DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
Global bonds produced a global range of returns in 1997. The soaring U.S.
dollar and declining interest rates in the developed countries stood in stark
contrast to the currency collapse in Southeast Asia and the associated
deterioration in credit quality. Diversification is a prime goal of the
Lexington Ramirez Global Income Fund. This served us particularly well last
year. For 1997, the Fund's total return was 5.0%*.
We believe that we are well-positioned for 1998. The Fund enters the year
with no exposure to the Asian markets. The portfolio's investments are equally
balanced between Dollar and non-Dollar denominated securities and a portion of
our non-Dollar exposure is hedged. We expect the U.S. Dollar to remain strong
while Asian markets are in flux. Later in the year, however, we see greater
strength in core European currencies, reflecting the better growth prospects in
these economies.
Our high income orientation also will be a big plus during the year ahead.
Investors are starved for income and, as the Fund's cash returns for 1997 show,
balancing high-yield non-Dollar emerging market debt with a spectrum of high
quality developed market bonds can produce big dividends. For all of 1997,
Lexington Ramirez Global Income Fund investors received 91 cents a share of
income dividends and another 27 cents a share of capital gains. We look for a
continued high income return in 1998 despite an anticipated drop in U.S.
interest rates.
Diversification is an important tool to reduce risk. For all of 1997, the
Fund's price was no more volatile than that of a typical U.S. Treasury 10 year
bond. (The Fund's average thirty-day price volatility was 4.1% compared with
4.0% for the ten year bond.) And, that volatility bought the Fund's investors an
income return twice that of the U.S. Treasury bond. While 1997 was not a stellar
year for the Fund, it is worth noting that over time the high income return will
shine through. For example, over the last three years, the Lexington Ramirez
Global Income Fund has enjoyed an average annual total return of 12.6%*
(assuming the reinvestment of dividends). This matches the total return of the
bellwether 10-year U.S. Treasury bond. Unlike U.S. Treasury securities, it
should be noted however that many of the securities in which the fund invests
are rated below investment grade and are not issued or guaranteed by the U.S.
Government.
1
<PAGE>
We think U.S. dollar denominated high yield debt offers particularly good
value in the coming year. The Fund has about 20% of its assets invested in such
securities with a particular emphasis on mortgage securities. We look for the
continued low interest rate level to speed mortgage refinancing and improve the
credit quality of these securities. We have screened our high-yield corporate
bonds and have sold the bonds of companies which might face increased
competition from Asian exporters in 1998.
Sincerely,
/s/ Maria Fiorini Ramirez /s/ Robert M. DeMichele /s/ Denis P. Jamison
- ------------------------- ----------------------- --------------------
Maria Fiorini Ramirez Robert M. DeMichele Denis P. Jamison
Portfolio Manager President Portfolio Manager
February, 1998 February, 1998 February, 1998
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
LEXINGTON RAMIREZ GLOBAL INCOME FUND AND
THE UNMANAGED LEHMAN BROTHERS GLOBAL BOND INDEX
[The following table represents a line graph in the printed report.]
Year Ramirez LBGBI
==========================================================
12/31/94 $10,000 $10,000
6/30/95 $11,054 $11,503
12/31/95 $12,010 $12,018
6/30/96 $12,471 $11,913
12/31/96 $13,611 $12,664
6/30/97 $13,903 $12,464
12/31/97 $14,291 $12,795
AVERAGE ANNUAL STANDARD TOTAL RETURNS
FOR THE PERIOD ENDED 12/31/97
----------------------------------------------------------------------
FUND/INDEX 1 YEAR 3 YEAR
----------------------------------------------------------------------
LEXINGTON RAMIREZ
GLOBAL INCOME FUND 5.00% 12.64%
----------------------------------------------------------------------
LEHMAN BROTHERS
GLOBAL BOND FUND 1.04% 8.56%
----------------------------------------------------------------------
*Prior to December 31, 1994, the Fund operated under a different investment
objective.
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund with a similar investment in the Lehman Brothers Global
Bond Index. Results for the Fund and the Lehman Brothers Global Bond Index
include the reinvestment of all dividend and capital gain distributions.
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 and it is not predictive of
future results.
- --------------------------------------------------------------------------------
*5.00%, 8.18% and 8.17% are the one, five and ten year average annual standard
total returns, respectively, for the period ended December 31, 1997. Prior to
December 31, 1994 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 and is not
predictive of future results.
2
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1997
PRINCIPAL VALUE
AMOUNT OR SHARES SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
LONG-TERM DEBENTURES: 86.9%
GOVERNMENT OBLIGATIONS: 49.8%
ARGENTINA: 4.4%
$ 1,400,000 Republic of Argentina
5.50%, due 03/31/23 .......... $ 1,029,868
-------------
BRAZIL: 6.7%
1,995,455 Government of Brazil "C"
4.50%, due 04/15/14 .......... 1,582,839
-------------
COSTA RICA: 3.3%
900,000 Banco Costa Rica
6.25%, due 05/21/10 .......... 778,500
-------------
DOMINICAN REPUBLIC: 4.1%
1,200,000 Central Bank of Dominican Republic
6.375%, due 08/30/24 ......... 966,000
-------------
ECUADOR: 3.5%
1,100,000 Government of Ecuador
6.6875%, due 02/28/25 ........ 830,729
-------------
GREECE: 7.2%
310,000,000* Hellenic Republic
11.00%, due 10/23/03 ......... 1,056,639
200,000,000* Hellenic Republic
8.80%, due 06/19/07 .......... 648,569
-------------
1,705,208
-------------
HUNGARY: 4.3%
200,000,000* Government of Hungary
21.00%, due 10/24/99 ......... 1,020,865
-------------
MEXICO: 3.5%
1,000,000 United Mexican States
6.25%, due 12/31/19 .......... 836,074
1,000,000 United Mexican States (Rights) . --
-------------
836,074
-------------
POLAND: 3.0%
2,680,000* Government of Poland
16.00%, due 10/12/98 ......... 710,046
-------------
SOUTH AFRICA: 5.3%
5,100,000* Electricity Supply Commission
11.00%, due 06/01/08 ......... 884,050
2,000,000* Republic of South Africa
12.00%, due 02/28/05 ......... 379,509
-------------
1,263,559
-------------
UNITED KINGDOM: 4.5%
600,000* Government of United Kingdom
Treasury Bond
7.50%, due 12/07/06 .......... $1,063,134
-------------
TOTAL GOVERNMENT OBLIGATIONS
(cost $12,122,393) ........... 11,786,822
-------------
CORPORATE BONDS: 37.1%
CANADA: 8.8%
$ 1,000,000 CHC Helicopter
11.50%, due 07/15/02 ......... 1,072,500
500,000* Rogers Communication, Inc.
10.50%, due 02/14/06 ......... 379,974
700,000* Stelco, Inc.
10.40%, due 11/30/09 ......... 633,161
-------------
2,085,635
-------------
CZECH REPUBLIC: 3.3%
12,500,000* CEZ, A.S.
11.30%, due 06/06/05 ......... 342,491
14,800,000* Skofin S.R.O., A.S.
11.625%, due 02/09/98 ........ 423,650
-------------
766,141
-------------
DENMARK: 7.9%
5,430,090* Nykredit
7.00%, due 10/01/26 .......... 793,434
5,436,353* REALKREDIT DANMARK
7.00%, due 10/01/26. ......... 795,936
1,998,666* Unikredit
7.00%, due 10/01/26. ......... 291,596
-------------
1,880,966
-------------
UNITED STATES: 17.1%
700,000 Archibold Candy Corporation
10.25%, due 7/01/04. ......... 736,750
566,372 BA Mortgage Securities, Inc.,
Series 1997-2, Class B4
7.25%, due 10/25/27** ........ 399,292
1,000,000 Chiquita Brands International, Inc.
10.25%, due 11/01/06 ......... 1,096,250
200,000 Clark Material Handling Company
10.75%, due 11/15/06 ......... 213,500
195,430 DLJ Mortgage Acceptance Corporation
7.25%, due 9/25/11** ......... 161,719
934,697 Norwest Asset Securities Corporation
Series 1997-6, Class B4,
7.50%, due 5/25/27** ......... 663,635
3
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1997 (Continued)
PRINCIPAL VALUE
AMOUNT OR SHARES SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
UNITED STATES (CONTINUED)
$ 699,822 PNC Mortgage Securities Corporation,
Series 1997-5, Class B5,
7.25%, due 10/25/27** ....... $ 491,625
312,266 Residential Asset
Securitization Trust,
Series 1997-A6, Class B4
7.25%, DUE 9/25/12** ........ 288,260
-------------
4,051,031
-------------
TOTAL CORPORATE BONDS
(cost $8,822,010) ........... 8,783,773
-------------
TOTAL LONG-TERM DEBENTURES
(cost $20,944,403) .......... 20,570,595
-------------
SHORT-TERM INVESTMENTS: 9.7%
LEBANON: 2.4%
882,470,000* Government of Lebanon Treasury Bills
0%, DUE 2/19/98 ............. 567,753
-------------
MEXICO: 3.1%
6,200,000* Cetes
0%, due 3/05/98. ............ 744,292
-------------
TURKEY: 3.0%
20,000,000,000* Government of Turkey
Treasury Bills
0%, due 5/27/98 ............. 716,674
-------------
UNITED STATES: 1.2%
300,000 U.S. Treasury Bills
5.35%, due 06/25/98 .......... 292,417
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,385,691) ............ 2,321,136
-------------
Call Options Written: (0.1%)
1,995,455 Government of Brazil "C"
strike price $77.812 expires
01/28/98 (premium $42,218)
(Note 8) ....................... (55,094)
-------------
TOTAL INVESTMENTS: 96.5%
(cost $23,330,094) (Note 1) .. 22,836,637
-------------
Other assets in excess of
liabilities: 3.5%. ........... 831,096
-------------
TOTAL NET ASSETS: 100.0%
(equivalent to $10.58 per share
on 2,236,035 shares
outstanding) ................. $ 23,667,733
=============
*Principal amount represents local currency.
**Restricted Security (Note 9).
+Aggregate cost for Federal income tax purposes is $23,330,224.
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS
Investments, at value (cost $23,330,094) (Note1) ....... $ 22,836,637
Cash ................................................... 11,283
Receivable for investment securities sold .............. 1,587,139
Receivable for shares sold ............................. 457,459
Interest receivable .................................... 515,194
Unrealized gain on open forward contracts (Note 7) ..... 24,805
------------
TOTAL ASSETS .................................... 25,432,517
------------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ....... 28,638
Payable for investment securities purchased ............ 1,583,543
Payable for shares redeemed ............................ 11,753
Distributions payable .................................. 99,788
Accrued expenses ....................................... 41,062
------------
TOTAL LIABILITIES ............................... 1,764,784
------------
NET ASSETS (equivalent to $10.58 per share on
2,236,035 shares outstanding) (Note 4) ............... $ 23,667,733
============
NET ASSETS consist of:
Additional paid-in capital (Note 1) .................... $ 24,155,138
Distributions in excess of net investment income (Note 1 (148,142)
Accumulated net realized gain on investments
and foreign currency holdings (Note 1) 97,112
Unrealized depreciation on investments
and foreign currency holdings (436,375)
------------
TOTAL NET ASSETS ................................ $ 23,667,733
============
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
<TABLE>
<CAPTION>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<S> <C> <C>
INVESTMENT INCOME
Interest ...........................................................$ 2,388,523
Less: foreign tax expense .......................................... 17,222
--------------
Total investment income ............................................ $ 2,371,301
EXPENSES
Investment advisory fee (Note 2) ................................ 212,446
Distribution expense (Note 3) ................................... 53,111
Transfer agent and shareholder servicing expense (Note 2) ....... 32,317
Printing and mailing expenses ................................... 29,113
Custodian expense. .............................................. 28,177
Registration fees ............................................... 26,958
Accounting expenses (Note 2) .................................... 24,832
Professional fees ............................................... 19,641
Directors' fees and expenses .................................... 17,393
Computer processing fees ........................................ 7,082
Other expenses .................................................. 9,346
--------------
Total expenses. .............................................. 460,416
Less: expenses recovered under contract with
investment adviser (Note 2) ............................... 141,233 319,183
-------------- --------------
Net investment income......................................... 2,052,118
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 5)
Net realized gain (loss) on:
Investments .................................................. 686,638
Foreign currency transactions ................................ (592,345)
--------------
Net realized gain ......................................... 94,293
Net change in unrealized appreciation on:
Investments .................................................. (1,156,404)
Foreign currency translation of other assets and liabilities . 1,953
--------------
Net change in unrealized appreciation ..................... (1,154,451)
--------------
Net realized and unrealized loss ....................... (1,060,158)
--------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $ 991,960
==============
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
6
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
NET INVESTMENT INCOME ............................................... $ 2,052,118 $ 1,816,665
Net realized gain from investments and foreign currency transactions 94,293 193,850
Net change in unrealized appreciation of investments
and foreign currency translation ................................. (1,154,451) 222,285
------------ ------------
Increase in net assets resulting from operations .............. 991,960 2,232,800
Distributions to shareholders from net investment income ............ (1,746,581) (1,529,914)
Distributions to shareholders from net realized gains from
security transactions ............................................. (556,566) (92,247)
Increase (decrease) in net assets from capital share
transactions (Note 4) ............................................ (4,130,900) 16,244,449
------------ ------------
Net increase (decrease) in net assets ......................... (5,442,087) 16,855,088
NET ASSETS
Beginning of period .............................................. 29,109,820 12,254,732
------------ ------------
End of period (including distributions in excess of net investment
income of $97,112 and $86,311, 1997 and 1996, respectively) ... $ 23,667,733 $ 29,109,820
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
7
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington Ramirez Global Income Fund (the "Fund") is an open-end non-diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is to seek high current
income. Capital appreciation is a secondary objective. 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.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Long-term debt obligations held by the Fund are valued at
the mean of representative quoted bid and asked prices for such securities or,
if such prices are not available, at prices for securities of comparable
maturity, quality and type; however, when LMC deems it appropriate, prices
obtained for the day of valuation from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation. Equity securities are valued at the
last sale price on the exchange or in the principal OTC market in which such
securities are traded, as of the close of business on the day the securities are
being valued, in the absence of any sales, securities are valued at the mean of
the last available bid and asked price. Securities for which market quotations
are not readily available and other assets are valued at fair value as
determined by management and approved in good faith under the direction of the
Fund's Board of Directors. All investments quoted in foreign currencies are
valued in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the close of business. 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.
FOREIGN CURRENCY TRANSACTIONS Foreign currencies (and receivables and
payables denominated in foreign currencies) are translated into U.S. dollar
amounts at current exchange rates. Translation gains or losses resulting from
changes in exchange rates and realized gains and losses on the settlement of
foreign currency transactions are reported in the statement of operations. In
addition, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk in the purchase or sale of securities
denominated in foreign currency. The Fund may also enter into such contracts to
hedge against changes in foreign currency exchange rates on portfolio positions.
These contracts are marked to market daily, by recognizing the difference
between the contract exchange rate and the current market rate as unrealized
gains or losses. Realized gains or losses are recognized when contracts are
closed and are reported in the statement of operations.
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 are normally declared
and paid quarterly and dividends from net realized capital gains are normally
declared and paid annually. However, 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
8
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
income tax regulations which may differ from generally accepted accounting
principles. 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.
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 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 MFR Advisors Inc. ("MFR") under which MFR provides
the Fund with investment management services. Pursuant to the terms of the
sub-advisory contract between LMC and MFR, LMC pays MFR a monthly sub-advisory
fee at the annual rate of .50% of the fund's average daily net assets. For 1997,
LMC has voluntarily agreed to limit the total expenses of the Fund (including
management fee but excluding interest, taxes, brokerage commissions and
extraordinary expenses) to an annual rate of 1.50% of the Fund's average daily
net assets. Total reimbursement was $141,233 for the year ended December 31,
1997, and is set forth in the statement of operations.
The Fund reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $40,337, which are incurred by the Fund, but paid
by LMC.
3. DISTRIBUTION PLAN
The Fund has adopted 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 year ended December 31,
1997 were $53,111 and are set forth in the statement of operations.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1997 December 31, 1996
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold .............................. 1,230,549 $ 13,579,416 2,090,482 $ 23,291,607
Shares issued on reinvestment of dividends 259,657 2,825,735 119,710 1,308,206
------------ ------------ ------------ ------------
1,490,206 16,405,151 2,210,192 24,599,813
Shares redeemed .......................... (1,848,616) (20,536,051) (755,281 (8,355,364)
------------ ------------ ------------ ------------
Net increase (decrease) .................. (358,410) $ (4,130,900) 1,454,911 $ 16,244,449
============ ============ ============ ============
</TABLE>
9
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 (continued)
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1997, excluding short-term securities, were $21,640,298 and
$22,798,588, respectively.
At December 31, 1997, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$1,008,209 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $1,446,702.
6. INVESTMENT AND CONCENTRATION RISKS
The Fund's investments in foreign securities may involve risks not present in
domestic investments. Since foreign securities may be denominated in a foreign
currency and involve settlement and pay interest or dividends in foreign
currencies, changes in the relationship of these foreign currencies to the U.S.
dollar can significantly affect the value of the investments and earnings of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments.
In addition to the risks described above, risks may arise from forward foreign
currency contracts as a result of the potential inability of counterparties to
meet the terms of their contracts.
7. FORWARD FOREIGN EXCHANGE CONTRACTS
At December 31, 1997, the Fund was committed to sell foreign currency under the
following forward foreign exchange contract:
<TABLE>
<CAPTION>
Contract
Amount Unrealized
Settlement (Local In Exchange Gain
Contract Date Currency) For Value 12/31/97
- -------- ---------- --------- ----------- ------ --------
<S> <C> <C> <C> <C> <C>
Danish Kroner ....... 1/12/98 12,750,000 $1,887,016 $1,862,211 $24,805
=======
</TABLE>
8. OPTION CONTRACTS
When the Fund writes a call option, an amount equal to the premium
received by the fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option is eliminated. When a written call
option is exercised the cost of the security sold will be decreased by the
premium originally received. The risk in writing a covered call option is that
the Fund gives up the opportunity to participate in any increase in the price of
the underlying security beyond the exercise price.
10
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 (continued)
8. OPTION CONTRACTS (CONTINUED)
The following written call option transactions occurred during the year ended
December 31, 1997:
<TABLE>
<CAPTION>
Number of
Premiums Contracts
--------- ---------
<S> <C> <C>
Options written, outstanding at December 31, 1996 ....... $ 5,530 1
Options written during the period ended December 31, 1997 315,067 15
Options exercised ....................................... (103,343) (9)
Options expired ......................................... (175,036) (6)
--------- -----
Options written, outstanding at December 31, 1997 ....... $ 42,218 1
========= =====
</TABLE>
9. RESTRICTED SECURITIES
The following securities were purchased under Rule 144A of the Securities Act of
1933 and, unless registered under the Act or exempted from registration, may be
sold only to qualified institutional investors.
<TABLE>
<CAPTION>
Shares or
Acquisition Principal Market % of Net
Security Date Amount Value Assets
- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
BAMortgage Securities ................... 12/17/97 $566,372 $ 399,292 1.69%
DLJ Mortgage Acceptance ................. 10/25/96 195,430 161,719 0.68
Norwest Asset Securities ................ 03/21/97 934,697 663,635 2.80
PNCMortgage Securities .................. 09/11/97 699,822 491,625 2.08
Residential Asset ....................... 07/31/97 312,266 288,260 1.22
---------- ----
$2,004,531 8.47%
========== ====
</TABLE>
Pursuant to guidelines adopted by the Fund's Board of Directors, these
unregistered securities are deemed to be illiquid. The Fund currently limits
investment in illiquid securities to 15% of the Fund's net assets, at market
value.
10. TAX INFORMATION (UNAUDITED)
Capital gain distributions paid to shareholders by the Fund during the year
ended December 31, 1997, whether taken in shares or cash:
$305,288 are designated as 28 percent long-term capital gains.
$106,877 are designated as 20 percent long-term capital gains.
11
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 11.22 $ 10.75 $ 9.80 $ 10.95 $ 10.39
------- ------- ------ -------- --------
Income (loss) from investment operations:
Net investment income ................................ 1.04 1.01 0.96 0.46 0.53
Net realized and unrealized gain (loss) from
investments and foreign currency transactions ...... (0.50) 0.36 0.95 (1.16) 0.58
------- ------- ------- ------ -------
Total income (loss) from investment operations ......... 0.54 1.37 1.91 (0.70) 1.11
------- ------- ------ -------- --------
Less distributions:
Distributions from net investment income ............. (0.91) (0.86) (0.96) (0.45) (0.55)
Distributions from net realized gains ................ (0.27) (0.04) -- -- --
------- ------- ------- ------ -------
Total distributions .................................... (1.18) (0.90) (0.96) (0.45) (0.55)
------- ------- ------- ------ -------
Net asset value, end of period ......................... $ 10.58 $ 11.22 $ 10.75 $ 9.80 $ 10.95
======= ======= ======= ====== =======
Total return ........................................... 5.00% 13.33% 20.10% (6.52%) 10.90%
Ratio to average net assets:
Expenses, before reimbursement or waiver ............. 2.17% 2.33% 3.07% 1.80% 1.44%
Expenses, net of reimbursement or waiver ............. 1.50% 1.50% 2.75% 1.50% 1.44%
Net investment income,
before reimbursement or waiver ..................... 8.99% 9.49% 9.48% 4.18% 4.83%
Net investment income ................................ 9.66% 10.32% 9.80% 4.48% 4.83%
Portfolio turnover ................................... 117.94% 71.83% 164.72% 10.20% 31.06%
Net assets, end of period (000's omitted) .............. $23,668 $29,110 $12,255 $10,351 $14,576
</TABLE>
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Lexington Ramirez Global Income Fund
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Ramirez Global
Income Fund as of December 31, 1997, and the related statements of operations
for the year then ended, the statement of changes in net assets for each of the
years in the two-year period then ended and the financial highlights for each of
the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted on audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian. As to securities
purchased and sold, but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Ramirez Global Income Fund as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 12, 1998
13
<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 and Lexington Tax Free
Money Fund permit 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 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 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 VALUE 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.
14
<PAGE>
LEXINGTON
RAMIREZ GLOBAL INCOME FUND
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
SUB-ADVISER
- --------------------------------------------------------------------------------
MFR ADVISORS, INC.
1 Liberty Plaza
46th Floor
165 Broadway
New York, New York 10006
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 Ramirez Global Income 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.
- --------------------------------------------------------------------------------
LEXINGTON
- --------------------------------------------------------------------------------
================================================================================
LEXINGTON
RAMIREZ
GLOBAL
INCOME
FUND
- --------------------------------------------------------------------------------
o Quarterly dividends
o Capital appreciation potential
o Free telephone exchange
privilege
o No sales charge
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1997
The Lexington Group
of NO LOAD
Investment Companies
================================================================================
