SECURITIES AND EXCHANGE COMMISSION FORM N-CSRS Certified semi-annual shareholder report of registered management investment companies filed on Form N-CSR Filing Date: 2012-07-02 | Period of Report: 2012-04-30 SEC Accession No. 0001398344-12-002141 (HTML Version on secdatabase.com) FILER TFS CAPITAL INVESTMENT TRUST Mailing Address Business Address 225 PICTORIA DRIVE, SUITE 1800 BAYBERRY COURT CIK:1283381| IRS No.: 200838619 | State of Incorp.:OH | Fiscal Year End: 1030 450 SUITE 103 Type: N-CSRS | Act: 40 | File No.: 811-21531 | Film No.: 12940753 CINCINNATI OH 45246 RICHMOND VA 23226 513-587-3400 Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document OMB APPROVAL OMB Number: 3235-0570 Expires: January 31, 2014 Estimated average burden hours per response: 20.6 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 811-21531 TFS Capital Investment Trust (Exact name of registrant as specified in charter) 1800 Bayberry Court, Suite 103 Richmond, Virginia 23226 Address of principal executive offices) (Zip code) Wade R. Bridge, Esq. Ultimus Fund Solutions, LLC 225 Pictoria Drive, Suite 450 Cincinnati, Ohio 45246 (Name and address of agent for service) Registrant's telephone number, including area code: (804) 484-1401 Date of fiscal year end: October 31, 2012 Date of reporting period: April 30, 2012 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507. Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Item 1. Reports to Stockholders. TFS Market Neutral Fund TFS Small Cap Fund TFS Hedged Futures Fund each a series of the TFS Capital Investment Trust SEMI-ANNUAL REPORT April 30, 2012 (Unaudited) For more information or assistance in opening an account, please call toll-free 1-888-534-2001. Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document LETTER TO SHAREHOLDERS June 22, 2012 Dear Shareholder, Enclosed is the Semi-Annual Report to shareholders of the TFS Market Neutral Fund (ticker: TFSMX), the TFS Small Cap Fund (ticker: TFSSX) and the TFS Hedged Futures Fund (ticker: TFSHX) for the period ended April 30, 2012. On behalf of the investment manager, TFS Capital LLC (“TFS Capital”), I’d like to thank you for your investment. As you may have observed, this is the first report that includes the TFS Hedged Futures Fund which was launched at the end of 2011. The TFS Hedged Futures Fund invests both long and short in futures contracts. TFSHX intends to hold a diversified portfolio of contracts spanning across multiple sectors including commodities, currencies and financial indices. It is structured such that it is expected to have a low correlation to both the equity markets and many other managed-futures mutual funds. Please visit www.tfscapital.com for a prospectus. TFS Market Neutral Fund (ticker: TFSMX) 1-year 3-year 5-year Since Inception (9/ return return return 7/2004) TFS Market Neutral Fund -1.45% 7.69% 4.89% 8.11% S&P 500 Index 4.76% 19.46% 1.01% 5.07% Average annual total returns for periods ended April 30, 2012 TFSMX did not perform favorably over the trailing 12-month period, generating a negative return and negative “alpha” over the period (i.e., the return that cannot be explained by a fund’s market exposure). As mentioned in the prior Annual Report, most of the alpha was lost during only a few months in the 3rd quarter of 2011. The Adviser believes that this recent period of poor performance may have been influenced by the credit crisis during this period resulting from the turmoil in Europe and debate among U.S. policy makers. This activity likely caused the market volatility and an increase in correlation among individual small-cap stocks that spiked during this time. It is believed that these conditions may have limited the opportunity to add value through stock selection. Many of the trends that may have been adverse to performance have reversed in the months following the recent turmoil. Similarly, TFSMX has more consistently generated alpha since the beginning of the fourth quarter of 2011. TFSMX’s performance over longer-term periods compares favorably to the overall U.S. equity market as measured by the S&P 500 Index. From inception through April 30, 2012, TFSMX generated an 8.11% average annual return and had an annualized standard deviation of 8.48%, whereas the S&P 500 Index generated a 5.07% average annual return and had an annualized standard deviation of 22.38%. Therefore, during this time period, TFSMX produced an average annual return that was 3.05 percentage points above that of the S&P 500 Index while subjecting investors to only 36.2% of the volatility. Based on its trailing 5-year return through April 30, 2012, TFSMX was ranked #1 among 35 funds in the Lipper “Equity Market Neutral” category.1 The broad U.S. equity market experienced a gain during the trailing 12-month period of 4.76%, but this had little impact on TFSMX given its ongoing hedge and corresponding low “beta” (i.e., market exposure) during the period. Similar to prior periods, TFSMX’s returns were largely driven by security selection by the portfolio management team. In making these selections, the 1 Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document portfolio management team continued to follow TFS Capital’s proprietary models. These models are designed to predict the future performance of individual securities relative to the overall U.S. equity market. The strategies used in managing TFSMX have resulted in its returns having a low historical correlation to other asset classes. According to Modern Portfolio Theory, portfolios may benefit by combining non-correlated investments. For your reference, below are the TFS Market Neutral Fund’s correlations to several other asset classes. It is notable that TFSMX saw a substantial rise in correlation to the equity indices, especially during the second half of 2011. Although this trend has improved, many of the recent correlation figures remain well above the historical averages. Index Correlation Since Inception S&P 500 Index 0.61 Russell 2000® Index 0.59 MSCI EAFE Index 0.51 Barclays U.S. Aggregate Bond Index -0.16 Dow Jones REIT ETF Index 0.38 Dow Jones Commodity Futures 0.45 As mentioned in our Annual Report letter, the TFS Market Neutral Fund is currently operating under a new policy for accepting additional investments (the “Subscription Policy”). Given the limited capacity of its investment strategies, the TFS Market Neutral Fund filed a prospectus supplement dated May 17, 2011 that describes a new Subscription Policy. The intent of the new Subscription Policy is to manage the growth of TFSMX. TFS Capital believes that this action will assist the portfolio management team in maintaining a high standard of performance. TFS Small Cap Fund (ticker: TFSSX) 1-year 3-year 5-year Since Inception (3/ return return return 7/2006) TFS Small Cap Fund -4.61% 24.69% 6.86% 8.96% Russell 2000® Index -4.25% 20.34% 1.45% 3.44% Average annual total returns for periods ended April 30, 2012 During the trailing 12-month period, TFSSX underperformed its benchmark, the Russell 2000® Index. TFSSX’s returns were heavily impacted by the movement of the U.S. “small-cap” equity sector as evidenced by the narrow difference between TFSSX and its benchmark return (i.e., -4.61% versus -4.25%). Given its long-only mandate, TFSSX will generally have a high correlation to U.S. small-cap equity market movements with most of the deviation attributable to TFS Capital’s equity selection. TFSSX is believed to have been adversely impacted from the same external market factors described above for TFSMX. Over a longer-term period, TFSSX achieved its objective of outperforming the Russell 2000® Index. In fact, it now has over a 6-year track record and has achieved an average annual return since inception that is 5.52 percentage points higher than that of the Russell 2000® Index. Based on its trailing 5-year return through April 30, 2012, TFSSX was ranked #9 among 501 funds in the Lipper Small Cap Core category.2 2 Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document TFS Hedged Futures Fund (ticker: TFSHX) Since Inception (12/ 29/2011) TFS Hedged Futures Fund 6.40% S&P Diversified Trends Index -7.37% S&P GSCI Index 5.19% Cumulative return for the period ended April 30, 2012 From inception through April 30, 2012, TFSHX generated a positive return of 6.40%.