Dear Shareholders:
- --------------------------------------------------------------------------------
We are pleased to report to our shareholders that Lexington SmallCap Fund's
portfolio has been successfully restructured to invest in both value and growth
stocks. Unfortunately, the stock market environment for small cap stocks has not
provided the same upside opportunity as it has for large cap stocks. This can
easily be seen when one compares the performance of the unmanaged Standard &
Poor's 500 Stock Price Index for the first six months of 1998 which was up 17.6%
in comparison with the unmanaged Russell 2000 Index which recorded a 4.93%
return. Clearly, large cap stocks have been the place to be in the first half of
1998.
On a comparative basis with other small cap funds, the Lexington SmallCap
Fund performed well in the second quarter of 1998. The Fund was down 1.98%*, but
the average small cap fund according to Lipper Analytical Services, Inc. lost
4.11%. Obviously, we are pleased with this result especially in light of the
fact that the portfolio was significantly changed during the quarter.
We are very optimistic about the potential performance opportunities for
small cap stocks. As large cap stocks continue to be driven to new levels of
over-valuation, most small cap stocks are cheaper and represent far greater
value than large cap stocks.
Our portfolio is invested in companies where we see excellent earnings
acceleration at a price that is selling at a discount to what we believe the
real value to be. Currently, the portfolio is well diversified with significant
commitments to the technology, health and financial sectors, which we believe
represent excellent value and growth prospects.
Sincerely,
/s/Frank A. Peluso /s/Allan H. Wapnick /s/Robert M. DeMichele
- ------------------ ------------------- ----------------------
Frank A. Peluso Alan H. Wapnick Robert M. DeMichele
Portfolio Manager Portfolio Manager President
August, 1998 August, 1998 August, 1998
*4.71% and 13.06% are the one year and since commencement (1/2/96) average
annual standard total returns, respectively, for the period ended June 30, 1998.
Investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total return represents past performance and is not predictive of future
results.
------
RESULTS OF THE SPECIAL MEETING OF SHAREHOLDERS HELD MARCH 27, 1998 (UNAUDITED)
Total Outstanding Shares as of February 12, 1998: 800,442
1. Directors Elected: S.M.S. Chadha, Robert M. DeMichele, Beverley C. Duer,
Barbara R. Evans, Richard M. Hisey, Lawrence Kantor, Jerard F. Maher,
Andrew M. McCosh, Donald B. Miller, John G. Preston, Margaret W. Russell
and Allen H. Stowe.
For All Nominees: 627,769 Withheld Authority: 12,028
<TABLE>
<CAPTION>
Votes Votes Votes
For Against Abstained
--------- --------- ----------
<S> <C> <C> <C>
2. Approval of an investment sub-advisory agreement between 616,404 18,167 5,226
Lexington Management Corporation and Market Systems
Research Advisors, Inc. (doing business as "MSR Advisors")
with respect to the Fund.
3. Selection of KPMG Peat Marwick LLP as Independent Auditors 634,647 865 4,284
</TABLE>
1
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
STATEMENT OF NET ASSETS
(Including the Portfolio of Investments)
June 30, 1998 (unaudited)
NUMBER
OF VALUE
SHARES SECURITY (NOTE 1)
- -------- ---------------------------------------------------------- ----------
COMMON STOCKS: 95.7%
AIRLINES: 2.6%
7,500 America West Airlines, Inc.1 ............................ $ 214,219
----------
BANKING: 5.8%
2,500 First Commercial Corporation ............................ 173,516
4,100 Oriental Financial Group, Inc. ......................... 151,187
6,800 St. Paul Bancorp, Inc. .................................. 153,637
----------
478,340
----------
BANKS-THRIFT INSTITUTIONS: 3.3%
19,500 PBOC Holdings, Inc.1 ..................................... 268,734
----------
BUILDING MATERIALS: 2.1%
2,800 Medusa Corporation ..................................... 175,700
----------
CAPITAL EQUIPMENT: 3.2%
8,000 Cymer, Inc.1 ........................................... 129,500
3,700 Orbital Sciences Corporation1 ............................ 138,403
----------
267,903
----------
COMPUTER SYSTEMS: 2.3%
7,800 National Computer Systems ............................... 186,712
----------
CONSTRUCTION & HOUSING: 7.3%
7,000 Granite Construction, Inc. ............................... 214,375
13,000 Insituform Technologies1 ............................... 179,969
6,500 Skyline Corporation ..................................... 212,062
----------
606,406
----------
CONSUMER DURABLE GOODS: 9.1%
4,000 Ampco-Pittsburgh Corporation ............................ 61,500
9,200 K - Swiss, Inc. ........................................ 182,275
7,000 Myers Industries, Inc.1 .................................. 168,000
3,900 Pillowtex Corporation1 .................................. 156,487
8,000 Standard Motor Products, Inc.1 ......................... 178,000
----------
746,262
----------
DIVERSIFIED MANUFACTURING: 2.1%
3,000 SPS Technologies, Inc.1 .................................. 175,500
----------
ELECTRICAL & ELECTRONICS: 2.4%
6,200 Telxon Corporation ..................................... 199,950
----------
FINANCIAL SERVICES: 2.3%
4,100 Eaton Vance Corporation .................................. 189,881
----------
HEALTH & PERSONAL CARE: 5.2%
8,000 Alpharma, Inc. ........................................... 176,000
4,706 Laboratory Corporation of America (Preferred shares) .... 254,124
----------
430,124
----------
HEALTHCARE-MISCELLANEOUS: 2.3%
5,000 Integrated Health Services, Inc. ......................... 187,500
----------
2
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
STATEMENT OF NET ASSETS
(Including the Portfolio of Investments)
June 30, 1998 (unaudited) (continued)
NUMBER
OF VALUE
SHARES SECURITY (NOTE 1)
- ------- ----------------------------------------------------------- ---------
INSURANCE: 11.4%
4,700 Ace, Ltd. ..................................................$ 183,300
5,100 Allied Group, Inc.1 ...................................... 238,744
4,000 Arthur J. Gallagher & Company ............................. 179,000
5,800 Enhance Financial Services Group, Inc. . ................. 195,750
5,300 Nymagic, Inc. ............................................ 145,088
----------
941,882
----------
INVESTMENT COMPANY: 2.0%
2,600 SEI Investment Company ................................... 160,794
----------
MACHINERY AND MACHINE TOOLS: 4.7%
6,800 Astec Industries, Inc.1 ................................... 232,050
6,400 Baldor Electric Company ................................... 156,000
----------
388,050
----------
MATERIALS: 2.1%
2,200 Lone Star Industries, Inc.1 ................................ 169,537
----------
MEDICAL PRODUCTS & SUPPLIES: 3.8%
2,000 MedImmune, Inc.1 ......................................... 125,250
4,600 Safeskin Corporation1 ...................................... 189,319
----------
314,569
----------
MERCHANDISING: 10.1%
2,600 Ethan Allen Interiors, Inc. ................................ 129,838
6,900 Fingerhut Companies, Inc. ................................ 227,700
4,600 Michaels Stores, Inc.1 ................................... 162,294
5,900 Pier 1 Imports, Inc. ...................................... 140,863
7,800 Sonic Corporation1 ......................................... 174,038
----------
834,733
----------
RETAIL-SPECIALTY: 2.6%
6,000 O'Reilly Automotive, Inc.1 ................................ 215,250
----------
SERVICES: 1.8%
3,100 PeopleSoft, Inc.1 ......................................... 145,603
----------
TELECOMMUNICATIONS: 1.9%
8,900 California Microwave, Inc.1 ................................ 154,638
----------
TRANSPORTATION: 2.9%
8,600 SkyWest, Inc. ............................................ 240,800
----------
UTILITIES: 2.4%
36,000 Kaneb Services, Inc.1 ...................................... 195,750
----------
TOTAL INVESTMENTS: 95.7%
(cost $7,042,788+)(Note 1) ................................. 7,888,837
Other assets in excess of liabilities: 4.3% .............. 351,071
----------
TOTAL NET ASSETS: 100.0%
(equivalent to $11.91 per share on 691,677
shares outstanding) ........................................$8,239,908
==========
1 Non-income producing security.
+ Aggregate cost for Federal income tax purposes is $7,043,003.
The Notes to Financial Statements are an integral part of this statement.
3
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (unaudited)
ASSETS
Investments, at value
(cost $7,042,788) (Note 1) ......... $7,888,837
Cash .................................... 371,650
Receivable for investment
securities sold ..................... 63,298
Receivable for shares sold ............ 125
Dividends and interest receivable ...... 13,222
Deferred organization expense, net
(Note 1) ........................... 27,174
----------
Total Assets ........................ 8,364,306
----------
LIABILITIES
Due to Lexington Management
Corporation (Note 2) ............... 6,446
Payable for investment securities
purchased ........................... 89,441
Payable for shares redeemed ............ 3,005
Accrued expenses ........................ 25,506
----------
Total Liabilities .................. 124,398
----------
NET ASSETS: (equivalent to $11.91
per share on 691,677 shares
outstanding) (Note 4) ............... $8,239,908
==========
NET ASSETS consist of:
Capital stock - authorized
1,000,000,000 shares, $.001 par
value per share ..................... $ 692
Additional paid-in capital ............ 7,054,545
Accumulated deficit ..................... (92,805)
Accumulated net realized gain on
investments ........................ 431,427
Unrealized appreciation on
investments ........................ 846,049
----------
TOTAL NET ASSETS ..................... $8,239,908
==========
LEXINGTON SMALLCAP FUND, INC.
STATEMENT OF OPERATIONS
Six months ended June 30, 1998 (unaudited)
INVESTMENT INCOME
Dividends ..................... $ 34,802
Interest ..................... 12,937
--------
Total investment income ...... $ 47,739
EXPENSES
Investment advisory fee
(Note 2) .................. 44,522
Printing and mailing expenses 12,707
Directors' fees and expenses 11,581
Distribution expenses
(Note 3) .................. 11,131
Transfer agent and
shareholder servicing
expenses (Note 2) ......... 9,998
Professional fees ............ 7,260
Registration fees ............ 6,884
Amortization of deferred
organization costs (Note 1) 4,507
Accounting expenses (Note 2) 4,735
Computer processing fees ...... 2,957
Custodian expenses ............ 2,630
Other expenses ............... 3,717
--------
Total expenses ............... 122,629
Less: expenses recovered
under contract with
investment adviser
(Note 2) .................. 197 122,432
-------- ---------
Net investment loss ......... (74,693)
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5)
Net realized gain on
investments ............... 315,999
Net change in unrealized
appreciation on investments 188,050
---------
Net realized and unrealized
gain ........................ 504,049
---------
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS .................. $ 429,356
=========
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months
ended Year ended
June 30, 1998 December 31,
(unaudited) 1997
------------- -------------
<S> <C> <C>
Net investment loss .......................................... $ (74,693) $ (163,759)
Net realized gain from security transactions .................. 315,999 1,320,930
Net change in unrealized appreciation on investments ......... 188,050 (330,019)
------------ ------------
Increase in net assets resulting from operations ............ 429,356 827,152
Distributions to shareholders from net investment income ...... - (1,160,092)
Increase (decrease) in net assets from capital share
transactions (Note 4) ....................................... (1,754,221) 1,836,489
------------- ------------
Net increase (decrease) in net assets .................. (1,324,865) 1,503,549
NET ASSETS:
Beginning of period .......................................... 9,564,773 8,061,224
------------- ------------
End of period (including accumulated deficit of $92,805 and
$18,112, 1998 and 1997, respectively) ........................ $ 8,239,908 $ 9,564,773
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (unaudited) and December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington SmallCap Fund, Inc. (the "Fund") is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund commenced operations on January 2, 1996. The Fund's investment
objective is to seek long-term capital appreciation. The following is a summary
of significant accounting policies followed by the Fund in the preparation of
its financial statements:
INVESTMENTS Securities transactions are accounted for on a trade date
basis. Realized gains and losses from investment transactions are reported on
the identified cost basis. Securities traded on a recognized stock exchange are
valued at the last sales price reported by the exchange on which the securities
are traded. If no sales price is recorded, the mean between the last bid and
asked prices is used. Securities traded on the over-the-counter market are
valued at the mean between the last current bid and asked prices. Short-term
securities having a maturity of 60 days or less are stated at amortized cost,
which approximates market value. Securities for which market quotations are not
readily available and other assets are valued by Fund management in good faith
under the direction of the Fund's Board of Directors. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income, adjusted for amortization of premiums and accretion of discounts, is
accrued as earned.
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 income to its shareholders.
Therefore, no provision for Federal income taxes is required.
DISTRIBUTIONS Dividends from net investment income and net realized capital
gains are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. The character of income and gains to
be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principals. At December 31, 1997,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distribution under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this change.
DEFERRED ORGANIZATION EXPENSES Organization expenses aggregating $52,837
have been deferred and are being amortized on a straight line basis over five
years.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operatons during the reporting period. Actual results could differ from
those estimates.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at the annual rate of 1.00% of the Fund's average daily net assets. In
connection with providing investment advisory services, LMC has entered into a
sub-advisory contract with an affiliate, Market Systems Research Advisors, Inc.
("MSR"), under which MSR provides the Fund with investment management services.
Pursuant to the terms of the sub-advisory contract between LMC and MSR, LMC pays
MSR a monthly sub-advisory fee at the annual rate
6
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (unaudited) and December 31, 1997 (continued)
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE (CONTINUED)
of 0.50% of the Fund's average daily net assets. The sub-advisory fee will be
paid by LMC, not the Fund. For 1998, LMC has agreed to voluntarily limit the
total expenses of the Fund (excluding interest, taxes, brokerage, and
extraordinary expenses but including the management fee and operating expenses)
to an annual rate of 2.50% of the Fund's average daily net assets. Total
reimbursement was $197 for the six months ended June 30, 1998, and is set forth
in the statement of operations.
The Fund also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs of $9,357, which were incurred by the Fund, but paid
by LMC.
3. DISTRIBUTION PLAN
The Fund has a Distribution Plan (the "Plan") which allows payments to finance
activities associated with the distribution of the Fund's shares. The Plan
provides that the Fund may pay distribution fees on a reimbursement basis,
including payments to Lexington Funds Distributor, Inc. ("LFD"), the Fund's
distributor, in amounts not exceeding 0.25% per annum of the Fund's average
daily net assets. Total distribution expenses for the six months ended June 30,
1998 were $11,131 and are set forth in the statement of operations.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1998 Year ended
(unaudited) December 31, 1997
------------------------------- -------------------------------
Shares Amount Shares Amount
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Shares sold .................. 36,088 $ 423,842 242,768 $ 3,149,748
Shares issued on reinvestment
of dividends .................. - - 101,424 1,157,337
---------- ------------- ------- ------------
36,088 423,842 344,192 4,307,085
Shares redeemed ............... (184,130) (2,178,063) (191,705) (2,470,596)
---------- ------------- -------- ------------
Net increase (decrease) ...... (148,042) $ (1,754,221) 152,487 $ 1,836,489
========== ============ ======= ============
</TABLE>
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of securities for the six months
ended June 30, 1998, excluding short-term securities, were $6,346,088 and
$8,320,821, respectively.
At June 30, 1998, the aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost amounted to $1,179,121 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value amounted to $333,287.
7
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
January 2, 1996
(commencement
Six months ended Year ended of operations) to
June 30, 1998 December 31, December 31,
(unaudited) 1997 1996
---------------- ------------ -----------------
<S> <C> <C> <C>
Net asset value, beginning of period .................. $11.39 $11.73 $10.00
------ ------ ------
Income (loss) from investment operations: ............
Net investment loss ................................. (0.11) (0.19) (0.18)
Net realized and unrealized gain on investments ...... 0.63 1.41 1.94
------ ------ ------
Total income from investment operations ............... 0.52 1.22 1.76
------ ------ ------
Less distributions:
Distributions from net realized gains ............... -- (1.56) (0.03)
------ ------ ------
Net asset value, end of period ........................ $11.91 $11.39 $11.73
====== ====== ======
Total return .......................................... 9.42%* 10.47% 17.50%
Ratio to average net assets:
Expenses, before reimbursement or waivers ............ 2.75%* 2.57% 3.04%
Expenses, net of reimbursement or waivers ............ 2.75%* 2.57% 2.48%
Net investment loss, before reimbursement or
waivers ............................................. (1.68)%* (1.78)% (2.34)%
Net investment loss, net of reimbursement
or waivers .......................................... (1.68)%* (1.78)% (1.78)%
Portfolio turnover rate .............................. 155.53%* 39.09% 60.92%
Average commissions paid on equity security
transactions .......................................... $ 0.04 $ 0.04 $ 0.03
Net assets, end of period (000's omitted) ............ $ 8,240 $9,565 $8,061
</TABLE>
* Annualized.
8
<PAGE>
LEXINGTON
INVESTOR SERVICES
- --------------------------------------------------------------------------------
AS A LEXINGTON SHAREHOLDER, YOU SHOULD BE AWARE OF THE MANY SERVICES AVAILABLE
TO YOU.
NO LOAD -- The Lexington Funds are no load funds. That is, investments and
redemptions are made without any sales charges, commissions or redemption fees.*
--------
FREE TELEPHONE EXCHANGE -- Investments in the Lexington Funds may be exchanged
for shares of a different Lexington Fund at any time.
--------
Check Writing Privileges -- Lexington Money Market Trust permits investors
immediate access to their funds with check writing for withdrawals from their
account.
--------
TAX SHELTERED PLANS -- IRA, Keogh, Pension, and Profit Sharing Prototype Plans
are available to qualified individuals. These plans offer investment flexibility
through the Share Exchange Service, simplified record keeping, convenience and
investment supervision.
--------
CUSTODIAL ACCOUNTS FOR MINORS -- Investments may be made on behalf of minors
under the Uniform Gifts to Minors Act currently in effect in all states.
--------
SYSTEMATIC WITHDRAWAL PLAN -- An investor may elect to receive a fixed amount
from his or her account each month or quarter, subject to certain minimums.
--------
COMPLETE RECORD KEEPING - A statement is provided for every transaction in
addition to a year-end statement with tax information.
THE LEXINGTON GROUP OF
NO LOAD INVESTMENT COMPANIES
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC. -- Seeks long-term growth of
capital primarily through investment in equity securities of companies domiciled
in, or doing business in, emerging countries and emerging markets.
LEXINGTON GLOBAL CORPORATE LEADERS FUND, INC. -- Seeks long-term growth of
capital primarily through investment in common stocks of companies domiciled in
foreign countries and the United States.
LEXINGTON INTERNATIONAL FUND, INC. -- Seeks long-term growth of capital through
investment in companies domiciled in foreign countries.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC. -- Seeks long-term capital
appreciation through investments primarily in the equity securities of Russian
companies.
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC. -- Seeks long-term capital
appreciation through investment in companies domiciled in the Asia Region with a
market capitalization of less than $1 billion.
LEXINGTON RAMIREZ GLOBAL INCOME FUND -- Seeks high current income. Capital
appreciation is a secondary objective. The Fund invests in a combination of
foreign and domestic high-yield, lower rated debt securities.
LEXINGTON GOLDFUND, INC. -- Seeks capital appreciation through investment in
gold bullion and shares of gold mining companies.
LEXINGTON GROWTH AND INCOME FUND, INC. -- Seeks capital appreciation over the
long-term through investments in the stocks of large, ably managed and well
financed companies.
LEXINGTON CORPORATE LEADERS TRUST FUND -- Seeks capital growth and reasonable
income through investment in an equal number of shares of an established list of
American blue chip corporations.
LEXINGTON SMALLCAP FUND, INC. -- Seeks long-term capital appreciation through
investment in common stocks of companies domiciled in the United States with a
market capitalization of less than $1 billion.
LEXINGTON CONVERTIBLE SECURITIES FUND -- Seeks total return by providing capital
appreciation, current income and conservation of capital through investments in
a diversified portfolio of securities convertible into shares of common stock.
LEXINGTON GNMA INCOME FUND, INC. -- Seeks to achieve a high level of current
income, consistent with liquidity and safety of principal, through investment
primarily in mortgage-backed GNMA ("Ginnie Mae") certificates that are
guaranteed as to the timely payment of principal and interest by the United
States Government.
LEXINGTON MONEY MARKET TRUST -- Seeks a high level of current income consistent
with preservation of capital and liquidity through investments in interest
bearing short-term money market instruments.
For more complete information about any of the Lexington Funds and a prospectus
which includes management fee and expenses call the distributor toll-free at
1-800-526-0056. Read the prospectus carefully before you invest or send money.
*Redemptions on shares of Lexington Troika Dialog Russia Fund, Inc. held less
than 365 days are subject to a redemption fee of 2% of the redemption proceeds.
<PAGE>
LEXINGTON
SMALLCAP FUND, INC.
INVESTMENT ADVISER
- ---------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
SUB-ADVISER
- ---------------------------------------------------------
Market Systems Research Advisors, Inc.
80 Maiden Lane
New York, New York 10038
DISTRIBUTOR
- ---------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
All shareholder requests for services of
any kind should be sent to:
TRANSFER AGENT
--------------
STATE STREET BANK AND
TRUST COMPANY
c/o National Financial Data Services
1004 Baltimore
Kansas City, Missouri 64105
OR CALL TOLL FREE:
Service and Sales: 1-800-526-0056
24 Hour Account Information:
1-800-526-0052
- ---------------------------------------------------------
(800) 526-0052
"LEXLINE"
24 hour toll-free telephone access to your
Lexington Fund account
Price/Yield o Account Balances o Exchanges o
Last Transactions o Total Return o Duplicate Statements
- ---------------------------------------------------------
This report has been prepared for the information of the
shareholders of Lexington SmallCap Fund, Inc. and is
authorized for distribution to the public only if it is
accompanied or preceded by a currently effective
prospectus which sets forth expenses and other material
information.
L E X I N G T O N
[GRAPHIC OMITTED]
LEXINGTON
SMALLCAP
FUND, INC
-----------------------------------
Seeks long-term capital
appreciation through investment in
common stocks of companies
domiciled in the United States
with a market capitalization
of less than $1 billion.
-- --------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1998
The Lexington Group
of No Load
Investment Companies