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LEVCO EQUITY VALUE FUND
-----------------------
SEMI-ANNUAL REPORT
June 30, 1999
(Unaudited)
INVESTMENT ADVISER DISTRIBUTOR
------------------ -----------
JOHN A. LEVIN & CO., INC. LEVCO SECURITIES, INC.
One Rockefeller Plaza One Rockefeller Plaza
New York, New York 10020 New York, New York 10020
1.888.300.9887 1.888.300.9887
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<PAGE>
LETTER TO SHAREHOLDERS JULY 29, 1999
The market, as measured by the S&P 500 Index, continued to rise strongly in
the first half of 1999. Most notably, however, an important shift took place in
the second quarter as value stocks came back into favor. As measured by the
Russell indices, value outperformed growth by more than 7% during the quarter.
This development allowed the Fund to post its strongest period since its
inception. For the six months ended June 30, 1999, the Fund returned 14.93%,
while the S&P 500 Index achieved a return of 12.38%, and the Russell 1000 Value
Index rose by 12.87%.
The resurgence of value stocks was highlighted by strength in a number of
cyclical groups, such as basic materials and capital goods. At the same time,
financials, consumer staples and health care stocks went through a period of
relative weakness, as interest rate fears drove the market down for the month of
May. In this environment, where the market's rise was more broadly based than it
had been in the recent past and where growth stocks trading at very high
multiples were not driving the market, our investment philosophy, with its focus
on fundamental value, diversification and capital preservation, served us well.
Looking ahead, a number of economic signs bode well for the stock market,
including an increase in the rate of growth of corporate profits, high levels of
consumer confidence and consumer spending and nascent economic recoveries in the
Far East and Latin America. On the negative side, wage inflation remains a
concern, although competitive pressures and increases in productivity may limit
the impact of wage inflation on prices and on margins. With respect to the
market itself, while the rebound of value stocks has been encouraging, the
market continues to see precariously high relative valuations, (although this
factor is not in itself a catalyst for a market retreat).
In short, even though every environment poses a set of market risks, we
believe our stock selection and portfolio construction process is geared to
perform well relative to the market in both broadly advancing and declining
environments.
As always, we welcome your comments and thank you for your support.
Sincerely,
John A. Levin Jeffrey A. Kigner
Co-Chairman Co-Chairman
and President
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(Unaudited)
ASSETS
Investments in securities:
At acquisition cost $ 20,650,642
============
At value (Note 1) $ 23,901,473
Dividends receivable 2,987
Interest receivable 13,153
Due from Adviser (Note 3) 9,789
Organization expenses, net (Note 1) 79,705
Other assets 21
------------
TOTAL ASSETS 24,007,128
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LIABILITIES
Payable for securities purchased 247,024
Payable for capital shares redeemed 6,268
Accrued expenses 47,069
------------
TOTAL LIABILITIES 300,361
------------
NET ASSETS $ 23,706,767
============
NET ASSETS CONSIST OF:
Paid-in capital $ 19,447,244
Undistributed net investment income 28,781
Accumulated net realized gains from security transactions 979,911
Net unrealized appreciation on investments 3,250,831
------------
Net assets $ 23,706,767
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, $0.001 par value) 1,851,049
============
Net asset value, offering price and redemption
price per share (Note 1) $ 12.81
============
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Unaudited)
INVESTMENT INCOME
Dividends $ 149,278
Interest 36,571
------------
TOTAL INVESTMENT INCOME 185,849
------------
EXPENSES
Investment advisory fees (Note 3) 77,333
Professional fees 47,284
Trustees' fees and expenses (Note 3) 15,000
Accounting services fees 14,500
Amortization of organization expenses (Note 1) 12,925
Transfer agent fees 6,000
Custodian fees 4,228
Shareholder reporting costs 3,626
Insurance expense 3,600
Registration fees 1,749
Pricing costs 794
Other expenses 162
------------
TOTAL EXPENSES 187,201
Fees waived and expenses reimbursed by the Adviser (Note 3) (87,122)
------------
NET EXPENSES 100,079
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NET INVESTMENT INCOME 85,770
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 982,708
Net change in unrealized appreciation/
depreciation on investments 1,624,844
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,607,552
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,693,322
============
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
June 30, Ended
1999 December 31,
(Unaudited) 1998
------------ ------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 85,770 $ 131,394
Net realized gains from security transactions 982,708 642,605
Net change in unrealized appreciation/depreciation
on investments 1,624,844 1,430,085
------------ ------------
Net increase in net assets from operations 2,693,322 2,204,084
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (57,116) (131,388)
From net realized gains -- (462,547)
In excess of net realized gains -- (2,797)
------------ ------------
Decrease in net assets from distributions to shareholders (57,116) (596,732)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,755,382 615,145
Net asset value of shares issued in reinvestment
of distributions to shareholders 57,116 596,732
Payments for shares redeemed (90,713) (139,689)
------------ ------------
Net increase in net assets from capital share transactions 4,721,785 1,072,188
------------ ------------
TOTAL INCREASE IN NET ASSETS 7,357,991 2,679,540
NET ASSETS:
Beginning of period 16,348,776 13,669,236
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End of period $ 23,706,767 $ 16,348,776
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ 28,781 $ 127
============ ============
CAPITAL SHARE ACTIVITY:
Sold 391,123 56,820
Reinvested 4,782 53,926
Redeemed (7,570) (13,325)
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Net increase in shares outstanding 388,335 97,421
Shares outstanding, beginning of period 1,462,714 1,365,293
------------ ------------
Shares outstanding, end of period 1,851,049 1,462,714
============ ============
</TABLE>
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
<TABLE>
<CAPTION>
Six Months
Ended Year Period
June 30, Ended Ended
1999 December 31, December 31,
(Unaudited) 1998 1997 (a)
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value at beginning of period $ 11.18 $ 10.01 $ 10.00
---------- ---------- ----------
Income from investment operations:
Net investment income 0.04 0.09 0.07
Net realized and unrealized gains
on investments 1.63 1.50 0.01
---------- ---------- ----------
Total from investment operations 1.67 1.59 0.08
---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.04) (0.09) (0.07)
Distributions from net realized gains -- (0.33) --
---------- ---------- ----------
Total distributions (0.04) (0.42) (0.07)
---------- ---------- ----------
Net asset value at end of period $ 12.81 $ 11.18 $ 10.01
========== ========== ==========
Total return 14.93%(b) 15.98% 0.80%(b)
========== ========== ==========
Net assets at end of period (000's) $ 23,707 $ 16,349 $ 13,669
========== ========== ==========
Ratio of net expenses to average net assets (c) 1.10%(d) 1.10% 1.10%(d)
Ratio of net investment income to average net assets 0.94%(d) 0.89% 1.73%(d)
Portfolio turnover rate 81%(d) 89% 36%(b)
</TABLE>
(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
2.05%(d), 2.04% and 2.47%(d) for the periods ended June 30, 1999 and
December 31, 1998 and 1997, respectively (Note 3).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Shares Value
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COMMON STOCKS - 82.4%
AEROSPACE & DEFENSE - 3.8%
4,900 AlliedSignal Inc. $ 308,700
10,600 Loral Space & Communications Ltd. (a) 190,800
5,743 United Technologies Corp. 411,701
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911,201
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AUTOMOBILE PARTS - 1.3%
13,300 Tenneco Inc. 317,538
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BANKING - 3.4%
8,800 Bank of New York Company, Inc. 322,850
5,600 Mellon Bank Corp. 203,700
3,000 Northern Trust Corp. 291,000
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817,550
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CHEMICALS - 2.5%
15,000 Monsanto Co. 591,562
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COMPUTERS/COMPUTER TECHNOLOGY SERVICES - 5.9%
3,600 Compaq Computer Corp. 85,275
5,600 International Business Machines Corp. 723,800
23,400 Seagate Technology, Inc. (a) 599,625
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1,408,700
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CONTAINERS & PACKAGING - 1.9%
13,900 Owens-Illinois, Inc. (a) 454,356
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ELECTRONICS/ELECTRICAL COMPONENTS - 6.0%
5,796 Koninklijke (Royal) Philips Electronics N.V. 584,672
5,800 Texas Instruments Inc. 841,000
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1,425,672
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<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Shares Value
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COMMON STOCKS - 82.4%
ENERGY & UTILITIES - 7.3%
59,200 Key Energy Services, Inc. (a) $ 210,900
16,748 KeySpan Corp. 441,728
8,200 Schlumberger Ltd. 522,237
13,000 Williams Companies, Inc. 553,312
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1,728,177
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ENTERTAINMENT - 1.1%
8,500 The Walt Disney Company 261,906
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FOOD/BEVERAGES - 6.7%
5,600 Anheuser-Busch Companies, Inc. 397,250
12,500 Nabisco Holdings Corp. - Class A 540,625
1,000 PepsiCo, Inc. 38,688
20,000 Ralston-Ralston Purina Group 608,750
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1,585,313
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GOLD - 1.0%
18,130 Placer Dome Inc. 214,160
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HOUSEHOLD PRODUCTS - 4.3%
7,200 Black & Decker Corp. 454,500
4,900 General Electric Co. 553,700
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1,008,200
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INSURANCE - 7.7%
15,200 Ace Ltd. 429,400
5,000 Aetna Inc. 447,188
5,600 PartnerRe Ltd. 209,300
4,400 Tokio Marine & Fire Insurance Co. Ltd. - ADR 246,950
8,700 XL Capital Ltd. - Class A 491,550
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1,824,388
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<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Shares Value
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COMMON STOCKS - 82.4%
MEDIA - 7.4%
8,700 Chancellor Media Corp. (a) $ 479,588
14,700 Fox Entertainment Group, Inc. - Class A (a) 395,981
10,200 Tribune Co. 888,675
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1,764,244
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MEDICAL SUPPLIES - 1.0%
2,300 Tyco International Ltd. 217,925
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OFFICE EQUIPMENT - 1.1%
4,300 Xerox Corp. 253,969
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OIL & GAS DRILLING - 2.7%
11,000 Conoco Inc. - Class A 306,625
8,700 Unocal Corp. 344,737
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651,362
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PHARMACEUTICALS - 8.7%
7,100 Johnson & Johnson 695,800
10,100 McKesson HBOC, Inc. 324,463
4,300 Pfizer Inc. 471,925
8,200 Warner-Lambert Co. 568,875
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2,061,063
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SOFTWARE & PROCESSING - 2.6%
12,700 First Data Corp. 621,506
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UTILITIES - GAS - 0.6%
4,000 Equitable Resources, Inc. 151,000
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<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999
(Unaudited)
Shares Value
------ -----
COMMON STOCKS - 82.4%
UTILITIES - TELEPHONE - 5.4%
10,600 Bell Atlantic Corp. $ 692,975
12,400 BellSouth Corp. 581,250
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1,274,225
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TOTAL COMMON STOCKS (Cost $16,399,609) $ 19,544,017
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PREFERRED STOCKS - 4.0%
26,600 News Corp. Ltd. - ADR $ 839,563
2,600 Owens-Illinois, Inc. 113,750
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TOTAL PREFERRED STOCKS (Cost $846,890) $ 953,313
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MONEY MARKET FUNDS - 14.4%
3,404,143 United Missouri Bank Money Market Fiduciary
(Cost $3,404,143) $ 3,404,143
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TOTAL INVESTMENTS AT VALUE - 100.8%
(Cost $20,650,642) $ 23,901,473
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.8)% (194,706)
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NET ASSETS - 100.0% $ 23,706,767
============
(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, 1999
(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
(normally 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.
Securities for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
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 is made in shares. Income distributions and capital
gain distributions are determined in accordance with income tax regulations.
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, 1999
(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 following information is based upon the federal income tax cost of portfolio
investments of $20,581,872 as of June 30, 1999:
Gross unrealized appreciation........................... $3,784,738
Gross unrealized depreciation........................... (534,247)
----------
Net unrealized appreciation............................. $3,250,491
==========
The difference between the federal income tax cost of portfolio investments and
the acquisition cost is due to certain timing differences in the recognition of
capital losses under income tax regulations and generally accepted accounting
principles.
2. INVESTMENT TRANSACTIONS
During the six months ended June 30, 1999, cost of purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $9,172,048 and $6,535,958, 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 $77,333 and reimbursed the Fund for
$9,789 of other operating expenses for the six months ended June 30, 1999.
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 LEVCO Securities, Inc., the Distributor of
the Fund's shares. The Fund pays each unaffiliated trustee an annual retainer of
$7,500.
