUSTODIAN....................................................................12
TRANSFER AGENT...............................................................12
ACCOUNTANTS..................................................................12
DISTRIBUTOR..................................................................12
<PAGE>
DESCRIPTION OF THE TRUST
Alpha Analytics Value Fund (the "Value Fund") and Alpha Analytics Small
Cap Quant Fund (the "Small Cap Quant Fund") (each a "Fund" or collectively, the
"Funds") were organized as series of Alpha Analytics Investment Trust (the
"Trust"). The Trust is an open-end investment company established under the laws
of Ohio by an Agreement and Declaration of Trust dated August 18, 1998 (the
"Trust Agreement") and has no prior history. The Trust Agreement permits the
Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value.
Each share of a series represents an equal proportionate interest in
the assets and liabilities belonging to that series with each other share of
that series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will been titled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
For information concerning the purchase and redemption of shares of the
Fund, see "How to Invest in the Fund" and "How to Redeem Shares" in the Funds'
Prospectus. For a description of the methods used to determine the share price
and value of a Fund's assets, see "Share Price Calculation" in the Funds'
Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Funds may make and some of the techniques they may use, as
described in the Prospectus (see "Investment Objectives and Strategies" and
"Investment Policies and Techniques and Risk Considerations").
A. AMERICAN DEPOSITORY RECEIPTS (ADRS). ADRs are subject to risks
similar to those associated with direct investment in foreign securities. For
example, there may be less information publicly available about a foreign
company then about a U.S. company, and foreign companies are not generally
subject to accounting, auditing and financial reporting standards and practices
comparable to those in the U.S. Other risks associated with investments in
foreign securities include changes in restrictions on foreign currency
transactions and rates of exchanges, changes in the administrations or economic
and monetary policies of foreign governments, the imposition of exchange control
regulations, the possibility of expropriation decrees and other adverse foreign
governmental action, the imposition of foreign taxes, less liquid markets, less
government supervision of exchanges, brokers and issuers, difficulty in
enforcing contractual obligations, delays in settlement of securities
transactions and greater price volatility. In addition, investing in foreign
securities will generally result in higher commissions than investing in similar
domestic securities.
B. OPTION TRANSACTIONS. Up to 5% of the Small Cap Quant Fund's net
assets may be invested in option transactions involving individual securities
and market indices. An option involves either (a) the right or the obligation to
buy or sell a specific instrument at a specific price until the expiration date
of the option, or (b) the right to receive payments or the obligation to make
payments representing the difference between the closing price of a market index
and the exercise price of the option expressed in dollars times a specified
multiple until the expiration date of the option. Options are sold (written) on
securities and market indices. The purchaser of an option on a security pays the
seller (the writer) a premium for the right granted but is not obligated to buy
or sell the underlying security. The purchaser of an option on a market index
pays the seller a premium for the right granted, and in return the seller of
such an option is obligated to make the payment. A writer of an option may
terminate the obligation prior to expiration of the option by making an
1
<PAGE>
offsetting purchase of an identical option. Options are traded on organized
exchanges and in the over-the-counter market. Options on securities which the
Fund sells (writes) will be covered or secured, which means that it will own the
underlying security (for a call option); will segregate with the Custodian high
quality liquid debt obligations equal to the option exercise price (for a put
option); or (for an option on a stock index) will hold a portfolio of securities
substantially replicating the movement of the index (or, to the extent it does
not hold such a portfolio, will maintain a segregated account with the Custodian
of high quality liquid debt obligations equal to the market value of the option,
marked to market daily). When the Fund writes options, it may be required to
maintain a margin account, to pledge the underlying securities or U.S.
government obligations or to deposit liquid high quality debt obligations in a
separate account with the Custodian.
The purchase and writing of options involves certain risks; for
example, the possible inability to effect closing transactions at favorable
prices and an appreciation limit on the securities set aside for settlement, as
well as (in the case of options on a stock index) exposure to indeterminate
liability. The purchase of options limits the Fund's potential loss to the
amount of the premium paid and can afford the Fund the opportunity to profit
from favorable movements in the price of an underlying security to a greater
extent than if transactions were effected in the security directly. However, the
purchase of an option could result in the Fund losing a greater percentage of
its investment than if the transaction were effected directly. When the Fund
writes a covered call option, it will receive a premium, but it will give up the
opportunity to profit from a price increase in the underlying security above the
exercise price as long as its obligation as a writer continues, and it will
retain the risk of loss should the price of the security decline. When the Fund
writes a covered put option, it will receive a premium, but it will assume the
risk of loss should the price of the underlying security fall below the exercise
price. When the Fund writes a covered put option on a stock index, it will
assume the risk that the price of the index will fall below the exercise price,
in which case the Fund may be required to enter into a closing transaction at a
loss. An analogous risk would apply if the Fund writes a call option on a stock
index and the price of the index rises above the exercise price.
C. FUTURES CONTRACTS. When the Small Cap Quant Fund purchases a futures
contract, it agrees to purchase a specified underlying instrument at a specified
future date. When the Fund sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when the Fund enters into the
contract. Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on indices
of securities, such as the Standard & Poor's 500 Composite Stock Price Index
("S&P 500"). Futures can be held until their delivery dates, or can be closed
out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore, purchasing
futures contracts will tend to increase a Funds's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When the Small Cap Quant Fund
sells a futures contract, by contrast, the value of its futures position will
tend to move in a direction contrary to the market. Selling futures contracts,
therefore, will tend to offset both positive and negative market price changes,
much as if the underlying instrument had been sold. Successful use of futures
contracts will depend on the Adviser's ability to predict the future direction
of stock prices or interest rates and incorrect predictions by the Adviser may
have an adverse effect on the Fund. In this regard, it should be noted that the
skills and techniques necessary to arrive at such predictions are different from
those needed to predict price changes in individual stocks.
D. BORROWING. Because the Funds' investments will fluctuate in value,
whereas the interest obligations on borrowed funds may be fixed, during times of
borrowing, the Funds' net asset value may tend to increase more when its
investments increase in value, and decrease more when its investments decrease
in value. In addition, interest costs on borrowings may fluctuate with changing
market interest rates and may partially offset or exceed the return earned on
the borrowed funds. Also, during times of borrowing under adverse market
conditions, the Funds might have to sell portfolio securities to meet interest
or principal payments at a time when fundamental investment considerations would
not favor such sales.
2
<PAGE>
INVESTMENT LIMITATIONS
FUNDAMENTAL. The investment limitations described below have been
adopted by the Trust with respect to each Fund and are fundamental
("Fundamental"), I.E., they may not be changed without the affirmative vote of a
majority of the outstanding shares of each Fund. As used in the Prospectus and
the Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. BORROWING MONEY. The Funds will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. SENIOR SECURITIES. The Funds will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. UNDERWRITING. The Funds will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. REAL ESTATE. The Funds will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. COMMODITIES. The Funds will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. LOANS. The Funds will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. CONCENTRATION. Neither Fund will invest 25% or more of its total
assets in a particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. government, its
agencies and instrumentalities or repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
3
<PAGE>
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
NON-FUNDAMENTAL. The following limitations have been adopted by the
Trust with respect to the Fund and are Non-Fundamental (see "Investment
Restrictions" above).
1. PLEDGING. The Funds will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. BORROWING. Neither Fund will purchase any security while borrowings
representing more than 5% of its total assets are outstanding.
3. MARGIN PURCHASES. Neither Fund will purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by a Fund for the clearance of purchases and sales or redemption
of securities, or to arrangements with respect to transactions involving
options, futures contracts, short sales and other permitted investments and
techniques.
4. SHORT SALES. The Alpha Analytics Value Fund will not effect short
sales of securities.
5. OPTIONS. The Alpha Analytics Value Fund will not purchase or sell
puts, calls, options or straddles.
6. ILLIQUID INVESTMENTS. Neither Fund will invest in securities for
which there are legal or contractual restrictions on resale and other illiquid
securities.
7. LOANS OF PORTFOLIO SECURITIES. Neither Fund will make loans of
portfolio securities (the Funds have no current intention to loan portfolio
securities).
INVESTMENT ADVISORY ARRANGEMENTS
INVESTMENT ADVISER. The investment adviser to each Fund is Alpha
Analytics Investment Group LLC, 1901 Avenue of the Stars, Suite 1100, Los
Angeles, CA 90067 (the "Adviser"). Robert E. Gipson, is a Trustee and the
President of the Trust. He is also the President and managing member of the
Adviser and, as such, controls the Adviser. As a result, he is an affiliate of
the Trust and the Adviser.
Under the terms of each Fund's management agreement (each an
"Agreement" or collectively the "Agreements"), the Adviser manages each Fund's
investments subject to approval of the Board of Trustees and pays all of the
expenses of each Fund except brokerage, taxes, interest, fees and expenses of
the non-interested person trustees and extraordinary expenses. As compensation
for its management services and agreement to pay the Fund's expenses, each Fund
is obligated to pay the Adviser a fee computed and accrued daily and paid
monthly at an annual rate of 1.50% of the average daily net assets of the Fund.
The Adviser may waive all or part of its fee, at any time, and at its sole
discretion, but such action shall not obligate the Adviser to waive any fees in
the future.
The Adviser retains the right to use the name "Alpha Analytics" or any
variation thereof in connection with another investment company or business
enterprise with which the Adviser is or may become associated. The Trust's right
to use the name "Alpha Analytics" in connection with each Fund automatically
ceases ninety days after termination of the respective Agreement and may be
withdrawn by the Adviser on ninety days written notice.
4
<PAGE>
The Adviser may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Funds believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Funds believes that there would be no material impact on any Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. Each Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Funds, no preference will be shown for such
securities.
SUB-ADVISER. Cambiar Investors, Inc., ("Cambiar") is the Sub-adviser to
the Value Fund. Cambiar is a wholly-owned subsidiary of United Asset Management
Corporation, a holding company. Under the terms of the Sub-Advisory Agreement,
the Sub-adviser receives a fee from the Adviser computed and accrued daily and
paid monthly at an annual rate of 0.50% of the average daily net assets of the
Fund.
Subject always to the control of the Board of Trustees, the
Sub-Adviser, at its expense, furnishes continuously an investment program for
the Value Fund. The Sub-Adviser must use its best judgement to make investment
decisions on behalf of the Value Fund, place all orders for the purchase and
sale of portfolio securities and execute all agreements related thereto. The
Sub-Adviser makes its officers and employees available to the Adviser from time
to time at reasonable times to review investment policies of the Value Fund and
to consult with the Adviser regarding the investment affairs of the Fund. The
Sub-Adviser maintains books and records with respect to the securities
transactions of the Value Fund and renders to the Adviser such periodic and
special reports as the Adviser or the Trustees may request. The Sub-Adviser pays
all expenses incurred by it in connection with its activities under this
Agreement other than the cost (including taxes and brokerage commissions, if
any) of securities and investments purchased for the Value Fund.
5
<PAGE>
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
<TABLE>
<CAPTION>
==================================== ---------------- ======================================================================
NAME, AGE AND ADDRESS POSITION PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
==================================== ---------------- ======================================================================
<S> <S> <S> <C>
Robert E. Gipson* President and Vice President of Sundance Group, Inc., a holding company, from 1993
Age: 52 Trustee to present; Chairman of National Mercantile Bancorp from June 1997
1901 Avenue of the Stars to present; Director of National Mercantile Bancorp from October
Suite 1100 1996 to present; Of Counsel at Gipson, Hoffman & Pancione from July
Los Angeles, CA 90067 1997 to present; Officer at Gipson, Hoffman & Pancione from December
1983 to July 1997; Owner/Officer of Corporate Management Group,
Inc., a business and financial consulting company, from August 1988
to present.
==================================== ---------------- ======================================================================
Jack P. McNally* Secretary, Vice President of Corporate Management Group, Inc. from 1989 to
Age: 43 Treasurer and present.
1901 Avenue of the Stars Trustee
Suite 1100
Los Angeles, CA 90067
==================================== ---------------- ======================================================================
Donald J. Alschuler Trustee Partner of Donlyn Company, a private investment company, from 1962
Age: 63 to present; Vice President of Lyndon Distribution Services, Inc., a
13104 Nimrod Place warehousing and distribution company, from 1988 to 1998; Chairman of
Los Angeles, CA 90049 Wisdom, Inc., a business advisory services company, from 1991 to
present; President of Modern Service Office Supply Co., Inc., an
office products marketer and distributor, from 1963 to 1993.
==================================== ---------------- ======================================================================
Michelle M. Schoeffel Trustee Chief Executive Officer and Chairwoman of Pacific American
Age: 38 Securities, a broker/dealer, from January 1998 to present; Vice
550 South Hope Street President of Mellon Private Asset Management from November 1993 to
Suite 1025 April 1997.
Los Angeles, CA 90071
==================================== ================ ======================================================================
Felice R. Cutler Trustee Partner at the Law Offices of Cutler & Cutler from 1966 to 1998;
Age: 61 Director of Aegis Consumer Funding Group, Inc., a consumer finance
813 Greenway Drive company, from 1996 to 1998; Trustee of Astra Institutional
Beverly Hills, CA 90210 Securities Trust and Astra Institutional Trust from 1995 to 1997;
Director and Trustee of
Pilgrim Group Family of
Funds from 1986 to 1995.
==================================== ================ ======================================================================
</TABLE>
6
<PAGE>
Trustee fees are Trust expenses and each series of the Trust pays a
portion of the Trustee fees. The following table estimates the Trustees'
compensation for the first fiscal period of the Trust ending July 31, 1999.
<TABLE>
<CAPTION>
==================================== =================================
TOTAL COMPENSATION
FROM TRUST (THE TRUST IS
NAME NOT IN A FUND COMPLEX)
==================================== =================================
<S> <C>
Robert E. Gipson $0
==================================== =================================
Jack P. McNally $0
==================================== =================================
Donald J. Alschuler $6,000
==================================== =================================
Michelle M. Schoeffel $6,000
==================================== =================================
Felice R. Cutler $6,000
==================================== =================================
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Adviser is responsible for each Fund's portfolio decisions and the placing
of each Fund's portfolio transactions. In placing portfolio transactions, the
Adviser seeks the best qualitative execution for each Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
7
<PAGE>
The Adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Funds and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Funds effect securities
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Funds. Although research services and other information are useful to the Funds
and the Adviser, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Adviser that the review and study of the research and other information will not
reduce the overall cost to the Adviser of performing its duties to the Funds
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
To the extent that the Trust and another of the Adviser's clients seek
to acquire the same security at about the same time, the Trust may not be able
to acquire as large a position in such security as it desires or it may have to
pay a higher price for the security. Similarly, the Trust may not be able to
obtain as large an execution of an order to sell or as high a price for any
particular portfolio security if the other client desires to sell the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for the
Trust. In the event that more than one client wants to purchase or sell the same
security on a given date, the purchases and sales will normally be made by
random client selection.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of each Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. For a description of the methods
used to determine the net asset value (share price), see "Share Price
Calculation" in the Prospectus.
8
<PAGE>
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return for the period indicated that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
In addition to providing average annual total return, the Funds may
also provide non-standardized quotations of total return for differing periods
and may provide the value of a $10,000 investment (made on the date of the
initial public offering of the Funds' shares) as of the end of a specified
period.
Each Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with each Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of any of the
Funds may be compared to indices of broad groups of unmanaged securities
considered to be representative of or similar to the portfolio holdings of the
Funds or considered to be representative of the stock market in general. The
Funds may use the Standard & Poor's 500 Stock Index or the Dow Jones Industrial
Average.
In addition, the performance of any of the Funds may be compared to
other groups of mutual funds tracked by any widely used independent research
firm which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of any of the Funds. Performance rankings and
ratings reported periodically in national financial publications such as
Barron's and Fortune also may be used.
CUSTODIAN
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is
Custodian of the Funds' investments. The Custodian acts as the Funds'
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Funds' request and
maintains records in connection with its duties.
TRANSFER AGENT
American Data Services, Inc. ("ADS"), P.O. Box 5536, Hauppauge, New
York 11788-0132, acts as the Funds' transfer agent and, in such capacity,
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other accounting and shareholder service functions. In addition, ADS, in its
capacity as Fund Administrator, provides the Funds with certain monthly reports,
record-keeping and other management-related services. For a description of the
fees paid by the Adviser on behalf of the Funds for these administrative
services, see "Operation of the Funds" in the Funds' Prospectus.
9
<PAGE>
ACCOUNTANTS
The firm of McCurdy & Associates, CPA's, 27955 Clemens Road, Westlake,
Ohio 44145, has been selected as independent public accountants for the Trust
for the fiscal year ending July 31, 1999. McCurdy & Associates performs an
annual audit of the Funds' financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
ADS Distributors, Inc. (the "Distributor"), P.O. Box 5536, Hauppauge,
New York 11788-0132, is the exclusive agent for distribution of shares of the
Funds. The Distributor is obligated to sell the shares of the Funds on a best
efforts basis only against purchase orders for the shares. Shares of the Funds
are offered to the public on a continuous basis. The Distributor is an
affiliated company of ADS, the Funds' transfer agent.
-10-
<PAGE>
FINANCIAL STATEMENTS
ALPHA ANALYTICS INVESTMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 22, 1998
<TABLE>
<CAPTION>
Alpha Analytics
Alpha Analytics Small Cap
Value Fund Quant Fund
---------- ----------
<S> <C> <C>
ASSETS:
Cash in Bank $51,000 $51,000
------- -------
Total Assets $51,000 $51,000
------- -------
LIABILITIES: $ 0 $ 0
------- -------
Total Liabilities $ 0 $ 0
------- -------
NET ASSETS $51,000 $51,000
------- -------
NET ASSETS CONSIST OF:
Capital Paid In $51,000 $51,000
------- -------
OUTSTANDING SHARES
Unlimited Number of Shares
Authorized Without Par Value 5,100 5,100
NET ASSET VALUE PER SHARE $ 10.00 $ 10.00
MAXIMUM REDEMPTION PRICE PER SHARE $ 9.80 $ 9.80
(Net asset value x 98%)
</TABLE>
See Accountants' Audit Report
11
<PAGE>
ALPHA ANALYTICS INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
December 22, 1998
1. ORGANIZATION Alpha Analytics Investment Trust (the "Trust") is an open-end
management investment company organized as a business trust under the laws
of the State of Ohio by a Declaration of Trust dated August 18, 1998. The
Declaration of Trust provides for an unlimited number of authorized shares
of beneficial interest without par value, which may, without shareholder
approval, be divided into an unlimited number of series of such shares, and
which presently consist of two series of shares for the Alpha Analytics
Value Fund and the Alpha Analytics Small Cap Quant Fund (the "Funds"). The
investment objective of both Funds is to provide long term capital
appreciation.
The Funds use an independent custodian and transfer agent. No transactions
other than those relating to organizational matters and the sale of 5,100
Shares of the Alpha Analytics Value Fund and 5,100 Shares of the Alpha
Analytics Small Cap Quant Fund have taken place to date.
2. RELATED PARTY TRANSACTIONS As of December 22, 1998, all of the outstanding
shares of the Funds were owned by Corporate Management Group Retirement
Plan and Robert E. Gipson and spouse. A shareholder who beneficially owns,
directly or indirectly, more than 25% of the Funds' voting securities may
be deemed a "control person" (as defined in the 1940 Act) of the Fund.
Alpha Analytics Investment Group, LLC, the Fund's investment adviser, is
registered an an investment adviser under the Investment Advisers Act of
1940. Robert Gipson is an owner and officer of Alpha Analytics Investment
Group, LLC, Corporate Management Group, Inc. and an officer and director of
the Fund.
The adviser receives from each Fund as compensation for its services to the
Funds, an annual fee of 1.5% of each Funds' net assets. The fee is paid
monthly and calculated on the basis of that month's net asseets. Through
November 30, 1999 the adviser has agreed to waive a portion of its fees so
that 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.
The adviser has entered into a sub-advisory agreement with Cambiar
Investors, Inc. for the Value Fund. Cambiar Investors, Inc. is an unrelated
party.
12
<PAGE>
ALPHA ANALYTICS INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 22, 1998
3. CAPITAL STOCK AND DISTRIBUTION
At December 22, 1998, an unlimited number of shares were authorized and
paid in capital amounted to $51,000 for each Fund. Transactions in capital
stock were as follows:
Shares Sold:
Alpha Analytics Value Fund 5,100
Alpha Analytics Small Cap Quant Fund 5,100
Shares Redeemed:
Alpha Analytics Value Fund 0
-----
Alpha Analytics Small Cap Quant Fund 0
-----
Net Increase:
Alpha Analytics Value Fund 5,100
-----
Alpha Analytics Small Cap Quant Fund 5,100
-----
Shares Outstanding:
Alpha Analytics Value Fund 5,100
-----
Alpha Analytics Small Cap Quant Fund 5,100
-----
13
