================================================================================
LEXINGTON
================================================================================
================================================================================
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.
----------
SEMI-ANNUAL REPORT
JUNE 30, 1997
The Lexington Group
of No Load
Investment Companies
================================================================================
<PAGE>
DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
The Lexington Global Fund advanced 9.7%* during the second quarter, and
12.2%* for the first half of 1997. The average global fund returned 12.2% for
the quarter and 12.9% through the first half, according to Lipper Analytical
Services, Inc. Due to strong U.S. equity performance the unmanaged Morgan
Stanley World Index appreciated 15.1% for the quarter and 15.4% for the first
half.
The underweighting of U.S. equities was the primary reason for the Fund's
relative underperformance. The U.S. equity market advanced 17.7% during the
second quarter and 20.8% for the first half of 1997. The unmanaged Morgan
Stanley World Index easily out paced most managed global funds due to a 43%
weighting of U.S. equities. The average global fund is significantly underweight
U.S. equities and as a result, the Lexington Global Fund was able to perform in
line with most global funds. The Fund benefitted from strong equity performance
in Europe. For example, Switzerland returned 31.3% for the first half, while
Spain advanced 20.7%. Although many European markets provided returns above 20%,
the strength of the dollar muted some of the returns. For example, the dollar
gained 13.3% against the German Mark for the first half of the year. Emerging
market holdings helped the Fund in Latin America and Eastern Europe, however,
these gains were largely offset by losses suffered in Malaysia and the
Philippines.
Equity markets are enjoying an historic climb in most countries around the
world. A lack of inflation has driven down interest rates to low nominal levels.
As a result, stocks have faced little competition from other asset categories,
especially bonds. There are other regional drivers moving stock prices. In Latin
America economic recovery is leading to profit acceleration. European equities
are advancing due to several positive factors. Investors anticipate European
Monetary Union will take place and this confidence has led to dramatic falls in
interest rates as European rates converge with low German rates. Economic
activity is also accelerating from depressed levels and as a result, profit
expectations are rising. Finally, many European companies are restructuring by
divesting underperforming assets and reducing costs. This new shareholder
friendly culture has been a major theme, driving stock prices higher. Finally,
even Japan, after a difficult start, has enjoyed positive returns so far in 1997
with a gain of 8.7%. Japanese economic growth has accelerated improving profits
and investor confidence.
The current global environment remains attractive for equities. However,
like Federal Reserve Chairman Greenspan, we wonder whether investors have become
"irrationally exuberant." The challenge for investors today is quite high.
Conditions are positive for stocks yet much, if not all, the good news seems
reflected in valuations using most historical benchmarks. The Fund has been
positioned to participate in the rising tide, while at the same time offering
some downside protection when stocks inevitably correct. The focus on equity
selection remains toward value. Given that markets have and continue to be
driven by excess liquidity large companies have seen their stock prices soar.
These very same stocks will be most vulnerable when markets decline due to their
lofty valuations and wide institutional share holding base, including index
funds. As a result of this trend, we have discovered better value in smaller
stocks like IMAX in Canada, or JCG Holdings in Hong Kong. These growth stocks
1
<PAGE>
are not well known and can be purchased at a discount relative to large stocks
with a similar growth outlook. Regionally, the Fund remains underweight in the
U.S. due to high valuation levels and a muted profit outlook. Europe remains
attractive although many stocks are becoming extended. Japanese stocks may have
a difficult second half as we expect the economy to slow and profits to
disappoint. Opportunities in emerging markets are best found in Latin America
and we think this trend will continue. The Mexican market looks especially
attractive as profit growth accelerates in a falling interest rate environment.
In conclusion, there are many exciting opportunities around the world.
However, some caution is prudent, especially at these price levels. Stocks are
not a one way ride and investors must weigh both risk and reward. The Lexington
Global Fund will continue to focus on equities which have valuations offering an
attractive risk reward profile. The Fund is currently overweight in Canada,
Latin America, and Europe while the U.S. remains underweight.
Sincerely,
/s/Richard T. Saler /s/Alan H. Wapnick /s/Robert M. DeMichele
- ------------------- ------------------ ----------------------
Richard T. Saler Alan H. Wapnick Robert M. DeMichele
Portfolio Manager Portfolio Manager President
August, 1997 August, 1997 August, 1997
* 16.85%, 13.74% and 9.85% are the one, five and ten year average annual
standard total returns, respectively, for the period ended June 30, 1997.
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 GLOBAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997 (unaudited)
NUMBER OF VALUE
SHARES SECURITY (NOTE 1)
- -------------------------------------------------------------------------------
COMMON STOCKS: 96.7%
ARGENTINA: 1.5%
39,800 Perez Companc S.A. ........... $ 319,633
23,200 Transportadora de Gas del
Sur, S.A.(ADR) ............. 290,000
-----------
609,633
-----------
AUSTRALIA: 2.6%
306,000 Foster's Brewing Group, Ltd. . 563,926
77,875 QBE Insurance Group, Ltd. .... 466,717
-----------
1,030,643
-----------
AUSTRIA: 4.3%
12,500 Boehler-Uddeholm AG .......... 969,537
3,700 Wienerberger Baustoff-
industrie AG ............... 760,158
-----------
1,729,695
-----------
BRAZIL: 2.1%
25,600 Aracruz Celulose S.A. (ADR) .. 521,600
410,000 Companhia Cervejaria Brahma
(Preferred shares) ......... 314,199
-----------
835,799
-----------
CANADA: 6.7%
23,900 Bombardier, Inc. "B" ......... 542,253
15,100 Hudson's Bay Company ......... 339,312
33,200 Imax Corporation2 ............ 819,625
13,100 Jetform Corporation2 ......... 172,756
42,600 Noranda Forest, Inc. ......... 313,426
10,200 Tarragon Oil & Gas, Ltd.2 .... 119,777
80,200 Yogen Fruz World-Wide, Inc.2 . 351,714
-----------
2,658,863
-----------
CHILE: 1.6%
36,700 Antofagasta Holdings Plc ..... 280,051
13,100 Banco Santander (ADR) ........ 193,225
11,100 Maderas y Sinteticos Sociedad
Anonima S.A. (ADR) ......... 184,537
-----------
657,813
-----------
FRANCE: 3.8%
2,880 Alcatel Alsthom .............. 361,046
9,300 Elf Aquitaine S.A. (ADR) ..... 506,269
5,100 Lafarge ...................... 317,505
3,130 Sidel ........................ 242,576
6,100 Unisor Sacilor ............... 110,136
-----------
1,537,532
-----------
GERMANY: 3.3%
13,900 Continental AG ............... 345,399
7,800 Deutsche Bank AG ............. 456,129
3,500 Hoechst AG ................... 148,594
854 Sto AG (Preferred shares) .... 357,276
-----------
1,307,398
-----------
GREECE: 0.4%
972 Hellenic Tellecommunication
Organization S.A. Rights2 .. 1,594
20,600 Michaniki S.A. ............... 156,112
-----------
157,706
-----------
HONG KONG: 4.2%
10,800 HSBC Holdings Plc ............ 324,811
376,000 JCG Holdings, Ltd. ........... 303,332
340,000 National Mutual Asia, Ltd. ... 377,423
7,400 Nu Skin Asia Pacific, Inc. ... 196,100
227,000 Peregrine Investment
Holdings, Ltd. ............. 467,345
-----------
1,669,011
-----------
INDONESIA: 0.6%
160,000 PT Tambang Timah ............. 248,406
-----------
IRELAND: 3.4%
45,800 Allied Irish Banks Plc ....... 350,481
4,200 Elan Corporation Plc2 ........ 190,050
236,200 Jefferson Smurfit Group ...... 684,161
25,000 Ryanair Holdings Plc2 ........ 132,758
-----------
1,357,450
-----------
ITALY: 1.6%
12,900 Industrie Natuzzi Spa (ADR) .. 330,562
52,900 Stet Societa' Finanziaria
Telefonica S.p.A. .......... 307,824
-----------
638,386
-----------
JAPAN: 12.9%
5,700 Acom Company, Ltd. ........... 274,963
16,900 Amway Japan, Ltd. ............ 573,031
5,200 Doutor Coffee Company, Ltd. .. 211,308
20,000 Fuji Bank, Ltd. .............. 300,620
11,000 Fujitsu, Ltd. ................ 152,844
35,000 Kubota Corporation ........... 171,590
3,300 Maruco Company, Ltd. ......... 27,512
13,000 Matsushita Electric Industrial
Company, Ltd. .............. 262,431
22,000 Mitsubishi Estate Company .... 319,147
11,000 NEC Corporation .............. 153,806
3
<PAGE>
LEXINGTON GLOBAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997 (unaudited)(continued)
NUMBER OF VALUE
SHARES SECURITY (NOTE 1)
- -------------------------------------------------------------------------------
JAPAN (CONTINUED):
134,000 Nippon Steel Corporation ..... $ 428,594
8,000 Omron Corporation ............ 167,089
7,200 Sony Corporation ............. 628,576
10,000 Sumitomo Electric Industries . 167,788
16,000 The Bank of Tokyo-Mitsubishi,
Ltd. ....................... 321,594
3,700 Tiemco, Ltd. ................. 164,904
7,000 Tokyo Electron, Ltd. ......... 335,227
39,000 Toshiba Corporation .......... 251,184
21,000 Yamato Kogyo Company, Ltd. ... 207,376
-----------
5,119,584
-----------
MALAYSIA: 1.4%
163,000 Tanjong Plc .................. 561,845
-----------
MEXICO: 1.7%
140,900 Cemex S.A. de C.V. "B" ....... 685,501
-----------
NETHERLANDS: 0.8%
4,420 Philips Electronics N.V. ..... 317,177
-----------
NEW ZEALAND: 2.5%
300,900 Brierley Investments, Ltd. ... 293,657
129,200 Carter Holt Harvey, Ltd. ..... 333,613
127,200 Fletcher Challenge Building .. 381,898
5,088 Fletcher Challenge Forests ... 7,379
-----------
1,016,547
-----------
NORWAY: 1.5%
31,700 Saga Petroleum AS ............ 601,888
-----------
PHILIPPINES: 0.5%
520,500 C & P Homes, Inc. ............ 195,365
-----------
POLAND: 1.4%
5,812 Debica S.A. .................. 119,379
16,411 Elektrim Towarzystwo
Handlowe S.A. .............. 142,824
5,217 Wedel S.A. ................... 280,992
-----------
543,195
-----------
SINGAPORE: 1.8%
48,300 Clipsal Industries, Ltd. ..... 170,982
69,000 Jardine Strategic Holdings, Ltd. 260,820
3,450 Jardine Strategic Holdings, Ltd.
(Warrants)2 ................ 155
88,800 Want Want Holdings2 .......... 294,816
-----------
726,773
-----------
SPAIN: 2.0%
8,100 Adolfo Dominguez S.A.2 ....... 319,440
1,100 Banco Popular Espanol S.A. ... 270,007
3,500 Tele Pizza, S.A.2 ............ 206,568
-----------
796,015
-----------
SWEDEN: 1.2%
61,600 Industrial & Financial Systems,
IFS AB.1,2 ................. 298,744
18,000 Skandinaviska Enskilda ....... 194,377
-----------
493,121
-----------
SWITZERLAND: 5.8%
370 ABB AG ....................... 560,894
380 Nestle S.A. .................. 502,027
260 Novartis AG .................. 416,257
650 Saurer AG2 ................... 431,149
470 Winterthur Schweizerische
Versicherungs-Gesellschaft . 414,597
-----------
2,324,924
-----------
THAILAND: 0.3%
15,000 BEC World Public Company ..... 128,547
-----------
UNITED KINGDOM: 8.3%
244,000 Aegis Group Plc .............. 254,821
6,800 Blacks Leisure Group PLC ..... 51,493
30,850 D.F.S. Furniture Company Plc . 288,551
89,100 George Wimpey Plc ............ 200,190
31,600 Grand Metropolitan Plc ....... 305,822
28,500 Harvey Nichols Plc ........... 133,760
134,900 Inchcape Plc ................. 635,375
14,000 Oriflame International S.A. .. 113,006
29,100 PizzaExpress Plc ............. 304,632
14,500 Provident Financial Plc ...... 134,417
15,300 RTZ Corporation Plc .......... 266,479
76,300 Tomkins Plc .................. 330,164
63,400 Vodafone Group Plc ........... 308,636
-----------
3,327,346
-----------
UNITED STATES: 18.5%
2,100 Ace, Ltd. .................... 155,138
3,900 Adaptec, Inc.2 ............... 135,525
1,900 AlliedSignal, Inc. ........... 159,600
2,400 BJ Services Company2 ......... 128,700
3,000 Boeing Company ............... 159,188
5,000 Borders Group, Inc.2 ......... 120,625
2,000 Bristol-Myers Squibb Company . 162,000
1,300 Citicorp ..................... 156,731
4,200 Conseco, Inc. ................ 155,400
2,300 Crown Cork & Seal Company, Inc. 122,906
4
<PAGE>
LEXINGTON GLOBAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997 (unaudited)(continued)
NUMBER OF VALUE
SHARES SECURITY (NOTE 1)
- -------------------------------------------------------------------------------
UNITED STATES (CONTINUED):
2,600 Diamond Offshore Drilling,
Inc.2 ...................... $ 203,125
2,200 Dover Corporation ............ 135,300
3,200 Equity Residential Properties
Trust ........................ 152,000
3,700 Federal National Mortgage
Association ................ 161,413
3,400 Gap, Inc. .................... 132,175
2,000 Georgia Pacific Corporation .. 170,750
1,900 Honeywell, Inc. .............. 144,163
3,400 Ingersoll-Rand Company ....... 209,950
3,500 James River Corporation of
Virginia ................... 129,500
2,800 Johnson & Johnson ............ 180,250
2,800 Kimberly-Clark Corporation ... 139,300
1,700 Medtronic, Inc. .............. 137,700
2,000 Mobil Corporation ............ 139,750
4,400 Monsanto Company ............. 189,475
4,000 NAC Re Corporation ........... 193,500
2,400 NationsBank Corporation ...... 154,800
3,500 Norwest Corporation .......... 196,875
1,900 Perkin-Elmer Corporation ..... 151,169
1,100 Procter & Gamble Company ..... 155,375
1,800 Reynolds Metals Company ...... 128,250
2,800 Rite Aid Corporaton .......... 139,650
13,100 Rofin-Sinar Technologies2 .... 250,538
2,800 Safeway, Inc.2 ............... 129,150
1,500 Schlumberger, Ltd. ........... 187,500
3,600 Seagate Technology, Inc.2 .... 126,675
3,000 Sealed Air Corporation2 ...... 142,500
5,400 Service Corporation .......... 177,525
2,000 St. Paul Companies, Inc. ..... 152,500
6,300 Structural Dynamics Research
Corporation2 ............... 165,572
5,100 Tosco Corporation ............ 152,681
2,700 Tyco International, Ltd. ..... 187,819
1,700 Union Pacific Corporation .... 119,850
3,000 Union Planters Corporation ... 155,625
2,500 United Healthcare Corporation 130,000
1,600 Warner-Lambert Company ....... 198,800
4,000 Waste Management, Inc. ....... 128,500
3,000 Williams Companies, Inc. ..... 131,250
-----------
7,336,768
-----------
TOTAL INVESTMENTS: 96.7%
(cost $33,405,022+) (Note 1) 38,612,931
Other assets in excess of
liabilities: 3.3% .......... 1,328,184
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $12.65 per
share on 3,156,654 shares
outstanding) ............... $39,941,115
===========
1 Restricted security (Note 7).
2 Non-income producing security.
ADR - American Depository Receipt.
+ Aggregate cost for Federal income tax purposes is $33,501,533.
----------
At June 30, 1997, the composition of the Fund's net assets by industry was as
follows:
Banking ................ 6.8%
Capital Equipment ...... 11.6
Chemicals .............. 0.5
Construction & Housing . 1.4
Consumer-Durable Goods . 5.0
Consumer-Non durable
Goods ................ 11.1
Electrical & Electronics 3.7
Energy Sources ......... 5.7
Financial Services ..... 9.9
Health & Personal Care . 4.3
Materials .............. 16.9
Merchandising .......... 5.4
Multi-Industry ......... 4.6
Real Estate ............ 1.2
Services ............... 4.6
Telecommunications ..... 1.5
Trade .................. 1.9
Transportation ......... 0.6
Other assets ........... 3.3
-----
100.0%
=====
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
LEXINGTON GLOBAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
ASSETS
Investments, at value
(cost $33,405,022) (Note 1) ............. $38,612,931
Cash ....................................... 1,989,634
Receivable for investment securities sold .. 766,573
Receivable for shares sold ................. 3,264
Dividends and interest receivable .......... 81,380
Foreign taxes recoverable .................. 48,990
Unrealized gain on
open forward contracts (Note 6) ......... 46,241
-----------
Total Assets ......................... 41,549,013
-----------
LIABILITIES
Due to Lexington Management
Corporation (Note 2) .................... 32,520
Payable for investment securities
purchased ............................... 1,465,893
Accrued expenses ........................... 109,485
-----------
Total Liabilities .................... 1,607,898
-----------
NET ASSETS (equivalent to $12.65 per share
on 3,156,654 shares
outstanding) (Note 4) ................... $39,941,115
===========
NET ASSETS consist of:
Capital stock--authorized 1,000,000,000
shares, $.001 par value per share ....... $ 3,157
Additional paid-in capital (Note 1) ........ 32,017,205
Accumulated undistributed net
investment income (Note 1) .............. 96,707
Accumulated net realized gain on
investments and foreign currency
holdings (Note 1) ........................ 2,573,415
Net unrealized appreciation of
investments and foreign
currency holdings ........................ 5,250,631
-----------
TOTAL NET ASSETS ........................... $39,941,115
===========
LEXINGTON GLOBAL FUND, INC.
STATEMENT OF OPERATIONS
Six months ended June 30, 1997 (unaudited)
INVESTMENT INCOME
Dividends ........................ $ 486,721
Interest ......................... 55,406
---------
542,127
Less: foreign tax expense ........ 48,486
---------
Investment income ............. $ 493,641
EXPENSES
Investment advisory fee
(Note 2) ....................... 188,639
Custodian expense ................ 54,691
Transfer agent and
shareholder servicing
expenses (Note 2) .............. 35,312
Printing and mailing
expenses ....................... 25,401
Accounting expenses
(Note 2) ....................... 23,349
Registration fees ................ 17,756
Professional fees ................ 13,196
Directors' fees and expenses ..... 11,268
Computer processing fees ......... 5,651
Other expenses ................... 6,888
................................. ---------
Total expenses ............. 382,151
----------
Net investment income ... 111,490
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 4)
Net realized gain on:
Investments .................... 2,824,596
Foreign currency transactions .. 22,051
---------
Net realized gain ............ 2,846,647
Net change in unrealized
appreciation on:
Investments .................... 1,363,676
Foreign currency
translation of other
assets and liabilities ....... 62,636
---------
Net change in unrealized
appreciation ................. 1,426,312
----------
Net realized and
unrealized gain .............. 4,272,959
----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................ $4,384,449
==========
The Notes to Financial Statements are an integral part of these statements.
6
<PAGE>
LEXINGTON GLOBAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------- -------------
<S> <C> <C>
Net investment income ................................................................ $ 111,490 $ 43,248
Net realized gain from investments and foreign currency transactions ................. 2,846,647 6,036,296
Net change in unrealized appreciation (depreciation) of investments and
foreign currency translations ...................................................... 1,426,312 (84,524)
----------- -----------
Increase in net assets resulting from operations ............................... 4,384,449 5,995,020
Distributions to shareholders from net investment income ............................. -- (457,395)
Distributions to shareholders from net realized gains from
security transactions .............................................................. -- (4,924,188)
Decrease in net assets from capital share transactions (Note 3) ...................... (1,666,817) (17,004,160)
----------- -----------
Net increase (decrease) in net assets .......................................... 2,717,632 (16,390,723)
NET ASSETS:
Beginning of period ................................................................ 37,223,483 53,614,206
----------- -----------
End of period (including undistributed net investment income of $96,707
and distributions in excess of net investment income of $14,783,
respectively) .................................................................... $39,941,115 $37,223,483
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
7
<PAGE>
LEXINGTON GLOBAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited) and December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington Global Fund, Inc. (the "Fund") is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek long-term growth of capital
primarily through investment in the common stock of companies domiciled in
foreign countries and the United States. 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. Securities traded on a recognized stock exchange are
valued at the last sales price reported by the exchange on which the securities
are traded. If no sales price is recorded, the mean between the last bid and
asked price is used. Securities traded on the over-the-counter market are valued
at the mean between the last current bid and asked price. Short-term securities
having a maturity of 60 days or less are stated at amortized cost, which
approximates market value. 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.
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 and net realized capital
gains are normally declared and paid annually, but 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 which
may differ from generally accepted accounting principles. At December 31, 1996,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions 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.
8
<PAGE>
LEXINGTON GLOBAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited) and December 31, 1996 (continued)
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. For
1997, LMC has voluntarily agreed to limit the total expenses of the Fund
(including management fees, but excluding interest, taxes, brokerage commissions
and extraordinary expenses) to an annual rate of 2.50% of the Fund's average
daily net assets. No reimbursement was required for the six months ended June
30, 1997.
The Fund reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $45,362 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, 1997 Year ended
(unaudited) December 31, 1996
-------------------------- ----------------------------
Shares Amount Shares Amount
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 103,273 $ 1,219,923 639,550 $ 7,983,790
Shares issued on reinvestment of dividends -- -- 452,255 5,069,783
------- ----------- --------- ------------
103,273 1,219,923 1,091,805 13,053,573
Shares redeemed (246,299) (2,886,740) (2,526,528) (30,057,733)
------- ----------- --------- ------------
Net decrease (143,026) $(1,666,817) (1,434,723) $(17,004,160)
======= =========== ========= ============
</TABLE>
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of securities for the six months
ended June 30, 1997, excluding short-term securities, were $ 24,231,741 and $
26,850,495 respectively.
At June 30, 1997, the aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost amounted to $6,069,745 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value amounted to $819,114.
5. 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.
9
<PAGE>
LEXINGTON GLOBAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited) and December 31, 1996 (continued)
6. FORWARD FOREIGN EXCHANGE CONTRACTS
At June 30, 1997, the Fund was committed to sell foreign currencies under the
following forward foreign exchange contracts:
<TABLE>
<CAPTION>
Contract
Amount Unrealized
Settlement (Local Contract Current Gain at
Security Date Currency) Rate Rate 6/30/97
------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
New Zealand Dollar ..................... 10/03/97 1,077,645 0.6900 0.6783 $ 12,593
French Franc ........................... 12/02/97 4,024,516 5.6747 5.8215 17,884
Italian Lira ........................... 12/02/97 404,458,306 1,699.22 1,710.70 1,597
Spanish Pesetas ........................ 12/02/97 83,619,327 143.485 147.06 14,167
--------
$ 46,241
========
</TABLE>
7. RESTRICTED SECURITIES
The following security was 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 Average Cost Market % of Net
Security Date Shares Per Share Value Assets
------- ---- ------ -------- ----- ------
<S> <C> <C> <C> <C> <C>
Industrial and Financial Systems, IFSAB 6/12/97 61,600 $4.88 $298,744 0.75%
</TABLE>
Pursuant to guidelines adopted by the Fund's Board of Directors, this
unregistered security has been deemed to be illiquid. The Fund currently limits
investment in illiquid securities to 15% of the Fund's net assets, at market
value, at the time of purchase.
10
<PAGE>
LEXINGTON GLOBAL FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Six months
ended
June 30, Year ended December 31,
1997 ----------------------------------------------------
(unaudited) 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ......................... $ 11.28 $ 11.32 $ 11.17 $ 13.51 $ 11.09
------- ------- ------- ------- -------
Income from investment
operations:
Net investment income ....................... 0.03 0.01 0.09 0.02 0.06
Net realized and unrealized gain
on investments ............................ 1.34 1.84 1.10 0.23 3.47
------- ------- ------- ------- -------
Total income from
investment operations ..................... 1.37 1.85 1.19 0.25 3.53
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income .................................... -- (0.16) (0.29) -- (0.06)
Distributions in excess of
net investment income
(temporary book-tax
difference) ............................... -- -- (0.13) -- --
Distributions from net realized
gains ..................................... -- (1.73) (0.62) (2.46) (1.05)
Distributions in excess of net
realized gains (temporary
book-tax difference) ...................... -- -- -- (0.13) --
------- ------- ------- ------- -------
Total distributions ................... -- (1.89) (1.04) (2.59) (1.11)
------- ------- ------- ------- -------
Net asset value, end of period ................ $ 12.65 $ 11.28 $ 11.32 $ 11.17 $ 13.51
======= ======= ======= ======= =======
Total return .................................. 24.55%* 16.43% 10.69% 1.84% 31.88%
Ratio to average net assets:
Expenses .................................... 2.03%* 1.67% 1.61% 1.49% 1.52%
Net investment income ....................... 0.59%* 0.48% 0.14% 0.52% 0.55%
Portfolio turnover rate ....................... 137.40%* 128.05% 166.35% 83.40% 84.61%
Average commission paid on equity
security transactions** ..................... $0.01 $0.03 -- -- --
Net assets, end of period
(000's omitted) ............................. $39,941 $53,614 $67,392 $87,313 $50,298
</TABLE>
*Annualized
**In accordance with SECdisclosure guidelines, the average commissions are
calculated for the periods beginning with the year ended December 31, 1996,
but not for prior periods.
11
<PAGE>
LEXINGTON
GLOBAL 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 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 Global Fund, Inc. and is authorized for distribution to the public
only if it is accompanied or preceded by a currently effective prospectus which
sets forth expenses and other material information.
