Dear Shareholders:
- --------------------------------------------------------------------------------
Lexington Natural Resources Trust had a good year despite less than
favorable conditions for natural resource funds. We reported to you that for the
first six months of 1995 the Trust was up 7.42%*. In the second half the Trust
was up 8.80%*, as energy stocks which lagged in the first half of the year began
to perform better. For the year the Trust was up 16.87%*, but as a specialty
fund, it lagged the spectacular performance of the unmanaged Standard and Poor's
500 Stock Price Index ("S&P 500") which was up 37.6%.
1995 Total Return
----------------------------------------------------
Jan 1 to June 30 July 1 to Dec 31 Calendar Year
----------------- ---------------- ---------------
Lexington Natural Resources
Trust........................ 7.42%* 8.80%* 16.87%*
S&P 500......................... 20.2%* 14.5%* 37.6%*
The reason why the broad market index, the S&P 500, outperformed
sector-oriented natural resource funds is that the key factors that drive
natural resource stock valuations are the same factors that impact the broad
market indices. The critical variable is the "direction" in the factors.
The locomotive for natural resource stocks is a combination of factors that
we have discussed previously.
* Inflation-Inflation, as measured by the CPI, is creeping toward 3.0%, but
has not accelerated rapidly enough to ignite a raw material supply
crisis that would favor resource stocks.
____________________________________________________________________________
GRAPH
Paper version of this shareholder report contains a graph measuring the
Consumer Price Index from June, 1990 through November, 1995.
____________________________________________________________________________
1
<PAGE>
* Oil-Oil prices, which are a major component in all manufacturing
processes, have stabilized in the $18-$19 range.
* Gold-Despite heavy jewelry demand, political uncertainty in Central Europe
and the Middle East, and strong demand for bullion from the Far East,
gold has not been able to break the $400 per ounce barrier.
* Economy-We have avoided a recession in 1995 (soft landing), but GDP growth
of 2.0% to 2.5% does not ignite inflationary forces, which are favorable
for natural resource stocks.
* Commodities-The CRB Index is climbing, which measures a broad range of
commodity prices. It is a strong positive, but not enough to offset the
other benign factors.
____________________________________________________________________________
GRAPH
Paper version of this shareholder report contains a graph measuring the
CRB Index from October, 1991 through December, 1995.
____________________________________________________________________________
Outlook
The outlook however, is starting to look more positive for natural resource
stocks. Inflation is not dead, it is slowly creeping upward. Gold, in December
was making its run toward $400 per ounce and the cold weather was starting to
help the energy sector as natural gas prices rose.
We are well positioned to participate in a slow growth economy that has a
bias towards increased inflation in 1996. The Trust is participating in the
restructuring of our energy industry as many companies such as Mobil and Texaco
downsize and become more efficient in the flat
2
<PAGE>
oil price environment. Environmental concerns about clean air and water should
benefit companies such as WMX and Ionics in the environmental technology area.
And lastly, gold stocks could perform well if gold bullion can sustain prices
above $400 per ounce.
We are cautiously optimistic that the key ingredients for strong performance
for natural resource stock valuations will continue to move in the right
direction in 1996. The natural resource sector funds may be the positive
surprise in 1996, perhaps outperforming the broad market indices if several of
the factors discussed above continue to move in the right direction.
Sincerely,
Robert M. DeMichele
President
January, 1996
_____________________________________________________________________________
GRAPH
Paper version of this shareholder report contains a graph comparing the
changes in value of a $10,000 investment in
Lexington Natural Resources Trust and
the unmanaged Standard & Poor's 500 Stock Price Index
_____________________________________________________________________________
*16.87%, 3.77% and 2.66% are the one and five year and since commencement
(8/1/89) average annual standard total returns, respectively, for the period
ended December 31, 1995. Prior to September, 1991, the Trust 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.
3
<PAGE>
(LEFT COLUMN)
Lexington Natural Resources Trust
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1995
Number of
Shares Security Value
- ----------------------------------------------------------------------
COMMON STOCKS: 96.3%
AGRICULTURE: 4.4%
7,700 Dekalb Genetics Corporation ......... $ 347,463
7,100 Pioneer Hi-Bred International, Inc. . 394,938
----------
742,401
----------
CHEMICAL PRODUCTS: 15.5%
8,100 Avery-Dennison Corporation .......... 406,012
4,900 Great Lakes Chemical Corporation .... 352,800
6,800 Hercules, Inc. ...................... 383,350
9,000 IMC Global, Inc. .................... 367,875
3,500 Monsanto Company .................... 428,750
5,200 Olin Corporation .................... 386,100
8,000 Union Carbide Corporation ........... 300,000
----------
2,624,887
----------
ENERGY SOURCES: 41.0%
6,800 Anadarko Petroleum Corporation ...... 368,050
4,000 Atlantic Richfield Company .......... 443,000
3,600 British Petroleum Company Plc ....... 367,650
8,100 Burlington Resources, Inc. .......... 317,925
9,400 Coastal Corporation ................. 350,150
13,600 Devon Energy Corporation ............ 346,800
5,300 Exxon Corporation ................... 424,663
29,500 Horsham Corporation ................. 398,250
3,800 Mobil Corporation ................... 425,600
14,400 Noble Affiliates, Inc. .............. 430,200
12,000 Panhandle Eastern Corporation ....... 334,500
2,500 Royal Dutch Petroleum Company ....... 352,812
7,000 Schlumberger, Ltd. .................. 484,750
5,100 Texaco, Inc. ........................ 400,350
14,000 Tidewater, Inc. ..................... 441,000
9,200 Tosco Corporation ................... 350,750
15,000 Valero Energy Corporation ........... 367,500
8,100 Williams Companies, Inc. ............ 355,388
----------
6,959,338
----------
ENVIRONMENTAL TECHNOLOGY: 17.3%
17,200 Davis Water and Waste
Industries, Inc. ................. 249,400
17,000 IMCO Recycling, Inc. ................ 416,500
10,000 Ionics, Inc. ........................ 435,000
8 800 Millipore Corporation ............... 361,900
15,200 Pall Corporation .................... 408,500
18,500 Sevenson Environmental
Services, Inc. ................... 335,312
11,000 Thermo Instrument Systems, Inc.1 .... 371,250
11,600 WMX Technologies, Inc. .............. 346,550
----------
2,924,412
----------
(RIGHT COLUMN)
Number of
Shares
or Principal
Amounts Security (Note 1) Value
- --------------------------------------------------------------------------
FERROUS METALS: 5.4%
10,000 Alcan Aluminum, Ltd. ................ $ 311,250
4,700 Phelps Dodge Corporation ............ 292,575
12,000 Western Mining Holdings (ADR) ....... 313,500
-----------
917,325
-----------
FOREST PRODUCTS: 3.4%
10,000 Lydall, Inc.1 ....................... 227,500
7,100 Pentair, Inc. ....................... 355,000
-----------
582,500
-----------
PRECIOUS METALS: 9.3%
14,900 Barrick Gold Corporation ............ 392,987
16,500 Freeport McMoran Copper &
Gold "A" ......................... 462,000
7,200 Newmont Gold Company ................ 315,000
9,000 Newmont Mining Corporation .......... 407,250
-----------
1,577,237
-----------
TOTAL COMMON STOCKS
(cost $14,667,664) ................ 16,328,100
-----------
SHORT-TERM INVESTMENTS: 1.2%
$100,000 U.S. Treasury Bill
5.29%, due 02/08/96 ............... 99,442
100,000 U.S. Treasury Bill
5.295%, due 05/09/96 .............. 98,102
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $197,544) ................... 197,544
-----------
TOTAL INVESTMENTS: 97.5%
(cost $14,865,208+) ............... 16,525,644
Other assets in excess of liabilities:
2.5% .............................. 429,603
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $11.30 per share
on 1,500,607 shares outstanding) .. $16,955,247
===========
1Non-income producing security.
ADR-American Depository Receipt.
+Aggregate cost for federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
Lexington Natural Resources Trust
Statement of Assets and Liabilities
December 31, 1995
Assets
Investments, at value (cost $14,865,208) (Note 1) ............. $16,525,644
Cash .......................................................... 468,743
Receivable for shares sold .................................... 5,888
Interest and dividends receivable ............................. 21,400
-----------
Total Assets .................................. 17,021,675
-----------
Liabilities
Due to Lexington Management Corporation (Note 2) .............. 13,096
Payable for shares redeemed ................................... 28,806
Accrued expenses .............................................. 24,526
-----------
Total Liabilities ............................. 66,428
-----------
Net Assets (equivalent to $11.30 per share on
1,500,607 shares outstanding) (Note 3) ................... $16,955,247
===========
Net Assets consist of:
Paid-in capital-unlimited authorized shares of beneficial
interest at no par value (Note 1) ........................ $15,403,143
Undistributed net investment income (Note 1) .................. 11,627
Accumulated net realized loss on investments (Notes 1 and 6) .. (119,959)
Net unrealized appreciation of investments (Note 4) ........... 1,660,436
-----------
Net Assets ..................................... $16,955,247
===========
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
Lexington Natural Resources Trust
Statement of Operations
Year ended December 31, 1995 (unaudited)
Investment Income
Interest Income .................................... $ 27,664
Dividend income .................................... 279,062
---------
306,726
Less: Foreign tax expense .......................... 5,921
---------
Total investment income ....................... $ 300,805
---------
Expenses
Investment advisory fee (Note 2) ................. 148,634
Accounting expense (Note 2) ...................... 3,600
Custodian fees ................................... 6,915
Printing and mailing ............................. 24,626
Directors' fees .................................. 6,462
Professional fees ................................ 13,730
Registration fees ................................ 2,001
Computer processing fees ......................... 7,575
Other expenses ................................... 4,410
---------
Total expenses ................................. 217,953
----------
Net investment income 82,852
Realized and Unrealized Gain on Investments (Note 4)
Net realized gain on
investments .................................... 513,678
Net change in unrealized appreciation on
investments .................................... 1,735,936
----------
Net realized and unrealized gain on investments 2,249,614
----------
Increase in Net Assets Resulting from Operations ... $2,332,466
==========
The Notes to Financial Statements are an integral part of this statement.
6
<PAGE>
Lexington Natural Resources Trust
Statements of Changes in Net Assets
Years ended December 31, 1995 and 1994
1995 1994
----------- -----------
Net investment income ............................. $ 82,852 $ 52,351
Net realized gain (loss) from investment
transactions .................................. 513,678 (490,471)
Increase (decrease) in unrealized
appreciation of investments ................... 1,735,936 (339,043)
----------- -----------
Net increase (decrease) in net
assets resulting from operations .... 2,332,466 (777,163)
Distributions to shareholders from net
investment income ............................. (71,225) (50,415)
Increase in net assets from capital
share transactions (Note 3) ................... 1,067,096 9,129,763
----------- -----------
Net increase in net assets ............ 3,328,337 8,302,185
Net Assets:
Beginning of period ............................. 13,626,910 5,324,725
----------- -----------
End of period (including undistributed
net investment income of $11,627 and
distributions in excess of net investment
income of $2,513, respectively.) .............. $16,955,247 $13,626,910
=========== ===========
The Notes to Financial Statements are an integral part of these statements.
7
<PAGE>
Lexington Natural Resources Trust
Notes to Financial Statements
December 31, 1995 and 1994
Note 1-Significant Accounting Policies
Lexington Natural Resources Trust (the "Trust") is an open-end diversified
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
through investment primarily in common stock of companies which own, or develop
natural resources and other basic commodities, or supply goods and services to
such companies. With the exception of shares held in connection with initial
capital of the Trust, shares of the Trust are currently being offered only to
participating insurance companies for allocation to certain of their separate
accounts established for the purpose of funding variable annuity contracts
issued by the participating insurance companies. The following is a summary of
significant accounting policies followed by the Trust 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. Investments in securities traded on a national securities
exchange are valued at the last sale price on such exchange as of the close of
business. Securities traded on the over-the-counter market are valued at the
mean between the last reported bid and asked price. Short-term securities are
stated at amortized cost, which appoximates market value. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is accrued as earned.
Distributions: In accordance with Statement of Position 93-2: Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain and
Return of Capital Distributions by Investment Companies, as of December 31,
1995, $2,513 and $9,485 were reclassified from additional paid-in capital to
undistributed net investment income and accumulated net realized loss on
investments.
Federal Income Taxes: It is the Trust's intention to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes has been made.
Note 2-Investment Advisory Fee and Other Transactions with Affiliate
The Trust pays an investment advisory fee to Lexington Management
Corporation ("LMC") at the annual rate of 1% of the Trust's average daily net
assets. LMC has entered into a sub-advisory management contract with Market
Systems Research Advisors, Inc. ("MSR"), a registered investment advisor, under
which MSR will provide the Trust with certain investment management and
administrative services. Pursuant to the terms of the sub-advisory contract
between LMC and MSR, LMC pays MSR a monthly sub-advisory fee of .50% the Trust's
average daily net assets. LMC shall reimburse the Trust in any fiscal year for
the amount by which the Trust's aggregate expenses (excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceed the most restrictive
expense limits imposed by any state or regulatory authority of any jurisdiction
in which shares of the Trust are offered for sale during any such year. No
reimbursement was required for the year ended December 31, 1995.
The Trust also reimburses LMC for certain expenses, including accounting
costs, which are incurred by the Trust, but paid by LMC.
8
<PAGE>
Lexington Natural Resources Trust
Notes to Financial Statements
December 31, 1995 and 1994 (continued)
Note 3-Capital Stock
Transactions in capital stock were as follows:
Year ended Year ended
December 31, 1995 December 31, 1994
-------------------- --------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold .................. 59,893 $5,848,911 1,309,826 $13,428,318
Shares issued on reinvestment
of distributions from net
investment income .......... 6,325 71,225 5,203 50,415
-------- ---------- --------- -----------
566,218 5,920,136 1,315,029 13,478,733
Shares redeemed .............. (468,861) (4,853,040) (428,676) (4,348,970)
-------- ---------- --------- -----------
Net increase ................. 97,357 $1,067,096 886,353 $ 9,129,763
======== ========== ========= ===========
Note 4-Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments for the year
ended December 31, 1995, excluding short-term securities, were $22,867,932 and
$21,434,861, respectively.
At December 31, 1995, aggregate gross unrealized appreciation for all
investments in which there is an excess of value over tax cost amounted to
$1,801,223 and aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value amounted to $140,787.
Note 5-Investment and Concentration Risks
The Fund can make significant investments in foreign securities and has a
policy of investing in the securities of companies that own or develop natural
resources and other basic commodities, or supply goods and services to such
companies. There are certain risks involved in investing in foreign securities
or concentrating in specific industries such as natural resources that are in
addition to the usual risks inherent in domestic investments. These risks
include those resulting from future adverse political and economic developments,
as well as the possible imposition of foreign exchange or other foreign
governmental restrictions or laws.
Note 6-Federal Income Taxes-Capital Loss Carryforwards
Capital loss carryforwards available for Federal income tax purposes as of
December 31, 1995 are approximately $119,959 expiring in 2002.
To the extent any future capital gains are offset by these losses, such
gains would not be distributed to shareholders.
Treasury regulations were issued in early 1990 which provide that capital
losses incurred after October 31 of a trust's taxable year can be deemed to have
occurred on the first day of the following taxable year (i.e., January 1). The
regulations indicate that a fund may elect to retroactively apply these rules
for purposes of computing taxable income. Accordingly, the capital loss
carryforwards for Lexington Natural Resources Trust have been adjusted to
reflect prior years' post-October losses in the next fiscal year.
9
<PAGE>
Lexington Natural Resources Trust
Financial Highlights
Selected per share data for a share outstanding throughout the period:
Year ended December 31,
--------------------------------------------------
1995 1994 1993 1992 1991
--------------------------------------------------
Net asset value, beginning
of period .............. $ 9.71 $10.30 $ 9.30 $9.01 $9.50
------ ------ ------ ----- -----
Income (loss) from
investment operations:
Net investment income . 0.06 0.04 - - 0.02
Net realized and
unrealized gain (loss)
on investments ...... 1.58 (0.59) 1.01 0.29 (0.49)
------ ------ ------ ----- -----
Total income (loss) from
investment operations ... 1.64 (0.55) 1.01 0.29 (0.47)
------ ------ ------ ----- -----
Less distributions:
Dividends from net
investment income .... (0.05) (0.04) (0.01) - (0.02)
------ ------ ------ ----- -----
Net asset value, end
of period ............... $11.30 $ 9.71 $10.30 $9.30 $9.01
====== ====== ====== ===== =====
Total return ............. 16.87% (5.38%) 10.90% 3.22% (4.95%)
Ratios to average net assets:
Expenses, before
reimbursement ........ 1.47% 1.55% 2.26% 2.31% 2.97%
Expenses, net of
reimbursement ........ 1.47% 1.55% 2.26% 2.31% 1.60%
Net investment income
(loss), before
reimbursement ......... 0.56% 0.49% 0.08% 0.02% (1.10%)
Net investment income .. 0.56% 0.49% 0.08% 0.02% 0.27%
Portfolio turnover ..... 149.18% 87.40% 114.44% 65.50% 100.94%
Net assets at end
of period (000's
omitted) ............ $16,955 $13,627 $5,325 $1,926 $1,393
10
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Lexington Natural Resources Trust:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Natural
Resources Trust as of December 31, 1995, the related statements of operations
for the year then 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 Trust'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. Our procedures included confirmation of securities owned as of
December 31, 1995 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 Natural Resources Trust as of December 31, 1995, and 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
January 29, 1996
11
<PAGE>
(LEFT COLUMN)
Lexington
Natural Resources Trust
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
Sub-Advisor
- --------------------------------------------------------
MSR ADVISORS, INC.
80 Maiden Lane
New York, New York 10038
This report has been prepared for the information of
the shareholders of Lexington Natural Resources Trust
and is authorized for distribution to the public only if
it is accompanied or preceded by a currently effective
prospectus which sets forth expenses and other material
information.
(RIGHT COLUMN)
---------
LEXINGTON
---------
--------------------
LEXINGTON
NATURAL
RESOURCES
TRUST
--------------------
ANNUAL REPORT
DECEMBER 31, 1995
The Lexington Group
of No Load
Investment Companies
--------------------
