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)
8150 N. Central Expressway #101 Dallas, Texas 75206
(Address of principal executive offices)
Laura S. Adams
8150 N. Central Expressway #101 Dallas, Texas 75206
(Name and address of agent for service)
Registrants telephone number, including area code: 800-704-6072
Date of fiscal year end: December 31
Date of Reporting Period: June 30, 2005
Item 1. Report to Shareholders.
ALPHA HEDGE FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2005
Alpha Hedge Fund, Inc.
8150 N. Central Expressway #101
Dallas, Texas 75206
1-800-704-6072
Dear shareholders of Alpha Hedge Fund, Inc.,
The Fund ended the first six months of 2005 with a Net Asset Value of
$18.71, down from a Net Asset Value per share of $19.95 at the beginning
of the year.
As of June 30, 2005, Laura S. Adams and her family continue to own 100%
of the shares of the Fund. We look forward to the second half of the
year and completing our first year of operation in 2005.
Sincerely,
Laura S. Adams
President
ALPHA HEDGE FUND, INC.
EXPENSES
JUNE 30, 2005
As a shareholder of the Fund you incur ongoing costs including management
fees and other operating expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and
to compare these costs with the ongoing costs of investing in other
mutual funds. This example is based on an investment of $1,000 invested
at the beginning of the period and held for the entire six month period
of December 31, 2004 to June 30, 2005.
Actual Expenses
The first line of the table below provides information about actual
account values and actual expenses. You may use the information in this
line, together with the amount you invested at the beginning of the
period, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,500 account value
divided by $1,000 equals 8.5), then multiply this result by the number in
the first line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual ending
account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Fund to
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other
funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs such
as sales charges (loads), redemption fees, or exchange fees. Therefore,
the second line of the table is useful in comparing ongoing costs only.
Expenses Paid
Beginning Ending During Period*
Account Value Account Value December 31, 2004,
December 31, 2004 June 30, 2005 June 30, 2005
----------------- ------------- -----------------
Actual $ 1,000 $ 937.84 $ 4.80
Hypothetical** $ 1,000 $ 1,014.87 $ 9.99
*Expenses are equal to the Fund's annualized expense ratio of 1.00% plus
a 20% performance bonus on any gains, multiplied by the average account
value over the period, multiplied by 181 days/365 days to reflect the
one-half year period. There were no gains for the period and thus no
performance expense.
** Hypothetical return assumes 5% return and 2% expenses.
ALPHA HEDGE FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2005
ASSETS
Investment securities, at
fair value(cost $914,184) $ 850,110
Cash 83,114
Receivables:
Dividends 0
Accrued Interest 68
-----------
Total assets 933,292
-----------
LIABILITIES
Advisory fees payable 788
-----------
Total liabilities 788
-----------
NET ASSETS -
(Equivalent to $18.71 per
share based on 49,850 shares of
common stock issued and outstanding;
100,000,000 shares authorized,
$0.001 par value $ 932,505
============
NET ASSETS CONSIST OF:
Common stock $ 50
Paid-in capital 1,000,442
Net unrealized depreciation
of investments (64,074)
Undistributed net investment income (3,914)
Undistributed net realized gain on investments 0
- -----------
Net assets $ 932,505
============
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 $ 552,690
--------
552,690
PUT OPTIONS ON COMMON STOCKS - 31.69% --------
Yahoo 47.50 Puts exp. 1/06 (a) 19 24,130
Motorola 30 Puts exp. 1/06 (a) 42 39,060
Bell South 37.50 Puts exp. 1/06 (a) 25 27,750
United Technologies 60 Puts exp. 1/06 (a) 14 12,040
Goldman Sachs 120 Puts exp. 1/06 (a) 7 12,530
Target 55 Puts exp. 1/06 (a) 14 4,620
Bristol Myers 40 Puts exp. 1/06 (a) 28 41,720
Lowes 75 Puts exp. 1/06 (a) 13 21,710
Freddie Mac 80 Puts exp. 1/06 (a) 10 14,600
Dow Chemical 60 Puts exp. 1/07 (a) 14 22,120
DuPont 60 Puts exp. 1/06 (a) 15 25,500
Gillette 55 Puts exp. 1/06 (a) 16 7,520
Boeing 70 Puts exp. 1/06 (a) 13 7,540
Texas Instruments 40 Puts exp. 1/06 (a) 31 36,580
----------
297,420
- ----------
Total options (cost $914,184) 850,110
- ----------
SHORT-TERM INVESTMENTS - 8.71%
Schwab Value Advantage Money Fund
Bears interest at 2.5% 83,114 83,114
--------
Total short-term investments (cost $83,114) 83,114
--------
Total investment securities - 100.00% (cost $9976,298)) 933,224
Other assets less liabilities - 0.00% (720)
--------
Net assets - 100.00% $ 932,505
============
Notes:
(a) presently non-income producing.
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
INVESTMENT INCOME:
Dividends $ 0
Interest 829
------------
Total investment income 829
EXPENSES -
Advisory fees 4,743
----
Net investment income (3,914)
GAINS ON INVESTMENTS -
Net realized gain on investments 0
Net change in unrealized depreciation of securities (57,990)
------------
Net realized and unrealized loss on investments (57,990)
Net decrease in net assets resulting from operations $ (61,904)
============
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
June 30, 2005 Dec. 31, 2005
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ (3,914) $ 492
Net change in unrealized depreciation
of securities (57,990) (6,084)
----------- ------------
Net decrease in net assets
resulting from operations (61,904) (5,592)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income 0 (492)
----------- ------------
Total Distributions 0 (492)
CAPITAL SHARE TRANSACTIONS 0 1,000,492
----------- ------------
TOTAL INCREASE IN NET ASSETS (61,904) 994,408
NET ASSETS, beginning of period 994,408 0
----------- ------------
NET ASSETS, end of period $ 932,505 $ 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
ENDED:
(unaudited)
6/30/2005 12/31/2004 (a)
----------- ------------
Net asset value,
beginning of period $ 19.95 $ 20.08
---------- ----------
Loss from investment
operations:
Net investment income (0.08) 0.01
Net realized and unrealized
loss on investments (1.16) (0.13)
---------- ----------
Total loss from investment operations (1.24) (0.12)
Less distributions from net
investment income 0.00 (0.01)
---------- ----------
Net asset value,
end of period $ 18.71 $ 19.95
========== =========
Total Return (6.22) (0.62%)(d)
Net assets, end of period $ 932,505 $ 994,408
Ratio of expenses to 0.98% 0.90%
average monthly net assets (b)(c)
Ratio of net investment income 0.16% 1.63%
to average monthly net assets (b)
Portfolio turnover rate 0.00% 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 June 30, 2005,
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
December 31, 2004
to June 30, 2005
-------------------
Shares Amount
Shares sold $ 0 $ 0
Shares issued in
reinvestment of
dividends 0 0
------ --------
Net increase 0 0
Beginning of period 49,850 $1,000,492
------ --------
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 $0.00 and
$0.00, respectively, for the period ended June 30, 2005. The
aggregate cost of investment securities for federal income tax
purposes was $914,184 as of June 30, 2005.
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. There have been no distributions in 2005 as of
June 30, 2005.
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 June 30, 2005, 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.
Proxy Voting Information
Alpha Hedge Fund, Inc. management is responsible for exercising the
voting rights associated with the securities held by the Fund. A
description of our philosophy on fulfilling this responsibility is
available without charge, upon request, by calling 1-800-704-6072.
Board of Directors Information
INDEPENDENT DIRECTORS
Name and Age Position Term Principal Occupation Other Public
Past five years Directorships
- ------------------- -------- ---- --------------------- -------------
Vicky L. Hubbard Director 1 Yr Private Investor Stock Dividend
Age 46 since 2000, Tech Co. Fund, Index
Manager prior Plus Fund,
Small Cap
Value Fund
Yolawnde F. Malone Director 1 Yr Tax Mngr-Tolleson Stock Dividend
Age 40 Wealth Mgmt, Self Emp Fund, Index
Tax Consultant prior Plus Fund,
Small Cap
Value Fund
Melissa D. Gordon, Director 1 Yr Pathologist, North Stock Dividend
M.D. Dallas Pathology Fund, Index
Age 41 Plus Fund,
Small Cap
Value Fund
INTERESTED DIRECTORS
Laura S. Adams Director, 1 Yr President, Adams Stock Dividend
Age 44 President Asset Advisors and Fund, Index
Secretary Index Plus Fund 2001, Plus Fund,
Treasurer Private Investor Small Cap
prior Value Fund
Item 2. Code of Ethics. The registrant, as of the end of the period
covered by this report, has adopted a code of ethics that applies to all
officers and employees of the Fund. The registrant has not made any
amendments to its code of ethics or granted any waivers or exceptions to
the code during the covered period.
Item 3. Audit Committee Financial Expert. The entire Board of
Directors, in effect, acts as the audit committee. The Board has two
financial experts serving on the Board. Laura Adams and Yolawnde Malone
are the financial experts. Mrs. Adams is an "interested" Director and
Mrs. Malone is an "independent" Director.
Item 4. Principal Accountant fees and services. As part of the
Registrants contract with the Investment Advisor of the Fund, the
Investment Advisor is responsible for paying all accountant and related
audit fees as part of the Advisory fee paid by the Fund.
Item 5. Audit Committee of listed Registrants. (Not applicable for
semi-annual reports)
Item 6. Schedule of Investments. Schedule of Investments is included as
part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of proxy voting policies and procedures for closed-
end management investment companies. (Not applicable)
Item 8. Portfolio Managers of Closed-End Management Investment
Companies. Not Applicable to open-end investment companies.
Item 9. Purchase of equity securities by closed-end management
investment companies. (Not applicable)
Item 10. Submission of Matters to a vote of security holders. (None)
Item 11. 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 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 12. Exhibits.
a) (1)Code of Ethics-Not applicable for semi-annual reports.
(2)Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002- Attached
b) 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 8/22/05
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and dates indicated.
Alpha Hedge Fund
By /s/ Laura S. Adams
- --------------------------------------
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 8/22/05