UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-21577
Alpha Hedge Fund, Inc.
(Exact name of registrant as specified in charter)
2820 Hanover Dallas, Texas 75225
(Address of principal executive offices)
Laura S. Adams
2820 Hanover Dallas, Texas 75225
(Name and address of agent for service)
Registrants telephone number, including area code: 866-819-3174
Date of fiscal year end: December 31
Date of Reporting Period: December 31, 2004
Item 1. Report to Shareholders.
ALPHA HEDGE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2004
Alpha Hedge Fund, Inc.
2820 Hanover Avenue
Dallas, Texas 75225
1-866-819-3174
Dear shareholders of Alpha Hedge Fund, Inc.,
The Fund began investment operations on December 21,2004 with a net
asset value of 20.0826 ended the year December 31, 2004 with a Net
Asset Value per share of $19.948, after declaring and distributing a
dividend of $0.0099 per share on December 31, 2004, for a total return
of (0.62%).
As of the end of 2004, Laura S. Adams and her family own 100% of the
shares of the Fund. We look forward to our first year of operation in
2005.
Sincerely,
Laura S. Adams
President
ALPHA HEDGE FUND, INC.
PERFORMANCE SUMMARY
The graph below represents the changes in value for an initial $10,000
investment in the Alpha Hedge Fund from its inception (the beginning of
investment operations), December 21, 2004 through December 31, 2004.
These changes are then compared to a $10,000 investment in the S&P 500
Index for the same period. Returns shown include the reinvestment of
all dividends. Past performance is not predictive of future
performance. Investment return and principal value will fluctuate, so
that your shares, when redeemed, may be worth more or less than the
original cost.
Inception Year End
(12/21/04) 2004
--------- --------
Alpha Hedge Fund $10,000 $ 9,938
S&P 500 Index $10,000 $10,148
$12,000| # = Alpha Hedge Fund
$11,000| * = S&P 500 Index
$10,000| # * # *
$ 9,000|__________________________________________________
(Inception) 2004
12/21/2004
10 Day
Return Since Inception
On December 21, 2004
----------------------
Alpha Hedge Fund (0.62%)
S&P 500 Index 1.48%
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2004
ASSETS
Investment securities, at
fair value(cost $1,000,763) $ 994,679
-----------
Total assets 994,679
-----------
LIABILITIES
Advisory fees payable 271
-----------
Total liabilities 271
-----------
NET ASSETS -
(Equivalent to $19.95 per
share based on 49,850 shares of
common stock issued and outstanding;
100,000,000 shares authorized,
$0.001 par value $ 994,408
============
NET ASSETS CONSIST OF:
Common stock $ 50
Paid-in capital 1,000,442
Net unrealized depreciation
of investments (6,084)
- -----------
Net assets $ 994,408
============
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2004
Contracts/
DESCRIPTION Shares VALUE
- ----------- --------- ------------
INDEX OPTIONS LONG - 59.63%
OEX (S&P 100 Index) Calls exp. 12/06 (a) 23 $ 592,940
--------
592,940
PUT OPTIONS ON COMMON STOCKS - 31.69% --------
Yahoo 47.50 Puts exp. 1/06 (a) 19 20,900
Motorola 30 Puts exp. 1/06 (a) 42 44,940
Bell South 37.50 Puts exp. 1/06 (a) 25 24,750
United Technologies 120 Puts exp. 1/06 (a) 7 12,110
Goldman Sachs 120 Puts exp. 1/06 (a) 7 11,970
Target 55 Puts exp. 1/06 (a) 14 7,840
Bristol Myers 40 Puts exp. 1/06 (a) 28 40,880
Lowes 75 Puts exp. 1/06 (a) 13 22,620
Freddie Mac 80 Puts exp. 1/06 (a) 10 8,600
Dow Chemical 60 Puts exp. 1/07 (a) 14 16,520
DuPont 60 Puts exp. 1/06 (a) 15 16,800
Gillette 55 Puts exp. 1/06 (a) 16 16,320
Boeing 70 Puts exp. 1/06 (a) 13 23,790
Texas Instruments 40 Puts exp. 1/06 (a) 31 47,120
----------
315,160
- ----------
Total options (cost $914,184) 908,100
- ----------
SHORT-TERM INVESTMENTS - 8.71%
Schwab Value Advantage Money Fund
Bears interest at 1.5% 86,579 86,579
--------
Total short-term investments (cost $86,579) 86,579
--------
Total investment securities - 100.00% (cost $1,000,763)) 994,679
Other assets less liabilities - 0.00% (271)
--------
Net assets - 100.00% $ 994,408
============
Notes:
(a) presently non-income producing.
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM APRIL 13, 2004(inception) THROUGH DECEMBER 31, 2004
INVESTMENT INCOME:
Dividends $ 0
Interest 763
------------
Total investment income 763
EXPENSES -
Advisory fees 271
----
Net investment income 492
GAINS ON INVESTMENTS -
Net change in unrealized depreciation of securities (6,084)
------------
Net unrealized loss on investments (6,084)
- ------------
Net decrease in net assets resulting from operations $ (5,592)
============
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM APRIL 13, 2004(inception) THROUGH DECEMBER 31, 2004
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 492
Net change in unrealized depreciation
of securities (6,084)
------------
Net decrease in net assets
resulting from operations (5,592)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (492)
------------
Total Distributions (492)
CAPITAL SHARE TRANSACTIONS 1,000,492
------------
TOTAL INCREASE IN NET ASSETS 994,408
NET ASSETS, beginning of period 0
------------
NET ASSETS, end of period $ 994,408
============
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
FINANCIAL HIGHLIGHTS
PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
PERIOD ENDED
December 31,
2004(a)
------------
Net asset value,
beginning of period $ 20.08
---------
Loss from investment
operations:
Net investment income 0.01
Net unrealized loss on investments (0.13)
---------
Total loss from investment operations (0.12)
Less distributions from net
investment income (0.01)
---------
Net asset value,
end of period $ 19.95
=========
Total Return (0.62%)(d)
Net assets, end of period $ 994,408
Ratio of expenses to 0.90%(b)
average monthly net assets (c)
Ratio of net investment income 1.63%(b)
to average monthly net assets
Portfolio turnover rate 0.00%
(a) Calculation of per share data and ratios represents the period
from December 21, 2004 (date investment operations commenced)
through December 31,2004.
(b) Per share data has been annualized using the average number of
shares outstanding.
(c) The Fund's actual expenses are calculated daily at 1.00% of net
asset value (NAV), plus 20% of the total gain in net asset value,
if any.
(d) Total return is not annualized.
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Alpha Hedge Fund, Inc. (the "Fund") was incorporated in the State
of Texas on April 13, 2004 and is registered under the Investment
Company Act of 1940 as a non-diversified, open-end management
investment company. The investment objective of the Fund is to
achieve capital growth. The Fund had no operations until June 17,
2004, when it sold 7,500 shares of its common stock to its original
shareholder, Mrs. Laura S. Adams. Investment operations commenced
on December 21, 2004. The effective date of the Fund's SEC
registration was November 10, 2004.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting
period. Actual results could differ from these estimates.
Security Valuation
Securities listed on a national securities exchange or in the over-
the-counter market are valued at the last quoted sales price on the
day of valuation, or if no quoted sales price was reported on that
date, the last quoted bid price. Options are valued at the last
quoted bid price. Short-term investments are valued at cost which
approximates fair value. Securities for which quotations are not
readily available are valued at their estimated fair value as
determined in good faith by the Fund's Board of Directors.
Securities Transactions and Investment Income
Securities transactions are recorded on a trade-date basis.
Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Realized gains and losses
are determined on a specific identification basis of the securities
sold. Unrealized gains and losses resulting from the appreciation
and depreciation of securities carrying values are included in the
statements of operations.
Distribution of Income and Gains
The Fund declares and pays dividends annually from net investment
income and from net realized gains, if any. Distributions from
realized gains for book purposes may include short-term capital
gains, which are included in ordinary income for tax purposes.
ALPHA HEDGE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES
Federal Income Taxes
The Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment
companies and to distribute all of its taxable income, including
any realized gains on investment, to its shareholders. Therefore,
no federal income tax provision is required.
Net investment income (loss), net realized gains (losses) and the
cost of investments in securities may differ for financial
statement and income tax purposes. The character of distributions
from net investment income or net realized gains may differ from
their ultimate characterization for income tax purposes. At
December 31, 2004, there were no material differences. Also, due
to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the income or
realized gains were recorded by the Fund.
3. CAPITAL SHARE TRANSACTIONS
Capital Share transactions in the Fund's $0.001 par value common
stock were as follows:
Period from
April 13, 2004 (inception)
through December 31, 2004
-------------------
Shares Amount
Shares sold 49,825 $1,000,000
Shares issued in
reinvestment of
dividends 25 492
------ --------
Net increase 49,850 1,000,492
Beginning of period 0 0
------ --------
End of period 49,850 $1,000,492
====== =========
4. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investment
securities, excluding short-term investments, aggregated $914,184
and $0, respectively, for the period ended December 31, 2004. The
aggregate cost of investment securities for federal income tax
purposes was $914,184 as of December 31, 2004.
As of December 31, 2004, the aggregate unrealized appreciation and
depreciation of investment securities was as follows:
Unrealized appreciation
$
13,748
Unrealized depreciation
(19,832)
Net unrealized depreciation
$
(6,084)
ALPHA HEDGE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
5. DISTRIBUTION TO SHAREHOLDERS
On December 31, 2004 a distribution of $0.01 per share aggregating
$492 was paid to the shareholders of record on that date from net
investment income.
6. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund and the Advisor are under common control and the existence
of that control creates operating results and financial position
significantly different than if they were autonomous.
The Fund has entered into an agreement with Adams Asset Advisors,
LLC (the "Advisor") to provide investment advisory services to the
Fund. Laura S. Adams is the managing member of the Advisor and is an
officer, director and shareholder of the Fund. Under the terms of
the agreement, the Fund will pay the Advisor a monthly fee at the
annual rate of 1.00% of the Fund's average daily net assets. In
addition, the Fund will pay a performance incentive fee of 20% of
the total gain in net assets value, if any, accrued daily and paid
monthly. The actual incentive fee will depend upon future returns.
The Advisor has contractually agreed to pay all operating expenses
of the Fund, except brokerage fees and commissions, interest, taxes
and extraordinary expenses. As of December 31, 2004, Laura S. Adams
and her family owned 100% of the common stock of the Fund.
The Advisor acts as the transfer agent for the Fund.
Report of Independent Registered Public Accounting Firm
To the Shareholders and
Board of Directors of
Alpha Hedge Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Alpha Hedge Fund, Inc., including the schedule of investments, as of
December 31, 2004, and the related statement of operations for the
period from April 13, 2004 (inception) through December 31, 2004, the
statement of changes in net assets for the period from April 13, 2004
(inception) through December 31, 2004, and the financial highlights for
the period from December 21, 2004 (date investment operations
commenced) through December 31, 2004. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Alpha Hedge Fund, Inc. as of December 31, 2004,
the results of its operations for the period from April 13, 2004
(inception) through December 31, 2004, the changes in its net assets
for the from April 13, 2004 (inception) through December 31, 2004, and
the financial highlights for the period from December 21, 2004 through
December 31, 2004, in conformity with accounting principles generally
accepted in the United States of America.
Helin, Donovan, Trubee & Wilkinson, LLP
/s/ Helin, Donovan, Trubee & Wilkinson, LLP
Austin, Texas
February 7, 2005
Item 2. Code of Ethics.
Pursuant to the requirements of Section 406 and 407 of the Sarbanes-
Oxley Act of 2002, Alpha Hedge Fund, (the "Fund"), hereby adopts the
following Code of Ethics, which applies to the Fund's principal
executive, financial, and accounting officers or persons performing
similar functions regardless of whether these individuals are employed
by the Fund or a third party, and is designed to deter wrongdoing and
to promote:
a) Honest and ethical conduct, including the ethical handling of
actual and apparent conflicts of interest between personal
and professional relationships;
b) Full, fair, accurate, timely and understandable disclosure in
reports and documents that the Fund files with, or submits
to, the Securities and Exchange Commission and in all public
communications.
c) Compliance with all applicable governmental laws, rules and
regulations;
d) Prompt internal reporting of violations of the code, should
any occur, to any of the principal officers of the Fund and
all appropriate persons identified in the code; and
e) The principal executive officer of the Fund will be held
accountable for adherence to the code as presented above.
Item 3. Audit Committee Financial Expert.
The Fund has assets of under $2 million and no specific audit
committee and no audit committee financial expert. The Board of
Directors of the Fund, which consists of independent directors that
control over 2/3 of the Board, oversee and review all Fund reports and
activities of the President of the Fund. At this time, the Fund
believes there is adequate supervision over accounting procedures,
practices and reporting.
Item 4. Principal Accountant fees and services.
The Fund does its own accounting subject to audit and review
procedures by Helin, Donovan, Trubee and Wilkinson, LLP. The Advisor,
as part of the management fee paid by the Fund, is contractually
obligated to pay all expenses of the Fund, including all audit and
audit related fees, tax fees, and all other fees incurred. Therefore,
there is no audit expense incurred or paid by the Fund for these
services.
Item 5. Audit Committee of listed Registrants.
Not applicable to open-end investment companies.
Item 6. Schedule of Investments
Included under Item 1 above.
Item 7. Disclosure of proxy voting policies and procedures for closed-
end management Investment companies.
(Not applicable)
Item 8. Purchases of Equity Securities by Closed-End Management
Investment Companies
Not applicable to open-end investment companies.
Item 9. Submission of Matters to a Vote of Securities Holders
None
Item 10. Controls and Procedures
a) The Fund's president has concluded that the Fund's disclosure
controls and procedures are sufficient to ensure that information
required to be disclosed by the Fund in this Form N-CSR was
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the
report.
b) There were no significant changes or corrective actions with
regard to significant deficiencies or material weaknesses in the
Fund's internal controls or in other factors that could
significantly affect the Fund's internal controls subsequent to the
date of their evaluation.
Item 11. Exhibits.
a) Code of Ethics-Filed under Item 2, Code of Ethics above.
b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002- Attached
c) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002- Attached
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Alpha Hedge Fund
By /s/ Laura S. Adams
- ---------------------
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 2/18/05
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Alpha Hedge Fund
By /s/ Laura S. Adams
- ---------------------
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 2/18/05