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: December 31, 2005
Item 1. Report to Shareholders.
ALPHA HEDGE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 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 year ending December 31, 2005 with a Net Asset Value
of $20.21, up from a Net Asset Value per share of $19.95 at the beginning
of the year, for a total return of 1.31%.
As of December 31, 2005, Laura S. Adams and her family continue to own
100% of the shares of the Fund.
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 Index Plus Fund from its inception, December 21, 2004
through 2005. 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 Year End
(12/21/04) 2004 2005
--------- -------- --------
Alpha Hedge Fund $10,000 $ 9,938 $10,069
S&P 500 Index $10,000 $10,148 $10,646
$14,000|
$13,000|
$12,000| #=Alpha Hedge Fund
$11,000| * *=S&P 500 Index
$10,000| # * # * #
$ 9,000|__________________________________________________________
(Inception)
12/21/2004 2004 2005
10 Day Annual Compounded
Return Return Average
2004 2005 Annual Return
------ ------ ------
Alpha Hedge Fund (0.62%) 1.31% 0.62%
S&P 500 Index 1.55% 4.85% 6.28%
ALPHA HEDGE FUND, INC.
EXPENSES
DECEMBER 31, 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 year ended December 31,
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 December 31, 2005 December 31, 2005
----------------- ------------- -----------------
Actual $ 1,000 $ 1,013.00 $ 13.25
Hypothetical** $ 1,000 $ 1,030.00 $ 20.30
*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.
** Hypothetical return assumes 5% return before 2% total expenses.
ALPHA HEDGE FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS
Investment securities, at
value(cost $1,000,501) $ 1,007,364
Accrued interest 4
Dividends receivable 1,252
-----------
Total assets 1,008,620
-----------
LABILITIES
Advisory fees payable 1,154
-----------
Total liabilities 1,154
-----------
NET ASSETS -
(Equivalent to $20.21 per
share based on 49,855 shares
of common stock issued and outstanding;
100,000,000 shares authorized,
$0.001 par value $ 1,007,466
============
NET ASSETS CONSIST OF:
Common stock $ 50
Paid-in capital 1,000,553
Net unrealized appreciation
of investments 6,863
- ------------
Net assets $ 1,007,466
============
See accompanying notes to these financial statements
ALPHA HEDGE FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2005
Contracts/
DESCRIPTION Shares VALUE
- ----------- --------- -------
COMMON STOCKS - 86.88%
Consumer Discretionary - 31.57%
American Eagle Outfitters 3800 $ 87,323
Gap Inc. 4500 79,380
Liz Claiborne 2200 78,804
Radio shack 3450 72,553
-------
318,061
Consumer Staples - 38.86%
H&R Block 3100 76,105
Valassis 2600 75,582
Deluxe Corp 2500 75,350
UST, Inc. 2100 85,743
Gannett Co. Inc. 1300 78,741
-------
391,521
Healthcare/Pharmaceutical - 8.8%
Pfizer 3800 88,616
-------
88,616
Technology/Telecom - 7.6%
Cisco 4500 77,040
-------
77,040
--------
Total common stocks (cost $ 861,973) 875,238
PUT OPTIONS ON COMMON STOCKS - 31.69% --------
Yahoo 47.50 Puts exp. 1/06 (a) 19 15,580
Motorola 30 Puts exp. 1/07 (a) 32 23,680
United Technologies 65 Puts exp. 1/07 (a) 14 13,020
Lowes 75 Puts exp. 1/07 (a) 13 13,130
Boeing 85 Puts exp. 1/07 (a) 12 18,240
Texas Instruments 45 Puts exp. 1/07 (a) 25 32,000
----------
115,650
----------
Total options (cost $122,052) 115,650
----------
- - Continued -
INDEX PLUS FUND, INC.
SCHEDULE OF INVESTMENTS, continued
DECEMBER 31, 2005
Contracts/
DESCRIPTION Shares VALUE
- ----------- --------- -------
SHORT-TERM INVESTMENTS - 1.64%
Schwab Value Advantage Money Fund
bears interest at 3.5% $ 16,476
--------
Total short-term investments (cost $16,476) 16,476
--------
Total investment securities - 100.00%
(cost $1,000,501) 1,007,364
Other assets less liabilities - 0.00% 102
---------
Net assets - 100.00% $ 1,007,466
============
Notes:
(a) presently non-income producing.
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
INVESTMENT INCOME:
Dividends $ 2,407
Interest 4,707
------------
Total investment income 7,114
EXPENSES -
Advisory fees 10,871
------------
Net investment loss (3,757)
GAINS ON INVESTMENTS -
Net realized gain on investments 3,868
Net change in unrealized appreciation of securities 12,947
------------
Net realized and unrealized gain on investments 16,815
------------
Net decrease in net assets resulting from operations $ 13,058
============
See accompanying notes to these financial statements.
ALPHA HEDGE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 2005 AND THE PERIOD FROM APRIL 14, 2004
(inception) THROUGH DECEMBER 21, 2004
Year Ended Period Ended
Dec. 31, 2005 Dec. 31, 2004
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ (3,757) $ 492
Net realized gain on investments 3,869
Net change in unrealized appreciation
(depreciation)of securities 12,947 (6,084)
----------- ------------
Net increase (decrease) in net
assets resulting from operations 13,058 (5,592)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (112) (492)
----------- ------------
Total Distributions (112) (492)
CAPITAL SHARE TRANSACTIONS-NET 112 1,000,492
----------- ------------
TOTAL INCREASE IN NET ASSETS 13,058 994,408
NET ASSETS, beginning of period 994,408 0
----------- ------------
NET ASSETS, end of period $ 1,007,466 $ 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:
12/31/2005 12/31/2004 (a)
----------- ------------
Net asset value,
beginning of period $ 19.95 $ 20.08
---------- ----------
Income (loss) from investment
operations:
Net investment income (loss) (0.08) 0.01
Net realized and unrealized gain
(loss) on investments 0.34 (0.13)
---------- ----------
Total gain (loss) from
investment operations 0.26 (0.12)
Less distributions from:
Net investment income 0.00 (0.01)
---------- ----------
Net asset value,
end of period $ 20.21 $ 19.95
========== =========
Total Return 1.31% (0.62%)(d)
Net assets, end of period $ 1,007,466 $ 994,408
Ratio of expenses to 1.13% 0.90%
average monthly net assets (b)(c)
Ratio of net investment income (loss) (0.39)% 1.63%
to average monthly net assets (b)
Portfolio turnover rate 195 % 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 for 2004.
See accompanying notes to these financial highlights.
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 Registration
Statement under the Securities Act of 1933 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 (continued)
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,
2005, there were no material differences. Also, due to the timing of
dividend distributions, the 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:
April 13, 2004
(inception) through
December 31, 2005 December 31, 2004
------------------- -----------------
Shares Amount Shares Amount
Shares sold $ 0 $ 0 49,825 $ 1,000,000
Shares issued in
reinvestment of
dividends 5 111 25 492
------ -------- ------- ----------
Net increase 5 111 49,850 1,000,492
Beginning of period 49,850 $1,000,492 0 0
------ -------- ------- ----------
End of period 49,855 $1,000,603 49,850 $ 1,000,492
====== ========= ======= ===========
4. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investment
securities, excluding short-term investments, aggregated $1,940,488
and $1,874,518, respectively, for the year ended December 31, 2005.
There were no differences between the financial reporting basis and
the income tax basis in the cost or net realized gains (losses) of
the Fund's investments as of December 21, 2005.
ALPHA HEDGE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT TRANSACTIONS (Continued)
As of December 31, 2005, the aggregate unrealized appreciation and
depreciation of investment securities was as follows:
Unrealized appreciation $ 30,003
Unrealized depreciation (23,140)
--------
Net unrealized appreciation $ 6,863
=============
5. DISTRIBUTION TO SHAREHOLDERS
On December 31, 2005 a distribution of less than $0.01 per share
aggregating $112 was paid to the shareholders of record on that date
from net investment income and net realized gains. Net realized
gains on investments of $3,869 were net short-term capital gains and
considered investment income for purposes of dividend distributions.
6. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund and the Advisor are under common control and the existence of
that control may create 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 at each NAV pricing 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, 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 47 since 2000, Tech Co. Fund, Small Cap
Manager prior Value Fund
Yolawnde F. Malone Director 1 Yr Tax Mngr-Tolleson Stock Dividend
Age 41 Wealth Mgmt, Self Emp Fund, Small Cap
Tax Consultant prior Value Fund,
Melissa D. Gordon, Director 1 Yr Pathologist, North Stock Dividend
M.D. Dallas Pathology Fund, Small Cap
Age 42 Value Fund,
INTERESTED DIRECTORS
Laura S. Adams Director, 1 Yr President, Adams Stock Dividend
Age 44 President Asset Advisors and Fund, Small Cap
Secretary Index Plus Fund since Value Fund,
Treasurer 2002, Private Investor
prior
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, 2005, and
the related statement of operations for the year ended
December 31, 2005, the statement of changes in net assets
for the year ended December 31, 2005 and for the period
from April 13, 2004 (inception) through December 31,
2004, and the financial highlights for the year ended
December 31, 2005 and 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 audits.
We conducted our audits 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, 2005, 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in
all material respects, the financial position of Alpha
Hedge Fund, Inc. as of December 31, 2005, the
results of its operations for the year ended
December 31, 2005, the changes in its net assets for the
year ended December 31, 2005 and for the period from
April 13, 2004 through December 31, 2004,
and the financial highlights for the year ended
December 31, 2005 and 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
Austin,Texas
January 27, 2006
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)
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-Filed with N-CSR and hereby incorporated by
reference.
(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 2/17/06
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 2/17/06