(Lepercq-Istel Fund Logo)
SEMI-ANNUAL
REPORT
June 30, 2000
LEPERCQ-ISTEL FUND
AUGUST 10, 2000
DEAR SHAREHOLDERS:
The performance for your Fund for the second quarter and the first half of 2000
is provided in the table below. For comparative purposes, we have also provided
performance information for some relevant benchmarks.
SECOND QUARTER 2000 FIRST HALF 2000
------------------- ---------------
Lepercq-Istel Fund -10.36% -9.70%
Lipper Multi-Cap Core -2.80% 2.68%
Standard & Poor's 500 -2.66% -0.42%
The second quarter saw an improvement in the U.S. economic picture. Consumption
moderated, inflation was subdued and job creation slowed, thus reducing
pressures on the work force and enabling productivity to achieve new highs for
the current cycle. In the face of these improvements, the Federal Reserve voted
to keep interest rates unchanged in late June - taking a wait-and-see stance.
The stock market was volatile in the quarter. Concerns that rate increases
would choke off future economic growth and worries about corporate earnings
contributed to market volatility.
Second quarter reports of essentially all our portfolio holdings met our
expectations. We see no slowdown in the industrial revolution taking place
driven by technology.
We increased the cash position in the portfolio during the quarter in response
to market volatility. The cash will act as a cushion to provide the portfolio
some shield from volatility and a reserve from which we can quickly draw when
the market returns to a firmer footing.
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.
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
NUMBER OF MARKET
SHARES VALUE
--------- ------
U.S. EQUITIES - 59.85%
CONSUMER CYCLICAL - 17.40%
INTERNET ADVERTISING - 0.62%
5,500 DoubleClick Inc.*<F1> $ 209,688
-----------
INTERNET COMMERCE - 1.42%
5,000 eBay Inc.*<F1> 271,562
5,500 Priceline.com
Incorporated*<F1> 208,914
-----------
480,476
-----------
INTERNET MEDIA - 2.95%
20,000 StarMedia
Network, Inc.*<F1> 377,500
5,000 Yahoo! Inc.*<F1> 619,375
-----------
996,875
-----------
MEDIA - 11.02%
35,000 The Walt Disney
Company 1,358,437
34,720 Viacom Inc.*<F1> 2,367,470
-----------
3,725,907
-----------
RETAILERS - 1.39%
15,000 The Gap, Inc. 468,750
-----------
Total Consumer
Cyclicals 5,881,696
-----------
CONSUMER
NON-CYCLICAL - 13.41%
HEALTH CARE - 8.86%
15,000 Bausch & Lomb
Incorporated 1,160,625
18,000 Johnson & Johnson 1,833,750
-----------
2,994,375
-----------
PHARMACEUTICALS - 4.55%
29,750 Pharmacia
Corporation 1,537,703
-----------
Total Consumer
Non-Cyclicals 4,532,078
-----------
ENERGY - 2.10%
OIL & GAS - 2.10%
50,000 Ocean Energy Inc.*<F1> 709,375
-----------
Total Energy 709,375
-----------
FINANCIAL - 4.99%
BANKS - 4.11%
15,000 The Bank of New
York Company, Inc. 697,500
15,000 The Chase Manhattan
Corporation 690,938
-----------
1,388,438
-----------
INTERNET VENTURE CAPITAL - 0.88%
6,500 CMGI Inc.*<F1> 297,781
-----------
Total Financial 1,686,219
-----------
INDUSTRIAL - 5.53%
COMMERCIAL SERVICES - 5.53%
3,000 Akamai
Technologies, Inc.*<F1> 356,203
6,500 Commerce One, Inc.*<F1> 294,937
10,000 Exodus
Communications,
Inc.*<F1> 460,625
4,300 VeriSign, Inc.*<F1> 758,950
-----------
1,870,715
-----------
Total Industrial 1,870,715
-----------
TECHNOLOGY - 14.86%
BIOTECHNOLOGY - 3.69%
5,000 ImClone Systems
Incorporated*<F1> 382,188
10,000 Immunex Corporation*<F1> 494,375
4,500 Incyte Genomics, Inc.*<F1> 369,844
-----------
1,246,407
-----------
COMMUNICATIONS
EQUIPMENT - 5.59%
10,000 Cisco Systems, Inc.*<F1> 635,625
22,500 Motorola, Inc. 653,906
10,000 QUALCOMM Inc.*<F1> 600,000
-----------
1,889,531
-----------
COMMUNICATIONS
SOFTWARE - 1.29%
1,500 Inktomi Corporation*<F1> 177,375
4,000 Phone.com, Inc.*<F1> 260,500
-----------
437,875
-----------
SEMICONDUCTORS - 4.29%
10,000 Atmel Corporation*<F1> 368,750
2,500 Broadcom Corporation*<F1> 547,344
4,000 Intel Corporation 534,750
-----------
1,450,844
-----------
Total Technology 5,024,657
UTILITIES - 1.56%
COMMUNICATIONS SERVICES - 1.56%
20,000 Global Crossing Ltd.*<F1> 526,250
-----------
Total Utilities 526,250
-----------
TOTAL U.S. EQUITIES 20,230,990
-----------
INTERNATIONAL EQUITIES - 14.11%
BASIC MATERIALS - 1.40%
STEEL - 1.40%
50,000 Ispat International NV 475,000
-----------
Total Basic Materials 475,000
-----------
CONSUMER CYCLICAL - 1.95%
CONSUMER ELECTRONICS - 0.98%
3,500 Sony Corporation 330,094
-----------
MEDIA - 0.97%
5,500 NTL Incorporated*<F1> 329,313
-----------
Total Consumer
Cyclical 659,407
-----------
TECHNOLOGY - 9.87%
COMMUNICATIONS
EQUIPMENT - 8.73%
19,000 Telefonaktiebolaget
LM Ericsson AB 380,000
20,000 Nortel Networks
Corporation 1,365,000
8,000 Siemens AG 1,207,822
-----------
2,952,822
-----------
SOFTWARE - 1.14%
8,000 SmartForce Public
Limited Company*<F1> 384,000
-----------
Total Technology 3,336,822
-----------
UTILITIES - 0.89%
COMMUNICATION SERVICES - 0.89%
25,000 Global
TeleSystems, Inc.*<F1> 301,562
-----------
Total Utilities 301,562
-----------
TOTAL INTERNATIONAL
EQUITIES 4,772,791
-----------
TOTAL EQUITIES
(COST $21,762,777) $25,003,781
-----------
-----------
PRINCIPAL
AMOUNT
---------
SHORT-TERM INVESTMENTS - 26.33%
U.S. TREASURIES - 23.50%
$2,000,000 U.S. Treasury Bill,
due 9/21/00 $1,974,934
6,000,000 U.S. Treasury Bill,
due 8/3/00 5,968,568
-----------
Total U.S. Treasuries 7,943,502
-----------
VARIABLE RATE DEMAND NOTES#<F2> - 2.83%
415,334 American Family
Financial Services,
Inc., 6.3060% 415,334
110,000 General Mills, Inc.,
6.2788% 110,000
319,889 Sara Lee Corporation,
6.2738% 319,889
110,940 Wisconsin Electric
Power Company,
6.3060% 110,940
-----------
Total Variable Rate
Demand Notes 956,163
-----------
TOTAL SHORT-TERM
INVESTMENTS
(COST $8,899,128) 8,899,665
-----------
Total Investments -
100.29%
(Cost $30,661,905) 33,903,446
Liabilities, less Other
Assets - (0.29)% (98,418)
-----------
NET ASSETS -
100.00% $33,805,028
-----------
-----------
*<F1> Non-income producing security.
#<F1> Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates change periodically on specified
dates. The rates shown are as of June 30, 2000.
See accompanying notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
ASSETS:
Investments, at market value
(cost $30,661,905) $33,903,446
Cash 319
Dividends and interest
receivable 10,811
Other assets 14,062
-----------
Total Assets 33,928,638
-----------
LIABILITIES:
Payable to adviser 62,592
Accrued expenses and
other liabilities 61,018
-----------
Total Liabilities 123,610
-----------
NET ASSETS $33,805,028
-----------
-----------
NET ASSETS CONSIST OF:
Capital stock $30,720,384
Accumulated undistributed
net investment income 17,875
Accumulated undistributed
net realized loss on
investments (174,772)
Net unrealized appreciation
on investments 3,241,541
-----------
Total Net Assets $33,805,028
-----------
-----------
Shares outstanding
(unlimited shares of $1.00
par value authorized) 1,463,868
Net Asset Value (offering
and redemption price) $23.09
------
------
See accompanying notes to financial statements.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
INVESTMENT INCOME:
Dividend income (net of taxes
withheld of $2,148) $ 83,899
Interest income 162,700
-----------
Total income 246,599
-----------
EXPENSES:
Investment advisory fee 136,845
Administration fee 19,539
Shareholder servicing fees
and expense 16,926
Fund accounting fee 11,544
Trustee fees and expenses 11,219
Federal and state registration 8,175
Audit fee 6,470
Legal fee 5,258
Custody fees 5,161
Distribution fee 2,539
Reports to shareholders 1,924
Other 3,124
-----------
Total expenses 228,724
-----------
NET INVESTMENT INCOME 17,875
-----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain
on investments 6,095,731
Change in unrealized
depreciation on investments (9,718,515)
-----------
Net realized and unrealized
loss on investments (3,622,784)
-----------
NET DECREASE IN
NET ASSETS RESULTING
FROM OPERATIONS $(3,604,909)
-----------
-----------
See accompanying notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,875 $ 22,954
Net realized gain (loss) on investments 6,095,731 (6,264,856)
Change in unrealized appreciation
(depreciation) on investments (9,718,515) 15,715,108
----------- -----------
Net increase (decrease) in net assets
resulting from operations (3,604,909) 9,473,206
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (26,007)
Net realized gain on investments -- (536,960)
----------- -----------
Total dividends and distributions -- (562,967)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares subscribed 216,689 2,454,920
Shares issued to holders in
reinvestment of dividends -- 269,914
Cost of shares redeemed (3,481,666) (3,773,448)
----------- -----------
Net decrease in net assets
from capital share transactions (3,264,977) (1,048,614)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,869,886) 7,861,625
----------- -----------
NET ASSETS:
Beginning of period 40,674,914 32,813,289
----------- -----------
End of period (including undistributed
net investment income of $17,875 and $0,
respectively) $33,805,028 $40,674,914
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
FINANCIAL HIGHLIGHTS
<TABLE>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------------
2000 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $25.57 $19.91 $19.21 $19.03 $15.83 $13.17
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss) 0.01 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 (2.49) 6.01 2.90 1.69 4.26 3.42
------ ------ ------ ------ ------ ------
Total from investment operations (2.48) 6.03 2.90 1.69 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 period $23.09 $25.57 $19.91 $19.21 $19.03 $15.83
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
Total return (9.70%) 30.5% 15.4% 9.0% 26.3% 27.1%
Supplemental data and ratios:
Net assets, in millions, end
of period $33.8 $40.7 $32.8 $28.4 $24.2 $20.2
Ratio of expenses to average
net assets 1.29% 1.35% 1.48% 1.51% 1.647%(2)<F4> 1.50%
Ratio of net investment income
(loss) to average net assets 0.10% 0.07% (0.40%) (0.40%) 0.65%(2)<F4> 0.89%
Portfolio turnover rate 51.81% 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 or 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 - JUNE 30, 2000 (UNAUDITED)
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.
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.
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 six months ended June 30, 2000, the Fund paid Lepercq, de Neuflize
Securities Inc., a wholly owned subsidiary of the Adviser, $8,656 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. For the six months ended June 30, 2000, the Fund incurred an expense
pursuant to the Plans of $2,539.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
Shares subscribed 8,927 111,457
Shares issued to holders in
reinvestment of dividends -- 11,730
Shares redeemed (135,527) (180,996)
-------- --------
Net increase (decrease) (126,600) (57,809)
-------- --------
-------- --------
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Fund for the six months ended June 30, 2000, were as
follows:
U.S. GOVERNMENT OTHER
--------------- -----
Purchases -- $15,859,838
Sales -- 22,968,145
At June 30, 2000, gross unrealized appreciation and depreciation of
investments for federal income-tax purposes were as follows:
Appreciation $6,162,586
(Depreciation) (2,992,854)
----------
Net unrealized appreciation on investments $3,169,732
----------
----------
At June 30, 2000, the cost of investments for federal income-tax purposes
was $30,733,714.
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 Paul, Hastings, Janofsky & Walker 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.
