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LEVCO EQUITY VALUE FUND
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SEMI-ANNUAL REPORT
JUNE 30, 2000
(UNAUDITED)
INVESTMENT ADVISER DISTRIBUTOR
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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 AUGUST 18, 2000
The first half of 2000 saw a shift in the equity markets, as technology stocks
finally yielded their leadership role. The results have been negative returns
for the major equity indices and greater volatility. In this environment, we
were able to produce strong performance, as our fundamental, value-oriented
approach proved successful. For the six months ended June 30, 2000, the Fund
returned 9.45%, while the S&P 500 Index declined 0.43% and the Russell 1000
Value Index fell 4.23%.
In our opinion, our performance primarily reflects good stock selection, the
proper weighting of our highest conviction ideas and avoidance of costly
mistakes. In addition, we were well served by our strategy of constructing
well-diversified portfolios and paring back positions that have appreciated
significantly.
We continue to remain focused on our philosophy of value investing, searching
for new ideas primarily among stocks that are out of favor or that have suffered
temporary setbacks. The current market has provided many investment ideas that
pass our initial screen - being substantially off a recent high or near a
52-week low and offering value. As always, the challenging portion is to
identify specific catalysts that will lead the market to recognize the value.
We believe that we will be able to identify companies that can continue to
achieve revenue growth, improve productivity, introduce new products and/or
develop new markets for their goods and services - in other words, companies
with the types of catalysts for increased valuations that we traditionally seek.
By adding individual investments with these characteristics to the Fund, we
believe we can continue to achieve strong results in a volatile market
environment.
As always, we welcome your comments and thank you for your continued support.
Sincerely,
John A. Levin Daniel M. Theriault
Co-Chairman Senior Portfolio Manager
and President
1
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
(Unaudited)
ASSETS
Investments in securities:
At acquisition cost $ 25,138,698
============
At value (Note 1) $ 29,036,441
Dividends receivable 23,636
Interest receivable 8,600
Investment securities sold 28,546
Receivable for capital shares sold 484,886
Organization expenses, net (Note 1) 53,855
------------
TOTAL ASSETS 29,635,964
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LIABILITIES
Due to Adviser (Note 3) 77,150
Investment securities purchased 102,084
Accrued expenses 44,066
------------
TOTAL LIABILITIES 223,300
------------
NET ASSETS $ 29,412,664
============
NET ASSETS CONSIST OF:
Paid-in capital $ 24,866,642
Accumulated net realized gains from security transactions 648,279
Net unrealized appreciation on investments 3,897,743
------------
Net assets $ 29,412,664
============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, $0.001 par value) 2,314,610
============
Net asset value, offering price and redemption price per
share (Note 1) $ 12.71
============
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000
(Unaudited)
INVESTMENT INCOME
Dividends $ 184,638
Interest 57,662
------------
TOTAL INVESTMENT INCOME 242,300
------------
EXPENSES
Investment advisory fees (Note 3) 116,132
Trustees' fees and expenses (Note 3) 15,000
Accounting services fees 14,500
Amortization of organization expenses (Note 1) 12,925
Insurance expense 11,100
Professional fees 8,149
Transfer agent fees 6,000
Custodian fees 3,319
Registration fees 627
Pricing costs 590
Shareholder reporting costs 350
Other expenses 578
------------
TOTAL EXPENSES 189,270
Fees waived by the Adviser (Note 3) (38,982)
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NET EXPENSES 150,288
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NET INVESTMENT INCOME 92,012
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 648,618
Net change in unrealized appreciation/depreciation
on investments 1,775,080
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,423,698
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,515,710
============
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six Months
Ended For the Year
June 30, Ended
2000 December 31,
(Unaudited) 1999
------------ ------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 92,012 $ 145,618
Net realized gains from security transactions 648,618 2,240,877
Net change in unrealized appreciation/depreciation
on investments 1,775,080 496,676
------------ ------------
Net increase in net assets from operations 2,515,710 2,883,171
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (92,623) (145,134)
From net realized gains -- (2,238,080)
In excess of net realized gains -- (339)
------------ ------------
Decrease in net assets from distributions to shareholders (92,623) (2,383,553)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 3,144,488 5,314,786
Net asset value of shares issued in reinvestment
of distributions to shareholders 92,623 2,383,553
Payments for shares redeemed (336,023) (458,245)
------------ ------------
Net increase in net assets from capital share transactions 2,901,089 7,240,094
------------ ------------
TOTAL INCREASE IN NET ASSETS 5,324,176 7,739,712
NET ASSETS:
Beginning of period 24,088,488 16,348,776
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End of period $ 29,412,664 $ 24,088,488
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ -- $ 611
============ ============
CAPITAL SHARE ACTIVITY:
Sold 267,417 436,034
Reinvested 7,350 205,007
Redeemed (27,252) (36,660)
------------ ------------
Net increase in shares outstanding 247,514 604,381
Shares outstanding, beginning of period 2,067,095 1,462,714
------------ ------------
Shares outstanding, end of period 2,314,610 2,067,095
============ ============
</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>
For the Six Months
Ended For the Year For the Year For the Period
June 30, Ended Ended Ended
2000 December 31, December 31, December 31,
(Unaudited) 1999 1998 1997(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 11.65 $ 11.18 $ 10.01 $ 10.00
------------ ------------ ------------ ------------
Income from investment operations:
Net investment income 0.04 0.08 0.09 0.07
Net realized and unrealized gains
on investments 1.06 1.67 1.50 0.01
------------ ------------ ------------ ------------
Total from investment operations 1.10 1.75 1.59 0.08
------------ ------------ ------------ ------------
Less distributions:
Dividends from net investment income (0.04) (0.08) (0.09) (0.07)
Distributions from net realized gains -- (1.20) (0.33) --
------------ ------------ ------------ ------------
Total distributions (0.04) (1.28) (0.42) (0.07)
------------ ------------ ------------ ------------
Net asset value at end of period $ 12.71 $ 11.65 $ 11.18 $ 10.01
============ ============ ============ ============
Total return 9.45%(b) 15.73% 15.98% 0.80%(b)
============ ============ ============ ============
Net assets at end of period (000's) $ 29,414 $ 24,088 $ 16,349 $ 13,669
============ ============ ============ ============
Ratio of net expenses to average net
assets (c) 1.10%(d) 1.10% 1.10% 1.10%(d)
Ratio of net investment income to average
net assets 0.67%(d) 0.70% 0.89% 1.73%(d)
Portfolio turnover rate 57%(d) 62% 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 ration of expenses to average net assets would have been 1.38%
(d), 1.71%, 2.04% and 2.47%(d) for the periods ended June 30, 2000,
December 31, 1999, 1998 and 1997, respectively (Note 3).
(d) Annualized.
See accompanying notes to financial statements.
<PAGE>
LEVCO EQUITY VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 2000
(Unaudited)
Shares Value
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COMMON STOCKS - 95.5%
AEROSPACE & DEFENSE - 4.0%
8,900 Honeywell International $ 299,819
9,700 Rockwell International Corp. 305,550
9,943 United Technologies Corp. 585,394
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1,190,763
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AUTOMOBILE PARTS - 3.0%
10,600 Ford Motor Co. 455,800
5,000 General Motors - Class H 438,750
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894,550
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BANKING/FINANCE - 11.1%
15,200 ACE, Ltd - Bermuda 425,600
25,300 AON Corporation 785,881
13,600 Bank of New York Co., Inc. 632,400
15,400 Fleet Boston Financial Corp. 523,600
20,900 John Hancock Financial 495,069
6,000 Northern Trust Corp. 390,375
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3,252,925
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CHEMICALS - 1.5%
10,400 Dupont De Nemours & Co 455,000
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COMPUTERS/COMPUTER TECHNOLOGY SERVICES - 6.1%
27,300 Compaq Computer Corp. 697,856
2,800 Hewlett-Packard Co. 349,650
2,200 International Business Machines Corp. 241,038
9,200 Seagate Technology, Inc. (a) 506,000
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1,794,544
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<PAGE>
Shares Value
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ELECTRONICS/ELECTRICAL COMPONENTS - 6.5%
1 Agilent Technologies Inc. $ 68
6,300 Emerson Electric Co 380,363
18,384 Koninklijke (Royal) Philips Electronics N.V. 873,240
9,400 Texas Instruments Inc. 645,663
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1,899,333
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ENERGY & UTILITIES - 9.0%
10,400 DTE Energy Company 317,850
12,548 KeySpan Corp. 385,851
8,200 Schlumberger Ltd. 611,925
31,700 Williams Companies, Inc. 1,321,494
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2,637,120
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FOOD/BEVERAGES - 5.4%
8,200 Anheuser-Busch Companies, Inc. 612,438
6,600 Coca-Cola Co. 379,088
11,300 Nabisco Holdings Corp. - Class A 593,250
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1,584,775
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HOUSEHOLD PRODUCTS - 5.5%
8,800 Black & Decker Corp. 345,950
14,700 General Electric Co. 779,100
14,000 Gillette Co. 489,125
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1,614,175
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INSURANCE - 5.0%
5,900 Aetna Inc. 378,706
10,000 Metlife Inc. 210,625
6,000 Tokio Marine & Fire Insurance Co. Ltd. - ADR 357,000
9,700 XL Capital Ltd. - Class A 525,013
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1,471,344
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<PAGE>
Shares Value
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MEDIA - 13.8%
14,700 Fox Entertainment Group, Inc. - Class A (a) $ 446,513
30,900 News Corporation Ltd. ADR 1,467,750
3,500 Pegasus Com CL A 171,719
24,600 Tribune Co. 861,000
10,900 Viacom Inc. - Class B (a) 743,244
9,200 The Walt Disney Co. 357,075
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4,047,300
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MEDICAL SUPPLIES - 2.9%
4,200 Johnson & Johnson 427,875
8,700 Tyco International Ltd. 412,163
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840,038
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OFFICE EQUIPMENT - 0.8%
11,900 Xerox Corp. 246,925
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OIL & GAS DRILLING - 2.6%
17,600 Conoco Inc. - Class A 387,200
11,800 Unocal Corp. 390,875
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778,075
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PHARMACEUTICALS - 5.3%
10,500 American Home Products Corp. 616,875
2,800 Lilly & Co 279,650
12,600 Pharmacia Corporation 651,263
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1,547,788
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RETAIL - 2.7%
13,300 Federated Department Stores, Inc. (a) 448,875
5,700 Target Corp. 330,600
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779,475
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<PAGE>
Shares Value
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SOFTWARE & PROCESSING - 2.7%
3,000 Automatic Data Processing $ 160,688
12,700 First Data Corp. 630,238
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790,925
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UTILITIES - TELEPHONE - 6.4%
14,600 Bell Atlantic Corp. 741,863
20,500 BellSouth Corp. 873,813
4,000 Grupo Televisa S.A. - ADR 275,750
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1,891,425
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TRAVEL SERVICES - 1.2%
12,400 Sabre Holdings Corp 353,400
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TOTAL COMMON STOCKS (COST $24,104,512) $ 28,069,878
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PREFERRED STOCKS - 0.2%
2,600 Owens-Illinois, Inc. (Cost $125,473) $ 57,850
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MONEY MARKET FUNDS - 3.1%
908,713 United Missouri Bank Money Market Fiduciary
(Cost $908,713) $ 908,713
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TOTAL INVESTMENTS AT VALUE - 98.72% (COST $25,138,698) $ 29,036,441
OTHER ASSETS IN EXCESS OF LIABILITIES - (1.28)% 376,223
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NET ASSETS - 100.0% $ 29,412,664
============
(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, 2000
(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,
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, 2000
(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 $25,166,307 as of June 30, 2000:
Gross unrealized appreciation ...................... $ 5,305,201
Gross unrealized depreciation ...................... (1,435,067)
------------
Net unrealized appreciation ........................ $ 3,870,134
============
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, 2000, cost of purchases and proceeds from
sales and maturities of investment securities, other than short-term
investments, amounted to $9,904,669 and $8,207,896, 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 $38,982 of its investment advisory fees for the six months ended June 30,
2000. Certain trustees and officers of the Trust are also officers of the
Adviser and Distributor.
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.
