Dear Fellow Shareholders:
--------------------------------------------------------------------------------
During the first six months of 1995, the Lexington Short-Intermediate
Government Securities Fund returned 6.7%*. This is a just reward for investors
who suffered the dismal results in 1994 when short-term government funds
typically lost money.
The Federal Reserve reversed course and the market loves it. In February,
1994, the Federal Reserve began to battle an enemy who never came-inflation.
They gradually raised short-term interest rates from 3% to 6%. The bond market
expected even worse. By late December, two-year U.S. Treasury bonds yielded 7.7%
compared with 4% at the start of the year. It soon became clear, however, that
the Fed would need to loosen its reins on interest rates if we were to avoid a
recession. Yields on two-year U.S. Treasuries had fallen to 5.5% by the end of
the June quarter. In July, the Fed lowered its short-term interest rate target
to 5.75% from 6%. This promises to be the first in a string of rate reductions.
The Fund was fully invested throughout the bond rally. We can buy securities
with a maximum maturity of five years and must keep the average maturity of the
portfolio below three and a half years. Until very recently, the Fund operated
close to these limits and our strong relative performance reflects this
exposure.
Approximately 40% of the Fund's assets are invested in U.S. Treasury bills
as opposed to longer dated notes. There now is no difference between the yield
on three month U.S. Treasury bills and two-year notes. (They're both returning
about 5.5%.) Five-year U.S. Treasury notes only yield 25 basis points more than
two year securities. Clearly, investors aren't getting paid for accepting
maturity risk. Even though we agree with the market's view that further easing
by the Federal Reserve is likely, the pace and extent of the decline in short-
term rates may be far more gradual than anticipated. Accordingly, we will avoid
the price risk associated with the longer dated securities.
Most of the quick profits have already been made through price appreciation.
Now, it's time to focus on building the Fund's income return. At the close of
the June quarter, we were fully invested in U.S. Treasury obligations. While
these securities afford maximum interest rate sensitivity and performance
potential, they don't generate high current income. Accordingly, the Fund's
standard yield for the 30 day period was 4.86%* on June 30th. We intend to boost
that return in the months ahead through the addition of U.S. government
agency guaranteed securities.
We appreciate your continued support and welcome the opportunity to answer
any questions you might have concerning your investment.
Sincerely,
Denis P. Jamison Robert M. DeMichele
Portfolio Manager President
July, 1995 July, 1995
*8.10% and 4.17% are the one year and from commencement (11/1/93) average annual
standard total returns, respectively, for the period ended June 30, 1995. Prior
to November 1993, the Fund operated under a different name and investment
objective. 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 at
their original cost. Total return represents past performance.
1
<PAGE>
Lexington Short-Intermediate Government Securities Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 1995 (unaudited)
<TABLE>
<CAPTION>
Principal Maturity Stated Value
Amount Security Date Rate (Note 1)
----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS: 77.8%
<S> <C> <C> <C> <C>
$1,100,000 U.S. Treasury Note ................................. 04/30/00 6.75% $1,133,517
3,000,000 U.S. Treasury Note ................................. 02/15/98 7.25% 3,098,790
----------
Total U.S. Government Obligations:
(cost $4,178,194) ................................ 4,232,307
----------
SHORT-TERM INVESTMENTS: 20.0%
1,100,000 U.S. Treasury Bill (cost $1,089,395) ............... 8/31/95 5.69% 1,089,395
----------
TOTAL INVESTMENTS: 97.8%
(cost $5,267,589(D)) (Note 1) .................... 5,321,702
Other assets in excess of liabilities: 2.2% ........ 119,570
----------
TOTAL NET ASSETS: 100.0%
(equivalent to $9.96 per share
on 546,318 shares outstanding) ................... $5,441,272
==========
</TABLE>
(D)Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
2
<PAGE>
Lexington Short-Intermediate Government Securities Fund, Inc.
Statement of Assets and Liabilities
June 30, 1995 (unaudited)
<TABLE>
Assets
<S> <C>
Investments in securities, at value (cost $5,267,589) (Note 1) ................ $5,321,702
Cash (Note 4) ................................................................. 48,537
Receivable for Fund shares sold ............................................... 4,058
Interest receivable ........................................................... 94,602
Due from Lexington Management Corporation (Note 2) ............................ 9,745
----------
Total Assets ...................................................... 5,478,644
----------
Liabilities
Accrued expenses .............................................................. 15,403
Distributions payable ......................................................... 21,969
----------
Total Liabilities ................................................. 37,372
----------
Net Assets (equivalent to $9.96 per share
on 546,318 shares outstanding) (Note 3) ..................................... $5,441,272
==========
Net Assets consist of:
Capital stock-authorized 10,000,000,000 shares, $.001 par value per share ..... $ 546
Additional paid-in capital .................................................... 5,516,449
Undistributed net investment income ........................................... 950
Accumulated net realized loss on investments .................................. (130,786)
Net unrealized appreciation of investments .................................... 54,113
----------
$5,441,272
==========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
3
<PAGE>
Lexington Short-Intermediate Government Securities Fund, Inc.
Statement of Operations
Six months ended June 30, 1995 (unaudited)
Investment Income
<TABLE>
<S> <C> <C>
Interest income ............................................... $ 171,432
Expenses
Investment advisory fee (Note 2) .......................... $ 13,335
Accounting and shareholder services expense (Note 2) ...... 5,630
Custodian and transfer agent fees and expenses ............ 10,279
Printing and mailing ...................................... 9,241
Directors' fees and expenses .............................. 6,355
Audit and legal ........................................... 8,400
Registration fees ......................................... 6,808
Other expenses ............................................ 6,736
---------
Total expenses ........................................ 66,784
Less: expenses recovered under contract with investment
advisor (Note 2) .................................... 39,932 26,852
--------- ---------
Net investment income ................................. 144,580
Realized and Unrealized Gain (Loss) on Investments (Note 5)
Realized loss on investments (excluding short-term securities):
Proceeds from sales ................................... 9,601,629
Cost of securities sold ............................... 9,620,407
---------
Net realized loss (18,778)
Unrealized appreciation of investments:
End of period ......................................... 54,113
Beginning of period ................................... (174,500)
---------
Change during period ................................ 228,613
---------
Net realized and unrealized gain on investments ... 209,835
---------
Increase in Net Assets Resulting from Operations .............. $ 354,415
=========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
Lexington Short-Intermediate Government Securities Fund, Inc.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six months
ended Year
June 30, ended
1995 December 31,
(unaudited) 1994
----------- ------------
<S> <C> <C>
Net investment income ................................................ $ 144,580 $ 249,530
Net realized loss from security transactions ......................... (18,778) (102,412)
Increase in unrealized appreciation (depreciation) of investments .... 228,613 (168,623)
---------- ----------
Net increase (decrease) in net assets resulting from operations .. 354,415 (21,505)
Distributions to shareholders from net investment income ............. (143,630) (247,585)
---------- ----------
Decrease in net assets from capital share transactions (Note 3) ...... (568,932) (1,678,490)
Net decrease in net assets ........................................... (358,147) (1,947,580)
Net Assets:
Beginning of period .............................................. 5,799,419 7,746,999
---------- ----------
End of period .................................................... $5,441,272 $5,799,419
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
Lexington Short-Intermediate Government Securities Fund, Inc.
Notes to Financial Statements
June 30, 1995 (unaudited) and December 31, 1994
1. Significant Accounting Policies
Lexington Short-Intermediate Government Securities 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:
Security Transactions Security transactions are accounted for on a trade
date basis. Realized gains and losses from security transactions are reported on
the identified cost basis. Investments are stated at market value based on the
last reported bid price as of the last business day of the period for those
securities traded in the over-the-counter market. As authorized by the Board of
Directors, securities may be valued on the basis of valuations furnished by a
pricing service. Short-term securities are stated at amortized cost, which
approximates market value. 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 income to its shareholders. Therefore,
no provision for Federal income taxes has been made.
Dividends Dividends are declared daily from net investment income.
Distributions Effective January 1, 1993, the Fund adopted Statement of
Position 93-2: Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions by Investment
Companies. As of December 31, 1994, book and tax basis differences amounting to
$38 have been reclassified from undistributed net investment income to
additional paid-in capital. In addition GNMA paydown losses of $1,945 were
reclassified from accumulated net realized losses to undistributed net
investment income.
2. Investment Advisory Fee and Other Transactions with Affiliate
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at the rate of 0.5% of the Fund's average daily net assets. LMC is
required to reimburse the Fund for any expenses, excluding brokerage
commissions, taxes, interest and extraordinary expenses, in excess of 1% of the
Fund's average daily net assets. The investment advisory fee and expense
reimbursement are 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 in capital stock were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(unaudited) December 31, 1994
----------------------- -----------------------
Shares Amount Shares Amount
-------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold............................................... 77,703 (2,761,152 219,023 $ 2,135,075
Shares issued to shareholders on reinvestment of dividends 14,305 139,947 23,240 227,255
-------- ---------- -------- -----------
92,008 $ 901,099 242,263 $ 2,362,330
Shares redeemed........................................... (151,275) (1,470,031) (413,015) (4,040,820)
-------- ---------- -------- -----------
Net decrease.............................................. (59,267) $ (568,932) (170,752) $(1,678,490 )
======== ========== ======== ===========
</TABLE>
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 $8,300 and is included in cash in the statement
of assets and liabilities.
5. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales of securities, excluding
short-term securities, for the six months ended June 30, 1995 were $8,010,375
and $9,601,629, respectively.
At June 30, 1995, aggregate gross unrealized appreciation for all securities in
which there is an excess of value over tax cost amounted to $54,113 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value amounted to $0.
6
<PAGE>
Lexington Short-Intermediate Government Securities Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period1:
<TABLE>
<CAPTION>
Six months
ended Year ended December 31,
June 30, 1995 ---------------------------------------------
(unaudited) 1994 1993 1992 1991
----------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..... $9.58 $9.98 $1.00 $1.00 $1.00
Income from investment operations:
Net Investment income.................. .26 .38 .08 .03 .05
Net realized and unrealized
gain (loss) on investments........... .38 (.40) (.02) - -
----- ----- ----- ----- -----
Total income (loss) from
investment operations.................. .64 (.02) .06 .03 .05
Less distributions:
Dividends from net investment income... (.26) (.38) (.08) (.03) (.05)
Reverse stock split (1 for 10)........... - - 9.00 - -
----- ----- ----- ----- -----
Net asset value, end of period........... $9.96 $9.58 $9.98 $1.00 $1.00
===== ===== ===== ===== =====
Total return............................. 13.64%* (.20%) 2.27% 2.97% 5.14%
Ratio to average net assets:
Expenses, before reimbursement......... 2.50%* 2.35% 1.68% 1.33% 1.21%
Expenses, net of reimbursement......... 1.00%* 1.00% 0.83% 1.00% 1.00%
Net investment income,
before reimbursement................. 3.92%* 2.53% 1.59% 2.67% 4.82%
Net investment income,
including reimbursement.............. 5.42%* 3.87% 2.44% 3.00% 5.03%
Portfolio turnover....................... 337.94%* 75.87% - - -
Net assets at end of period
(000's omitted)........................ $5,441 $5,799 $7,747 $11,982 $21,483
<FN>
----------
*Annualized
1Prior to November 1993, Fund operated under a different name and investment
objective. In accordance with this change a 1 for 10 reverse stock split
occurred on October 8, 1993.
</FN>
</TABLE>
7
<PAGE>
(Left column)
Lexington
Short-Intermediate Government
Securities 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 Short-Intermediate
Government Securities Fund 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
SHORT-
INTERMEDIATE
GOVERNMENT
SECURITIES
FUND, INC.
(filled box)
The Fund seeks current income
as is consistent with the
preservation of capital by investing
in a portfolio of U.S. Government
Securities with a dollar-weighted
average maturity in its portfolio in
a range of two to five years.
(filled box)
SEMI-ANNUAL REPORT
JUNE 30, 1995
The Lexington Group
of No Load
Investment Companies
