DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
At a meeting held on August 8, 1997, Lexington Tax Free Money Fund's share-
holders voted to approve a Plan of Liquidation and Dissolution of the Fund. The
Lexington Tax Free Money Fund was one of the first twenty such mutual funds. It
began operating as a dollar-stabilized money fund in April, 1980. Over the
intervening seventeen years, assets ebbed and flowed, reaching a peak level of
$130 million-plus in mid-1986. Since then, there has been a steady erosion in
the asset base. At the close of the June quarter, the Fund's net assets were
$22.9 million, reflecting the low interest rate environment.
We have already taken steps to insure a smooth liquidation and to maintain
a stable $1.00 net asset value during this period. Most of the Fund's
investments with maturities beyond September 2nd have been sold. This excludes
variable rate demand notes which can be tendered at par upon seven days notice.
These latter securities will be sold to meet shareholder redemptions as they
occur. Municipal commercial paper and short-term bond maturities, likewise, will
be used to meet redemptions.
I wish to thank the shareholders for their support during the past sixteen
years I have managed the Fund's portfolio. We welcome the opportunity to answer
any questions you may have about the liquidation process and other Lexington
Fund alternatives.
Sincerely,
/s/Denis P. Jamison /s/Robert M. DeMichele
--------------------- -------------------------
Denis P. Jamison Robert M. DeMichele
Portfolio Manager President
August, 1997 August, 1997
1
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
ALABAMA: 2.8%
$ 640,000 Alaska Industrial Development & Export
Authority (Lot 11)* ..................... A-1 7/1/07 4.25% 4.25% $ 640,000
-----------
ARIZONA: 1.3%
300,000 Mohave County High School District #2
Pre-Refun. Bonds ........................ AAA/Aaa 7/1/01 6.80 3.75 303,025
-----------
CALIFORNIA: 6.6%
1,200,000 California Pollution Control Finance Authority
(Southdown Project)* .................... A-1+ 2/15/98 3.90 3.90 1,200,000
300,000 California Pollution Control Finance Authority
(Southern California Project)* .......... Mig 1/A-1+ 2/28/08 5.20 5.20 300,000
-----------
1,500,000
-----------
GEORGIA: 7.9%
1,000,000 Fulton County I.D.A. (ADP Project)* .......... P-1/Aa2 9/1/12 4.10 4.10 1,000,000
800,000 Georgia Technical Foundation Facilities Inc.* A-1+ 2/1/12 4.15 4.15 800,000
-----------
1,800,000
-----------
HAWAII: 8.3%
1,000,000 City & County Of Honolulu** .................. A-1+/P-1 7/11/97 3.70 3.70 1,000,000
900,000 Hawaii State Department Budget &Finance
(Kuakini Medical Center)* ............... Vmig 1 7/1/05 4.15 4.15 900,000
-----------
1,900,000
-----------
INDIANA: 1.8%
400,000 Gary Industrial Environmental Improvement
Authority (U.S. Steel)* ............. P-1/A-1+ 7/15/02 4.10 4.10 400,000
-----------
KANSAS: 3.5%
800,000 Burlington Pollution Control (Kansas City
Power And Light) Series B Revenue
Bonds** ................................. P-1 7/23/97 3.75 3.75 800,000
-----------
KENTUCKY: 4.4%
1,000,000 Pendleton County Leasing Program** ........... A-1+ 8/1/97 3.80 3.80 1,000,000
-----------
LOUISIANA: 5.5%
1,000,000 Monroe County Development Authority
(Gulf Power) Series 2* .................. P-1/A1 9/1/24 5.45 5.45 1,000,000
105,000 State Of Louisiana Series A G.O.Bonds ........ AAA/Aaa 8/1/97 4.50 3.98 105,043
150,000 State Of Louisiana Pre-Refunded Revenue
Bonds ................................... AAA/Aaa 8/1/02 7.00 3.95 153,368
-----------
1,258,411
-----------
MAINE: 0.9%
200,000 Maine Health & Higher Education Facilities
Revenue Bonds ........................... AAA/Aaa 7/1/97 5.60 5.60 200,000
-----------
MASSACHUSETTS: 0.4%
100,000 Nantucket Island Loan Bank Series D
Revenue Bonds ........................... AAA/Aaa 7/1/97 6.35 6.35 100,000
-----------
NEW JERSEY: 0.6%
145,000 Stafford Township G.O.Bonds .................. AAA 9/1/97 5.50 4.01 145,350
-----------
</TABLE>
2
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997 (unaudited) (continued)
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
NEW YORK: 14.2%
$ 200,000 City Of New York Subseries B-3* .............. VMig1/A-1+ 8/15/18 5.50% 5.50% $ 200,000
200,000 City Of New York Subseries B-4* .............. VMig1/A-1+ 8/15/22 5.50 5.50 200,000
500,000 New York City Series C* ...................... VMig1/A-1+ 10/1/23 5.50 5.50 500,000
600,000 New York City* ............................... VMig1/SP1 8/15/18 5.50 5.50 600,000
500,000 New York City Water Finance Authority
Series A* ............................... VMig1/A-1+ 6/15/25 5.50 5.50 500,000
1,000,000 New York State Energy Research and
Development Authority* .................. A-1+ 7/1/15 5.45 5.45 1,000,000
250,000 Suffolk County G.O. Bonds AAA/Aaa 7/15/97 3.70 3.70 250,000
-----------
3,250,000
-----------
OHIO: 8.8%
1,000,000 Ohio State Air Quality Development
Authority** ............................. A-1+/VMig1 8/1/97 3.55 3.55 1,000,000
900,000 Ohio State Air Quality Development
Authority** ............................. A-1+ 12/1/15 5.50 5.50 900,000
100,000 Springfield G.O. Bonds ....................... AAA/Aaa 9/1/97 6.10 3.91 100,343
-----------
2,000,343
-----------
PENNSYLVANIA: 3.1%
500,000 Venango I.D.A. (Pennzoil Project)
Series 1982A* ........................... A-1 12/1/12 4.45 4.45 500,000
200,000 Butler County Hospital Facilities Series A
Pre-Refunded Revenue Bonds .............. AAA/Aaa 11/1/05 9.20 3.60 203,945
-----------
703,945
-----------
SOUTH CAROLINA: 3.1%
400,000 York County Pollution Control Authority
(Project NRU 84 N-1)* ................... Mig1/A-1+ 9/15/14 4.20 4.20 400,000
300,000 York County Pollution Control Authority
(Project NRU 84 N-2)* ................... Mig1/A-1+ 9/15/14 4.20 4.20 300,000
-----------
700,000
-----------
TEXAS: 15.7%
330,000 Coppell I.D.C. Series 1984
(Minyard Properties)* ................... A-1 12/1/01 3.90 3.90 330,000
150,000 Eanes Independent School District
G.O. Bonds .............................. AAA/Aaa 8/1/97 3.60 3.60 150,000
800,000 Garland I.D.A.* A-1 12/1/05 4.35 4.35 800,000
1,000,000 Harris County Health Facilities Development
Corporation* ............................ A-1+/VMig 12/5/22 5.50 5.50 1,000,000
100,000 North Harris & Montgomery Community
College G.O. Bonds ...................... AAA/Aaa 8/15/97 4.25 3.57 100,076
500,000 Sabine River Authority Pollution Control
Revenue Bonds Series B* ................. A-1+/VMig1 6/1/30 6.50 5.50 500,000
695,000 Texas Higher Education Authority Inc.
Series B* ................................. VMig1 12/1/25 4.15 4.15 695,000
-----------
3,575,076
-----------
</TABLE>
3
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997 (unaudited) (continued)
<TABLE>
<CAPTION>
Principal Maturity Coupon Yield to Value
Amount Security Rating Date Rate Maturity (Note 1)
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
VERMONT: 4.2%
$ 550,000 Vermont Industrial Development Authority
Series 1983* ............................ A-1+/AA 12/1/13 4.10% 4.10% $ 550,000
400,000 Vermont Student Assistance Corporation* ...... VMig1 1/1/04 3.80 3.80 400,000
-----------
950,000
-----------
WYOMING 4.4%
1,000,000 Gillette County (Pacificorp)** ............... A-1+/P-1 7/22/97 3.70 3.70 1,000,000
-----------
TOTAL INVESTMENTS: 97.5%
(cost $22,226,150+)(Note 1) ............. 22,226,150
Other assets: in excess of liabilities 2.5% .. 599,081
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $1.00 per share on
22,825,231 shares outstanding) ......... $22,825,231
===========
*Seven-day Floating Rate Note backed by Letter of Credit.
**Municipal Commercial Paper. I.D.A.--Industrial Development Authority
+Aggregate cost for Federal income tax purposes is identical. G.O.--General Obligation
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
ASSETS
Investments, at value (cost $22,226,150) (Note 1) ............ $22,226,150
Receivable for investment securities sold .................... 1,564,056
Receivable for shares sold ................................... 10,881
Dividends and interest receivable ............................ 103,695
-----------
Total Assets .................................. 23,904,782
LIABILITIES
Due to custodian bank (Note 4) ............................... 922,908
Due to Lexington Management Corporation (Note 2) ............. 4,249
Payable for shares redeemed .................................. 113,135
Accrued expenses ............................................. 39,259
-------
Total Liabilities ............................. 1,079,551
NET ASSETS (equivalent to $1.00 per share on
22,825,231 shares outstanding) (Note 3) ................. $22,825,231
===========
NET ASSETS consist of:
Capital stock--authorized 1,000,000,000 shares,
$.01 par value per share ................................ $ 228,252
Additional paid-in capital (Note 1) .......................... 22,596,979
-----------
$22,825,231
===========
The Notes to Financial Statements are an integral part
of these statements.
4
<PAGE>
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF OPERATIONS
Six months ended June 30, 1997 (unaudited)
INVESTMENT INCOME
Interest income ........................................... $446,939
EXPENSES
Investment advisory fee (Note 2) ...................... $ 61,948
Printing and mailing expenses ......................... 18,125
Transfer agent and shareholder
servicing expense (Note 2) ....................... 17,930
Registration fees ..................................... 11,465
Professional fees ..................................... 9,547
Accounting expenses (Note 2) .......................... 8,002
Directors' fees and expenses .......................... 7,631
Computer processing fees .............................. 3,265
Custodian expense ..................................... 2,192
Other expenses ........................................ 6,289
--------
Total expenses ................................. 146,394
Less: expenses recovered under contract with
the investment adviser (Note 2) .......... 22,389 124,005
-------- --------
Net investment income .......................... 322,934
--------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... $322,934
========
LEXINGTON TAX FREE MONEY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six months
ended Year ended
June 30, 1997 December 31,
(unaudited) 1996
------------- ------------
Net investment income ........................ $ 322,934 $ 705,974
Distributions to shareholders from
net investment income ................... (322,934) (705,974)
Decrease in net assets from
capital share transactions Note 3) ...... (3,690,309) (1,715,724)
----------- -----------
Net decrease in net assets ................... (3,690,309) (1,715,724)
NET ASSETS
Beginning of period ...................... 26,515,540 28,231,264
----------- -----------
End of period ............................ $22,825,231 $26,515,540
=========== ===========
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, 1997 (unaudited) and December 31, 1996
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 Fund's investment objective is to seek current income
exempt from Federal income taxes while also maintaining stability of principal,
liquidity and preservation of capital. The following is a summary of significant
accounting policies followed by the Fund in the preparation of its financial
statements:
INVESTMENTS 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 income to its shareholders.
Therefore, no provision for Federal income taxes is required.
DIVIDENDS Dividends are declared daily from the total of net investment
income and net realized gain (loss) on investments.
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 at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations 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 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 1.0% of the Fund's average daily net assets. Reimbursement for the six
months ended June 30, 1997 amounted to $22,389 and is set forth in the statement
of operations.
The Fund reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs, of $17,348 which were 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, 1997 December 31,
(unaudited) 1996
----------- ------------
Shares sold .................................... 6,305,995 19,634,926
Shares issued on reinvestment of dividends ..... 278,675 634,447
----------- -----------
6,584,670 20,269,373
Shares redeemed ................................ (10,274,979) (21,985,097)
----------- -----------
Net decrease ................................... (3,690,309) (1,715,724)
=========== ===========
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, 1997, this
compensating balance amounted to $29,600 and is included in due to custodian
bank in the statement of assets and liabilities.
5. SUBSEQUENT EVENT
The Board of Directors has approved a Plan of Liquidation and Dissolution of the
Fund. This Plan was approved by the shareholders at a meeting held on August 8,
1997.
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 Year Ended December 31,
June 30, 1997 --------------------------------------------
(unaudited) 1996 1995 1994 1993
----------- ------ ------ ------ ------
<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 .......................... 0.013 0.026 0.029 0.020 0.018
Less distributions:
Distributions from net investment income (0.013) (0.026) (0.029) (0.020) (0.018)
------- ------- ------- ------- -------
Net asset value, end of period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------
Total Return ........................................ 2.65%* 2.61% 2.92% 2.00% 1.78%
======= ======= ======= ======= =======
Ratio to average net assets:
Expenses, before reimbursement ................... 1.18%* 1.09% 1.12% 1.09% 0.92%
Expenses, net of reimbursement ................... 1.00%* 1.00% 1.00% 1.00% 0.92%
Net investment income, before reimbursement ...... 2.43%* 2.50% 2.76% 1.88% 1.77%
Net investment income ............................ 2.61%* 2.59% 2.88% 1.97% 1.77%
Net assets, end of period (000's omitted) ........... $22,825 $26,516 $28,231 $37,654 $41,096
*Annualized
</TABLE>
7
<PAGE>
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, Missori 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 Tax Free Money 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.
- --------------------------------------------------------------------------------
LEXINGTON
- --------------------------------------------------------------------------------
================================================================================
LEXINGTON
TAX
FREE
MONEY
FUND, INC.
--------------------------------------
Seeks to achieve current income
exempt from Federal income
taxes while maintaining stability
of principal, liquidity and
preservation of capital.
--------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1997
The Lexington Group
of No Load
Investment Companies
================================================================================
