(Lepercq-Istel Fund Logo)
ANNUAL
REPORT
December 31, 1999
LEPERCQ-ISTEL FUND
FEBRUARY 20, 2000
DEAR SHAREHOLDERS:
We are pleased to report to you the performance of your Fund for the fourth
quarter and for the full year 1999. For comparative purposes, we have also
provided performance information for some relevant benchmarks.
FOURTH QUARTER 1999 YEAR ENDED 1999
------------------- ---------------
Lepercq-Istel Fund 34.12% 30.48%
Lipper Multicap Core Average 17.95% 22.45%
Standard & Poor's 500 Index 14.88% 21.04%
REVIEW OF 1999
The U.S. economy continued its outstanding performance with strong growth, a
ramp up in productivity and contained inflation. However, during the year the
Federal Reserve initiated a program of monetary tightening to induce a
moderation of growth from what it viewed as unsustainable levels.
While most U.S. stock indices showed nice gains in 1999, there was, if anything,
an increase in the dichotomy of the market last year. While the S&P 500 Index
gained 21% for the year, the average return for components of the index was just
14% and fully 50% of the index lost value. However, in 1999 there was an
enormous change from recent years in the demarcation between the winners and
losers. What had been a dividing line between large capitalization stocks and
small capitalization stocks became a separation of the "new economy" players
from everybody else.
The very performance of the economy has served to drive home the point that
there is an incredible transformation going on in the U.S. economy. Information
and communications technology with its offspring - the internet - are driving a
conversion of the U.S. economy to an electronic- and communications-based
business platform. The velocity of the conversion is being propelled by the
awareness that this e-platform brings about immense gains in productivity and
also by the realization that if a business does not change, there are many new
players quite willing to take its place. The beneficiaries of this business
conversion to the e-platform are the new economy companies.
OUR CURRENT OUTLOOK
The immense changes that we are witnessing are likely to continue for a long
time. Many of these new economy players are fast-growing, young companies which
connotes a certain higher volatility of their stock prices and a greater need
for our nimbleness. One area that will require close monitoring is the impact
of Federal Reserve policy on business momentum. In its recent statements, the
Federal Reserve indicated it is including the targeting of stock market gains in
its monetary policy noting the important role these gains have played in
stimulating demand and driving business investment.
Thank you for your continued support.
Sincerely,
/s/ Tsering Ngudu /s/ Jerry Getsos
Tsering Ngudu Jerry Getsos
President and Portfolio Manager Executive Vice President and Portfolio Manager
Past performance is not predictive of future performance.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN LEPERCQ-ISTEL FUND AND THE S&P 500
1 YEAR
DATE LEPERCQ-ISTEL FUND S&P 500
12/98 10,000 10,000
3/99 9,834 10,498
6/99 10,392 11,238
9/99 9,729 10,537
12/99 13,048 12,105
5 YEARS
DATE LEPERCQ-ISTEL FUND S&P 500
12/94 10,000 10,000
6/95 11,784 12,021
12/95 12,709 13,758
6/96 14,387 15,148
12/96 16,047 16,917
6/97 15,793 20,403
12/97 17,482 22,562
6/98 19,766 26,558
12/98 20,172 29,009
6/99 20,962 32,600
12/99 26,320 35,114
AVERAGE ANNUAL RATE OF RETURN (%)
for Periods Ended December 31, 1999
ONE YEAR 30.48
FIVE YEARS 21.35
TEN YEARS 12.60
10 YEARS
DATE LEPERCQ-ISTEL FUND S&P 500
12/89 10,000 10,000
12/90 9,331 9,690
12/91 10,946 12,643
12/92 11,545 13,606
12/93 13,109 14,977
1/94 12,451 15,175
12/95 15,824 20,878
12/96 19,980 25,671
12/97 21,768 34,235
12/98 25,116 44,020
12/99 32,771 53,282
Returns shown include the reinvestment of all dividends. Past performance is not
predictive of future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or less than
the original cost.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
NUMBER OF MARKET
SHARES VALUE
- --------- -----
COMMON STOCKS - 87.85%
BANKS - 6.61%
40,000 The Bank of New York
Company, Inc. $ 1,600,000
14,000 The Chase Manhattan
Corporation 1,087,625
-----------
2,687,625
-----------
CHEMICALS - 3.68%
10,001 du Pont (E.I.) de
Nemours 658,816
22,000 Great Lakes Chemical
Corporation 840,125
-----------
1,498,941
-----------
COMMUNICATIONS - 6.75%
5,000 Cisco Systems, Inc.*<F1> 535,625
15,000 Motorola, Inc. 2,208,750
-----------
2,744,375
-----------
COMPUTERS - 3.76%
30,000 Dell Computer
Corporation*<F1> 1,530,000
-----------
HEALTH CARE - 5.96%
15,000 Bausch & Lomb
Incorporated 1,026,562
15,000 Johnson & Johnson 1,396,875
-----------
2,423,437
-----------
INTERNET - 20.92%
10,000 CMGI Inc.*<F1> 2,768,750
4,500 eBay Inc.*<F1> 563,344
13,000 Exodus
Communications,
Inc.*<F1> 1,154,562
17,000 StarMedia
Network, Inc.*<F1> 681,063
7,722 Yahoo! Inc.*<F1> 3,341,213
-----------
8,508,932
-----------
MEDIA - 5.03%
32,000 CBS Corporation*<F1> 2,046,000
-----------
OIL & GAS - 3.88%
24,567 Conoco Inc. - Class B 611,104
125,000 Ocean Energy Inc.*<F1> 968,750
-----------
1,579,854
-----------
PHARMACEUTICALS - 2.76%
25,000 Pharmacia &
Upjohn, Inc. 1,125,000
-----------
SEMICONDUCTORS - 1.82%
9,000 Intel Corporation 740,813
-----------
SOFTWARE - 7.82%
5,000 Microsoft Corporation*<F1> 583,750
65,000 Novell, Inc.*<F1> 2,595,937
-----------
3,179,687
-----------
TELEPHONE - 9.42%
25,000 AT&T Corp. 1,268,750
51,250 Global Crossing Ltd.*<F1> 2,562,500
-----------
3,831,250
-----------
INTERNATIONAL EQUITIES - 9.44%
50,000 Ispat International NV 806,250
20,000 Nortel Networks
Corporation 2,020,000
8,000 Siemens AG 1,012,730
-----------
3,838,980
-----------
TOTAL COMMON STOCKS
(COST $22,775,231) 35,734,894
-----------
PRINCIPAL
AMOUNT
- ---------
U.S. TREASURIES - 11.50%
$3,200,000 U.S. Treasury Bill,
due 1/13/00 3,194,715
1,500,000 U.S. Treasury Bill,
due 3/16/00 1,484,518
-----------
Total U.S. Treasuries
(Cost $4,678,839) 4,679,233
-----------
VARIABLE RATE
DEMAND NOTES#<F2> - 1.10%
357,228 Pitney Bowes Credit
Corporation,
6.0950% 357,228
88,472 Sara Lee Corporation,
6.0900% 88,472
-----------
Total Variable Rate
Demand Notes
(Cost $445,700) 445,700
-----------
Total Investments -
100.45%
(Cost $27,899,770) 40,859,827
-----------
Liabilities, less Other
Assets - (0.45%) (184,913)
-----------
NET
ASSETS - 100.00% $40,674,914
-----------
-----------
*<F1> Non-income producing security.
#<F2> Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rate changes periodically on specified
dates. The rate is as of December 31, 1999.
See accompanying notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS:
Investments, at market value
(cost $27,899,770) $40,859,827
Dividends and interest
receivable 22,847
Capital shares sold 62,114
Cash 645
Other assets 16,400
-----------
Total Assets 40,961,833
-----------
LIABILITIES:
Payable to adviser 64,631
Capital shares redeemed 156,010
Accrued expenses and
other liabilities 66,278
-----------
Total Liabilities 286,919
-----------
NET ASSETS $40,674,914
-----------
-----------
NET ASSETS CONSIST OF:
Capital stock $33,985,360
Accumulated undistributed
net realized loss on
investments (6,270,503)
Net unrealized appreciation
on investments 12,960,057
-----------
Total Net Assets $40,674,914
-----------
-----------
Shares outstanding
(unlimited shares of $1.00
par value authorized) 1,590,468
Net Asset Value (offering
and redemption price) $25.57
------
------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME:
Dividend income (net of taxes
withheld of $1,409) $ 217,704
Interest income 248,243
Other income 1,555
-----------
Total income 467,502
-----------
EXPENSES:
Investment advisory fee 246,995
Administration fee 43,967
Professional fees 42,366
Shareholder servicing fees
and expense 34,113
Fund accounting fee 22,491
Trustee fees and expenses 20,510
Federal and state registration 16,425
Custody fees 7,300
Other 5,213
Reports to shareholders 5,168
-----------
Total expenses 444,548
-----------
NET INVESTMENT INCOME 22,954
-----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss
on investments (6,264,856)
Change in unrealized
appreciation on
investments 15,715,108
-----------
Net realized and unrealized
gain on investments 9,450,252
-----------
NET INCREASE IN
NET ASSETS RESULTING
FROM OPERATIONS $ 9,473,206
-----------
-----------
See accompanying notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
OPERATIONS:
Net investment income (loss) $ 22,954 $ (122,592)
Net realized gain (loss) on investments (6,264,856) 3,024,353
Change in unrealized appreciation or
depreciation on investments 15,715,108 1,385,309
----------- -----------
Net increase in net assets
resulting from operations 9,473,206 4,287,070
----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (26,007) --
Net realized gain on investments (536,960) (3,246,117)
----------- -----------
Total dividends and distributions (562,967) (3,246,117)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares subscribed 2,454,920 2,654,631
Shares issued to holders in
reinvestment of dividends 269,914 2,487,870
Cost of shares redeemed (3,773,448) (1,819,378)
----------- -----------
Net increase (decrease) in net assets
from capital share transactions (1,048,614) 3,323,123
----------- -----------
TOTAL INCREASE IN NET ASSETS 7,861,625 4,364,076
----------- -----------
NET ASSETS:
Beginning of year 32,813,289 28,449,213
----------- -----------
End of year (including undistributed
net investment income of $0 and $0,
respectively) $40,674,914 $32,813,289
----------- -----------
----------- -----------
See accompanying notes to financial statements.
FINANCIAL HIGHLIGHTS
<TABLE>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year $19.91 $19.21 $19.03 $15.83 $13.17
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) 0.02 (0.07)(1)<F3> (0.07)(1)<F3> (0.11)(1)<F3> 0.14(1)<F3>
Net realized and unrealized gains on securities 6.01 2.90 1.69 4.26 3.42
------ ------ ------ ------ ------
Total from investment operations 6.03 2.83 1.62 4.15 3.56
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.02) -- -- -- (0.13)
Distributions from capital gains (0.35) (2.13) (1.44) (0.95) (0.77)
------ ------ ------ ------ ------
Total distributions (0.37) (2.13) (1.44) (0.95) (0.90)
------ ------ ------ ------ ------
Net asset value, end of year $25.57 $19.91 $19.21 $19.03 $15.83
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total return 30.5% 15.4% 9.0% 26.3% 27.1%
Supplemental data and ratios:
Net assets, in millions, end of year $40.7 $32.8 $28.4 $24.2 $20.2
Ratio of expenses to average net assets 1.35% 1.48% 1.51% 1.65%(2)<F4> 1.50%
Ratio of net investment income (loss)
to average net assets 0.07% (0.40)% (0.40)% (0.65)%(2)<F4> 0.89%
Portfolio turnover rate 95.70% 83.06% 71.20% 54.13% 59.72%
</TABLE>
(1)<F3> Net investment income (loss) per share is calculated using ending
balances prior to consideration or adjustment for permanent book and
tax differences.
(2)<F4> 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)%.
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
Lepercq-Istel Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end investment company,
established under a Declaration of Trust dated April 8, 1986. The Trust was
formerly a Delaware corporation established in 1953 known as Istel Fund,
Inc. 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. The Trust currently consists of one series,
Lepercq-Istel Fund (the "Fund"). The principal investment objective of the
Fund is long-term capital appreciation. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. These policies are in conformity
with generally accepted accounting principles for investment companies.
a) Investment Valuation--Investments in securities traded on a national
securities exchange are valued at the last reported sale on the primary
exchange on which they are traded. Investments not listed on a
securities exchange and exchange-listed securities for which no sale
was reported for that date are valued at the last reported bid price.
Once short-term securities have a maturity of 60 days or less, they are
valued at amortized cost which approximates market value; prior to that
they are marked to market. Restricted securities for which quotations
are not readily available are valued at fair value as determined by the
Adviser under the supervision of the Board of Trustees.
b) Federal Income Taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable net income as
well as any net realized gains to its shareholders. Therefore, no
federal income tax provision is required. Generally accepted accounting
principles require that permanent differences between financial
reporting and tax reporting be reclassified between various components
of net assets. As a result of permanent book-to-tax differences,
accumulated undistributed net investment loss has been decreased by
$3,053, and accumulated undistributed net realized loss on investments
has been decreased by $2,840, resulting in a net reclassification
adjustment to decrease capital stock by $5,893.
The Fund intends to utilize provisions of the federal income tax laws
which allow it to carry a realized capital loss forward for eight years
following the year of loss and offset such losses against any future
realized capital gains. At December 31, 1999, the Fund had an
accumulated capital loss carryforward for tax purposes of $6,270,503
which will expire on December 31, 2007.
c) Distributions to Shareholders--Dividends from net investment income and
net realized capital gains, if any, are declared at least annually.
For the year ended December 31, 1999, the Fund declared and paid a
long-term capital gain distribution in the amount of $411,516.
d) Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principals requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
e) Other--Investment and shareholder transactions are recorded on trade
date. The Fund determines the gain or loss realized from the investment
transactions by comparing the original cost of the security lot sold
with the net sales proceeds. Dividend income is recognized on the ex-
dividend date or as soon as information is available to the Fund, and
interest income is recognized on an accrual basis. Discounts on
securities purchased are amortized over the life of the respective
security.
2. AGREEMENTS
The Fund has entered into an investment advisory agreement with Lepercq, de
Neuflize & Co. Incorporated (the "Adviser"). The Adviser is entitled to
receive a fee, computed and accrued daily and payable quarterly, at the
annual rate of 0.75% of the Fund's average daily net assets.
For the year ended December 31, 1999, the Fund paid Lepercq, de Neuflize
Securities Inc., a wholly owned subsidiary of the Adviser, $16,240 of
brokerage commissions.
Firstar Mutual Fund Services, LLC serves as the Fund's transfer agent,
administrator and accounting services agent. Firstar Bank, N.A. serves as
the Fund's custodian.
The Board of Trustees, on behalf of the Fund, has adopted a Distribution
Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 and a
Shareholder Servicing Plan. Pursuant to the Distribution Plan, 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. 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. The Fund did not incur any expense pursuant to the Plans for the year
ended December 31, 1999.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of beneficial interest were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
Shares subscribed 111,457 127,807
Shares issued to holders in
reinvestment of dividends 11,730 132,263
Shares redeemed (180,996) (92,811)
-------- --------
Net increase (decrease) (57,809) 167,259
-------- --------
-------- --------
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Fund for the year ended December 31, 1999, were as
follows:
U.S. GOVERNMENT OTHER
--------------- -----
Purchases -- $26,737,122
Sales -- 28,879,899
At December 31, 1999, gross unrealized appreciation and depreciation of
investments for federal income-tax purposes were as follows:
Appreciation $13,579,700
(Depreciation) (619,643)
-----------
Net unrealized appreciation on investments $12,960,057
-----------
-----------
At December 31, 1999, the cost of investments for federal income-tax
purposes was $27,899,770.
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND
BOARD OF TRUSTEES OF
LEPERCQ-ISTEL TRUST:
We have audited the accompanying statement of assets and liabilities of Lepercq-
Istel Fund (the "Fund"), including the schedule of investments, as of December
31, 1999, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
Chicago, Illinois
February 4, 2000
TRUSTEES
+<F6> Bruno Desforges Chairman of the Board, Lepercq-Istel Trust;
Managing Director, Lepercq, de Neuflize &
Co. Incorporated; Director and Chairman of
the Board, Lepercq, de Neuflize Securities
Inc.
Stanley A. Deitch Principal, CPI Associates, Inc., Member,
American Institute of CPA's.
+<F6> Francois Letaconnoux Director, President and Chief Executive
Officer, Lepercq Inc., Lepercq, de Neuflize
& Co. Incorporated and Lepercq, de Neuflize
Securities Inc.
Jean-Louis Milin Managing Director, Banque de Neuflize,
Schlumberger, Mallet, Demachy
*<F5> Marvin Schiller, Ph.D. Director, Tutor Time Learning Systems, Inc.;
General Partner, Reprise Capital Corp.
*<F5> Franz Skryanz Financial Consultant
Marie-Monique Steckel Consultant; Director, Microcard Technologies
Inc.; Director, GlobeCast North America
Inc.; Director, C&P Press, Inc.
Dennis Tarzian President and Chief Executive Officer, New
Century Education Corp.; Director, National
Registered Agents, Inc.
+<F6> Jean-Michel Terrein Managing Director, Lepercq Corporation
Management Ltd.
*<F5> Member of Audit, Ethics and Nominating Committees
+<F6> Interested Trustees
OFFICERS
Tsering Ngudu President
Jerry Getsos Executive Vice President
Peter Hartnedy Secretary and Treasurer
Investment Adviser Lepercq, de Neuflize & Co. Incorporated,
New York
Underwriter and Distributor Lepercq, de Neuflize Securities Inc., New
York
Dividend Paying Agent,
Transfer Agent, Administrator
and Fund Accountant Firstar Mutual Fund Services, LLC,
Milwaukee
Custodian Firstar Bank, N.A., Milwaukee
Legal Counsel Battle Fowler LLP, New York
Independent Auditors KPMG LLP, Chicago
(Lepercq-Istel Fund Logo)
1675 Broadway, New York, N.Y. 10019
Telephone:(212) 698-0749
Shareholder Services: (800) 497-1411
This report is issued for the information of shareholders of Lepercq-Istel Fund,
and is not authorized for distribution to prospective investors in the Fund
unless it is preceded or accompanied by a current prospectus.
