ALLEGIANCE INVESTMENT TRUST
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SEMI-ANNUAL REPORT
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For the Six Months Ended
April 30, 2000
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ALLEGIANCE AMERICAN VALUE FUND
April 30, 2000
Dear Shareholders:
The American Value Fund declined 4.9 percent for the six-month period ended
April 30, 2000. By comparison, the S&P 500 Index gained 7.2 percent for the same
period. Most of the Fund's disappointing results occurred in the first few
months of the term under review. By contrast, for the most recent three months
ended April 30, 2000, the Fund posted a gain of 4.4 percent that was nearly
identical to the 4.5 percent increase recorded by the S&P 500.
Investors have experienced a substantial increase in stock price volatility in
recent months. Many stocks have struggled during this period as investors grew
increasingly concerned that the Federal Reserve Board's policy of raising
interest rates would slow the economy. At first, these concerns negatively
impacted stocks primarily in the consumer-related and financial services sectors
of the market. Since the Fund held large commitments in these attractively
valued sectors, the portfolio was buffeted to some degree.
More recently, however, many of these consumer and financial stocks have
rebounded from their lows, greatly improving the Fund's returns. As investors
shifted their interest toward these traditional market segments, they sold
stocks in the sectors that characteristically had some of the highest valuation
levels in the market. In many cases, the subsequent price declines were
dramatic, and, as is often the case, overdone.
This dramatic sell-off has provided us the opportunity to broaden the Fund's
diversification by buying shares in high-growth market segments that were hugely
under-represented. During the last several months, we purchased a number of
high-quality health care, technology and telecommunications stocks that we
believed were at very reasonable prices relative to their underlying business
fundamentals. These new investments, which include such large, outstanding
businesses as Bristol-Myers Squibb & Co., Merck & Co., Emerson Electric Co.,
Lucent Technologies Inc. and MCI Worldcom Inc., to name a few, may benefit your
portfolio with significantly higher- growth potential in the years to come.
We know that dramatic price swings like those evident in the market since early
March can be unnerving to many investors. We counsel shareholders, however, to
remain focused on their long-term goals. The Fund has a disciplined investment
strategy, and it holds a widely-diversified portfolio of financially strong
businesses that we believe are undervalued relative to their assets and earning
power. We believe the strategy employed within the Fund is especially well
suited to difficult market climates, and that patient shareholders will be
rewarded over the long term by the portfolio's holdings.
Cordially,
/s/ Russell Kartub
Russell Kartub
Portfolio Manager of American Value Fund
1
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ALLEGIANCE AMERICAN VALUE FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 2000 (UNAUDITED)
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Shares COMMON STOCKS: 95.9% Value
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BASIC MATERIALS: 1.4%
9,000 Louisiana-Pacific Corp. $ 120,375
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CAPITAL GOODS: 9.8%
6,500 Crown Cork & Seal Co., Inc. 105,625
3,000 Emerson Electric Co. 164,625
3,000 Fluor Corp. 100,688
6,500 ITT Industries, Inc. 205,156
10,800 Reliance Steel & Aluminum Co. 248,400
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824,494
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CHEMICALS: 4.7%
2,000 Avery Dennison Corp. 131,250
6,000 Praxair, Inc. 266,625
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397,875
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COMMUNICATION SERVICES: 4.2%
2,200 GTE Corp. 149,050
3,000 MCI WorldCom Inc.* 136,313
1,500 SBC Communications, Inc. 65,720
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351,083
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CONSUMER CYCLICAL: 10.9%
4,000 Delphi Automotive Systems Corp. 76,500
4,000 Goodyear Tire & Rubber Co. 110,500
18,000 Mattel, Inc. 220,500
3,000 May Department Stores, Co. 82,500
9,000 Sherwin-Williams Co. 223,875
7,000 V F Corp. 197,750
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911,625
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CONSUMER STAPLES: 10.3%
7,000 Albertson's, Inc. 227,937
12,000 Bowne & Co., Inc. 138,000
1,800 Cardinal Health, Inc. 99,112
3,000 Clorox Co. 110,250
5,000 Kimberly-Clark Corp. 290,313
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865,612
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2
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ALLEGIANCE AMERICAN VALUE FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 2000 (UNAUDITED) - (CONTINUED)
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Shares Value
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ENERGY: 13.9%
3,500 Burlington Resources, Inc. $ 137,594
7,000 EOG Resources, Inc. 174,125
5,000 Halliburton Co. 220,937
4,800 Lubrizol Corp. 123,000
9,500 Occidental Petroleum Corp. 203,656
2,600 Phillips Petroleum Co. 123,338
5,000 Texas Pacific Land Trust 182,812
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1,165,462
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FINANCIAL SERVICES: 18.7%
4,000 A.G. Edwards, Inc. 150,500
10,000 Allstate Corp. 236,250
5,000 Federal National Mortgage Association 301,562
3,600 MBIA, Inc. 177,975
3,800 Metris Companies, Inc. 142,500
6,000 UnumProvident Corp. 102,000
2,000 Wachovia Corp. 125,375
6,720 Washington Mutual, Inc. 171,780
4,000 Wells Fargo Co. 164,250
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1,572,192
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HEALTH CARE: 5.0%
3,000 Bristol Myers Squibb Co. 157,312
1,400 Merck & Co., Inc. 97,300
4,000 Schering-Plough Corp. 161,250
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415,862
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REAL ESTATE INVESTMENT TRUST: 1.6%
4,674 BRE Properties, Inc., Class A 130,580
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TECHNOLOGY: 10.1%
2,700 Boeing Co. 107,156
5,500 Compaq Computer Corp. 160,875
4,000 Electronic Data Systems Corp. 275,000
700 International Business Machines Corp. 78,138
700 Lucent Technologies Inc. 43,531
7,000 Xerox Corp. 185,063
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849,763
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TRANSPORTATION & SERVICES: 0.8%
1,500 Union Pacific Corp. 63,188
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3
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ALLEGIANCE AMERICAN VALUE FUND
SCHEDULE OF INVESTMENTS AT APRIL 30, 2000 (UNAUDITED) - (CONTINUED)
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Shares Value
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UTILITIES: 4.5%
4,000 American Water Works Co., Inc. $ 90,750
3,500 El Paso Energy Corp. 148,750
3,000 FPL Group, Inc. 135,562
375,062
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TOTAL COMMON STOCKS (cost $7,434,713) 8,043,173
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Principal
Amount SHORT-TERM INVESTMENTS: 0.6%
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MONEY MARKET INVESTMENTS: 0.0%
$ 969 UMB Money Market Fiduciary (cost $969) 969
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U.S. TREASURY OBLIGATION: 0.6%
51,000 U.S. Treasury Bill, due 06/01/2000 (cost $50,756) 50,756
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TOTAL SHORT-TERM INVESTMENTS (cost $51,725) 51,725
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TOTAL INVESTMENTS IN SECURITIES
(cost $7,486,438**): 96.5% 8,094,898
Other Assets less Liabilities: 3.5% 289,408
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NET ASSETS: 100.0% $ 8,384,306
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* Non-income producing security.
** At April 30, 2000, the basis of investments for federal income tax purposes
was the same as their cost for financial reporting purposes. Unrealized
appreciation and depreciation were follows:
Gross unrealized appreciation $ 1,356,391
Gross unrealized depreciation (747,931)
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Net unrealized appreciation $ 608,460
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See accompanying Notes to Financial Statements.
4
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ALLEGIANCE AMERICAN VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES AT APRIL 30, 2000 (UNAUDITED)
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ASSETS
Investments in securities, at value (cost $7,486,438) $ 8,094,898
Receivables:
Securities sold 291,216
Interest and dividends 9,012
Other assets 1,857
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Total assets 8,396,983
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LIABILITIES
Accrued expenses 12,677
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Total liabilities 12,677
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NET ASSETS $ 8,384,306
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($8,384,306/748,086 shares outstanding; unlimited number
of shares authorized without par value) $ 11.21
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COMPONENTS OF NET ASSETS
Paid-in capital $ 8,187,776
Accumulated net investment income 41,730
Accumulated net realized loss on investment transactions (453,660)
Net unrealized appreciation of investments 608,460
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Net assets $ 8,384,306
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See accompanying Notes to Financial Statements.
5
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ALLEGIANCE AMERICAN VALUE FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
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INVESTMENT INCOME
Income
Dividends $ 108,548
Interest 22,684
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Total income 131,232
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Expenses
Management fees 32,433
Administration fees 16,216
Distribution fees 11,583
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Total expenses 60,232
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NET INVESTMENT INCOME 71,000
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REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (447,579)
Net unrealized depreciation on investments (195,856)
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Net realized and unrealized loss on investments (643,435)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(572,435)
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See accompanying Notes to Financial Statements.
6
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ALLEGIANCE AMERICAN VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 7,1999* TO
APRIL 30, 2000# OCTOBER 31,1999
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 71,000 $ 71,511
Net realized loss on investments (447,579) (6,081)
Net unrealized depreciation on investments (195,856) (1,584,652)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (572,435) (1,519,222)
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DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (100,781) --
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CAPITAL SHARE TRANSACTIONS
Net increase (decrease) in net assets derived from net
change in outstanding share (a) (1,560,024) 12,136,768
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TOTAL INCREASE (DECREASE) IN NET ASSETS (2,233,240) 10,617,546
NET ASSETS
Beginning of period 10,617,546 --
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END OF PERIOD (including accumulated net investment
income of $41,730 and $71,511, respectively) $ 8,384,306 $ 10,617,546
============ ============
</TABLE>
(a) A summary of capital share transactions is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 7, 1999* TO
APRIL 30, 2000# OCTOBER 31, 1999
------------------------- --------------------------
Shares Value Shares Value
-------- ----------- -------- ------------
<S> <C> <C> <C> <C>
Initial capitalization -- $ -- 903,489 $ 12,291,651
Shares sold 27,490 294,124 67,932 924,279
Shares issued for reinvestment of distributions 8,853 100,655 -- --
Shares redeemed (179,950) (1,954,803) (79,728) (1,079,162)
-------- ----------- -------- ------------
Net increase (decrease) (143,607) $(1,560,024) 891,693 $ 12,136,768
======== =========== ======== ============
</TABLE>
# Unaudited.
* Commencement of operations.
See accompanying Notes to Financial Statements.
7
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ALLEGIANCE AMERICAN VALUE FUND
FINANCIAL HIGHLIGHTS
FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD
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SIX MONTHS ENDED MAY 7, 1999* TO
APRIL 30, 2000# OCTOBER 31, 1999
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Net asset value, beginning of period $11.91 $13.60
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INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.09 0.08
Net realized and unrealized loss on
investments (0.68) (1.77)
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Total from investment operations (0.59) (1.69)
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LESS DISTRIBUTIONS:
From net investment income (0.11) --
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Net asset value, end of period $11.21 $11.91
====== ======
Total return (4.94%) (12.43%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 8.4 $ 10.6
Ratio of expenses to average net assets 1.30% ** 1.29%**
Ratio of net investment income to average
net assets 1.54% ** 1.23%**
Portfolio turnover rate 11.96% 25.16%
# Unaudited.
* Commencement of operations.
** Annualized.
See accompanying Notes to Financial Statements.
8
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ALLEGIANCE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1 - ORGANIZATION
Allegiance Investment Trust (the "Trust"), was organized as a business
trust under the laws of the Commonwealth of Delaware on October 12, 1997. The
Trust presently consists of two separate series: Allegiance Intermediate-Term
Bond Fund and Allegiance American Value Fund (the "Value Fund"). The Value Fund
seeks to provide long-term growth of capital and above average current income
with investments primarily in equity securities of U.S. companies. (i.e.
companies with at least a five-year operating history) which, in the opinion of
the Fund's advisor, are undervalued by the market. The Allegiance Intermediate
Term Bond Fund has not commenced operations.
The Value Fund commenced operations on May 7, 1999. The Board of Trustees
of the Trust approved an Agreement and Plan of Reorganization ("Reorganization
Plan") for a tax free reorganization whereby substantially all of the assets of
the Van Deventer & Hoch American Value Fund were to be acquired by the
Allegiance American Value Fund. The Reorganization Plan was approved by
applicable shareholders on April 19, 1999. In accordance with the Reorganization
Plan, on May 7, 1999, investments with a cost basis of $10,440,389 and
unrealized appreciation of $2,388,967 were received by the Allegiance American
Value Fund as its capitalization in exchange for issuance of 903,489 new shares.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Value Fund. These policies are in conformity with generally
accepted accounting principles.
A. SECURITY VALUATION. Investments in securities traded on a national
securities exchange or Nasdaq are valued at the last reported sales
price at the close of regular trading on each day that the exchanges
are open for trading; securities traded on an exchange or Nasdaq for
which there have been no sales and other over-the-counter securities
are valued at the last reported bid price. Securities for which
quotations are not readily available are valued at their respective
fair values as determined in good faith by the Board of Trustees.
Short-term investments are stated at cost, which when combined with
accrued interest, approximates market value.
B. FEDERAL INCOME TAXES. The Value Fund intends to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no federal income tax provision is
required.
C. SECURITY TRANSACTIONS, DIVIDEND INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined using the specific identification
method. Dividend income and distributions to shareholders are recorded
on the ex-dividend date.
D. USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
A. MANAGEMENT FEE. Van Deventer & Hoch (the "Advisor") acts as the
Investment Advisor to the Value Fund. As Investment Advisor, Van
Deventer & Hoch has responsibility for all investment advisory
services of the Value Fund and for such services is paid a fee. The
fee is computed daily and paid monthly at an annual rate equal to
0.70% of the average daily net assets of the Value Fund.
9
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ALLEGIANCE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - (CONTINUED)
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B. ADMINISTRATIVE SERVICE FEES. Pursuant to an Administrative Services
Agreement, Van Deventer & Hoch (the "Administrator") provides certain
administration services to the Value Fund. In consideration of the
services provided by the Administrator, the Administrator receives
from the Value Fund a fee computed daily and paid monthly at an annual
rate equal to 0.35% of the average daily net assets of the Value Fund.
This fee arrangement requires the administrator to absorb and pay out
of its own resources all operating expenses that exceed an annual rate
of 1.30% of the average daily net assets of the Value Fund.
C. DISTRIBUTION FEES. The Value Fund has adopted a Distribution Plan (the
"Distribution Plan") in accordance with Rule 12b-1 under the 1940 Act.
The Distribution Plan provides that the Value Fund shall pay
distribution fees, including payments to the Advisor as Distribution
Coordinator, at an annual rate not to exceed 0.25% of the average
daily net assets of the Value Fund.
NOTE 4 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from the sale of securities, other
than short-term investments, for the six months ended April 30, 2000, were
$1,018,352 and $1,778,928, respectively.
NOTE 5 - FUND RECORGANIZATION
On March 13, 2000, the Board of Trustees of Allegiance Investment Trust
approved the reorganization of the Allegiance American Value Fund into the Van
Deventer & Hoch American Value Fund, a newly designated series of Advisors
Series Trust. The Trustees determined that the reorganization would be in the
best interest of the Fund and its shareholders and authorized the officers of
the Trust to execute an Agreement and Plan of Reorganization, proxy the
shareholders and conduct a special meeting of the shareholders for the purpose
of approving such agreement. The date for the shareholder meeting has yet to be
determined.
10
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Advisor
VAN DEVENTER & HOCH
800 North Brand Blvd., Suite 300
Glendale, CA 91203
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
UMB BANK
928 Grand Blvd.
Kansas City, MO 64106
Transfer Agent
ICA FUND SERVICES CORPORATION
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
(800) 576-8229
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER, LLP
345 California Street, 29th Floor
San Francisco, CA 94104
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This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and subject to change.
