LEXINGTON
================================================================================
LEXINGTON
INTERNATIONAL
FUND, INC.
---------------------------------------------------
Seeks long-term growth of capital,
primarily through investment in
common stocks of companies
domiciled in foreign countries.
---------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 1997
The Lexington Group
of No Load
Investment Companies
================================================================================
<PAGE>
DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
The Lexington International Fund appreciated 9.4%* during the second
quarter, and for the first half of 1997 advanced 11.9%*. The average
international fund returned 11.1% for the quarter and 12.5% during the first
half of 1997, according to Lipper Analytical Services, Inc. Due to a 23.7% gain
in Japan during the second quarter the unmanaged Morgan Stanley EAFE Index
jumped 13.0%. For the first half the unmanaged Morgan Stanley EAFE Index
returned 11.2%.
The Lexington International Fund slightly underperformed the Lipper
average due to an underweighting of European equities and weakness in Southeast
Asian markets. In dollar terms European equities appreciated 14.3% during the
first half of the year. European equities are advancing due to several positive
factors. Interest rates have been falling due to low inflation and investor
belief in European monetary union. The profit outlook is also improving
stimulated by low interest rates and increasingly competitive currencies.
Finally, many European companies are restructuring operations by divesting
non-core or underperforming businesses, while reducing headcount and lowering
costs. Although the outlook remains positive, valuation levels have now become
stretched. Due to excessive valuation levels, the Fund is underweight European
equities. Many fundamentally attractive companies simply fail our value bias due
to the higher risk they present. The Fund has cut back its weighting in Asia,
but holdings in Malaysia and the Philippines did hurt returns in March and April
as these markets began a sharp decline. The focus of Lexington International
Fund remains on stock selection. Weighing both risk and reward has led to a
heavy weighting of Canadian issues. Stocks such as Bombardier and IMAX have been
strong performers in 1997.
Equity markets are enjoying an historic climb in most countries around the
world. Monetary stimulus from central banks in Europe and Japan has stimulated
financial asset inflation as weak economies can't absorb these funds. Of course,
there are other positive factors as well, such as global restructuring, European
Monetary Union and Latin American economic recovery. However, like Federal
Reserve Chairman Greenspan, we wonder whether investors have become
"irrationally exuberant." Conditions are positive for stocks yet much, if not
all, the good news seems reflected in valuations. Markets may continue advancing
but clearly the risks have become very high. Any external shock could cause a
sharp fall in global equities. Signs of inflation would likely lead to a bear
market as interest rates would have to rise.
The challenge to investors remains participating in this great bull market
while maintaining a healthy respect for risk and downside protection. As a
result, the Fund continues with its value bias. Due to the advent of index funds
and high institutional cashflows, many larger companies have stock prices at
extremely expensive levels. The Lexington International Fund has found better
value in smaller companies which should offer more downside protection.
Regionally, the Fund remains overweight in Canada, Australia and New Zealand.
Southeast Asian stocks have been reduced due to rising interest rates and a poor
profit outlook. European holdings are mainly comprised of restructuring
companies and cyclicals. However, the Fund is underweight European equities due
to what we believe to be excessive valuations on many stocks. Japanese stocks
also remain unattractive as the economy is likely to slow during the second half
of the year. Japanese companies have also been slow to restructure and
maximizing returns is still not a priority for corporate Japan. Finally, Latin
America is enjoying a strong economic recovery. Mexican stocks look very
attractive as profits are accelerating. A recently completed Congressional
election has given investors additional confidence in the newly democratic
political system. Mexican equities are still relatively cheap and should perform
well if interest rates fall as expected over the next year. Currently, the Fund
has over 3% in Mexican equities.
Sincerely,
/s/ Richard T. Saler /s/ Robert M. DeMichele
- ------------------------ --------------------------
Richard T. Saler Robert M. DeMichele
Portfolio Manager President
August, 1997 August, 1997
*13.47% and 10.63% are the one year and since commencement (1/3/94) 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.
1
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30,1997 (unaudited)
NUMBER OF VALUE
SHARES SECURITY (NOTE 1)
- --------------------------------------------------------
COMMON STOCK: 93.2%
Argentina: 1.8%
28,400 Perez Companc S.A. .......... $ 228,080
14,900 Transportadora de Gas del
Sur, S.A. (ADR) ........... 186,250
-----------
414,330
-----------
Australia: 2.7%
211,400 Foster's Brewing Group, Ltd. 389,588
37,925 QBE Insurance Group, Ltd. ... 227,290
-----------
616,878
-----------
Austria: 5.2%
8,800 Boehler-Uddeholm AG ......... 682,554
2,500 Wienerberger
Baustoffindustrie AG ...... 513,620
-----------
1,196,174
-----------
Brazil: 2.6%
18,800 Aracruz Celulose S.A. (ADR) . 383,050
290,000 Companhia Cervejaria Brahma
(Preferred shares) ........ 222,238
-----------
605,288
-----------
Canada: 8.1%
17,200 Bombardier, Inc. "B" ........ 390,241
10,700 Hudson's Bay Company ........ 240,439
24,600 Imax Corporation2 ........... 607,313
7,200 Jetform Corporation2 ........ 94,950
25,900 Noranda Forest, Inc ......... 190,557
7,200 Tarragon Oil & Gas, Ltd.2 ... 84,549
57,600 Yogen Fruz World-Wide, Inc.2 252,603
-----------
1,860,652
-----------
Chile: 2.1%
27,850 Antofagasta Holdings Plc .... 212,518
8,300 Banco Santander (ADR)
(Preferred Shares) ........ 122,425
8,600 Maderas y Sinteticos Sociedad
Anonima S.A. (ADR) ........ 142,975
---------
477,918
---------
France: 4.4%
2,080 Alcatel Alsthom ............. 260,756
5,300 Elf Aquitaine S.A. (ADR) .... 288,519
3,600 Lafarge ..................... 224,121
1,930 Sidel ....................... 149,576
4,400 Unisor Sacilor .............. 79,442
---------
1,002,414
---------
Germany: 3.6%
7,300 Continental AG .............. 181,397
4,600 Deutsche Bank AG ............ 268,999
2,100 Hoechst AG .................. 89,156
7,500 Rofin Sinar Technologies2 ... 143,438
346 Sto AG (Preferred shares) ... 144,751
-----------
827,741
-----------
Greece: 0.4%
732 Hellenic Tellecommunication
Organization S.A. (Rights)2 1,200
12,600 Michaniki S.A. .............. 95,486
-----------
96,686
-----------
Hong Kong: 5.1%
7,600 HSBC Holdings Plc ........... 228,571
280,000 JCG Holdings, Ltd. .......... 225,886
248,000 National Mutual Asia, Ltd. .. 275,297
4,000 Nu Skin Asia Pacific, Inc.2 . 106,000
163,000 Peregrine Investment
Holdings, Ltd. ............ 335,582
-----------
1,171,336
-----------
Indonesia: 0.7%
96,500 PT Tambang Timah ............ 149,820
-----------
Ireland: 3.8%
29,000 Allied Irish Banks Plc ...... 221,920
2,900 Elan Corporation Plc2 ....... 131,225
132,200 Jefferson Smurfit Group ..... 382,922
25,000 Ryanair Holdings Plc2 ....... 132,758
-----------
868,825
-----------
Italy: 1.9%
9,100 Industrie Natuzzi Spa (ADR) . 233,187
36,800 Stet Societa' Finanziaria
Telefonica Spa. ........... 214,138
-----------
447,325
-----------
Japan: 15.7%
3,600 Acom Company, Ltd. .......... 173,661
10,800 Amway Japan, Ltd. ........... 366,198
2,800 Doutor Coffee Company, Ltd. . 113,781
15,000 Fuji Bank, Ltd. ............. 225,465
8,000 Fujitsu, Ltd. ............... 111,160
22,000 Kubota Corporation .......... 107,856
2,200 Maruco Company, Ltd. ........ 18,341
13,000 Matsushita Electric Industrial
Company, Ltd. ............. 262,431
16,000 Mitsubishi Estate Company ... 232,107
8,000 NEC Corporation ............. 111,859
99,000 Nippon Steel Corporation .... 316,648
5,000 Omron Corporation ........... 104,431
5,100 Sony Corporation ............ 445,242
7,000 Sumitomo Electric Industries 117,452
12,000 The Bank of Tokyo--
Mitsubishi, Ltd. .......... 241,195
2,100 Tiemco, Ltd. ................ 93,594
5,000 Tokyo Electron, Ltd. ........ 239,448
25,000 Toshiba Corporation ......... 161,015
19,000 Yamato Kogyo Company, Ltd. .. 187,625
-----------
3,629,509
-----------
2
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30,1997 (unaudited) (continued)
NUMBER OF VALUE
SHARES SECURITY (NOTE 1)
- --------------------------------------------------------
Malaysia: 1.9%
126,000 Tanjong Plc ................. $ 434,310
-----------
Mexico: 2.1%
100,800 Cemex S.A. de C.V. "B" ...... 490,408
-----------
Netherlands: 1.0%
3,180 Philips Electronics N.V. .... 228,195
-----------
New Zealand: 3.0%
198,800 Brierley Investments, Ltd. .. 194,015
95,800 Carter Holt Harvey, Ltd. .... 247,370
81,300 Fletcher Challenge Building . 244,090
3,252 Fletcher Challenge Forests .. 4,716
-----------
690,191
-----------
Norway: 1.9%
22,600 Saga Petroleum AS ........... 429,106
-----------
Philippines: 0.7%
457,300 C & P Homes, Inc. ........... 171,643
-----------
Poland: 1.5%
3,756 Debica S.A. ................. 77,149
10,242 Elektrim Towarzystwo
Handlowe S.A. ............. 89,135
3,371 Wedel S.A. .................. 181,565
-----------
347,849
-----------
Singapore: 1.9%
26,200 Clipsal Industries, Ltd. .... 92,748
44,000 Jardine Strategic
Holdings, Ltd. ............ 166,320
2,200 Jardine Strategic
Holdings, Ltd. (Warrants)2 99
52,800 Want Want Holdings2 ......... 175,296
-----------
434,463
-----------
Spain: 2.7%
5,500 Adolfo Dominguez S.A.2 ...... 216,903
1,100 Banco Popular Espanol S.A. .. 270,007
2,200 Tele Pizza, S.A.2 ........... 129,843
-----------
616,753
-----------
Sweden: 1.6%
35,000 Industrial & Financial Systems,
IFS, AB1,2 ................ 169,741
17,900 Skandinaviska Enskilda ...... 193,298
-----------
363,039
-----------
Switzerland: 6.6%
240 ABB AG ...................... 363,823
205 Nestle S.A. ................. 270,830
170 Novartis AG ................. 272,168
490 Saurer AG2 .................. 325,020
330 Winterthur Schweizerische
Versicherungs-Gesellschaft 291,100
-----------
1,522,941
-----------
Thailand: 0.3%
9,000 BEC World Public Company, ... 77,128
-----------
United Kingdom: 9.9%
127,900 Aegis Group Plc ............. 133,572
3,800 Blacks Leisure Group Plc .... 28,776
20,330 D.F.S. Furniture Company Plc 190,154
50,500 George Wimpey Plc ........... 113,464
22,800 Grand Metropolitan Plc ...... 220,656
18,300 Harvey Nichols Plc .......... 85,888
96,400 Inchcape Plc ................ 454,041
8,000 Oriflame International S.A. . 64,575
19,800 PizzaExpress Plc ............ 207,275
10,000 Provident Financial Plc ..... 92,702
13,360 RTZ Corporation Plc ......... 232,690
54,800 Tomkins Plc ................. 237,129
45,800 Vodafone Group Plc .......... 222,958
-----------
2,283,880
-----------
TOTAL COMMON STOCK
(cost $19,073,554) ........ 21,454,802
-----------
SHORT-TERM INVESTMENTS: 4.3%
$1,000,000 Federal Home Loan Mortgage
Corporation, 5.42%, due 7/14/97
(cost $998,043) ........... 998,043
-----------
TOTAL INVESTMENTS: 97.5%
(Cost $20,071,597+) (Note 1) 22,452,845
-----------
Other assets in excess of
liabilities: 2.5% ......... 581,484
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $12.15 per
share on 1,895,902 shares
outstanding) .............. $23,034,329
===========
1Restricted Security (Note 8).
2Non income producing security.
ADR -- American Depository Receipt.
+Aggregate cost for Federal Income tax purposes is $20,085,420.
3
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30,1997 (unaudited) (continued)
At June 30, 1997, the composition of the Fund's net assets by industry
concentration was as follows:
Banking ................................... 7.7%
Capital Equipment ......................... 11.8
Construction & Housing .................... 1.7
Consumer Durable .......................... 5.6
Consumer Nondurable ....................... 11.7
Electric & Electronics .................... 2.3
Energy Sources ............................ 4.3
Financial Services ........................ 8.2%
Health &Personal Care ..................... 2.5
Materials ................................. 18.5
Merchandising ............................. 4.8
Multi-Industry ............................ 4.5
Real Estate ............................... 1.0
Services .................................. 3.7
Telecommunications ........................ 1.9%
Trade ..................................... 2.4
Transportation ............................ 0.6
Other assets .............................. 6.8
-----
Total Net Assets ........................ 100.0%
=====
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30,1997 (unaudited)
ASSETS
Investments, at value (cost $20,071,597) (Note 1) ................ $22,452,845
Cash ............................................................. 1,115,408
Receivable for investment securities sold ........................ 428,427
Receivable for shares sold ....................................... 51,483
Dividends and interest receivable ................................ 52,916
Foreign taxes recoverable ........................................ 33,528
Unrealized gain on open forward contracts (Note 7) ............... 31,347
Deferred organization expenses, net (Note 1) ..................... 16,381
-----------
Total Assets .............................................. $24,182,335
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ................. 9,388
Payable for investment securities purchased ...................... 1,056,925
Payable for shares redeemed ...................................... 1,231
Accrued expenses ................................................. 80,462
-----------
Total Liabilities ......................................... 1,148,006
-----------
NET ASSETS (equivalent to $12.15 per share on 1,895,902 shares
outstanding) (Note 4) .......................................... $23,034,329
===========
Net Assets consist of:
Capital stock--authorized 1,000,000,000 shares,
$.001 par value per share ...................................... $ 1,896
Additional paid-in capital (Note 1) .............................. 19,317,911
Undistributed net investment income (Note 1) ..................... 79,401
Accumulated net realized gain on investments and foreign
currency holdings (Note 1) ..................................... 1,226,419
Unrealized appreciation of investments and foreign
currency holdings .............................................. 2,408,702
-----------
TOTAL NET ASSETS ........................................ $23,034,329
===========
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF OPERATIONS
Six months ended June 30,1997 (unaudited)
INVESTMENT INCOME
Dividends ............................................ $ 303,825
Interest ............................................. 43,106
----------
346,931
Less: foreign tax expense ............................ 34,710
----------
Total investment income .......................... $ 312,221
EXPENSES
Investment advisory fee (Note 2) ................... 100,763
Custodian expense .................................. 37,235
Distribution expense (Note 3) ...................... 25,191
Printing and mailing expenses ...................... 16,837
Transfer agent and shareholder servicing
expense (Note 2) ................................. 15,975
Accounting expenses (Note 2) ....................... 10,409
Registration fees .................................. 9,631
Directors' fees and expenses ....................... 7,597
Amortization of organization costs (Note 1) ........ 5,468
Professional fees .................................. 5,085
Computer processing fees ........................... 2,887
Other expenses ..................................... 3,437
----------
Total expenses ................................... 240,515
Less: expenses recovered under contract with
investment adviser (Note 2) ................... 64,180 176,335
---------- ---------
Net investment income ............................ 135,886
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 5)
Net realized gain on:
Investments ...................................... 1,302,640
Foreign currency transactions .................... 32,968
----------
Net realized gain .............................. 1,335,608
Net change in unrealized appreciation on:
Investments ...................................... 826,886
Foreign currency translations of other assets
and liabilities ................................ 42,298
----------
Net change in unrealized appreciation .......... 869,184
----------
Net realized and unrealized gain ............... 2,204,792
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $2,340,678
==========
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
LEXINGTON INTERNATIONAL 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 (loss) ........................... $ 135,886 $ (73,734)
Net realized gain from investments and foreign
currency transactions ................................ 1,335,608 2,161,800
Net change in unrealized appreciation of
investments and foreign currency translations ........ 869,184 377,550
------------ ------------
Increase in net assets resulting from operations ... 2,340,678 2,465,616
Distributions to shareholders from net investment income -- (319,185)
Distributions to shareholders from net realized gains
from security transactions (Note 1) .................. -- (1,538,614)
Increase in net assets from capital share
transactions (Note 4) ................................ 1,802,683 428,512
------------ ------------
Net increase in net assets ......................... 4,143,361 1,036,329
NET ASSETS:
Beginning of period .................................. 18,890,968 17,854,639
------------ ------------
End of period (including undistributed net investment
income of $79,401 and distributions in excess of
net investment income of $56,485, respectively) .. $ 23,034,329 $ 18,890,968
============ ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
6
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited) and December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington International 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 through investment in common stocks and equivalents of companies
domiciled in foreign countries. 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.
DEFERRED ORGANIZATION EXPENSES Organization expenses aggregating $48,067
have been deferred and are being amortized on a straight-line basis over five
years.
7
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited) and December 31, 1996 (continued)
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 1.00% of the Fund' s average daily net assets. For
1997, LMC has agreed to voluntarily limit the total expenses of the Fund
(including management fees, but excluding interest, taxes, brokerage commissions
and extraordinary expenses) to an annual rate of 1.75% of the Fund's average
daily net assets. Total reimbursement was $64,180 for the six months ended June
30, 1997, and is set forth in the statement of operations. The Fund reimbursed
LMC for certain expenses, including accounting and shareholder servicing costs
of $26,384 which are incurred by the Fund, but paid by LMC.
3. DISTRIBUTION PLAN
The Fund has 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 six months ended June 30,
1997 were $25,191 and are set forth in the statement of operations.
4. 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 ................. 202,877 $ 2,332,157 317,658 $ 3,566,613
Shares issued on reinvestment
of dividends .............. -- -- 149,131 1,605,600
------- ----------- ------- -----------
202,878 2,332,157 466,789 5,172,213
Shares redeemed ............. (45,966) (529,474) (412,925) (4,743,701)
------- ----------- ------- -----------
Net increase ................ 156,911 $ 1,802,683 53,864 $ 428,512
======= =========== ======= ===========
</TABLE>
5. 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 $14,502,633 and
$13,652,205 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 $2,902,614 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value amounted to $493,912.
8
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited) and December 31, 1996 (continued)
6. INVESTMENT AND CONCENTRATION RISKS
The Fund's investments in foreign securities may involve risks not present in
domestic investments. Since foreign securities may be denominated in a foreign
currency and involve settlement and pay interest or dividends in foreign
currencies, changes in the relationship of these foreign currencies to the U.S..
dollar can significantly affect the value of the investments and earnings of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments. In addition to the risks described above, risks may arise
from forward foreign currency contracts as a result of the potential inability
of counterparties to meet the terms of their contracts.
7. FORWARD FOREIGN EXCHANGE CONTRACTS
At June 30, 1997, the Fund was committed to sell foreign currencies under the
following forward foreign exchange contracts:
<TABLE>
<CAPTION>
Contract Unrealized
Settlement Amount Contract Current Gain at
Security Date (Local Currency) Rate Rate June 30, 1997
------- --------- ------------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
New Zealand Dollar ........ 10/3/97 849,980 0.6900 0.6783 $ 9,932
French Franc .............. 12/2/97 2,780,125 5.6747 5.8215 12,354
Italian Lira .............. 12/2/97 267,411,158 1,699.22 1,710.70 1,056
Spanish Pesetas ........... 12/2/97 47,247,745 143.485 147.06 8,005
-------
$31,347
=======
</TABLE>
8. 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 IFS,AB ..... 6/12/97 35,000 $4.88 $169,741 0.74%
</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.
9
<PAGE>
LEXINGTON INTERNATIONAL 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
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................... $10.86 $10.60 $10.37 $10.00
------ ------ ------- -------
Income (loss) from investment operations:
Net investment income (loss) ........................... 0.07 (0.02) (0.01) (0.08)
Net realized and unrealized gain
on investments and foreign
currency transactions ................................ 1.22 1.45 0.61 0.67
------ ------ ------- -------
Total income from investment operations ................ 1.29 1.43 0.60 0.59
Less distributions:
Distributions from net investment income ............... -- (0.20) -- --
Distributions in excess of net investment income
(temporary book-tax difference) ........................ -- -- (0.35) --
Distributions from net realized gains .................. -- (0.97) (0.02) (0.10)
Distributions in excess of net realized gains
(temporary book-tax difference) ........................ -- -- -- (0.12)
------ ------ ------- -------
Total distributions .................................... -- (1.17) (0.37) (0.22)
------ ------ ------- -------
Net asset value, end of period ......................... $12.15 $10.86 $10.60 $10.37
====== ====== ======= =======
Total return ........................................... 23.95%* 13.57% 5.77% 5.87%
Ratio to average net assets:
Expenses, before reimbursement or waivers .............. 2.39%* 2.45% 2.46% 2.39%
Expenses, net of reimbursement or waivers .............. 1.75%* 2.45% 2.46% 2.39%
Net investment income (loss), before reimbursement
or waivers ........................................... 1.99%* (0.39%) (0.12%) 0.94%
Net investment income (loss) ........................... 1.35%* (0.39%) (0.12%) 0.94%
Portfolio turnover rate ................................ 146.18%* 113.55% 137.72% 100.10%
Average commission paid on equity
security transactions** ................................ $0.01 $0.03 -- --
Net assets, end of period (000's omitted) .............. $23,034 $18,891 $17,855 $17,843
</TABLE>
* Annualized.
**In accordance with SEC disclosure guidelines, the average commissions are
calculated for the periods beginning with the year ended December 31, 1996, but
not for prior periods.
10
<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 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 VALUE FUND, INC.--Seeks long-term capital appreciation
through investment in common stocks of companies domiciled in the United States
with a market capitalization of less than $1 billion.
LEXINGTON CONVERTIBLE SECURITIES FUND--Seeks total return by providing capital
appreciation, current income and conservation of capital through investments in
a diversified portfolio of securities convertible into shares of common stock.
LEXINGTON GNMA INCOME FUND, INC.--Seeks to achieve a high level of current
income, consistent with liquidity and safety of principal, through investment
primarily in mortgage-backed GNMA ("Ginnie Mae") certificates that are
guaranteed as to the timely payment of principal and interest by the United
States Government.
LEXINGTON MONEY MARKET TRUST--Seeks a high level of current income consistent
with preservation of capital and liquidity through investments in interest
bearing short-term money market instruments.
For more complete information about any of the Lexington Funds and a prospectus
which includes management fee and expenses call the distributor toll-free at
1-800-526-0057. Read the prospectus carefully before you invest or send money.
11
<PAGE>
Lexington
International 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 International 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.
