LEVCO Equity Value Fund
-----------------------
Semi-Annual Report
June 30, 1998
(Unaudited)
INVESTMENT ADVISER DISTRIBUTOR
------------------ -----------
JOHN A. LEVIN & CO., INC. LEVCO SECURITIES, INC.
One Rockefeller Plaza One Rockefeller Plaza
25th Floor 25th Floor
New York, New York 10020 New York, New York 10020
1.888.300.9887 1.888.300.9887
<PAGE>
LETTER TO INVESTORS AUGUST 24, 1998
The first half of 1998 brought us another rise in the market as measured by
the S&P 500 Index, but it was a rise that was very narrowly based. For the six
months ended June 30, 1998, the S&P 500 Index achieved a return of 17.7%, while
the Fund returned 9.4% over the same period.
The extremely tiered nature of the market's advance is perhaps best
illustrated by the following fact: in the second quarter, the increase in the
market capitalization of a group of only 14 stocks was equal to the increase in
the market capitalization of the entire S&P 500 Index. Furthermore, the
unweighted average return of these 14 stocks for the second quarter was 20.7%,
while the unweighted average return on the remainder of the stocks in the index
was just under -2.0%. The gains achieved by these market leaders were reflected
in the increases in their multiples, as the average price/earnings ratio of
these 14 stocks was 42.2x based on the trailing four quarters, which is very
high relative to historic valuations.
The second quarter dramatically illustrated how the returns of a
capitalization weighted index such as the S&P 500 can be strongly impacted by
the performance of a few stocks, masking the price action of the vast majority
of the other stocks in the index. While a benchmark is an important way of
measuring performance, an attempt to match a benchmark should not divert an
investment manager from following its basic investment philosophy. The
investment management team at John A. Levin & Co., Inc. constructed the Fund's
portfolio on the basis of its belief that a market based on such narrow
leadership contains significant risks and that the structuring of a diversified
portfolio and adherence to pricing disciplines is especially important in such
an environment, even at the cost of lagging the S&P 500 in the short term.
Since the conclusion of the second quarter, the S&P 500 has fallen
significantly, as concerns about the growth rate of corporate earnings and the
continuing problems in Asia are being more fully reflected in stock prices and
are affecting an even wider range of stocks. The momentum that has been carrying
the market for such an extended period has been abating, and investor psychology
may be changing. We believe that our portfolio, which is diversified and seeks
to control risks, is well suited for this shifting environment.
Since the inception of the Fund, the S&P 500 has been a difficult benchmark
for an active, value-oriented manager to match. The market environment may be
changing in important ways, however, and if that is the case, we believe that
the Fund's portfolio should enjoy better relative performance. As always, we
welcome your comments and thank you for your support.
Sincerely,
/s/ John A. Levin /s/ Jeffrey A. Kigner
John A. Levin Jeffrey A. Kigner
Co-Chairman Co-Chairman
and President
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS
Investments in securities:
At acquisition cost $14,087,323
===========
At value (Note 1) $14,947,963
Receivable for securities sold 65,999
Receivable for capital shares sold 491,585
Dividends receivable 9,874
Interest receivable 6,465
Due from adviser (Note 3) 4,051
Organization expenses, net (Note 1) 105,555
Other assets 4,500
-----------
TOTAL ASSETS 15,635,992
-----------
LIABILITIES
Payable for securities purchased 164,099
Other accrued expenses 56,200
-----------
TOTAL LIABILITIES 220,299
-----------
NET ASSETS $15,415,693
===========
Net assets consist of:
Paid-in capital $14,188,513
Accumulated net realized gains
from security transactions 362,250
Undistributed net investment income 4,290
Net unrealized appreciation on investments 860,640
-----------
Net assets $15,415,693
===========
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, $0.001 par value) 1,414,274
===========
Net asset value, offering price and
redemption price per share (Note 1) $ 10.90
===========
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998
(Unaudited)
INVESTMENT INCOME
Dividends $ 106,921
Interest 42,488
-----------
TOTAL INVESTMENT INCOME 149,409
-----------
EXPENSES
Investment advisory fees (Note 3) 61,635
Professional fees 19,500
Accounting services fees 15,000
Trustees' fees and expenses 15,000
Amortization of organization expenses (Note 1) 12,926
Shareholder report printing 7,493
Transfer agent fees 6,000
Custodian fees 4,025
Insurance expense 3,600
Registration fees 419
Other expenses 488
-----------
TOTAL EXPENSES 146,086
Fees waived and expenses reimbursed
by the Adviser (Note 3) (65,686)
-----------
NET EXPENSES 80,400
-----------
NET INVESTMENT INCOME 69,009
-----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 542,308
Net change in unrealized appreciation/
depreciation on investments 664,738
-----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 1,207,046
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,276,055
===========
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Period
Ended Ended
June 30, 1998 December 31,
(Unaudited) 1997 (a)
------------ ------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 69,009 $ 95,250
Net realized gains (losses) from security transactions 542,308 (180,058)
Net change in unrealized appreciation/depreciation
on investments 664,738 195,902
------------ ------------
Net increase in net assets from operations 1,276,055 111,094
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (64,840) (95,129)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 501,585 13,585,403
Net asset value of shares issued in reinvestment
of distributions to shareholders 64,840 95,129
Payments for shares redeemed (31,183) (27,261)
------------ ------------
Net increase in net assets from capital share transactions 535,242 13,653,271
------------ ------------
TOTAL INCREASE IN NET ASSETS 1,746,457 13,669,236
NET ASSETS:
Beginning of period 13,669,236 0
------------ ------------
End of period $ 15,415,693 $ 13,669,236
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ 4,290 $ 121
============ ============
CAPITAL SHARE ACTIVITY:
Shares sold 45,987 1,358,540
Shares issued in reinvestment of
distributions to shareholders 5,887 9,480
Shares redeemed (2,893) (2,727)
------------ ------------
Net increase in shares outstanding 48,981 1,365,293
Shares outstanding, beginning of period 1,365,293 0
------------ ------------
Shares outstanding, end of period 1,414,274 1,365,293
============ ============
</TABLE>
(a) Represents the period from August 4, 1997 (commencement of operations)
through December 31, 1997.
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share
Outstanding Throughout Each Period
Six Months Period
Ended Ended
June 30, 1998 December 31,
(Unaudited) 1997 (a)
---------- ----------
Net asset value at beginning of period $ 10.01 $ 10.00
---------- ----------
Income from investment operations:
Net investment income 0.05 0.07
Net realized and unrealized gains
on investments 0.89 0.01
---------- ----------
Total from investment operations 0.94 0.08
---------- ----------
Less distributions:
Dividends from net investment income (0.05) (0.07)
---------- ----------
Net asset value at end of period $ 10.90 $ 10.01
========== ==========
Total return (b) 9.36% 0.80%
========== ==========
Net assets at end of period (000's) $ 15,416 $ 13,669
========== ==========
Ratio of net expenses to average net assets (c) 1.10% 1.10%
Ratio of net investment income to average net assets 0.94% 1.73%
Portfolio turnover rate (b) 44% 36%
(a) Represents the period from August 4, 1997 (commencement of operations)
through December 31, 1997.
(b) Not annualized.
(c) Absent investment advisory fees waived and expenses reimbursed by the
Adviser, the ratio of expenses to average net assets would have been 2.00%
and 2.47% for the periods ended June 30, 1998 and December 31, 1997,
repectively (Note 3).
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
(Unaudited)
Shares Value
------ -----
COMMON STOCKS - 86.0%
AEROSPACE & DEFENSE - 7.3%
2,200 Lockheed Martin Corp. $ 232,925
7,800 Loral Space & Communications Limited (a) 220,350
2,800 Northrop Grumman Corp. 288,750
2,900 Rockwell International Corp. 139,381
4,600 TRW Inc. 251,275
-----------
1,132,681
-----------
BANKING - 4.1%
2,700 Bank of New York Company, Inc. (The) 163,856
3,600 First Union Corp. 209,700
3,400 NationsBank Corp. 260,100
-----------
633,656
-----------
BASIC MATERIALS - 2.1%
6,900 Allegheny Teledyne Inc. 157,838
5,400 Getchell Gold Corp. (a) 81,000
8,000 MacMillan Bloedel Limited 85,000
-----------
323,838
-----------
BEVERAGES - 1.9%
6,100 Anheuser-Busch Companies, Inc. 287,844
-----------
CHEMICALS - 3.2%
800 Air Products and Chemicals, Inc. 32,000
3,200 E.I. du Pont de Nemours and Company 238,800
500 FMC Corp. (a) 34,094
3,500 Monsanto Company 195,562
-----------
500,456
-----------
COMPUTERS/COMPUTER TECHNOLOGY SERVICES - 3.7%
3,300 Hewlett-Packard Company 197,588
3,300 International Business Machines Corp. 378,881
-----------
576,469
-----------
CONGLOMERATES - 2.0%
7,500 Fortune Brands, Inc. 288,281
-----------
<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
(Unaudited)
Shares Value
------ -----
COMMON STOCKS - CONTINUED
CONTAINERS & PACKAGING - 3.8%
9,400 Owens-Illinois, Inc. (a) $ 420,650
4,700 Sealed Air Corp. (a) 172,725
-----------
593,375
-----------
ELECTRICAL COMPONENTS - 3.9%
5,700 Sundstrand Corp. 326,325
4,700 Texas Instruments Inc. 274,069
-----------
600,394
-----------
ELECTRONICS - 3.1%
1,600 Royal Philips Electronics N.V. 136,000
3,700 United Technologies Corp. 342,250
-----------
478,250
-----------
FOOD PRODUCTS - 1.5%
3,200 General Mills, Inc. 218,800
-----------
HOUSEHOLD PRODUCTS - 4.4%
7,400 Black & Decker Corp. (The) 451,400
4,800 Kimberly-Clark Corp. 220,200
-----------
671,600
-----------
INDUSTRIAL - 4.6%
6,800 Inland Steel Industries, Inc. 191,675
4,500 Minnesota Mining and Manufacturing Company 369,844
6,200 Republic Services, Inc. - Class A (a) 148,800
-----------
710,319
-----------
INSURANCE - 12.8%
11,500 Ace, Limited 448,500
5,800 Aetna Inc. 441,525
1,300 American Bankers Insurance Group, Inc. 78,163
4,500 EXEL Limited 350,156
4,800 PartnerRe Limited 244,800
8,300 TIG Holdings, Inc. 190,900
4,400 Tokio Marine & Fire Insurance Co.
Limited (The) - ADR 223,850
-----------
1,977,894
-----------
<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
(Unaudited)
Shares Value
------ -----
COMMON STOCKS - CONTINUED
MEDIA - 5.5%
6,500 MediaOne Group Inc. (a) $ 285,594
8,100 Tribune Company 557,405
-----------
842,999
-----------
OFFICE EQUIPMENT - 0.8%
8,800 IKON Office Solutions, Inc. 128,150
-----------
OIL AND GAS DRILLING - 2.9%
2,400 Amerada Hess Corp. 130,350
8,700 Unocal Corp. 311,025
-----------
441,375
-----------
PHARMACEUTICALS - 5.4%
4,800 Eli Lilly and Company 317,100
3,200 Genentech, Inc. (a) 217,200
2,800 Pfizer Inc. 304,325
-----------
838,625
-----------
SOFTWARE & PROCESSING - 2.5%
11,700 First Data Corp. 389,756
-----------
TOBACCO - 1.2%
4,700 Philip Morris Companies, Inc. 185,062
-----------
UTILITIES - ELECTRIC - 7.0%
1,700 Consolidated Edison, Inc. 78,306
15,048 MarketSpan Corp. 450,500
11,600 Potomac Electric Power Company 290,725
6,400 Texas Utilities Company 266,400
-----------
1,085,931
-----------
UTILITIES - GAS - 0.8%
4,000 Equitable Resources, Inc. 122,000
-----------
UTILITIES - TELEPHONE - 1.5%
5,000 Bell Atlantic Corp. 228,125
-----------
TOTAL COMMON STOCKS (COST $12,397,577) $13,255,880
-----------
<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998
(Unaudited)
Shares Value
------ -----
PREFERRED STOCKS - 0.4%
1,100 Owens-Illinois, Inc. (Cost $55,000) $ 57,337
-----------
Face
Value
-----
MONEY MARKET FUNDS - 10.6%
$1,634,746 United Missouri Bank Money Market Fiduciary
(Cost $1,634,746) $ 1,634,746
-----------
TOTAL INVESTMENTS AT VALUE - 97.0%
(COST $14,087,323) $14,947,963
OTHER ASSETS IN EXCESS OF LIABILITIES - 3.0% 467,730
-----------
NET ASSETS - 100.0% $15,415,693
===========
(a) Non-income producing security.
ADR - American Depository Receipt
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The LEVCO Equity Value Fund (the Fund) is a no-load, diversified series of the
LEVCO Series Trust (the Trust), an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Trust was
organized as a Delaware business trust on January 2, 1997. The Fund commenced
operations on August 4, 1997.
The Fund's investment objective is long-term growth of capital through an
emphasis on the preservation of capital and an attempt to control volatility as
measured against the Standard & Poor's Composite 500 Stock Index. The Fund
pursues this objective by investing its assets primarily in common stocks and
other securities having equity characteristics.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities which are traded
over-the-counter are valued at the last sales price, if available, otherwise, at
the last quoted bid price. Securities traded on a national stock exchange are
valued based upon the closing price on the principal exchange where the security
is traded.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per share
of the Fund is equal to the net asset value per share.
Investment income and distributions to shareholders -- Interest income is
accrued as earned. Dividend income is recorded on the ex-dividend date.
Dividends arising from net investment income are declared and paid quarterly to
shareholders of the Fund. Net realized short-term capital gains, if any, may be
distributed throughout the year and net realized long-term capital gains, if
any, are distributed at least once each year. Payment of all dividends and
capital gains distributions will be made in shares. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
Organization expenses -- Expenses of organization, net of certain expenses paid
by the Adviser, have been capitalized and are being amortized on a straight-line
basis over five years.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are determined on a specific identification basis.
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 and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
<PAGE>
LEVCO EQUITY VALUE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
Federal income taxes -- The Fund has complied with the special provisions of the
Internal Revenue Code available to regulated investment companies and,
therefore, no federal income tax provision is required. The accumulated net
realized capital loss on sales of investments for federal income tax purposes at
December 31, 1997 amounted to $176,701. This loss may be utulized in the current
or future years to offset taxable capital gains and, if not applicable, expires
on December 31, 2005.
The following information is based upon the federal income tax cost of portfolio
investments of $14,087,323 as of June 30, 1998:
Gross unrealized appreciation....................$1,464,084
Gross unrealized depreciation.................... (603,444)
----------
Net unrealized appreciation......................$ 860,640
==========
2. INVESTMENT TRANSACTIONS
During the six months ended June 30, 1998, purchases and proceeds from sales and
maturities of investment securities, other than short-term investments, amounted
to $6,241,418 and $5,614,728, respectively.
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by John A. Levin & Co., Inc. (the Adviser)
under the terms of an Investment Advisory Agreement. The Adviser also provides
certain administrative services required by the Trust and the Fund. Under the
Investment Advisory Agreement, the Fund pays the Adviser a fee, which is
computed and accrued daily and paid monthly, at an annual rate of 0.85% of its
average daily net assets. The Adviser currently intends to limit the total
operating expenses of the Fund to 1.10% of its average daily net assets.
Accordingly, the Adviser voluntarily waived its investment advisory fees of
$61,635 and reimbursed the Fund for $4,051 of other operating expenses for the
six months ended June 30, 1998. Certain trustees and officers of the Trust are
also officers of the Adviser.
TRUSTEES COMPENSATION
No compensation is paid by the Fund to officers and trustees of the Fund who are
affiliated with the Adviser and/or the Distributor. The Fund pays each
unaffiliated trustee an annual retainer of $7,500 and certain expenses the
trustees incur in attending meetings.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001029881
<NAME> LEVCO EQUITY VALUE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUN-30-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 14,087,323
<INVESTMENTS-AT-VALUE> 14,947,963
<RECEIVABLES> 577,974
<ASSETS-OTHER> 110,055
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,635,992
<PAYABLE-FOR-SECURITIES> 164,099
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,200
<TOTAL-LIABILITIES> 220,299
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14,188,513
<SHARES-COMMON-STOCK> 1,414,274
<SHARES-COMMON-PRIOR> 1,365,293
<ACCUMULATED-NII-CURRENT> 4,290
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 362,250
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 860,640
<NET-ASSETS> 15,415,693
<DIVIDEND-INCOME> 106,921
<INTEREST-INCOME> 42,488
<OTHER-INCOME> 0
<EXPENSES-NET> 80,400
<NET-INVESTMENT-INCOME> 69,009
<REALIZED-GAINS-CURRENT> 542,308
<APPREC-INCREASE-CURRENT> 664,738
<NET-CHANGE-FROM-OPS> 1,276,055
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 64,840
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 45,987
<NUMBER-OF-SHARES-REDEEMED> 2,893
<SHARES-REINVESTED> 5,887
<NET-CHANGE-IN-ASSETS> 1,746,457
<ACCUMULATED-NII-PRIOR> 121
<ACCUMULATED-GAINS-PRIOR> (180,058)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 61,635
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 146,086
<AVERAGE-NET-ASSETS> 14,748,644
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .89
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.90
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
