DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
The Lexington Ramirez Global Income Fund ended 1998 with strong
performance. The Fund returned 6.53%* in the final quarter and ended the year
with a respectable 8.21%* total return. Emerging market debt, particularly that
of Latin American borrowers, was under pressure for much of the year reflecting
fiscal problems in Brazil and fears that Russia's default would spill over onto
other borrowers. High yielding, emerging market debt accounts for about half of
total Fund assets. Fortunately, a sizeable portion of this investment is in
Eastern Europe, a region that so far has proven immune to investor credit fears.
Also, large investments in Denmark, Greece and the U.K. - markets with solid
double-digit gains last year - helped to lift our total return.
While the Fund's broad investment exposure hurt its relative performance
last year the benefits become clear once you step back a little. For example,
over the last three years, the Fund has returned 8.8%* compounded annually. Our
investment strategy stresses diversification which helps minimize the Fund's
price volatility. The share price ranged between $9.86 and $10.90 last year.
Income is the prime driver behind total return.
We divide all global fixed income securities into four groups. The
categories reflect whether the bonds are U.S. dollar denominated or not and
whether borrowers are in developed markets or emerging markets. We then try to
pick the best values in each of these four segments. Importantly, however, we
keep a balance between the sectors and this is what limits our price volatility.
Last year, we saw value in Europe, outside the Euro-currency block. The best
bets for 1999 may be domestic high yield mortgage debt - which now trades 1,000
basis points cheaper than U.S. Treasury bonds - and emerging Asian debt. We will
be bolstering these holdings in the months ahead.
Last year, investors who purchased long-term, liquid, high-grade debt were
the winners. These securities performed well during a period which was marked by
a decline in interest rates and heightened fears about creditworthiness and
liquidity. We anticipate a very different environment in the year ahead. It is
likely that the Russian debt default, the Long Term Capital Management bail-out,
and finally the launch of the Euro currency were watershed events which marked a
cyclical low in global developed market interest rates. In 1999, we think income
- -rather than price appreciation - will be the dominant factor behind a bond
investor's total return. Moreover, a modest but persistent rise in bond yields
is probable given the prospect of higher inflation in the months ahead. Your
Fund is positioned to perform well in such an investment world.
We wish to thank you for your continued support.
Sincerely,
/s/ Denis P. Jamison /s/ Maria Fiorini Ramirez /s/ Robert M. DeMichele
- -------------------- -------------------------- --------------------------
Denis P. Jamison Maria Fiorini Ramirez Robert M. DeMichele
Portfolio Manager Portfolio Manager President
February, 1999 February, 1999 February, 1999
1
<PAGE>
- --------------------------------------------------------------------------------
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
6/30/98 $14,724 $13,248
12/31/98 $15,464 $14,757
AVERAGE ANNUAL STANDARD TOTAL RETURNS
FOR THE PERIOD ENDED 12/31/98
----------------------------------------------------------------------
FUND/INDEX 1 YEAR Since Inception
12/31/94
----------------------------------------------------------------------
LEXINGTON RAMIREZ
GLOBAL INCOME FUND 8.21% 11.51%
----------------------------------------------------------------------
LEHMAN BROTHERS
GLOBAL BOND FUND 15.33% 10.22%
----------------------------------------------------------------------
*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.
- --------------------------------------------------------------------------------
* 8.21%, 7.65% and 7.96% are the one, five and ten year average annual standard
total returns, respectively, for the period ended December 31, 1998. 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, 1998
PRINCIPAL
AMOUNT VALUE
OR SHARES SECURITY (NOTE 1)
- ------------------------------------------------------------------------------
LONG-TERM DEBENTURES: 91.8%
GOVERNMENT OBLIGATIONS: 54.6%
ARGENTINA: 5.5%
$ 2,200,000 Republic of Argentina,
9.75%, due 09/19/27 ..................... $1,988,849
----------
BRAZIL: 3.9%
2,355,240 Republic of Brazil, "C" Bond,
5.00%, due 04/15/14 ..................... 1,413,144
----------
DOMINICAN REPUBLIC: 2.2%
1,200,000 Central Bank of Dominican Republic,
Floating Rate Note,
6.625%, due 08/30/24 .................... 798,000
----------
ECUADOR: 1.6%
1,100,000 Government of Ecuador,
Floating Rate Note,
6.625%, due 02/28/25 .................... 580,250
----------
GREECE: 10.2%
500,000,000 * Hellenic Republic,
9.80%, due 03/21/00 ..................... 1,780,952
310,000,000 * Hellenic Republic,
Floating Rate Note,
13.10%, due 10/23/03 .................... 1,136,867
200,000,000 * Hellenic Republic,
8.80%, due 06/19/07 ..................... 796,667
----------
3,714,486
----------
HUNGARY: 5.3%
200,000,000* Government of Hungary,
21.00%, due 10/24/99 .................... 964,938
200,000,000* Government of Hungary,
16.00%, due 11/24/00 .................... 950,352
----------
1,915,290
----------
KOREA: 2.8%
1,000,000 Republic of Korea,
8.75%, due 04/15/03 ..................... 1,021,080
----------
MEXICO: 2.1%
1,000,000 United Mexican States,
6.25%, due 12/31/19 ..................... 775,000
1,000,000 United Mexican States (Rights) .......... -
----------
775,000
----------
NORWAY: 3.7%
10,000,000 * Government of Norway,
7.00%, due 05/31/01 ..................... 1,345,363
----------
PHILIPPINES: 2.9%
40,000,000 * Republic of the Philippines,
18.50%, due 05/07/00 .................... 1,055,929
----------
PRINCIPAL VALUE
AMOUNT SECURITY (NOTE 1)
=============== ================================== =============
POLAND: 6.8%
4,500,000* Government of Poland,
12.00%, due 06/12/01 ............. $1,296,137
4,000,000* Government of Poland,
12.00%, due 02/12/03 ............. 1,175,745
----------
2,471,882
----------
SOUTH AFRICA: 2.5%
5,100,000* Electricity Supply Commission
(ESKOM),
11.00%, due 06/01/08 ............. 645,793
2,000,000* Republic of South Africa,
12.00%, due 02/28/05 ............. 288,546
----------
934,339
----------
UNITED KINGDOM: 4.6%
1,000,000 * Government of United Kingdom
Treasury Bond,
6.00%, due 08/10/99 .............. 1,669,564
----------
UNITED STATES: 0.5%
$ 300,000 U.S. Strip Bond,
0.00%, due 11/15/08 .............. 184,689
----------
TOTAL GOVERNMENT OBLIGATIONS
(cost $20,905,790)................ 19,867,865
----------
CORPORATE BONDS: 37.2%
ARGENTINA: 2.5%
1,000,000 Compagnie De Radiocomunicaciones
Moviles SA,
9.25%, due 05/08/081,2 ........... 905,169
----------
CANADA: 0.9%
500,000* Rogers Communications, Inc.,
10.50%, due 02/14/06 ............. 344,251
----------
CZECH REPUBLIC: 4.0%
12,500,000 * CEZ, A.S.,
11.30%, due 06/06/05 ............. 422,201
30,000,000 * International Finance Corporation,
24.00%, due 10/12/99 ............. 1,039,207
----------
1,461,408
----------
DENMARK: 9.8%
3,482,000 * Danske Kredit,
6.00%, due 10/01/29 .............. 534,527
4,900,000 * Nykredit A/S,
6.00%, due 10/01/29 .............. 755,671
4,700,000 * Realkredit Danmark A/S,
6.00%, due 10/01/29 ............. 724,088
9,995,000 * Unikredit Realkredit,
6.00%, due 10/01/29 ............. 1,532,462
----------
3,546,748
----------
3
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998 (continued)
PRINCIPAL VALUE
AMOUNT SECURITY (NOTE 1)
============= ======================================= =============
CORPORATE BONDS (CONTINUED):
DOMINICAN REPUBLIC: 3.4%
$1,500,000 Tricom, S.A.,
11.375%, due 09/01/04 ................. $ 1,233,750
-----------
MEXICO: 3.0%
1,000,000 Cemex SA,
12.75%, due 07/15/06 .................. 1,101,350
-----------
UNITED STATES: 13.6%
564,778 ABN-AMRO Mortgage Corporation,
Series 1998-1, Class B4,
6.7079%, due 04/25/281 ................ 367,635
561,608 BA Mortgage Securities, Inc.,
Series 1997-2, Class B4,
7.25%, due 10/25/271 .................. 333,630
1,000,000 Chiquita Brands International Inc.,
10.25%, due 11/01/06 .................. 1,042,500
950,000 Clark Materials Handling Company,
Senior Note, Series D,
10.75%, due 11/15/06 .................. 983,250
186,344 DLJ Mortgage Acceptance Corporation,
Series 1996-I, Class B4,
7.25%, due 09/25/111, 2 ............... 144,183
925,926 Norwest Asset Securities Corporation,
Series 1997-6, Class B4,
7.50%, due 05/25/271,2 ................ 605,613
692,808 PNC Mortgage Securities Corporation,
Series 1997-5, Class B5,
7.25%, due 10/25/271,2 ................ 452,274
694,774 PNC Mortgage Securities Corporation,
Series 1998-2, Class VB5,
6.625%, due 03/25/281,2 ............... 424,464
1,498,836 PNC Mortgage Securities Corporation,
Series 1998-11, Class 1B6,
6.50%, due 11/25/281,2 ................ 326,465
300,147 Residential Asset Securitization Trust,
Series 1997-A6, Class B4,
7.25%, due 09/25/121,2 ................ 279,043
-----------
4,959,057
-----------
TOTAL CORPORATE BONDS
(cost $13,983,516)..................... 13,551,733
-----------
TOTAL LONG-TERM DEBENTURES
(cost $34,889,306)..................... 33,419,598
-----------
SHORT-TERM INVESTMENTS: 5.6%
TURKEY: 4.0%
600,000,000,000* Government of Turkey Treasury Bills,
0.00%, due 05/05/99 .................... $ 1,443,309
-----------
UNITED STATES: 1.6%
$ 600,000 U.S. Treasury Bills,
4.25%, due 02/04/99 .................... 597,591
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,160,833)....................... 2,040,900
-----------
TOTAL INVESTMENTS: 97.4%
(cost $37,050,139+) (Note 1)............ 35,460,498
Other assets in excess of
liabilities: 2.6% ...................... 946,064
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $10.36 per share on
3,512,625 shares outstanding) .......... $36,406,562
===========
* Principal amount represents local currency.
1 Restricted Security (Note 8).
2 Illiquid Security (Note 9).
+ Aggregate cost for Federal income tax purposes is $37,050,269.
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, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $37,050,139) (Note 1)...................................... $35,460,498
Cash .................................................................................. 14,041
Receivable for shares sold ............................................................ 30,411
Interest receivable ................................................................... 1,161,672
-----------
Total Assets ...................................................................... 36,666,622
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ...................................... 40,627
Payable for shares redeemed ........................................................... 10,076
Distributions payable ................................................................. 161,892
Accrued expenses ...................................................................... 47,465
-----------
Total Liabilities ................................................................. 260,060
-----------
NET ASSETS (equivalent to $10.36 per share on
3,512,625 shares outstanding) (Note 4) ............................................... $36,406,562
===========
NET ASSETS consist of:
Additional paid-in capital (Note 1) ................................................... $37,956,461
Distributions in excess of net investment income (Note 1) ............................. (134,882)
Accumulated net realized gain on investments and foreign currency transactions
(Note 1) ............................................................................. 162,854
Unrealized depreciation of investments and foreign currency translation of other assets
and liabilities ...................................................................... (1,577,871)
-----------
TOTAL NET ASSETS .................................................................. $36,406,562
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest ............................................................... $ 4,219,398
Less: foreign tax expense .............................................. 123,887
------------
Total investment income ............................................... $ 4,095,511
EXPENSES
Investment advisory fee (Note 2) ...................................... 317,877
Distribution expenses (Note 3) ........................................ 49,456
Transfer agent and shareholder servicing expenses (Note 2) ............ 40,051
Custodian expenses .................................................... 38,959
Printing and mailing expenses ......................................... 36,168
Professional fees ..................................................... 35,316
Accounting expenses (Note 2) .......................................... 22,214
Registration fees ..................................................... 19,947
Directors' fees and expenses .......................................... 17,433
Computer processing fees .............................................. 8,417
Other expenses ........................................................ 16,311
------------
Total expenses. ...................................................... 602,149
Less: expenses recovered under contract with
investment adviser (Note 2) ......................................... 125,346 476,803
------------ ------------
Net investment income. ............................................... 3,618,708
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 5)
Net realized gain (loss) on:
Investments .......................................................... 690,546
Foreign currency transactions ........................................ (847,222)
------------
Net realized loss ................................................... (156,676)
Net change in unrealized depreciation on:
Investments .......................................................... (1,138,403)
Foreign currency translation of other assets and liabilities ......... (3,093)
------------
Net change in unrealized depreciation ............................... (1,141,496)
------------
Net realized and unrealized loss .................................. (1,298,172)
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................... $ 2,320,536
============
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, 1998 and 1997
1998 1997
------------ ------------
Net investment income ..................................................... $ 3,618,708 $ 2,052,118
Net realized gain (loss) from investments and foreign currency
transactions ............................................................ (156,676) 94,293
Net change in unrealized depreciation of investments and foreign
currency translation .................................................... (1,141,496) (1,154,451)
------------ ------------
Increase in net assets resulting from operations ....................... 2,320,536 991,960
Distributions to shareholders from net investment income (Note 1) ......... (2,758,226) (1,746,581)
Distributions to shareholders from net realized gains from
security transactions (Note 1) .......................................... (624,804) (556,566)
Increase (decrease) in net assets from capital share
transactions (Note 4) ................................................... 13,801,323 (4,130,900)
------------ ------------
Net increase (decrease) in net assets .................................. 12,738,829 (5,442,087)
NET ASSETS:
Beginning of period ...................................................... 23,667,733 29,109,820
------------ ------------
End of period (including distributions in excess of net investment
income of $134,882 and $148,142 in 1998 and 1997,
respectively) ........................................................... $ 36,406,562 $ 23,667,733
============ ============
</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, 1998 and 1997
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 Securities 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, 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 prices. Securities traded on the
over-the-counter market are valued at the mean between the last current bid and
asked prices. Securities for which market quotations are not readily available
and other assets are valued by Fund management in good faith under the direction
of the Fund's Board of Directors. 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.
The Fund authorizes its custodian to place and maintain debt obligations in
a segregated account of the Fund having a value equal to the aggregate amount of
the Fund's commitments under forward foreign currency contracts entered into
with respect to position hedges. At December 31, 1998, the Fund had no forward
foreign currency contracts outstanding.
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.
8
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
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 income tax regulations that may differ from generally
accepted accounting principles. At December 31, 1998, 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from 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 0.35% of the Fund's average daily net assets in excess
of $15 million. For 1998, 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 $125,346 for the year ended
December 31, 1998, and is set forth in the statement of operations.
The Fund reimburses LMC for certain expenses, including accounting and
shareholder servicing costs of $49,851, 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,
1998, were $49,456 and are set forth in the statement of operations.
9
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year ended
December 31, 1998 December 31, 1997
---------------------------------- ----------------------------------
Shares Amount Shares Amount
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold ........................................ 2,249,211 $ 24,156,657 1,230,549 $ 13,579,416
Shares issued on reinvestment of dividends ......... 290,497 3,013,322 259,657 2,825,735
--------- ------------- --------- -------------
2,539,708 27,169,979 1,490,206 16,405,151
Shares redeemed .................................... (1,263,118) (13,368,656) (1,848,616) (20,536,051)
---------- ------------- ---------- -------------
Net increase (decrease) ............................ 1,276,590 $ 13,801,323 (358,410) $ (4,130,900)
========== ============= ========== =============
</TABLE>
5. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1998, excluding short-term securities, were $27,022,134 and
$13,521,199, respectively.
At December 31, 1998, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$1,121,253 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $2,711,024.
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. 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, 1998 and 1997 (continued)
7. OPTION CONTRACTS (continued)
The following written call option transactions occurred during the year ended
December 31, 1998:
<TABLE>
<CAPTION>
Number of
Premiums Contracts
------------ ----------
<S> <C> <C>
Options written, outstanding at December 31, 1997 ............... $ 42,218 1
Options written during the year ended December 31, 1998 ......... 94,645 3
Options exercised ............................................... (65,611) (2)
Options expired ................................................. (71,252) (2)
-------- ----
Options written, outstanding at December 31, 1998 ............... $ -- --
======== ====
</TABLE>
8. 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>
Acquisition Principal Market Percent of
Security Date Amount Value Net Assets
- -------------------------------------------- ------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
ABN-AMRO Mortgage Corporation,
Series 1998-1, Class B4,
6.7079%, due 04/25/28 ..................... 03/05/98 $ 564,778 $ 367,635 1.01%
BA Mortgage Securities, Inc.,
Series 1997-2, Class B4,
7.25%, due 10/25/27 ....................... 12/17/97 561,608 333,630 0.91
Compagnie De Radiocomunicaciones Moviles SA,
9.25%, due 05/08/08 ....................... 06/26/98 1,000,000 905,169 2.49
DLJ Mortgage Acceptance Corporation,
Series 1996-I, Class B4,
7.25%, due 09/25/11 ....................... 10/25/96 186,344 144,183 0.40
Norwest Asset Securities Corporation,
Series 1997-6, Class B4,
7.50%, due 05/25/27 ....................... 03/21/97 925,926 605,613 1.66
PNC Mortgage Securities Corporation,
Series 1997-5, Class B5,
7.25%, due 10/25/27 ....................... 09/11/97 692,808 452,274 1.24
PNC Mortgage Securities Corporation,
Series 1998-2, Class VB5,
6.625%, due 03/25/28 ...................... 03/30/98 694,774 424,464 1.16
PNC Mortgage Securities Corporation,
Series 1998-11, Class 1B6,
6.50%, due 11/25/28 ....................... 10/23/98 1,498,836 326,465 0.90
Residential Asset Securitization Trust,
Series 1997-A6, Class B4,
7.25%, due 09/25/12 ....................... 07/31/97 300,147 279,043 0.77
---------- -----
$3,838,476 10.54%
========== =====
</TABLE>
11
<PAGE>
LEXINGTON RAMIREZ GLOBAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
9. ILLIQUID SECURITIES
Pursuant to guidelines adopted by the Fund's Board of Directors, the following
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.
<TABLE>
<CAPTION>
Acquisition Principal Market Percent of
Security Date Amount Value Net Assets
- -------------------------------------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Compagnie De Radiocomunicaciones Moviles SA,
9.25%, due 05/08/08 ....................... 06/26/98 $1,000,000 $ 905,169 2.49%
DLJ Mortgage Acceptance Corporation,
Series 1996-I, Class B4,
7.25%, due 09/25/11 ....................... 10/25/96 186,344 144,183 0.40
Norwest Asset Securities Corporation,
Series 1997-6, Class B4,
7.50%, due 05/25/27 ....................... 03/21/97 925,926 605,613 1.66
PNC Mortgage Securities Corporation,
Series 1997-5, Class B5,
7.25%, due 10/25/27 ....................... 09/11/97 692,808 452,274 1.24
PNC Mortgage Securities Corporation,
Series 1998-2, Class VB5,
6.625%, due 03/25/28 ...................... 03/30/98 694,774 424,464 1.16
PNC Mortgage Securities Corporation,
Series 1998-11, Class 1B6,
6.50%, due 11/25/28 ....................... 10/23/98 1,498,836 326,465 0.90
Residential Asset Securitization Trust,
Series 1997-A6, Class B4,
7.25%, due 09/25/12 ....................... 07/31/97 300,147 279,043 0.77
---------- ----
$3,137,211 8.62%
========== ====
</TABLE>
10. TAX INFORMATION (UNAUDITED)
The following tax information represents the designation of various tax benefits
relating to the year ended December 31, 1998:
Net foreign source income received by the Fund from sources within foreign
countries and possessions of the United States was $.9552 per share
(representing a total of $3,225,699). The total amount of "qualifying" taxes
paid by the Fund to such countries was $.0356 per share (representing a total of
$120,105).
The percentage of ordinary income distributions paid by the Fund derived from
agency and direct obligations of the United States government were as follows:
U.S. Treasury............................................... 0.95%
Federal Home Loan Bank...................................... 0.09
Federal Home Loan Mortgage Corporation...................... 0.30
The Fund designates $398,626, whether taken in shares or cash, as 20% long-term
capital gain distributions.
12
<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,
-----------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................... $ 10.58 $11.22 $10.75 $ 9.80 $ 10.95
------- ------ ------ ------ -------
Income (loss) from investment operations:
Net investment income ................................. 0.90 1.04 1.01 0.96 0.46
Net realized and unrealized gain (loss) from
investments and foreign currency
transactions ........................................ (0.07) (0.50) 0.36 0.95 (1.16)
------ ------- ------ ------ -------
Total income (loss) from investment operations ......... 0.83 0.54 1.37 1.91 (0.70)
------ ------- ------ ------ -------
Less distributions:
Distributions from net investment income .............. ( 0.87) (0.91) (0.86) (0.96) (0.45)
Distributions from net realized gains ................. ( 0.18) (0.27) (0.04) -- --
------ ------- ------ ------ ------
Total distributions .................................... ( 1.05) (1.18) (0.90) (0.96) (0.45)
------- ------- ------ ------ -------
Net asset value, end of period ......................... $ 10.36 $ 10.58 $11.22 $10.75 $ 9.80
======= ======= ====== ====== =======
Total return ........................................... 8.21% 5.00% 13.33% 20.10% (6.52)%
Ratio to average net assets:
Expenses, before reimbursement or waivers ............. 1.89% 2.17% 2.33% 3.07% 1.80%
Expenses, net of reimbursement or waivers ............. 1.50% 1.50% 1.50% 2.75% 1.50%
Net investment income,
before reimbursement or waivers ...................... 10.99% 8.99% 9.49% 9.48% 4.18%
Net investment income ................................. 11.38% 9.66% 10.32% 9.80% 4.48%
Portfolio turnover ..................................... 45.26% 117.94% 71.83% 164.72% 10.20%
Net assets, end of period (000's omitted) .............. $36,407 $ 23,668 $29,110 $ 12,255 $ 10,351
</TABLE>
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Lexington Ramirez Global Income Fund:
We have audited the accompanying statement of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Ramirez Global
Income Fund as of December 31, 1998, and the related statement of operations for
the year ended, the statements 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 our 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998 by correspondence with the custodian
and brokers. 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, 1998, 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 LLP
New York, New York
February 8, 1999
14
<PAGE>
LEXINGTON
INVESTOR SERVICES
- --------------------------------------
AS A LEXINGTON SHAREHOLDER, YOU SHOULD BE AWARE OF THE MANY SERVICES AVAILABLE
TO YOU.
NO LOAD -- The Lexington Funds are no load funds. That is, investments and
redemptions are made without any sales charges, commissions or redemption fees.*
--------
FREE TELEPHONE EXCHANGE -- Investments in the Lexington Funds may be exchanged
for shares of a different Lexington Fund at any time.
--------
CHECK WRITING PRIVILEGES -- Lexington Money Market Trust permits investors
immediate access to their funds with check writing for withdrawals from their
account.
--------
TAX SHELTERED PLANS -- IRA, Keogh, Pension, and Profit Sharing Prototype Plans
are available to qualified individuals. These plans offer investment flexibility
through the Share Exchange Service, simplified record keeping, convenience and
investment supervision.
--------
CUSTODIAL ACCOUNTS FOR MINORS -- Investments may be made on behalf of minors
under the Uniform Gifts to Minors Act currently in effect in all states.
--------
SYSTEMATIC WITHDRAWAL PLAN -- An investor may elect to receive a fixed amount
from his or her account each month or quarter, subject to certain minimums.
--------
COMPLETE RECORD KEEPING -- A statement is provided for every transaction in
addition to a year-end statement with tax information.
The Lexington Group of
No Load Investment Companies
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.-Seeks long-term growth of
capital primarily through investment in equity securities of companies domiciled
in, or doing business in, emerging countries and emerging markets.
LEXINGTON GLOBAL CORPORATE LEADERS FUND, INC.-Seeks long-term growth of capital
primarily through investment in common stocks of companies domiciled in foreign
countries and the United States.
LEXINGTON INTERNATIONAL FUND, INC.-Seeks long-term growth of capital through
investment in companies domiciled in foreign countries.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.-Seeks long-term capital appreciation
through investments primarily in the equity securities of Russian companies.
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC.-Seeks long-term capital
appreciation through investment in companies domiciled in the Asia Region with a
market capitalization of less than $1 billion.
LEXINGTON RAMIREZ GLOBAL INCOME FUND-Seeks high current income. Capital
appreciation is a secondary objective. The Fund invests in a combination of
foreign and domestic high-yield, lower rated debt securities.
LEXINGTON GOLDFUND, INC.-Seeks capital appreciation through investment in gold
bullion and shares of gold mining companies.
LEXINGTON GROWTH AND INCOME FUND, INC.-Seeks capital appreciation over the
long-term through investments in the stocks of large, ably managed and well
financed companies.
LEXINGTON CORPORATE LEADERS TRUST FUND-Seeks capital growth and reasonable
income through investment in an equal number of shares of an established list of
American blue chip corporations.
LEXINGTON SMALLCAP FUND, INC. - Seeks long-term capital appreciation through
investment in common stocks of companies domiciled in the United States with a
market capitalization of less than $1 billion.
LEXINGTON CONVERTIBLE SECURITIES FUND - Seeks total return by providing capital
appreciation, current income and conservation of capital through investments in
a diversified portfolio of securities convertible into shares of common stock.
LEXINGTON GNMA INCOME FUND, INC.-Seeks to achieve a high level of current
income, consistent with liquidity and safety of principal, through investment
primarily in mortgage-backed GNMA ("Ginnie Mae") certificates that are
guaranteed as to the timely payment of principal and interest by the United
States Government.
LEXINGTON MONEY MARKET TRUST-Seeks a high level of current income consistent
with preservation of capital and liquidity through investments in interest
bearing short-term money market instruments.
For more complete information about any of the Lexington Funds and a prospectus
which includes management fee and expenses call the distributor toll-free at
1-800-526-0057. 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.
15
<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
==============================
[GRAPHIC OMITTED]
LEXINGTON
RAMIREZ
GLOBAL
INCOME
FUND
------------------------------
Seeks high current income.
The appreciation of Capital
is a secondary objective
------------------------------
ANNUAL REPORT
DECEMBER 31, 1998
The Lexington Group
of NO LOAD
Investment Companies
