As filed via EDGAR with the Securities and Exchange Commission on February 27,
1998
ICA No. 811-631, Registration No. 2-10841
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 75 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 22 |X|
-------
(Check appropriate box or boxes.)
LEPERCQ-ISTEL TRUST
(Exact name of Registrant as specified in Charter)
1675 BROADWAY, NEW YORK, NEW YORK 10019
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (212) 698-0749
COPY TO:
TSERING NGUDU CARL FRISCHLING, ESQ.
LEPERCQ-ISTEL TRUST KRAMER, LEVIN, NAFTALIS & FRANKEL
1675 BROADWAY 919 THIRD AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10022
(NAME AND ADDRESS OF AGENT FOR SERVICE)
- --------------------------------------------------------------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
|_| IMMEDIATELY UPON FILING PURSUANT TO |_| ON ( ) PURSUANT TO
PARAGRAPH (B) PARAGRAPH (B)
|X| 60 DAYS AFTER FILING PURSUANT TO |_| ON ( ) PURSUANT TO
PARAGRAPH (A)(1) PARAGRAPH (A)(1)
|_| 75 DAYS AFTER FILING PURSUANT TO |_| ON ( ) PURSUANT TO
PARAGRAPH (A)(2) OF PARAGRAPH (A)(2) RULE 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
|_| THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE>
LEPERCQ-ISTEL TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
FORM N-1A
ITEM NUMBER
- -----------
PART A PROSPECTUS CAPTION
- ------ ------------------
1. Cover Page
2. Fee Table
3.(a) Financial Highlights
(b) *
(c) Performance Information
4. Cover Page; Investment Objectives
and Policies
5.(a-b) The Investment Adviser
(c) *
(d) Custodian, Transfer Agent, Dividend
Paying Agent, Accounting Services Agent and Administrator
(e) Investment Adviser
(f) *
(g) Performance Information
6. (a) General Information
(b) *
(c-d) General Information
7. (a) How to Purchase Shares
(b) How Net Asset Value is Computed
(c) Individual Retirement Accounts
(d) How to Purchase Shares
(e) The Distribution Plan
8.(a-c) How to Redeem Shares
9. *
- ------------------
* Not applicable.
(i)
<PAGE>
Statement of Additional
Part B Information Caption
- ------ -------------------
10. Cover Page
11. Table of Contents
12. General Information and
History
13.(a-c) Investment Objectives and
Policies; Investment
Restrictions
14.(a-b) Trustees and Officers of
the Trust
(c) *
15. *
16.(a-b) The Investment Adviser;
Distribution Agreement
(c-e) *
(f) Distribution Plan
(g) *
(h) See Part A - Custodian,
Transfer Agent, Dividend Paying Agent,
Accounting Services Agent and Administrator
17. Brokerage Commissions
18. See Part A - General Information
19.(a) Redemption of Shares
(b) How Net Asset Value is Computed
(c) See Part A - How to Redeem Shares
(d) *
20. Taxes
21. The Distributor; Investment
Advisory and Distribution
Agreements
22. Performance Information
23. Financial Statements
* Not applicable.
Part C
- ------
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.
(ii)
<PAGE>
LEPERCQ-ISTEL FUND
P R O S P E C T U S
APRIL 28, 1998
Lepercq-Istel Fund
1675 Broadway
New York, New York 10019
800-497-1411
<PAGE>
LEPERCQ-ISTEL FUND
P R O S P E C T U S
APRIL 28, 1998
NEW ACCOUNT & SHAREHOLDER INFORMATION (800) 497-1411
INVESTMENT
OBJECTIVE The investment objective of the Lepercq-Istel Fund (the
"Fund") is long-term capital appreciation. Production of
income is incidental to this objective. The Fund seeks to
achieve its investment objective by investing in common
stock of companies undergoing a transformation that provides
an opportunity for capital appreciation.
HIGHLIGHTS
*No Sales Charges: Investors in the Fund pay no sales
commissions, service charges or redemption fees on shares
purchased directly. The Fund has a distribution plan through
which the Fund could incur distribution expenses not to
exceed 0.75% per annum of its average daily net assets. (See
page 14)
*Professional Management: Investors have access to
investment areas and techniques with professional management
that would be difficult to achieve as individual investors.
(See page 7)
*Automatic Investment Plan: The Fund offers its investors
the option to make purchases of shares of the Fund
automatically on a regular basis. (See page 9)
*Systematic Withdrawal: The Fund offers plans whereby
investors may arrange regular systematic withdrawals from
their investment accounts. (See page 11)
*Retirement Plans: Investors may invest in the Fund through
IRAs, Profit-Sharing, and Money Purchase Plans. (See page
15)
<PAGE>
ABOUT THIS
PROSPECTUS This prospectus should be read and retained for future
reference. Additional information about the Fund is
contained in the Statement of Additional Information dated
April 30, 1998 which is available at no charge upon written
request to the Fund at the address printed on the cover or
by calling (800) 497-1411. The Statement of Additional
Information is incorporated herein by reference.
TABLE OF CONTENTS
Fee Table 3
Financial Highlights 4
Investment Objective 5
Investment Policies 5
Risk Factors 6
Investment Restrictions 6
Writing Covered Call Options 6
Portfolio Managers 7
Management of the Fund 7
Fees and Expenses 7
Performance Information 8
Portfolio Turnover 8
How to Purchase Shares 8
Automatic Investment Plan 9
How to Redeem Shares 10
Systematic Withdrawal Plan 11
The Investment Adviser 11
Distributions 12
Tax Matters 12
Distribution Plan 14
Shareholder Servicing Plan 14
Reinvestment of Distributions 14
How Net Asset Value is Computed 15
Individual Retirement Accounts 15
General Information 15
Code of Ethics 15
Custodian, Transfer Agent, Dividend
Paying Agent, Accounting Services
Agent and Administrator 16
Shareholder Inquiries 16
Year 2000 Issues 16
Trustees and Officers 17
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
FEE TABLE
The purpose of this table is to assist an investor in understanding the
various costs and expenses which may be borne directly or indirectly by an
investment in the Fund. Below is a summary of the annual operating expenses
expected to be incurred by the Fund for the year ended December 31, 1998. For
the fiscal year ended December 31, 1997, total fund expenses equaled 1.51% of
average net assets .
Shareholder Transaction Expense............. None*
Annual Fund Operating Expenses
(as a % of average net assets)
Management Fees........................... 0.75%
Rule 12b-1 Fees (after fee deferrals)..... 0.10%**
Other Expenses............................ 0.70%
Total Fund Expenses......................... 1.55%
* No sales loads or transaction fees are charged in connection with the
purchase or redemption of Fund shares. Shareholders, however, will be
assessed fees for outgoing wire transfers, returned checks and stop payment
orders.
** Under the Fund's Rule 12b-1 Plan, the Fund may incur sales and distribution
expenses of up to 0.75% per annum of the Fund's average daily net assets.
The Fund, however, has agreed to voluntarily cap the amount paid under such
Plan to 0.10% per annum of the Fund's average daily net assets for the
fiscal year ending December 31, 1998. Shareholders will be provided 30 days
prior notice in the event that the Fund decides to discontinue such cap. As
a result of distribution fees, a long-term shareholder in the Fund may pay
more than the economic equivalent of the Fund's maximum sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
EXAMPLE:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each
time period: $16 $49 $84 $185
</TABLE>
-3-
<PAGE>
LEPERCQ-ISTEL FUND
FINANCIAL HIGHLIGHTS
The following information has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report is incorporated by reference from the Annual
Report. See accompanying notes to financial statements.
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ......... 19.03 $15.83 $13.17 $14.84 $14.17 $14.05
----- ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) ........... (0.07)(1) (0.11)(1) (0.14)(1) 0.18 0.29 0.40
Net gain (loss) on securities
(both realized and unrealized) ....... 1.69 4.26 3.42 (0.93) 1.62 0.35
----- ------ ------ ------ ------ ------
Total from investment operations ....... 1.62 4.15 3.56 (0.75) 1.91 0.75
----- ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment
income ............................... -- -- (0.13) (0.18) (0.29) (0.40)
Dividends in excess of net
investment income .................... -- -- 0.00 (0.03) (0.03) (0.01)
Distributions from capital gains ....... (1.44) (0.95) (0.77) (0.71) (0.92) 0.22
----- ------ ------ ------ ------ ------
Total distributions ................... (1.44) (0.95) (0.90) (0.92) (1.24) (0.63)
----- ------ ------ ------ ------ ------
Net asset value, end of year ............... $19.21 $19.03 $15.83 $13.17 $14.84 $14.17
====== ====== ====== ====== ====== ======
Total return (as a %) ....................... 9.0 26.3 27.1 (5.1) 13.5 5.3
Ratios/supplemental data
Net assets (in millions) end of year ... $28.4 $24.2 $20.2 $18.5 $16.6 $17.0
Ratio of expenses to average
net assets (as a %) .................. 1.51% 1.65(2) 1.50 1.56 1.51 1.53
Ratio of net investment income (loss) to
average net assets (as a %) .......... (0.40) (0.65) 0.89 1.36 2.00 2.90
Portfolio turnover rate (as a %) ....... 71.20 54.13 59.72 70.66 19.88 20.37
Average Commission rate per share (3) ...... $0.0825 $0.0917 -- -- -- --
<CAPTION>
Year ended December 31,
----------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value, beginning of year ......... $12.46 $14.00 $12.33 $12.23
------ ------ ------ ------
Income from investment operations:
Net investment income (loss) ........... 0.47 0.60 0.61 0.52
Net gain (loss) on securities
(both realized and unrealized) ....... 1.65 (1.52) 2.06 0.35
------ ------ ------ ------
Total from investment operations ....... 2.12 (0.92) 2.67 0.87
------ ------ ------ ------
Less distributions:
Dividends from net investment
income ............................... (0.47) (0.60) (0.61) (0.52)
Dividends in excess of net
investment income .................... (0.06) (0.02) (0.02) (0.02)
Distributions from capital gains ....... 0.00 0.00 (0.37) (0.23)
------ ------ ------ ------
Total distributions ................... (0.53) (0.62) (1.00) (0.77)
------ ------ ------ ------
Net asset value, end of year ............... $14.05 $12.46 $14.00 $12.33
====== ====== ====== ======
Total return (as a %) ....................... 17.0 (6.6) 21.7 7.1
Ratios/supplemental data
Net assets (in millions) end of year ... $17.4 $19.2 $22.0 $20.1
Ratio of expenses to average
net assets (as a %) .................. 1.54 1.50 1.48 1.50
Ratio of net investment income (loss) to
average net assets (as a %) .......... 3.80 4.57 4.41 4.13
Portfolio turnover rate (as a %) ....... 21.81 24.28 48.33 72.09
Average Commission rate per share (3) ...... -- -- -- --
</TABLE>
(1) Net investment income per share is calculated using ending balances prior
to consideration or adjustment for permanent book and tax differences.
(2) Without voluntary expense reimbursements of $13,000 for the year ended
December 31, 1996, the ratio of expenses to average net assets would have
been 1.71% and the ratio of net investment loss to average net assets would
have been (0.71)%.
(3) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations first effective for the fiscal year
ended December 31, 1996.
-4
<PAGE>
INVESTMENT
OBJECTIVE
The investment objective of the Lepercq-Istel Fund ("the
Fund") is long-term capital appreciation. Production of
income is incidental to this objective.
INVESTMENT
POLICIES
The Fund seeks to achieve its investment objective by
investing primarily in common stocks of companies undergoing
a transformation that provides an opportunity for capital
appreciation. The Fund will also invest in convertible
securities and bonds. In furtherance of its policy of
investing in companies undergoing a transformation, the Fund
has the flexibility of identifying opportunities in all
areas of the market without limits on company size or market
sector. The Fund will be managed with a long-term
perspective and will not engage in short-term trading on a
regular basis.
The Fund may invest up to 20% of its total assets in
securities of foreign issuers with the foregoing
characteristics. The Fund may invest in the securities of
foreign issuers in the form of American Depository Receipts
("ADRs") or other securities convertible into securities of
foreign issuers. ADRs are receipts typically issued by U.S.
banks representing the right to receive securities of a
foreign issuer deposited with that bank or a correspondent
bank. The Fund may also invest in the securities of foreign
issuers directly in foreign markets so long as, in the
Adviser's judgment, an established public trading market
exists for those securities.
The Fund may invest in debt securities and preferred stock
that are convertible into or carry rights to acquire common
stock, and other short-term and long-term debt securities
that are investment grade and lower-quality, high-yielding
debt instruments as rated by Moody's or Standard & Poor's.
The Fund intends to limit its investments in these
securities to less than 25% of its total assets.
The Fund may also invest up to 10% of its total assets in
rights or warrants to subscribe for or purchase common
stock.
It is anticipated that the major portion of the portfolio
will at all times be invested in common stock. The Fund
reserves the right, as a temporary defensive measure, to
hold other types of securities including short-term U.S.
Government securities, money market securities, including
repurchase agreements, or cash, in such proportions as, in
the opinion of the Adviser, prevailing market or economic
conditions warrant.
The Fund may lend securities to broker-dealers and other
financial institutions as a means of earning income. This
practice could result in a loss or a delay in recovering the
Fund's securities. The Fund's loans will not exceed 33 1/3%
of the Fund's total assets.
The Fund may invesnt in variable rate master demand notes.
Variable rate master demand notes are notes issued by
corporations to finance their current operations. Master
demand notes are direct lending arrangements between the
Fund and the corporation. There is no secondary market for
the notes, but the Fund may demand payment of the principal
of the instrument at any time.
-5-
<PAGE>
RISK FACTORS
In seeking capital appreciation, investors should be aware
that investments in small and medium capitalization issuers
carry more risk than investments in issuers with market
capitalization greater than $1 billion. Generally, such
companies rely on limited product lines, financial resources
and business activities that may make them more susceptible
to setbacks or downturns. In addition, the stock of such
companies may be more thinly traded. Accordingly, the
performance of small and medium capitalization issuers may
be more volatile.
Investments in securities of foreign issuers involve certain
risks, including fluctuations in foreign exchange rates,
future political and economic developments, and possible
imposition of exchange controls or other foreign
governmental laws or restrictions. In addition, foreign
companies are not subject to accounting, auditing, and
financial reporting standards and requirements comparable to
those of United States companies. Delays or problems with
settlement could affect the liquidity of the Fund's
portfolio and adversely affect the Fund's performance. To
the extent such investments are subject to withholding or
other taxes, or to regulations relating to repatriation of
assets, the Fund's distributable income will be reduced. The
prices of securities in different countries are subject to
different economic, financial, political and social factors.
The Fund may purchase lower-graded debt securities (those
rated Ba or lower by Moody's or BB or lower by Standard &
Poor's) that have poor protection against default in the
payment of principal and interest. These securities are
often considered to be speculative and involve greater risk
of loss or price change due to change in the issuer's
capacity to pay. The market prices of lower-rated debt
securities may fluctuate more than those of higher-rated
debt securities, and may decline significantly in periods of
general economic difficulty, which may follow periods of
rising interest rates.
INVESTMENT
RESTRICTIONS
The Fund has also adopted the following restrictions, which
are matters of fundamental policy and cannot be changed
without the approval of the lesser of: (a) 67% or more of
the voting securities present at a meeting if the holders of
more than 50% are present or represented by proxy; or (b)
more than 50% of the voting securities.
Investments will not be made for the purpose of exercising
control or management of any company. The Fund will not
purchase securities of any issuer if, as a result of such
purchase, the Fund would hold more than 10% of the voting
securities of such issuer. Not more than 5% at the time of
purchase of the Fund's total net assets, taken at market
value, will be invested in the securities of any one issuer
(excluding United States Government Securities). Not more
than 25% of the Fund's total net assets will be concentrated
in companies of any one industry or group of related
industries.
WRITING COVERED
CALL OPTIONS
The Fund is authorized to write (i.e., sell) covered call
options on the equity securities in which it may invest and
to enter into closing transactions with respect to such
options.
-6-
<PAGE>
A covered call option is an option where the Fund, in return
for a premium, gives another party a right to buy specified
securities owned by the Fund at the stated exercise price at
any time until the stated expiration date of the option. By
writing covered call options, the Fund gives up the
opportunity, while the option is in effect, to profit from
an increase in price of the underlying security above the
option's exercise price. In addition, the Fund's ability to
sell the underlying security will be limited while the
option is in effect unless the Fund effects a closing
purchase transaction. A closing purchase transaction cancels
out the Fund's position as the writer of an option by means
of an offsetting purchase of an identical option prior to
the expiration of the option it has written. The Fund
intends to employ covered call options for the purpose of
partially reducing portfolio risk and the possibility of
enhancing portfolio income. The Fund may not write covered
call options in underlying securities in an amount whereby
portfolio securities exceeding 15% of the Fund's net assets
would be subject to covered call options.
PORTFOLIO
MANAGER
Tsering Ngudu is primarily responsible for the day-to-day
management of the Fund's investment portfolio. Mr. Ngudu is
President of the Fund and Senior Vice President of Lepercq,
de Neuflize & Co. (the "Adviser"). Mr. Ngudu has been with
the Adviser since December 1985. Mr. Ngudu was co-manager of
the Fund from December 1993 to October 1997 and since
November 1997 has been the sole manager of the Fund.
MANAGEMENT
OF THE FUND
The business affairs of the Fund are managed under the
direction of its Board of Trustees. There are currently
seven Trustees (of whom five are not interested persons of
the Fund) who meet four times each year. The Statement of
Additional Information contains additional information
regarding the trustees and officers of the Fund.
FEES AND
EXPENSES
The Fund pays its own expenses including, without
limitation: its investment management fee; interest, taxes
and brokerage commissions; extraordinary expenses, including
but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto;
the charges and expenses of any registrar, any custodian or
depository appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock
transfer, dividend, accounting or administrator agent or
agents appointed by the Fund; all fees payable by the Fund
to federal, state or other government agencies; the cost and
expense of engraving or printing certificates representing
shares of the Fund; all costs and expenses in connection
with the registration and maintenance of the Fund and its
shares with the Securities and Exchange Commission and
various states and other jurisdictions (including filing
fees and legal fees); the cost and expense of printing,
including typesetting, and Distributing Prospectuses and
Statements of Additional Information of the Fund, and
supplements thereto, to the Fund's shareholders; all
expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and
reports to shareholders; all expenses incident to the
payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash;
-7-
<PAGE>
charges and expenses of any outside service used for pricing
of the Fund's shares; any distribution fee up to the maximum
aggregate rate of 0.75% per annum of the Fund's average
daily net assets payable by the Fund under its Rule 12b-1
Plan of Distribution; any shareholder service fee up to the
maximum aggregate rate of 0.25% per annum of the Fund's
average daily net assets payable by the Fund under its
Shareholder Servicing Plan; expenses of legal counsel and of
independent public accountants in connection with any matter
relating to the Fund; membership dues of industry
associations; postage; insurance premiums on property or
personnel (including officers and Trustees) of the Fund
which inure to its benefit; and all other charges and costs
of the Fund's operations unless otherwise explicitly assumed
by the Adviser. The Fund may also reimburse the Adviser for
the costs of performing certain internal accounting
functions. The expenses may exceed those for other mutual
funds.
PERFORMANCE
INFORMATION
From time to time the Fund may advertise its performance as
compared to other mutual funds with similar investment
objectives, to stock or other indices and to data prepared
by independent services which monitor the performance of
mutual funds. All such advertisements will show the value of
an assumed initial investment of $10,000 in the Fund at the
end of a one-, five-and ten-year period. These values will
be calculated by multiplying the compounded average annual
total return for each time period by the amount of the
assumed initial investment. If the Fund compares its
performance to other funds, relevant indices or independent
services, the Fund's performance will be stated in the same
terms in which such comparative data and indices are stated,
which is normally total return rather than yield.
Performance will fluctuate and any statement of performance
should not be considered as representative of the future
performance of the Fund. Shareholders should remember that
the Fund's performance is generally a function of the type
and quality of instruments held by the Fund, operating
expenses and market conditions. Any fees charged by banks
with respect to customer accounts through which shares of
the Fund may be purchased, although not included in the
calculations of performance for the Fund, will reduce
performance results.
PORTFOLIO
TURNOVER
For the year ended December 31, 1997, the Fund's portfolio
turnover rate was 71.20%. The Fund's portfolio turnover rate
may vary and is not necessarily indicative of future rates.
HOW TO PURCHASE
SHARES
Shares may be purchased at the next determined net asset
value (see "How Net Asset Value is Computed") after receipt
of an order to purchase such shares. There are no sales
charges. Initial investments are subject to a $1,000
minimum, except for UGMA, 401(k), Keogh and other pension or
profit sharing accounts where the minimum is $500. The
minimum subsequent investment in the Fund is $100, however,
the Fund has waived
-8-
<PAGE>
this minimum additional investment amount for shareholders
who invested in the Fund prior to May 1, 1997.
BY MAIL:
1. Complete the purchase application form.
2. Make check payable to Lepercq-Istel Fund for the amount
invested.
3. Send both to:
Lepercq-Istel Fund c/o
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701
Firstar's telephone number is (800) 497-1411
BY OVERNIGHT/EXPRESS MAIL OR BY WIRE:
Investors who wish to invest by Overnight/Express Mail or by
wire should call Firstar Trust Company for directions at
(800) 497-1411. Firstar Trust Company will charge a $20 fee
against a shareholder's account for any check returned to it
for insufficient funds.
Shares may also be purchased through unaffiliated
broker/dealers who will not impose a "sales load" but may
instead impose a service charge for services rendered on
behalf of the purchaser.
The investor will receive from the Transfer Agent and the
Dividend Paying Agent (also referred to herein as the
"Shareholder Servicing Agent") for the Fund, a confirmation
indicating the number of full shares and fractional shares
(if any) acquired. The Shareholder Servicing Agent will also
provide the investor with a confirmation of each new
transaction in his or her account. The Fund bears the
administrative cost of this service.
Shareholders may, upon written request to the Shareholder
Servicing Agent, obtain certificates for their full shares.
It is recommended, however, that shareholders not request
certificates until they need them. Certificates, which can
be lost or stolen, are unnecessary except for certain
purposes, such as collateral for a loan. A shareholder
retains full voting rights whether or not he or she receives
certificates.
Lepercq, de Neuflize Securities Inc., 1675 Broadway, New
York, New York 10019 (the "Distributor") has agreed to
promote and sell shares of the Fund. The Distributor has
agreed to purchase shares of the Fund only to fill orders
received from subscribers or broker/dealers. The Distributor
however, is not bound to accept such orders, and the Fund
has retained the right to reject orders received from the
Distributor.
AUTOMATIC
INVESTMENT PLAN
Shareholders who choose the Automatic Investment Plan (AIP)
option may make purchases of shares of the Fund
automatically on a regular basis (monthly, bimonthly,
quarterly, or yearly) in any amount subject to a $50
minimum. Shareholders may
-9-
<PAGE>
establish this option by completing the appropriate section
of the New Account Application.
HOW TO REDEEM
SHARES
Shareholders of the Fund may redeem their shares at any time
without charge. Upon receipt of a redemption request in good
order, the Shareholder Servicing Agent will effect the
requested redemption at the next determined net asset value.
Payment will be made as soon as practicable, but in no event
later than three business days after proper receipt of
redemption notification, except that when a purchase has
been made by check, the Fund can hold payment on redemption
until the Fund is reasonably satisfied the check has
cleared. (This may normally take up to three days for local
personal or corporate checks and up to seven days for other
personal or corporate checks.) The shareholder's redemption
proceeds will be mailed upon clearance of the purchase
check. Shareholders who wish to have their redemption
proceeds wired to their bank account should call Firstar
Trust Company at (800) 497-1411. Firstar Trust Company will
assess a $12 wire charge against redemption proceeds.
THE REDEMPTION REQUEST MUST:
1. Be in writing;
2. Specify account number and account name;
3. Be mailed to:
Lepercq-Istel Fund
c/o Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701
4. Be signed by all account owners;
5. Include endorsed Certificates or Stock Powers when
share certificates have been issued; and
6. All signatures must be Medallion guaranteed for
redemptions in excess of $50,000.
Medallion guarantees are available from a commercial bank
which is a member of Federal Deposit Insurance Corporation,
a trust company or a member firm (broker/dealer) of a
national securities exchange. A notary public or a savings
and loan association is not an acceptable guarantor.
Shareholders who hold Fund shares in an Individual
Retirement Account ("IRA") or other retirement plan must
indicate on their redemption request whether federal income
tax should be withheld by the Fund. All IRA redemptions will
be subject to withholding tax unless the shareholder
specifically instructs the Fund not to withhold their
redemption request.
A shareholder's right to redeem shares will be sus pended
for any period during which (a) the New York Stock Exchange
is closed because of financial conditions or any other
extraordinary reason, (b) trading on the New York Stock
Exchange is restricted pursuant to rules and regulations of
the Securities and Exchange Commission, (c) the Securities
and Exchange Commission has by order permitted such
suspension or (d) such
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emergency, as defined by rules and regulations of the
Securities and Exchange Commission, exists as a result of
which it is not reasonably practicable for the Fund to
dispose of its securities or fairly to determine the value
of its net assets.
The Fund has elected to be governed by Rule 18g-1 of the
Investment Company Act of 1940, under which it is obligated
to redeem the shares of any shareholder solely in cash up to
the lesser of 1% of the net assets of the Fund or $250,000
during any 90-day period. Should any shareholder's
redemption exceed this limitation, the Fund can, at its sole
option, redeem the excess in cash or in portfolio securities
selected solely by the Fund (and valued as in computing the
net asset value). In these circumstances, a shareholder
selling such securities would probably incur a brokerage
charge and there can be no assurance that the price realized
by the shareholder upon the sale of such securities will not
be less than the value used in computing the net asset value
for the purpose of such redemption.
SYSTEMATIC
WITHDRAWAL
PLAN
A shareholder who owns or purchases shares having a total
value of at least $10,000 (at the then current net asset
value) may open a Systematic Withdrawal Plan. The
shareholder can request payments of any amount, but not less
than $50 to be paid monthly, quarterly or annually. The Fund
does not make any recommendation as to an appropriate amount
for periodic withdrawal. Payments are made by Firstar Trust
Company by redeeming as many shares as necessary to make
such periodic payments on the day of the shareholder's
choosing (or, if not a business day, the next preceding
business day). All income dividends and capital-gains
distributions on the shares held under a Systematic
Withdrawal Plan are automatically reinvested at the next
determined net asset value.
The cost of administering a Systematic Withdrawal Plan is
presently borne by the Fund and is an expense of all
shareholders of the Fund. A shareholder may terminate its
Systematic Withdrawal Plan at any time upon 30 days' written
notice to Firstar Trust Company. A Systematic Withdrawal
Plan may also be terminated by the Fund, the Distributor or
Firstar Trust Company, upon 30 days' written notice to the
shareholder.
THE INVESTMENT
ADVISER
Since December 21, 1953, Lepercq, de Neuflize & Co.
Incorporated (or its predecessors), 1675 Broadway, New York,
New York 10019 (the "Adviser"), has acted as the investment
adviser to the Fund and to its predecessor, Istel Fund, Inc.
The current investment advisory agreement, dated April 8,
1986, is subject to the annual review and approval of the
Board of Trustees.
The Fund's investment advisory agreement entered into with
the Adviser provides, in substance, that the Adviser will
submit analytical reports and recommendations as to
investments of the Fund, and will furnish office space and
general management, subject at all times to the policies set
forth by the Fund's Board of Trustees. In return, the
Adviser will receive an annual fee equal to 3/4 of 1% per
annum of the Fund's average daily net assets paid quarterly.
For the years ended December 31, 1997, 1996, and 1995,
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<PAGE>
the total advisory fees amounted to $186,157, 153,414, and
144,012 after waivers of $0, $13,000, and $0 respectively.
The advisory fee may be higher than those of most other
investment companies; however, the Board of Trustees has
determined that these fees are comparable to those of
similar investment companies with similar investment
objectives and policies. The total of all expenses paid by
the Fund in the year ended December 31, 1997, including the
advisory fee, was 1.51% of the Fund's average daily net
assets.
The Adviser provides investment counsel and/or advice for
various institutions, including educational, charitable,
industrial, financial and banking organizations, as well as
for individuals. Lepercq, de Neuflize Securities Inc., a
wholly owned subsidiary of the Adviser, conducts
broker/dealer operations and is a member of the New York
Stock Exchange.
DISTRIBUTIONS
Currently, the Fund intends to declare semi-annual dividends
from its net investment income, to be paid in July and
December of each calendar year. In addition, a year-end
distribution of any net realized capital gains will be paid
at least annually and will generally be made in December.
TAX MATTERS
The Fund intends to qualify as a regulated investment
company by satisfying the requirements under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"),
including requirements with respect to diversification of
assets, distribution of income and sources of income. It is
the Fund's policy to distribute to shareholders all of its
investment income (net of expenses) and any capital gains
(net of capital losses) in accordance with the timing
requirements imposed by the Code so that the Fund will not
be subject to the federal income or excise tax.
If the Fund fails to satisfy any of the Code requirements
for qualification as a regulated investment company, it will
be taxed at regular corporative tax rates on all of its
taxable income (including capital gains) without any
deduction for distributions to shareholders, and
distributions to shareholders will be taxable as ordinary
dividends (even if derived from the Fund's net long-term
capital gains) to the extent of the Fund's current and
accumulated earnings and profits.
Distributions by the Fund of its net investment income and
the excess, if any, of its net short-term capital gain over
its net long-term capital loss are taxable to shareholders
as ordinary income. These distributions are treated as
dividends for federal income tax purposes. In the case of
corporate shareholders of the Fund, a portion of these
distributions (essentially, the portion attributable to
qualifying dividends from domestic corporations received by
the Fund during the year) may qualify for the 70%
dividends-received deduction . Since it is anticipated that
the Fund's investment income will include interest and
dividends from foreign corporations and since the Fund may
have long -term capital gains, substantially less than 100%
of ordinary income dividends paid by the Fund may qualify
for the dividends-received deduction. Distributions by the
Fund of the excess, if any, of its net long-term capital
gain over its net short-term capital loss will be designated
as capital gain dividends and will be taxed
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<PAGE>
to shareholders as long-term capital gains, regardless of
the length of time the shareholders have held their shares.
Distributions to shareholders will be treated in the same
manner for federal income tax purposes whether received in
cash or reinvested in additional shares of the Fund. In
general, distributions by the Fund are taken into account by
the shareholders in the year in which they are made.
However, certain distributions made during January will be
treated as having been paid by the Fund and received by the
shareholders on December 31 of the preceding year. A
statement setting forth the federal income tax status of all
distributions made or deemed made during the year will be
sent to shareholders promptly after the end of each year.
Shareholders purchasing shares of the Fund shortly before a
dividend record date will be taxed on the entire amount of
the dividend received, even though the price they paid for
the shares reflected the amount of the anticipated dividend.
A shareholder will recognize gain or loss upon sale or
redemption of shares of the Fund in an amount equal to the
difference between the proceeds of the sale or redemption
and the shareholders adjusted tax basis in the shares. Any
loss realized upon a taxable disposition of shares within
six months from the date of purchase will be treated as a
long-term capital loss to the extent of any capital gain
dividends received on such shares. All or a portion of any
loss recognized upon a taxable disposition of shares of the
Fund may be disallowed if other shares of the Fund are
purchased within thirty days before or after such
disposition.
Ordinary income dividends paid to foreign shareholders
generally will be subject to United States withholding tax
at the rate of 30% (or lower rate under an applicable
treaty). Foreign shareholders are urged to consult their own
tax advisors concerning the applicability of United States
withholding taxes.
Under the back up withholding rules of the Code, certain
shareholders may be subject to withholding of federal income
tax on dividends redemption payments made by the Fund. In
order to avoid back up withholding, a shareholder must
provide the Fund with a correct taxpayer identification
number (which for an individual is usually his/her Social
Security number), or certify that the shareholder is a
corporation or otherwise exempt from or not subject to back
up withholding. The purchase account application provides
for shareholder compliance with these certification
requirements.
The foregoing discussion of federal income tax consequences
is based on tax laws and regulations in effect on the date
of this Prospectus, and is subject to change by judicial,
legislative or administrative action. As the foregoing
discussion is for general information only, a prospective
shareholder should also review the more detailed discussion
of federal income tax considerations relevant to the Fund
and its shareholders that is contained in the Statement of
Additional Information. In addition, each prospective
shareholder should consult with his/her own tax adviser as
to the tax consequences of investing in the Fund in light of
such shareholder's particular circumstances, including the
application of state and local taxes , which may differ from
the federal consequences described above.
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<PAGE>
DISTRIBUTION
PLAN
The Board of Trustees, on behalf of the Fund, has adopted a
distribution plan (the "Distribution Plan") pursuant to Rule
12b-1 of the Investment Company Act of 1940, pursuant to
which the Fund may incur distribution expenses of up to
0.75% per annum of its average daily net assets. The
Distribution Plan provides that the Fund may finance
activities which are primarily intended to result in the
sale of the Fund's shares, including, but not limited to,
advertising, printing of Prospectuses and reports for other
than existing shareholders, preparation and distribution of
advertising material and sales literature.
The Distribution Plan will only make payments for expenses
actually incurred on behalf of the Fund. The Distribution
Plan will not carry over expenses from year to year and if
the Distribution Plan is terminated in accordance with its
terms, the obligations of the Fund to make reimbursement
payments to the Distributor pursuant to the Distribution
Plan will cease and the Fund will not be required to make
any payments for expenses incurred after the date the
Distribution Plan terminates. (See the Statement of
Additional Information "Distribution Plan" for further
information about the Distribution Plan.)
SHAREHOLDER
SERVICING PLAN
In accordance with the Shareholder Servicing Plan, the Fund
may enter into Shareholder Service Agreements under which it
pays fees of up to 0.25% of the average daily net assets for
fees incurred in connection with the personal service and
maintenance of accounts holding the shares of the Fund. Such
agreements are entered into between the Trust and various
shareholder servicing agents, including the Distributor and
its affiliates, and other financial institutions and
securities brokers (each, a "Shareholder Servicing Agent").
Among the services provided by Shareholder Servicing Agents
are: answering customer inquiries regarding account matters;
assisting shareholders in designating and changing various
account options; aggregating and processing purchase and
redemption orders and transmitting and receiving funds for
shareholder orders; transmitting, on behalf of the Trust,
proxy statements, prospectuses and shareholder reports to
shareholders and tabulating proxies; processing dividend
payments and providing subaccounting services for Fund
shares held beneficially; and providing such other services
as the Trust or a shareholder may request. Shareholder
Servicing Agents may periodically waive all or a portion of
their respective shareholder servicing fees.
REINVESTMENT OF
DISTRIBUTIONS
All ordinary income dividends and capital-gain distributions
are automatically reinvested in shares of the Fund unless
the shareholder elects to receive such distributions in cash
by completing the applicable section on the New Account
Application form. All reinvestments will be at the net asset
value on the reinvestment date and the shareholder will
receive a confirmation indicating the number of full and
fractional shares so purchased.
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<PAGE>
HOW NET ASSET
VALUE IS
COMPUTED
The net asset value per share is equal to the total assets
of the Fund less total liabilities divided by the number of
shares outstanding. It is determined as of the close of
business of the New York Stock Exchange on each day that the
Exchange is open. In addition, the Fund will also determine
a net asset value on any day during which there is
sufficient trading in its portfolio securities that the net
asset value may be materially affected, except for New
Year's Day, Martin Luther King Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and only if on any such
day the Fund is required to redeem shares.
INDIVIDUAL
RETIREMENT
ACCOUNTS
The Fund offers Individual Retirement Accounts (IRAs), as
well as various other retirement plan accounts. To obtain
the appropriate disclosure documentation and more complete
information on how to open a retirement account, call (800)
497-1411.
GENERAL
INFORMATION
The Fund is a series of the Lepercq-Istel Trust which is an
open-end management investment company organized as a
Massachusetts business trust on April 8, 1986. As such, the
Fund is not required to hold annual shareholders' meetings.
However, pursuant to its Declaration of Trust, the Trust
will hold special meetings for purposes such as electing
Trustees, changing fundamental policies, approving an
investment advisory agreement or amending its Distribution
Plan to increase materially the amount to be spent by the
Fund under its Distribution Plan and, at the request of its
shareholders, to call a meeting to replace Trustees. In
addition, the Trust has undertaken to hold a shareholders'
meeting to fill vacancies created on the Board of Trustees
if less than a majority of the Trustees are not elected by
the shareholders. The Trust currently has one series,
Lepercq-Istel Fund with only one class and with a par value
of $1.00 per share. All shares when issued are fully paid,
non-assessable and redeemable. All shares have equal voting,
dividend and liquidation rights but have no subscription,
preemptive or conversion rights and no sinking-fund
provisions. There is no limitation on the transferability of
shares, and no share is subject to further call. The Board
of Trustees may create additional series of the Trust
without shareholder approval.
CODE OF ETHICS
The Code of Ethics of the Adviser and the Fund prohibits all
affiliated personnel from engaging in personal investment
activities which compete with or attempt to take advantage
of the Fund's planned portfolio transactions. The objective
of the Code of Ethics of both the Adviser and the Fund is
that their operations be carried out for the exclusive
benefit of the Fund's shareholders. Both organizations
maintain careful monitoring of compliance with the Code of
Ethics.
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<PAGE>
CUSTODIAN,
TRANSFER AGENT,
DIVIDEND PAYING
AGENT, ACCOUNTING
SERVICES AGENT
AND ADMINISTRATOR
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701 is the Fund's custodian, transfer agent and
dividend paying agent. Firstar Trust Company also serves as
the Fund's accounting services agent and Fund administrator.
As such, Firstar Trust Company provides a variety of
administrative and accounting services to the Fund, such as
accounting relating to the Fund's portfolio and portfolio
transactions, the determination of net asset value and
pricing of the Fund's shares, and maintaining the books of
account of the Fund.
SHAREHOLDER
INQUIRIES
Shareholder inquiries may be made by writing or calling
Firstar Trust Company, Mutual Fund Services, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701, telephone (800) 497-1411 or
Lepercq-Istel Fund at 1675 Broadway, New York, New York
10019, telephone (800) 655-7766.
YEAR 2000
ISSUES
Like other mutual funds, financial and business
organizations and individuals around the world, the Fund
could be adversely affected if the computer systems used by
the Adviser, the Administrator and other service providers
do not properly process and calculate date- related
information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Adviser and
the Administrator are taking steps that they believe are
reasonably designed to address the Year 2000 Problem with
respect to computer systems that they use and to obtain
reasonable assurances that comparable steps are being taken
by the Fund's other major service providers.
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<PAGE>
TRUSTEES AND OFFICERS
TRUSTEES
Bruno Desforges Chairman of the Board; Managing Director, Lepercq,
de Neuflize & Co. Incorporated; Director and
Chairman of the Board, Lepercq, de Neuflize
Securities Inc.
Francois Letaconnoux Lepercq Inc. , Lepercq, de Neuflize & Co.
Incorporated and Lepercq, de Neuflize Securities
Inc.
Jean-Louis Milin Managing Director, Banque de Neuflize,
Schlumberger, Mallet
*Dr. Marvin Schiller Former Managing Director, A.T. Kearney, Inc.
*Franz Skryanz Financial Consultant; formerly, Treasurer, Chief
Financial Officer, Schenkers International
Marie-Monique Steckel President, France Telocom North America.
Dennis Tarzian President and Chief Executive Officer, New Century
Education Corp.
*Member of Audit, Ethics and Nominating Committees
OFFICERS
Tsering Ngudu President
Stephen T. Murphy Treasurer and Secretary
Peter Hartnedy Controller
Investment Adviser Lepercq, de Neuflize & Co. Incorporated, New York
Underwriter and
Distributor Lepercq, de Neuflize Securities Inc., New York
Custodian, Transfer Firstar Trust Company, Wisconsin
Agent, Dividend Paying
Agent, Accounting
Services Agent and
Administrator
Legal Counsel Kramer, Levin, Naftalis & Frankel, New York
Independent Auditors KPMG Peat Marwick LLP, Wisconsin
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<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 28, 1998
LEPERCQ-ISTEL FUND
(a series of Lepercq-Istel Trust)
1675 Broadway
New York, New York 10019
Telephone: (800) 497-1411 or (212) 698-0749
Lepercq-Istel Trust (the "Trust") is a diversified, open-end
management investment company (or mutual fund) organized into one series:
Lepercq-Istel Fund (the "Fund"). This Statement of Additional Information is
intended to provide investors with additional information concerning the Fund.
To avoid repetition of information, investors are referred to the Fund's
Prospectus dated April 28, 1998. Additionally, the Prospectus and the Statement
of Additional Information omit certain information contained in the Trust's
Registration Statement, filed with the United States Securities and Exchange
Commission (the "SEC"). Copies of the Registration Statement may be obtained
from the SEC by paying the charges prescribed under its rules and regulations.
This Statement of Additional Information is intended to supplement the
Fund's Prospectus and should be read in conjunction with the Prospectus which
may be obtained without charge upon written request to the above address or by
calling (800) 497-1411 or (212) 698-0749.
TABLE OF CONTENTS
General Information and History...............................................2
Investment Objectives and Policies............................................4
Investment Restrictions.......................................................5
Trustees and Officers of the Trust............................................8
Management of the Trust......................................................10
The Investment Adviser.......................................................10
Distribution Plan............................................................11
Brokerage Commissions........................................................12
The Distributor..............................................................13
Investment Advisory and Distribution Agreements..............................14
Redemption of Shares ........................................................15
How Net Asset Value is Computed..............................................15
Performance Information......................................................16
Taxes........................................................................17
Independent Auditors.........................................................23
Financial Statements.........................................................23
<PAGE>
GENERAL INFORMATION AND HISTORY
On April 8, 1986, the shareholders of Istel Fund, Inc. (the Trust's
predecessor) approved a plan of reorganization (the "Reorganization") under
which Istel Fund, Inc. converted its corporate structure to change from a
Delaware corporation to a Massachusetts business trust. In accordance with the
terms and conditions of the Reorganization, Istel Fund, Inc. changed its name to
Lepercq-Istel Trust and the shareholders of Istel Fund, Inc. exchanged their
common stock for an equal number of shares of beneficial interest in the Fund. A
copy of the Agreement and Declaration of Trust is on file with the Secretary of
State of The Commonwealth of Massachusetts.
Shares of the Fund are redeemable at the net asset value thereof at
the option of the shareholders or, in certain circumstances, at the option of
the Fund. For information concerning the methods of redemptions and the rights
of share ownership, consult the Prospectus.
The Board of Trustees may classify or reclassify any unissued shares
of any series in addition to those already authorized by setting or changing in
any one or more respects, from time to time, prior to the issuance of such
shares, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act"). The Declaration of Trust permits the
Trustees to issue an unlimited number of full and fractional shares, $1.00 par
value, of the Fund. A share represents an equal proportionate interest in the
Fund with each other share of the Fund and is entitled to a proportionate
interest in the dividends and distributions with respect thereto. Additional
information concerning the rights of share ownership is set forth in the
Prospectus. The assets received by the Fund from the issue of its shares and all
income, earnings, profits, losses and proceeds therefrom, subject only to the
rights of creditors, are allocated to the Fund and constitute the underlying
assets of the Fund. The underlying assets of the Fund are segregated and are
charged with the expenses attributable to the Fund and with a share of the
general expenses of the Trust and with expenses incurred directly or allocated
to the Fund.
Under Massachusetts law, shareholders could, under certain
circumstances, be held liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder responsibility for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or Trustees to all parties, and each party thereto must expressly waive all
rights of action directly against shareholders. The Declaration of Trust
provides for indemnification out of the Fund's property for all loss and expense
of any shareholder of the Fund held liable on account of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Trust or Fund
would
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<PAGE>
be unable to meet its obligations wherein the complaining party was held not to
be bound by the disclaimer. The Declaration of Trust further provides that the
Trustees will not be liable for errors of judgment or mistakes of fact or law.
However, nothing in the Declaration of Trust protects a Trustee against any
liability to which the Trustees would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved for the conduct of his office. The Declaration of Trust provides for
indemnification of the Trustees and officers of the Trust except with respect to
any matter to which any such person did not act in good faith in the reasonable
belief that his action was in or not opposed to the best interest of the Trust.
Such person may not be indemnified against any liability to the Trust or the
Fund shareholders to which he would otherwise be subject by reason of the duties
involved in the conduct of his office. The Declaration of Trust also authorizes
the purchase of liability insurance on behalf of the Trustees and officers,
except that such liability insurance will not indemnify Trustees and officers
against actions adjudicated to have been the result of willful misfeasance, bad
faith, gross negligence or reckless disregard of one's duties.
The Trust will not normally hold annual shareholders' meetings. At
such time as less than a majority of the Trustees have been elected by the
shareholders, the Trustees then in office will call a shareholders' meeting for
the election of Trustees. In addition, Trustees may be removed from office by a
written consent signed by the holders of two-thirds of the Trust's outstanding
shares and filed with the Trust's custodian or by a vote of the holders of
two-thirds of the Trust's outstanding shares at a meeting duly called for the
purpose, which meeting shall be held upon written request of the holders of not
less than 10% of the outstanding shares of the Trust. Upon written request by
ten or more shareholders, who have been such for at least six months and who
hold shares constituting 10% of the Trust's outstanding shares, stating that
such shareholders wish to communicate with the other shareholders for the
purpose of obtaining the signatures necessary to demand a meeting to consider
removal of a Trustee, the Trust has undertaken to provide a list of shareholders
or to disseminate appropriate materials (at the expense of the requesting
shareholders).
Shareholders do not have cumulative voting rights and therefore the
holders of more than 50% of the outstanding shares of the Trust voting together
for election of Trustees may elect all of the members of the Board of Trustees.
In such event, the remaining shareholders cannot elect any members of the Board
of Trustees. Except as otherwise disclosed in the Prospectus and in this
Statement of Additional Information, the Trustees shall continue to hold office
and may appoint their successors.
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives: As described in the Fund's Prospectus, the
investment objective of the Fund is long-term capital appreciation. There is no
assurance that the Fund's investment objective will be achieved. Investment in
the Fund does not constitute a complete investment program.
Investment Techniques:
Writing Covered Call Option Contracts. The Fund may, at times, write
(sell) call options against securities held in its portfolio, a
practice known as covered call options writing. Only call options
which are listed on a national securities exchange will be written.
The Fund may purchase call options of matching maturity and exercise
price covering the same underlying security for the sole and specific
purpose of canceling the obligation incurred through the previous
writing of a covered call option. When it appears that a previously
written covered call option is likely to be exercised, it may be
considered appropriate to avoid liquidating its position, or the Fund
may wish to extinguish the previously written call option so as to be
free to sell the underlying security, to realize a profit on the
previously written call option, or to write another call option. The
Fund will realize a short-term capital gain if the amount paid to
purchase the call option plus transaction costs is less than the
premium received for writing the covered call option. The Fund will
realize a short-term capital loss if the amount paid to purchase the
call option plus transaction costs is greater than the premium
received for writing the covered call option. There is no assurance
that the Fund will be able to purchase a call option in a closing
transaction at any given time. Alternatively, the Fund may allow the
call obligation to be extinguished by exercise or expiration.
Lending Portfolio Securities. To a limited extent, the Fund may lend
its portfolio securities to broker-dealers and other financial
institutions, provided it receives cash collateral which at all times
is maintained in an amount equal to at least 100% of the current
market value of the securities loaned. By lending its portfolio
securities, the Fund can increase its income through the investment of
the cash collateral. From time to time, the Fund may return to the
borrower or a third party which is unaffiliated with the Fund, and
which is acting as a "placing broker", a part of the interest earned
from the investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are
loaned: (1) the Fund must receive at least 100% cash collateral from
the borrower; (2) the borrower must increase such collateral whenever
the market value of the securities rises
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<PAGE>
above the level of such collateral; (3) the Fund must be able to
terminate the loan at any time; (4) the Fund must receive reasonable
interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in
market value; (5) the Fund may pay only reasonable custodian fees in
connection with the loan; and (6) while voting rights on the loaned
securities may pass to the borrower, the Fund's Board of Trustees must
terminate the loan and regain the right to vote the securities if a
material event adversely affecting the investment occurs. These
conditions are subject to future modification.
PORTFOLIO TURNOVER
The frequency of changes in the Fund's investment portfolio during its
fiscal year is known as its portfolio turnover rate. The Fund intends to
purchase securities primarily for investment rather than with a view to trading
for profits. It is the policy of the Trustees to allow only such portfolio
turnover as is in the best interest of the shareholders. The Fund's annual rates
of portfolio turnover for the years ended December 31, 1997, 1996, and 1995 were
71.20%, 54.13%, and 59.72% , respectively. The Fund's rate may vary and is not
necessarily indicative of future rates. In particular, if a substantial number
of the call options written by the Fund are exercised, its portfolio turnover
rate may exceed historical levels. In general, the rate of turnover of portfolio
securities is a ratio determined by dividing the lesser of the purchases or the
sales of portfolio securities during the year by the monthly average of the
aggregate value of the portfolio securities owned during that year (excluding,
in each case, short-term investments).
INVESTMENT RESTRICTIONS
The Trustees on behalf of the Fund have adopted investment
restrictions as matters of fundamental policy. These restrictions cannot be
altered without the authorization of a majority of the Fund's outstanding voting
securities. The vote of a majority of the outstanding voting securities of the
Fund means the vote, at a special meeting of the security holders of the Fund
duly called (a) of 67% or more of the voting securities present or represented
by proxy at such meeting, if the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy; or (b) of
more than 50% of the outstanding voting securities of the Fund, whichever is
less.
The following investment restrictions apply to the Fund:
1. The Fund will not make loans nor will it underwrite securities, except
that the
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<PAGE>
Fund may lend portfolio securities provided that the value of
such loaned securities does not exceed 33 1/3% of the value of
the Fund's total assets.
2. The Fund will not buy or sell real estate, commodities, or
commodity contracts, except the Fund may purchase or sell futures
or options on futures.
3. The Fund will maintain a diversification of investments among
industries. Consistent with this policy, the Fund does not intend
to invest more than 25% of it assets in any one industry.
4. With respect to 75% of the value of the Fund's assets, the Fund
will not purchase any securities (other than obligations issued
or guaranteed by the U.S. Government or its agencies or
instrumentalities) if, immediately after such purchase, more than
5% of the value of the Fund's total assets would be invested in
securities of any one issuer, or more than 10% of the outstanding
voting securities of any one issuer would be owned by the Fund.
5. The Fund will not issue senior securities.
6. The Fund will not borrow money, except from banks for temporary
or emergency purposes, in excess of 10% of the value of the
Fund's total assets. The Fund may not purchase securities while
borrowings exceed 5% of the value of its total assets.
The following restrictions are non-fundamental and may be changed by
the Fund's Board of Trustees:
1. The Fund will not sell securities short.
2. The Fund may, from time to time, invest up to 10% of its total
assets in the shares of closed-end investment companies
particularly if such shares are selling at less than net asset
value, but it will invest rarely in the shares of other open-end
investment companies. No investment by the Fund in an investment
company will at the time it is made cause the Fund to own in the
aggregate more than 3% of the total outstanding voting stock of
the investment company.
3. The Fund will not purchase securities for the purpose of
exercising control or management of any issuer.
4. The Fund will not make any investment which would cause, at the
time of purchase, more than 5% of the value of its total assets
to be invested in the securities of issuers which, including any
predecessors, have records of less than
- 6 -
<PAGE>
3 years continuous operation. The fundamental policies of the
Fund do not restrict the acquisition of securities which might
require registration under the Securities Act of 1933 prior to
their disposition in a public offering. However, the Trustees
have determined, as a matter of policy, that the Fund shall make
no further investments in such restricted securities, and that no
investment shall be made if it would cause more than 10% of its
net assets to be invested in securities which are not readily
marketable. Included in this category are illiquid assets
including, but not limited to, repurchase agreements which mature
in more than seven days and other securities including securities
of foreign issuers for which a bona fide market does not exist.
It is the Fund's policy to value such securities in good faith at
fair value giving consideration, among other factors, to
underlying assets, lack of marketability, past and prospective
earnings and market prices of similar securities. The Trustees
have also determined as a matter of policy that the Fund will not
invest in interests in oil, gas or other mineral exploration or
development programs. Furthermore, the Fund will not invest in
puts, calls, straddles, spreads or any combinations thereof,
except as otherwise set forth in the Fund's Prospectus. The
Trustees have also determined, as a matter of policy that no
covered call option will be written if, as a result, portfolio
securities exceeding in value 25% of the Fund's net assets would
be subject to covered call options.
- 7 -
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and Officers of the Trust, their addresses, ages and their
principal occupations for the last five years are set forth below. Unless
otherwise indicated, the address of each Trustee and Officer is 1675 Broadway,
New York, New York 10019.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address, Age with Registrant During Past 5 Years
- ----------------------------------------------- ---------------------- --------------------------------
<S> <C> <C>
*Bruno Desforges, 72 Trustee and Managing Director, Lepercq, de
Chairman of the Neuflize & Co. Incorporated;
Board Director and Chairman of the
Board, Lepercq, de Neuflize
Securities Inc.
*Francois Letaconnoux, 47 Trustee Director, President and Chief
Executive Officer, Lepercq Inc.,
Lepercq, de Neuflize & Co.
Incorporated and Lepercq, de
Neuflize Securities Inc.
Jean-Louis Milin, 52 Trustee Managing Director, Banque de
3, Avenue Hoche Neuflize, Schlumberger, Mallet.
75008 Paris, France
Dr. Marvin Schiller, 64 Trustee Former Managing Director, A.T.
17319 St. James Court Kearney, Inc.
Boca Raton, Florida 33496
Franz Skryanz, 60 Trustee Financial Consultant; prior thereto,
30 East 81st Street Vice President, Sutton & Edwards;
New York, New York 10028 prior thereto, Treasurer and Chief
Financial Officer, Schenkers
International.
* Peter Hartnedy, 48 Controller Senior Vice President, Treasurer
and Secretary, Lepercq, de
Neuflize & Co. Incorporated;
Director, Vice President, Treasurer
and Secretary, Lepercq, de
Neuflize Securities Inc.; Treasurer
and Secretary, Lepercq Inc.
</TABLE>
- 8 -
<PAGE>
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s)
Name, Address, Age with Registrant During Past 5 Years
- ----------------------------------------------- ---------------------- --------------------------------
<S> <C> <C>
*Stephen T. Murphy, 31 Secretary and Vice Pesident, Lepercq, de
Neuflize Securities since
February 1997; prior there
to Assistant Vice President,
Merrill Lynch & Co.
Treasurer
Senior Vice President, Lepercq, de
Neuflize & Co. Incorporated;
Executive Vice President and
*Tsering Ngudu, 42 President Director, Lepercq, de Neuflize
Securities Inc.
Dennis Tarzian, 47 Trustee President and Chief
Executive Officer, New
Century Education Corp.
since 1996; prior thereto
Vice President and Chief
Operating Officer, Paramount
Communications Business,
Technical, and Professional
Group.
Marie-Monique Steckel, 58 Trustee President, France Telecom
North America since 1979.
</TABLE>
- ---------
*Deemed to be interested person (as defined by the 1940 Act) of the Trust.
The following table indicates the compensation received by each
Trustee from the Trust for the 12-month period ended December 31, 1997.
<TABLE>
<CAPTION>
Total Compensa-
tion From
Registrant and
Aggregate Pension or Retire- Fund Complex
Compensation ment Benefits Estimated Annual Paid to Trustees
from Accrued As Part of Benefits Upon -----------------
Name of Person, Position Registrant(1) Fund Expenses Retirement (1)
- ------------------------ ---------- ---------------------- --------------------- ---
<S> <C> <C> <C> <C>
Jean-Louis Milin, Trustee 1,500(2) -0- -0- 1,500(1)
Dr. Marvin Schiller, Trustee 3,375 -0- -0- 3,375
Franz Skyranz, Trustee 3,375 -0- -0- 3,375
</TABLE>
- --------------
(1) Compensation does not include reimbursement for travel expenses.
(2) Net amount = $1,050.
As of December 31, 1997, Trustees and officers of the Fund, as a
group, owned 39,761.043 shares of the Fund.
- 9 -
<PAGE>
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of January 30, 1998, the following shareholders owned, directly or
indirectly, 5% or more of the outstanding shares of the Fund:
Name and Address Percent of Fund Shares Outstanding
Morgan Stanley & Co., Inc. 34.55%
Special Custody Account
for the Exclusive Benefit
of Customers
Attn: Steven Singer/Mutual Funds
1 Pierrepont Plaza, Suite 10
Brooklyn, New York 11201-2776
Donaldson Lufkin & Jenrette 7.91%
Securities Corp.
1 Pershing Plaza
Jersey City, NJ 07399-0001
A shareholder who beneficially owns, directly or indirectly, more than
25% of the Portfolio's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.
MANAGEMENT OF THE TRUST
The Trust is managed by its officers and a Board of Trustees (listed
above) who have available to them the services of Lepercq, de Neuflize & Co.
Incorporated. For the years ended December 31, 1997, 1996, and 1995 those
Trustees who are not "interested" Trustees received from the Trust an aggregate
remuneration of $8,250, $7,680, and $13,800, respectively. The Trust compensates
all Trustees except for Francois Letaconnoux and Bruno Desforges.
The Trust's regulation and registration under the 1940 Act do not
involve Federal supervision of management or investment practices.
THE INVESTMENT ADVISER
The firm of Lepercq, de Neuflize & Co. Incorporated (the "Investment
Adviser") is the investment adviser to the Fund pursuant to the investment
advisory agreement (the "Agreement"). The Fund's Agreement, dated April 8, 1986
was adopted by the Trust's Board of Trustees on January 29, 1986 and approved by
the Fund's shareholders on April 8, 1986. The continuance of the Investment
Advisory Agreement was approved by the Trustees at a Board of Trustees' Meeting
held on February 11, 1998.
- 10 -
<PAGE>
Under the terms of the Agreement, the expenses incurred relating to
the investment-advisory services performed by the Investment Adviser and the
furnishing of office space, office services and equipment to the Fund and
salaries of the officers of the Trust, except as indicated below, are borne by
the Investment Adviser, and the expenses relating to other services, including,
but not limited to, fees and expenses of non-interested Trustees, fees and
expenses of legal counsel and independent accountants, and the fees and expenses
involved in the registering and maintaining registration of the Fund's shares
under state securities laws are borne by the Fund. The costs (including
applicable office space, facilities and equipment) of the services of a
principal financial officer of the Trust, or any of the personnel operating
under his direction, may be borne by the Fund. Such costs include maintaining
the financial accounts and books and records of the Fund, including the
reviewing calculations of daily net asset value and reviewing tax returns.
Investment decisions for the Fund are made by the Investment Adviser.
These investment-advisory decisions receive regular review by the Trustees.
In addition, the Investment Adviser acts as investment adviser to
clients other than investment companies under discretionary and
non-discretionary advisory contracts covering net assets as of December 31,
1997, totaling approximately $194 million. Investment decisions for the Fund are
made independently from those for other clients which have different investment
objectives than those of the Fund. It is possible that, at times, identical
securities will be acceptable for the Fund and one or more of such investment
clients. However, the position of a client's or the Fund's account in the
securities of the same issue may vary and the length of time that each account
may choose to hold its investment in the securities of the same issue may
likewise vary. The timing and amount of purchase by each account will also be
determined by its cash position. If the purchase or sale of securities
consistent with the investment policies of the Fund and one or more of these
investment clients is considered at or about the same time, transactions in such
securities will be allocated among the accounts in a manner deemed equitable by
the Investment Adviser. The Investment Adviser may combine such transactions, in
accordance with applicable laws and regulations, in order to obtain the best net
price and most favorable execution. However, simultaneous transactions could
adversely affect the ability of the Fund to obtain or dispose of the full amount
of a security which it seeks to purchase or sell. As of March 31, 1998, Lepercq
Inc. controlled the Investment Adviser, owning beneficially 100% of the voting
stock of Lepercq, de Neuflize & Co. Incorporated.
DISTRIBUTION PLAN
On January 29, 1986, the Board of Trustees, including a majority of
the Trustees who were not interested persons of the Trust and who had no direct
or indirect financial interest in the operations of a distribution plan, on
behalf of the Fund, adopted a Distribution Plan, pursuant to Rule 12b-1 under
the 1940 Act (the "Plan"). The Plan was approved by the Trust's shareholders on
April 8, 1986 and its continuance was approved by the Trustees, including a
majority of the Trustees who are not interested persons and who have no direct
or indirect financial interest in the operation of the Plan, on February 11,
1998.
- 11 -
<PAGE>
Pursuant to the Plan, Lepercq, de Neuflize Securities Inc., a wholly
owned subsidiary of the Investment Adviser (the "Distributor"), will be entitled
to reimbursement each month of up to an aggregate maximum of .75% per annum of
the Fund's average daily net assets for actual expenses incurred in the
distribution and promotion of the shares of the Fund, including, but not limited
to, the printing of Prospectuses, Statements of Additional Information, reports
used for sales purposes, advertisements, expenses of preparation and printing of
sales literature, and other distribution-related expenses. No officer or Trustee
has any substantial interest in the Plan, except to the extent the Distributor,
which is a wholly owned subsidiary of the Investment Adviser, will be reimbursed
for expenses it might otherwise have been required to pay pursuant to its
Distribution Agreement with the Fund. The Fund incurred $15,183, $9,732, and
3,058 pursuant to the Plan for the year ended December 31, 1997, 1996, and 1995,
respectively. The expenses of distribution in excess of .75% per annum will be
borne by the Distributor and will not be eligible for any reimbursement or
payment by the Fund under the provisions of the Plan.
The Fund's Plan may be continued from year to year if approved at
least annually by the Board of Trustees (including the affirmative vote of a
majority of the Trustees who have no direct or indirect interest in the Plan or
any related agreement and are not interested persons of any such party) by votes
cast in person at a meeting called for such purpose. The Plan may be terminated
at any time as to the Trust by vote of a majority of the disinterested Trustees
or with respect to the Plan, by a vote of a majority of the outstanding voting
securities of the Fund. Any agreement entered into under the Plan may be
terminated at any time on 60 days' written notice by a vote of a majority of the
outstanding voting securities of the Fund. Any agreement entered into under the
Plan will terminate automatically in the event of its assignment.
The Plan may not be amended to increase materially the amount to be
spent by the Fund under the Plan without the approval of the shareholders of the
Fund, and all material amendments to the provisions of the Plan must be approved
by a vote of the Board of Trustees and the Trustees who have no direct or
indirect interest in the Plan, cast in person at a meeting called for the
purpose of such vote. During the continuance of the Plan, the Investment Adviser
will report in writing to the Board of Trustees quarterly the amounts and
purposes of all payments made pursuant to the Plan. Further, during the term of
the Plan, the selection and nomination of those Trustees who are not interested
persons of the Trust must be committed to the discretion of the Trustees who
have no direct or indirect interest in the Plan or any related agreement.
BROKERAGE COMMISSIONS
For the years ended December 31, 1997, 1996, and 1995 , the Fund paid
$50,284, $52,508, and $48,481 , respectively, in brokerage commissions on the
purchase and sale of its portfolio securities. Of the $50,284 of brokerage
commissions paid by the Fund in 1997, $15,950 (31.7%) was paid to Lepercq, de
Neuflize Securities, Inc., of which $1,279 was paid to other brokers or dealers
by Lepercq, de Neuflize Securities, Inc. Lepercq, de Neuflize Securities Inc.,
a wholly owned subsidiary of the Adviser, conducts broker/dealer operations and
holds a seat on the New York Stock Exchange, Inc.
- 12 -
<PAGE>
The Fund does not use a fixed formula in the allocation of brokerage
business but will allocate such business on a transaction-by-transaction basis.
In 1997, 1996, and 1995 , the Fund allocated 68.3%, 54.1% and 61.6% ,
respectively, of its brokerage business to non-affiliated brokers who supplied
the Fund or its Investment Adviser with research. The Fund does not now, nor
does it in the future, intend to allocate its brokerage business if as a result
thereof the Fund does not obtain the best prices and executions. Brokerage
transactions are allocated to brokers whom the Investment Adviser believes will
supply research or statistical services in accordance with the Fund's policy of
obtaining the best prices and executions. Research and/or statistical services
include, but are not limited to, stock analyses, research reports, newsletters
and updates. To the extent that the research and/or statistical services
supplied by brokers, services which cannot be valued, were available to aid the
Investment Adviser in fulfilling its obligations under its advisory contract
with the Fund, or to its other clients, the receipt of such services by the
Investment Adviser tended to reduce its expenses. When commissions paid reflect
research or statistical services furnished in addition to execution, the
Investment Adviser stands ready to demonstrate that such services were bona fide
and rendered for the benefit of the Fund. Lepercq, de Neuflize Securities Inc.
offers to effect transactions for the Fund at commission rates at least as low
as it offers to effect comparable transactions for any of its other customers.
Whenever Lepercq, de Neuflize Securities Inc. effects a transaction on the New
York Stock Exchange, Inc. for the Fund, it will transmit the order to an
unaffiliated broker for execution on the floor of the Exchange and pay such
broker a negotiated portion of the commission for rendering such service.
Lepercq, de Neuflize Securities Inc. will not encourage or solicit
brokerage business in return for brokerage transactions executed by other
brokers on behalf of the Fund. However, Lepercq, de Neuflize & Co. Incorporated
and Lepercq, de Neuflize Securities Inc. have in the past executed, and Lepercq,
de Neuflize Securities Inc. intends in the future to execute, brokerage
transactions from such other brokers in the normal course of business.
In connection with over-the-counter transactions, the Fund will
attempt to deal directly with the principal market-maker except in those
circumstances where the Fund believes better prices and executions are available
elsewhere.
THE DISTRIBUTOR
Lepercq, de Neuflize Securities Inc. (the "Distributor"), 1675
Broadway, New York, New York 10019, a wholly owned subsidiary of Lepercq, de
Neuflize & Co. Incorporated, is the distributor and underwriter of the shares of
the Fund, pursuant to a Distribution Agreement dated April 9, 1986, and adopted
by the shareholders on April 8, 1986. The continuation of the Agreement was
approved by the Trustees on February 11, 1998. The Distributor offers shares of
the Fund at the net asset value per share, computed once daily at the close of
trading on the New York Stock Exchange, Inc.
The Distributor will be entitled to reimbursement each month under the
terms of the Plan set forth above. If purchases of the Fund's shares are made
directly from the Distributor, without the intervention of another broker or
dealer, the shares may be purchased at the net asset value per share of the Fund
next determined after receipt of an order to purchase
- 13 -
<PAGE>
such shares. However, if the Fund's shares are purchased through a broker or a
dealer, a service charge may be incurred for services rendered to the purchaser
by the broker or dealer.
Lepercq, de Neuflize Securities Inc. is controlled by its sole parent,
Lepercq, de Neuflize & Co. Incorporated. The officers and directors of Lepercq,
de Neuflize Securities Inc. include Bruno Desforges, Chairman of the Board and
Director; Francois Letaconnoux, President and Director; Peter Hartnedy, Vice
President, Treasurer, Secretary and Director; and Tsering Ngudu, Executive Vice
President and Director. Some of the officers of the Distributor are also
officers of the Trust.
INVESTMENT ADVISORY AND DISTRIBUTION AGREEMENTS
The Investment Advisory and Distribution Agreements each may be
terminated by either party on 60 days' notice without penalty. Each contract
remains in effect from year to year provided its continuance is approved at
least annually (a) by the vote of a majority of those members of the Board of
Trustees who are not parties thereto or interested persons (as such term is
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval, and (b) either by the Board of
Trustees or by the vote of a majority of the outstanding voting securities of
the Fund.
The Investment Advisory and Distribution Agreements terminate
automatically if assigned and can be amended only by a vote of a majority of the
outstanding voting securities of the Fund.
- 14 -
<PAGE>
REDEMPTION OF SHARES
The Fund's obligation to redeem shares may be suspended and the date
of payment postponed for more than seven days during any period when (1) trading
on the New York Stock Exchange, Inc., other than weekends or holidays, is
suspended or restricted; (2) an emergency exists, as determined by the
Securities and Exchange Commission; or (3) the Securities and Exchange
Commission has by order permitted such suspension.
HOW NET ASSET VALUE IS COMPUTED
The Fund will determine the net asset value of its shares once daily
as of the close of trading on the New York Stock Exchange (the "Exchange") on
each day that the Exchange is open for business. It is expected that the
Exchange will be closed on Saturdays and Sundays and on New Year's Day, Martin
Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Fund may make or cause to be
made a more frequent determination of the net asset value and offering price,
which determination shall reasonably reflect any material changes in the value
of securities and other assets held by the Fund from the immediately preceding
determination of net asset value. The net asset value is determined by dividing
the market value of the Fund's investments as of the close of trading plus any
cash or other assets (including dividends receivable and accrued interest) less
all liabilities (including accrued expenses) by the number of the Fund's shares
outstanding. Securities traded on the New York Stock Exchange or the American
Stock Exchange will be valued at the last sale price , or if no sale, at the
mean between the latest bid and asked price. Securities traded in any other U.S.
or foreign market shall be valued in a manner as similar as possible to the
above, or if not so traded, on the basis of the latest available price. Where
there are no readily available quotations for securities they will be valued at
a fair value as determined by the Board of Trustees acting in good faith .
Premiums received by the Fund for investing in options are included in
the Fund's assets, and an equal amount is recorded as a liability. This
liability will be adjusted daily to the option's current market value, which
will be the latest sale price at the time as of which the net asset value per
share of the Fund is computed, or, in the absence of such sale, at the latest
asked quotation. If the option's current market value is less than the premium
received, the difference will be unrealized appreciation and, conversely, if the
option's current market value exceeds the premium received, the excess will be
unrealized depreciation. Upon expiration of the option or the purchase of an
identical option in a closing transaction, the liability will be extinguished
and the Fund will realize a gain (or a loss if the purchase price of the closing
option plus transaction costs exceeds the premium received for writing the
covered-call option.) Alternatively, upon exercise of the option, the liability
will be extinguished and the Fund will realize a gain or loss from the sale of
the underlying securities, with the proceeds of the sale being increased by the
premium received for writing the option.
- 15 -
<PAGE>
PERFORMANCE INFORMATION
For the purposes of quoting and comparing the performance of the Fund
to that of other mutual funds and to stock or other relevant indices in
advertisements or in reports to shareholders, performance will be stated in
terms of total return, rather than in terms of yield. Under the rules of the
Securities and Exchange Commission (the "SEC"), funds advertising performance
must include return quotes calculated according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return n =
number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-, 5- or 10-year
periods (or fractional portion thereof)
Under the foregoing formula the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover one-,
five- and ten-year periods or a shorter period dating from the effectiveness of
the Fund's registration date during the period. Total return, or "T" in the
formula above, is computed by finding the average annual compounded rate of
return over the 1-, 5-, or 10-year periods (or fractional portion thereof) that
would equate the initial amount invested to the ending redeemable value.
The Fund may also from time to time include in such advertising a
total-return figure that is not calculated according to the formula set forth
above in order to compare more accurately the Fund's performance with other
measures of investment return. For example, in comparing total return of the
Fund with data published by independent services, or with the performance of
certain stock or other relevant indices, the Fund calculates its total return
for the specified periods of time by assuming the investment of $10,000 in
shares of the Fund and assuming the reinvestment of each dividend of other
distribution at net asset value on the reinvestment date. Percentage changes are
determined by subtracting the initial value of the investment from the ending
value and by dividing the difference by the beginning value. Such alternative
total return information will be given no greater prominence in such advertising
than the information prescribed under SEC rules and all advertisements
containing performance data will include a legend disclosing that such
performance data represent past performance and that the investment return and
principal value of an investment will fluctuate so that the investor's shares,
when redeemed, may be worth more or less than their original cost.
The total return of the Fund for the one year period ending December
31, 1997, was as follows:
1) Ending redeemable value of initial $1,000 investment calculated
pursuant to the above formula is $1,089.50 which equates to an
average annual total return of 8.95%.
- 16 -
<PAGE>
2) Value of an initial investment of $10,000 is $10,895.00 pursuant
to the alternative computation, which equates to 8.95%.
The average annual total return for the Fund for the 5 year and 10
year periods ended December 31, 1997 was 13.52% and 11.01%, respectively.
TAXES
The following is only a summary of certain additional federal income
tax considerations generally affecting the Fund and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and will, therefore , count towards the satisfaction of the
Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement").
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated
- 17 -
<PAGE>
in a foreign currency or an option with respect thereto (but only to the extent
attributable to changes in foreign currency exchange rates), and gain or loss
recognized on the disposition of a foreign currency forward contract, futures
contract, option or similar financial instrument, or of foreign currency itself,
except for regulated futures contracts or non-equity options subject to Code
Section 1256 (unless the Fund elects otherwise), will generally be treated as
ordinary income or loss.
Further, the Code also treats as ordinary income a portion of the
capital gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of the Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
the Fund and a contemporaneous contract to sell substantially identical property
in the future; (2) the transaction is a straddle within the meaning of section
1092 of the Code; (3) the transaction is one that was marketed or sold to the
Fund on the basis that it would have the economic characteristics of a loan but
the interest-like return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction and (2) the
capital interest on acquisition indebtedness under Code section 263(g). Built-in
losses will be preserved where the Fund has a built-in loss with respect to
property that becomes a part of a conversion transaction. No authority exists
that indicates that the converted character of the income will not be passed
through to the Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, or (2) the asset is otherwise held by the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the Fund
grants a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto), or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
- 18 -
<PAGE>
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security rather than by the issuer of the option.
If, for any taxable year, the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
its ordinary taxable income for such calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or, at
the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain
- 19 -
<PAGE>
circumstances be required to liquidate portfolio investments to make sufficient
distributions to avoid excise tax liability.
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes. However, such distributions will qualify for the 70%
dividends-received deduction for corporate shareholders, but only to the extent
discussed below.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. Net capital gain that is distributed and designated as a capital
gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% (58% for alternative minimum tax purposes) of the capital gain
recognized upon the Fund's disposition of domestic "small business" stock will
be subject to tax.
Conversely, if the Fund elects to retain its net capital gain, the
Fund will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally available
to corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
Generally, a dividend received by the Fund will not be treated as a qualifying
dividend (1) if it has been received with respect to any share of stock that the
Fund has held for less than 46 days (91 days in the case of certain preferred
stock), excluding for this purpose under the rules of Code Section 246(c)(3) and
(4) any period during which the Fund has an option to sell, is under a
contractual obligation to sell, has made and not closed a short sale of, is the
grantor of a deep-in-the-money or otherwise nonqualified option to buy, or has
otherwise diminished its risk of loss by holding other positions with respect
to, such (or substantially identical) stock; (2) to the extent that the Fund is
under an obligation (pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property;
or (3) to
- 20 -
<PAGE>
the extent that the stock on which the dividend is paid is treated as
debt-financed under the rules of Code section 246A. The 46-day holding period
must be satisfied during the 90-day period beginning 45 days prior to each
applicable ex-dividend date; the 91-day holding period must be satisfied during
the 180-day period beginning 90 days before each applicable ex-dividend date.
Moreover, the dividends-received deduction for a corporate shareholder may be
disallowed or reduced (1) if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of the Fund or (2) by
application of Code Section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum marginal
rate of 28% for noncorporate taxpayers and 20% for corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable income ("AMTI") over an
exemption amount. For purposes of the corporate AMT , the corporate
dividends-received deduction is not itself an item of tax preference that must
be added back to taxable income or is otherwise disallowed in determining a
corporation's AMTI. However, a corporate shareholder will generally be required
to take the full amount of any dividend received from the Fund into account
(without a dividends-received deduction) in determining its adjusted current
earnings, which are used in computing an additional corporate preference item
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net operating
loss deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by the Fund will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
- 21 -
<PAGE>
Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
failed to provide a correct taxpayer identification number , (2) who is subject
to backup withholding for failure to properly report the receipt of interest or
dividend income , or (3) who has failed to certify to the Fund that it is not
subject to backup withholding or that it is a corporation or other "exempt
recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. Long- term capital gain recognized by an individual
shareholder will be taxed at the lowest rates applicable to capital gains if the
holder has held such shares for more than 18 months at the time of the sale.
However, any capital loss arising from the sale or redemption of shares held for
six months or less will be treated as a long-term capital loss to the extent of
the amount of capital gain dividends received on such shares. For this purpose,
the special holding period rules of Code Section 246(c)(3) and (4) (discussed
above in connection with the dividends-received deduction for corporations)
generally will apply in determining the holding period of shares. Long-term
capital gains of noncorporate taxpayers are currently taxed at a maximum rate at
least 11.6% lower than the maximum rate applicable to ordinary income. Capital
losses in any year are deductible only to the extent of capital gains plus, in
the case of a noncorporate taxpayer, $3,000 of ordinary income.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
- 22 -
<PAGE>
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend. Such
foreign shareholder would generally be exempt from U.S. federal income tax on
gains realized on the sale of shares of the Fund, capital gain dividends and
amounts retained by the Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of a foreign shareholder other than a corporation, the
Fund may be required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such shareholder furnishes the Fund with proper
notification of his foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; STATE AND LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect .
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, Milwaukee, Wisconsin, acts as independent
auditors for the Trust.
FINANCIAL STATEMENTS
The Financial Statements for the Fund are incorporated herein by
reference from the Fund's Audited Annual Report, dated December 31, 1997.
Shareholders will receive a copy of the Audited Annual Report at no additional
charge when requesting a copy of the Statement of Additional Information.
- 23 -
<PAGE>
PART C
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Included in Part A:
Condensed supplementary financial information for
Lepercq-Istel Fund.
Included in Part B:
Financial Statements and the Reports thereon for
Lepercq-Istel Fund filed herein for fiscal year ended
December 31, 1997 are incorporated into Part B from
the Trust's 1997 Annual Report to Shareholders as
filed with the Securities and Exchange Commission by
the Trust on Form N-30D on February 26, 1998,
accession number 0000898531-98-000023.
(b) Exhibits:
Exhibits filed under Registration Statement on Form
N-1 and Amendments thereto on Forms N-1 and N-1A are
hereby incorporated by reference into this
post-effective amendment.
The following documents are being filed herewith as
Exhibits.
EX-99.B11(a) Consent of Kramer, Levin, Naftalis
& Frankel.
EX-99.B11(b) Consent of KPMG Peat Marwick.
EX-27 Financial Data Schedule.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF JANUARY 30, 1998).
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of Beneficial Interest 546
ITEM 27. INDEMNIFICATION.
Section 8 of the Registrant's Declaration of Trust sets forth
the rights of indemnification of the Trustees and Officers of the Registrant as
follows:
"1. Trustees, Officers, etc. The Trust shall
indemnify each of its Trustees and officers (including persons
who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any
interest, as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all
liabilities and expenses (including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees) reasonably incurred by any
Covered Person in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or
criminal, before any court or
C-1
<PAGE>
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of
his being or having been such a Covered Person except with
respect to any matter as to which such Covered Person shall
have been finally adjudicated in any such action, suit or
other proceeding (a) not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the
best interests of the Trust or (b) to be liable to the Trust
or its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Expenses, including counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties) shall be
paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such Covered
Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is
not authorized under this Article, provided, however, that
either (a) such Covered Person shall have provided appropriate
security for such undertaking, (b) the Trust shall be insured
against losses arising from any such advance payments or (c)
either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees
then in office act on the matter), or independent legal
counsel in a written opinion shall have determined, based upon
a review of readily available facts (as opposed to a full
trial type inquiry) that there is reason to believe that such
Covered Person will be found entitled to indemnification under
this Article.
Section 2. Compromise Payment. As to any matter
disposed of (whether by a compromise payment, pursuant to a
consent decree or otherwise) without an adjudication by a
court, or by any other body before which the proceeding was
brought, that such Covered Person either (a) did not act in
good faith in the reasonable belief that his or her action was
in the best interests of the Trust or (b) is liable to the
Trust or its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, indemnification
shall be provided if (a) approved as in the best interests of
the Trust, after notice that it involves such indemnification,
by at least a majority of the disinterested Trustees acting on
the matter (provided that a majority of the disinterested
Trustees then in office act on the matter) upon a
determination, based upon a review of readily available facts
(as opposed to a full trial type inquiry) that such Covered
Person acted in good faith in the reasonable belief that his
or her action was in the best interests of the Trust and is
not liable to the Trust or its Shareholders by reasons of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office, or (b) there has been obtained an opinion in writing
of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry) to
the effect that such Covered Person appears to have acted in
good faith in the reasonable belief that his or her action was
in the best interests of the Trust and that such
indemnification would not protect such Covered Person against
any liability to the Trust to which he or she would otherwise
be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office. Any approval pursuant to this
Section shall not
C-2
<PAGE>
prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered
Person's action was in the best interests of the Trust or to
have been liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office.
Section 3. Indemnification Not Exclusive. The right
of indemnification hereby provided shall not be exclusive of
or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered
Person" shall include such person's heirs, executors and
administrators and a "disinterested Trustee" is a Trustee who
is not an "interested person" of the Trust as defined in
Section 2(a)(19) of the 1940 Act (or who has been exempted
from being an "interested person" by any rule, regulation or
order of the Commission) and against whom none of such
actions, suits or other proceedings or another action, suit or
other proceeding on the same or similar grounds is then or has
been pending. Nothing contained in this Article shall affect
any rights to indemnification to which personnel of the Trust,
other than Trustees or officers, and other persons may be
entitled by contract or otherwise under law, nor the power of
the Trust to purchase and maintain liability insurance on
behalf of any such person; provided, however, that the Trust
shall not purchase or maintain any such liability insurance in
contravention of applicable law, including without limitation
the 1940 Act.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See the Statement of Additional Information, "Trustees and
Officers of the Trust" and "The Investment Adviser."
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) None
(b)
Position and Position
Name and Principal Officers and and Offices
Business Address* Underwriter with Registrant
- ------------------- -------------- -----------------
Bruno Desforges Chairman of the Board and Trustee, Chairman
Director of the Board
Peter Hartnedy Vice President, Treasurer, Controller
Secretary and Director
Francois Letaconnoux President and Director Trustee
Tsering Ngudu Executive Vice President President
and Director
(c) Not applicable.
- -------------
* 1675 Broadway, New York, New York 10019.
C-3
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The Transfer and Dividend Disbursing Agent, Firstar Trust
Company, Mutual Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201, or its
successor, will maintain accounts and records showing the number of shares of
beneficial interest of the Registrant held by each shareholder.
All other accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder will be maintained by the Administrator.
ITEM 31. MANAGEMENT SERVICES NOT DISCUSSED IN PART A OR B.
None.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to furnish to each person to whom a
prospectus relating to the Lepercq-Istel Fund is delivered, a copy of the Fund's
annual report to shareholders which will include the information required by
item 5A, upon request and without charge.
Registrant further undertakes to call a meeting of
shareholders for the purpose of voting upon the questions of removal of a
trustee or trustees if registered to do so by the holders of at least 10% of the
Registrant's outstanding voting securities, and to assist in communications with
other shareholders as required by Section 16(c) of the Investment Company Act of
1940, as amended.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the State of
New York, on the 27th day of February, 1998.
By:/s/Tsering Ngudu
------------------------
Tsering Ngudu, President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to its Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
- ---------- -------- -------
/s/Tsering Ngudu President February 27, 1998
- -------------------------
Tsering Ngudu
/s/Stephen T. Murphy Treasurer February 27, 1998
- -------------------------
Stephen T. Murphy
/s/Franz Skryanz Trustee February 27, 1998
- -------------------------
Franz Skryanz
/s/Bruno Desforges Trustee February 27, 1998
- -------------------------
Bruno Desforges
/s/Francois Letaconnoux Trustee February 27, 1998
- -------------------------
Francois Letaconnoux
/s/Jean-Louis Milin Trustee February 27, 1998
- -------------------------
Jean-Louis Milin
/s/Dr, Marvin Schiller Trustee February 27, 1998
- -------------------------
Dr. Marvin Schiller
C-5
<PAGE>
INDEX TO EXHIBITS
Exhibit
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel
EX-99.B11(b) Consent of KPMG Peat Marwick
EX-27 Financial Data Schedule
Kramer, Levin, Naftalis & Frankel
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100
Arthur H. Aufses III Monica C. Lord Sherwin Kamin
Thomas D. Balliett Richard Marlin Arthur B. Kramer
Jay G. Baris Thomas Moers Mayer Maurice N. Nessen
Philip Bentley Thomas E. Molner Founding Partners
Saul E. Burian Thomas H. Moreland Counsel
Barry Michael Cass Ellen R. Nadler _____
Thomas E. Constance Gary P. Naftalis
Michael J. Dell Michael J. Nassau Martin Balsam
Kenneth H. Eckstein Michael S. Nelson Joshua M. Berman
Charlotte M. Fischman Jay A. Neveloff Jules Buchwald
David S. Frankel Michael S. Oberman Rudolph de Winter
Marvin E. Frankel Paul S. Pearlman Meyer Eisenberg
Alan R. Friedman Susan J. Penry-Williams Arthur D. Emil
Carl Frischling Bruce Rabb Maria T. Jones
Mark J. Headley Allan E. Reznick Maxwell M. Rabb
Robert M. Heller Scott S. Rosenblum James Schreiber
Philip S. Kaufman Michele D. Ross Counsel
Peter S. Kolevzon Howard J. Rothman _____
Kenneth P. Kopelman Max J. Schwartz
Michael Paul Korotkin Mark B. Segall M. Frances Buchinsky
Shari K. Krouner Judith Singer Abbe L. Dienstag
Kevin B. Leblang Howard A. Sobel Ronald S. Greenberg
David P. Levin Jeffrey S. Trachtman Debora K. Grobman
Ezra G. Levin Jonathan M. Wagner Christian S. Herzeca
Randy Lipsitz Harold P. Weinberger Jane Lee
Larry M. Loeb E. Lisk Wyckoff, Jr. Pinchas Mendelson
Lynn R. Saidenberg
Special Counsel
-----
FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------
February 27, 1998
Lepercq-Istel Trust
1675 Broadway
New York, New York 10019
Re: Lepercq-Istel Trust
Registration No. 2-10841
Post-Effective Amendment No. 75
Dear Sir/Madam:
We consent to the reference to our Firm in the prospectus and
statement of additional information portions of the above-mentioned Registration
Statement.
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and The Board of Trustees of
Lepercq-Istel Trust:
We consent to the use of our report incorporated herein by reference and to the
reference to our Firm under the headings "Financial Highlights" in the
Prospectus and "Independent Auditors" in the Statement of Additional
Information.
/s/ KPMG Peat Marwick LLP
Milwaukee, Wisconsin
February 25, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000052761
<NAME> LEPERCQ ISTEL TRUST
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 32,578
<INVESTMENTS-AT-VALUE> 28,438
<RECEIVABLES> 383
<ASSETS-OTHER> 56
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,877
<PAYABLE-FOR-SECURITIES> 316
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112
<TOTAL-LIABILITIES> 428
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,384
<SHARES-COMMON-STOCK> 1,481
<SHARES-COMMON-PRIOR> 1,269
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,205
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,140)
<NET-ASSETS> 28,449
<DIVIDEND-INCOME> 129
<INTEREST-INCOME> 149
<OTHER-INCOME> 0
<EXPENSES-NET> (376)
<NET-INVESTMENT-INCOME> (98)
<REALIZED-GAINS-CURRENT> 3,521
<APPREC-INCREASE-CURRENT> (1,714)
<NET-CHANGE-FROM-OPS> 1,709
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,035)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 290
<NUMBER-OF-SHARES-REDEEMED> 138
<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> 4,294
<ACCUMULATED-NII-PRIOR> 25
<ACCUMULATED-GAINS-PRIOR> (118)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 186
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 376
<AVERAGE-NET-ASSETS> 24,840
<PER-SHARE-NAV-BEGIN> 19.03
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 1.69
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 1.44
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.21
<EXPENSE-RATIO> 1.51
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
