Dear Shareholders:
Most tax free money funds, including Lexington's, returned approximately 3%*
during the first half of 1995. However, the usual build up in returns during
June was noticeably absent this year. There has been a lack of new supply from
municipal issuers. This, together with efforts by the Federal Reserve to reduce
short term interest rates, indicates that returns during the second half of 1995
will be somewhat lower than those of the first six months.
Orange County's troubles have had a major impact on municipal borrowings.
The California municipality ran an investment pool in which other local
governments in the state parked short-term funds. Unsound investment practices
enabled Orange County to quote high returns to these potential customers. This
encouraged many to borrow short term, investing the proceeds in the Orange
County fund and pocket the arbitrage profits. Given the publicity and losses
surrounding the Orange County fund, municipal treasurers both inside California
and elsewhere in the nation are wary of borrowing for arbitrage gain. This has
greatly reduced the supply of new offerings. Meanwhile, the decline in long term
interest rates encourages many issuers to "bond-out" previous variable-rate
demand debt with long term securities.
While good investments are scarce, money continues to flow into tax-free
money funds. Industry-wide, assets are up about 4%, year-over-year. This demand
and the reduced supply has driven municipal yields to less than 70% of the U.S.
Treasury bill scale. We expect little improvement in that percentage over the
next few months. Thus, tax-free money funds now make investment sense only for
those individuals in the highest tax brackets.
Federal Reserve policy will push yields lower in the months ahead. The Fed
gave the market an Independence Day present; it lowered short-term interest
rates (specifically, the Federal Funds rate) by twenty-five basis points. During
the prior fifteen months, the Fed had gradually raised this interest rate
benchmark from 3% to 6%. The Fed apparently believes that the economy is slow
enough to eliminate the risk of higher inflation. Now, lower interest rates are
necessary to avoid a recession. Look for further small reductions in short term
interest rates in the months ahead.
There has been little opportunity to extend the maturity of the Fund . A
slight decline in market yields is likely. But, we want a minimum yield equal to
at least 75% of that available from U.S. Treasury bills before purchasing six
month or one-year tax-exempt securities. Such returns haven't been available
since early in the year. So, we're keeping the average maturity of the Fund
unusually low.
We appreciate your continued support and welcome the opportunity to answer
any questions you may have about your investment.
Sincerely,
Denis P. Jamison Robert M. DeMichele
Portfolio Manager President
July, 1995 July, 1995
*The average annual yield for the seven day period ended June 30, 1995 was
3.14%. Shares of the Fund are not insured or guaranteed by the U.S. Government
and there can be no assurance that the Fund will be able to maintain a stable
net asset value of $1.00 per share. Some income is subject to state and local
taxes and the federal alternative minimum tax.
1
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 1995 (unaudited)
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALABAMA: 2.9%
$1,000,000 Chatom Alabama Industrial Development
Board Pollution Control** ....................... A-1+ 07/06/95 3.55% 3.55% $ 1,000,000
-----------
ALASKA: 6.2%
755,000 Alaska Industrial Development & Export
Authority (Lot 11)* ............................. A-1 07/01/07 4.55 4.55 755,000
1,400,000 City of Valdez (Alaska Marine Air Terminal)
Series 1994C** .................................. Vmigl/A-1 07/11/95 4.25 4.25 1,400,000
-----------
2,155,000
-----------
CALIFORNIA: 13.8%
1,000,000 Alum Rock Union Elementary School District
Tax & Revenue Anticipation Notes ................ SP-1+ 08/03/95 4.75 4.20 1,000,477
1,200,000 California Pollution Control Finance Authority
(Southdown Project)* ............................ A-1+ 02/15/98 3.40 3.40 1,200,000
1,100,000 California Pollution Control Finance Authority
(Southern California Project)* .................. Mig 1/A-1+ 02/28/08 4.50 4.50 1,100,000
1,500,000 City of Livermore Tax & Revenue Anticipation
Notes ........................................... Mig 1 07/05/95 4.25 4.00 1,500,039
-----------
4,800,516
-----------
CONNECTICUT: 0.3%
100,000 Meriden G.O. Bonds ................................ AAA/Aaa 08/01/95 11.40 7.00 100,559
-----------
FLORIDA: 7.2%
1,400,000 Indian River County Hospital District* ............ VMig 1/A-1 10/01/15 4.45 4.45 1,400,000
1,000,000 Jacksonville Electric Authority** ................. P1/A1+ 08/04/95 3.50 3.50 1,000,000
100,000 North Broward Hospital District Pre-Refunded
Bonds ........................................... AAA 01/01/96 8.00 4.39 104,600
-----------
2,504,600
-----------
GEORGIA: 12.2%
1,700,000 Fulton County l.D.A. (ADP Project)* ............... P-1/Aa2 09/01/12 3.60 3.60 1,700,000
900,000 Georgia Technical Foundation Facilities Inc.* ..... A-1+ 02/01/12 4.00 4.00 900,000
1,500,000 Monroe County Development Authority (Gulf
Power) Series 2* ................................ A-1 09/01/24 4.50 4.50 1,500,000
155,000 Walker County Water & Sewer Authority
Revenue Bonds ................................... AAA/Aaa 04/01/96 4.30 4.00 155,332
-----------
4,255,332
-----------
ILLINOIS: 0.3%
100,000 Chicago Pre-Refunded Bonds ........................ AAA/Aaa 07/01/95 9.00 4.00 102,013
-----------
INDIANA: 1.1%
400,000 Gary Industrial Environmental Improvement
Authority (U.S. Steel)* ......................... P-1/A-1+ 07/15/02 3.60 3.60 400,000
-----------
KENTUCKY: 4.3%
1,500,000 Pendleton County Leasing Program** ................ A-1+ 07/07/95 3.60 3.60 1,500,000
-----------
LOUISIANA: 2.0%
700,000 Caddo Parish l.D.B. (Pennzoil Project)* ........... A-1 12/01/12 4.95 4.95 700,000
-----------
NEW YORK: 8.0%
600,000 City of New York* ................................. VMig 1/A-1+ 08/15/18 4.55 4.55 600,000
800,000 City of New York .................................. VMig 1/A-1+ 10/01/20 4.50 4.50 800,000
300,000 City of New York Series B* ........................ VMig 1/A-1+ 10/01/22 4.50 4.50 300,000
1,100,000 New York State Power Authority** .................. P-1/A-1 08/01/95 4.05 4.05 1,100,000
-----------
2,800,000
-----------
</TABLE>
2
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NORTH CAROLINA: 4.3%
$1,500,000 Person County Industrial Facility Authority
(Carolina Power) Series 1992A* .................. P-1/A-1 11/01/09 4.30% 4.30% $ 1,500,000
-----------
OHIO: 4.3%
1,500,000 Ohio State Air Quality Authority** ................ A-1 +/VMig 1 08/11/95 3.40 3.40 1,500,000
-----------
PENNSYLVANIA: 1.7%
100,000 Lower Bucks County Joint Municipal Authority
Revenue Bonds ................................... AAA/Aaa 11/15/95 4.00 3.65 100,124
500,000 Venango l.D.A. (Pennzoil Project) Series
1982A* .......................................... A-1 12/01/12 4.95 4.95 500,000
-----------
600,124
-----------
SOUTH CAROLINA: 2.0%
400,000 York County Pollution Control Authority
(Project NRU 84 N-1)* ........................... Migl/A-1+ 09/15/14 4.30 4.30 400,000
300,000 York County Pollution Control Authority
(Project NRU 84 N-2)* ........................... Mig1/A-1+ 09/15/14 4.30 4.30 300,000
-----------
700,000
-----------
TEXAS: 11.2%
530,000 Coppell l.D.C. Series 1984 (Minyard Properties)* .. A-1 12/01/01 4.25 4.25 530,000
800,000 Garland l.D.A.* ................................... A-1 12/01/05 4.55 4.55 800,000
1,500,000 Sabine River Authority ............................ Vmig1/A-1+ 06/01/30 4.50 4.50 1,500,000
1,060,000 Texas Higher Education Authority Inc.
Series B* ....................................... VMig 1 12/01/25 4.25 4.25 1,060,000
-----------
3,890,000
-----------
UTAH: 2.9%
1,000,000 Intermountain Power Agency Pre-Refunded
Bonds ........................................... AAA/Aaa 07/01/95 10.25 4.00 1,020,162
-----------
VERMONT: 1.1%
400,000 Vermont State Student Assistance
Corporation ..................................... Vmig 1 01/01/04 4.00 4.00 400,000
-----------
VIRGINIA: 3.8%
1,310,000 Town of Louisa (Virginia Electric Power
Company) Series 1984** .......................... A-1/F-1 07/28/95 4.00 4.00 1,310,000
-----------
WEST VIRGINIA: 2.3%
800,000 West Virginia Public Energy Commission
(Morgantown Association)** ...................... P-1/A-1+ 07/13/95 3.65 3.65 800,000
-----------
WYOMING: 4.3%
1,500,000 Gillette County (Pacificorp)** .................... A-1 +/P-1 07/12/95 4.25 4.25 1,500,000
-----------
TOTAL INVESTMENTS: 96.2%
(cost $33,538,306\'86) .......................... 33,538,306
Other assets in excess of liabilities: 3.8% ....... 1,321,112
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $1.00 per share on
34,859,418 shares outstanding.) ................. $34,859,418
===========
<FN>
(Left Column)
*Seven day Floating Rate Note backed by Letter of Credit.
**Municipal Commercial Paper.
(D)Aggregate cost for Federal income tax purposes is identical.
(Right Column)
I.D.A.-Industrial Development Authority
I.D.B.-Industrial Development Bonds
I.D.C.-Industrial Development Corporation
G.O.-General Obligation
</FN>
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
3
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statement of Assets and Liabilities
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost $33,538,306) (Note 1) .......................... $33,538,306
Cash (Note 4) ............................................................................ 1,109,886
Receivable for shares sold ............................................................... 32,461
Interest receivable ...................................................................... 245,708
-----------
Total Assets ................................................................. 34,926,361
-----------
Liabilities
Due to Lexington Management Corporation (Note 2) ......................................... 12,630
Payable for shares redeemed .............................................................. 23,582
Accrued expenses ......................................................................... 30,731
-----------
Total Liabilities ............................................................ 66,943
-----------
Net Assets (equivalent to $1.00 per share on 34,859,418 shares outstanding) (Note 3) ..... $34,859,418
===========
Net Assets consist of:
Capital stock-authorized 1,000,000,000 shares, $.01 par value per share .................. $ 348,594
Additional paid-in capital ............................................................... 34,510,824
-----------
$34,859,418
===========
</TABLE>
Lexington Tax Free Money Fund, Inc.
Statement of Operations
Six months ended June 30, 1995 (unaudited)
Investment Income
<TABLE>
<S> <C> <C>
Interest income ............................................................. $ 725,742
Expenses
Investment advisory fee (Note 2) ........................................ $ 91,207
Accounting and shareholder services expense (Note 2) .................... 30,207
Custodian and transfer agent expenses ................................... 16,679
Printing and mailing .................................................... 9,874
Directors' fees and expenses ............................................ 8,280
Audit and legal ......................................................... 11,364
Registration fees ....................................................... 8,925
Computer processing fees ................................................ 5,430
Other expenses .......................................................... 7,660
--------
Total expenses .................................................. 189,626
Less: expenses recovered under contract with the
investment adviser (Note 2) ................................... 6,858 182,768
-------- -----------
Net investment income ........................................... 542,974
-----------
Increase in Net Assets Resulting from Operations ............................ $ 542,974
===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
Lexington Tax Free Money Fund, Inc.
Statements of Changes in Net Assets
Years Ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31,
(unaudited) 1994
--------------- ------------
<S> <C> <C>
Net investment income ........................................ $ 542,974 $ 785,450
Distributions to shareholders from net investment income ..... (542,974) (785,450)
Decrease in net assets from capital share transactions
(Note 3) ................................................... (2,794,424) (3,441,989)
----------- -----------
Net decrease in net assets ................................... (2,794,424) (3,441,989)
Net Assets
Beginning of period ...................................... 37,653,842 41,095,831
----------- -----------
End of period ............................................ $34,859,418 $37,653,842
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
Lexington Tax Free Money Fund, Inc.
Notes to Financial Statements
June 30, 1995 (unaudited) and December 31, 1994
1. Significant Accounting Policies
Lexington Tax Free Money Fund, Inc. (the "Fund") is an open end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements:
Securities Security transactions are accounted for on a trade date basis.
Investments are carried at amortized cost, which approximates market value.
Under this valuation method, a portfolio instrument is carried at cost and any
discount or premium is amortized on a constant basis to the maturity of the
instrument. Interest income is accrued as earned.
Federal Income Taxes It is the Fund's intention to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and tax exempt income to its
shareholders. Therefore, no provision for Federal income taxes has been made.
Dividends Dividends are declared daily from the total of net investment
income and net realized gain (loss) on investments.
2. Investment Advisory Fee and Other Transactions with Affiliate
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 0.5% of the Fund's average daily net assets up to
$150 million and in decreasing stages to 0.3% of average daily net assets in
excess of $800 million. LMC is required to reimburse the Fund for any expenses,
including the investment adviser's fee but excluding interest and taxes, in
excess of 1% of the Fund's average daily net assets. Reimbursement for the six
months ended June 30, 1995 amounted to $6,858 and is set forth in the statement
of operations.
The Fund also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs, which are incurred by the Fund but paid by LMC.
3. Capital Stock
Transactions (at $1.00 per share) in capital stock were as follows:
Six months
ended Year ended
June 30, 1995 December 31,
(unaudited) 1994
------------- ------------
Shares sold .................................... 10,932,380 25,605,181
Shares issued on reinvestment of dividends ..... 469,098 692,214
----------- -----------
11,401,478 26,297,395
Shares redeemed ................................ (14,195,902) (29,739,384)
----------- -----------
Net decrease in outstanding shares ......... (2,794,424) (3,441,989)
=========== ===========
4. Cash
In order to facilitate the clearing process for redemptions by check, the Fund
maintains a compensating balance with its transfer agent. At June 30, 1995, this
compensating balance amounted to $63,400 and is included in cash in the
statement of assets and liabilities.
6
<PAGE>
Lexington Tax Free Money Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
1995 ------------------------------------------
(unaudited) 1994 1993 1992 1991
----------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................. $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income ............................ .015 .020 .018 .024 .041
Less distributions:
Dividends from net investment income ............. (.015) (.020) (.018) (.024) (.041)
----- ----- ----- ----- -----
Net asset value, end of period ....................... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return ......................................... 3.02%* 2.00% 1.78% 2.47% 4.22%
Ratio to average net assets:
Expenses, before reimbursement ................... 1.04%* 1.09% 0.92% 0.99% 0.96%
Expenses, net of reimbursement ................... 1.00%* 1.00% 0.92% 0.99% 0.96%
Net investment income, before
reimbursement .................................. 2.94%* 1.88% 1.77% 2.46% 4.06%
Net investment income ............................ 2.98%* 1.97% 1.77% 2.46% 4.06%
Net assets, end of period (000's omitted) ............ $34,859 $37,654 $41,096 $45,844 $53,722
<FN>
*Annualized
</FN>
</TABLE>
7
<PAGE>
(Left Column)
Lexington
Tax Free Money Fund, Inc.
Investment Adviser
------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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 * Account Balances * Exchanges *
Last Transactions * Total Return * Duplicate Statements
------------------------------------------------------------
This report has been prepared for the information of the
shareholders of Lexington Tax Free 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.
(Right Column)
LEXINGTON
LEXINGTON
TAX
FREE
MONEY
FUND, INC.
(filled box)
Seeks to achieve current
income exempt from Federal
income taxes while maintaining
stability of principal, liquidity
and preservation of capital.
(filled box)
SEMI-ANNUAL REPORT
JUNE 30, 1995
The Lexington Group
of No Load
Investment Companies
