Dear Shareholders:
- --------------------------------------------------------------------------------
The Lexington International Fund, Inc., appreciated by 13.57%* in 1996
versus 11.8% for the average international fund, according to Lipper Analytical
Services, Inc. The unmanaged Morgan Stanley Capital International (EAFE) Index**
advanced 6.0% this past year.
The fourth quarter saw strong advances in most major markets except Japan.
Lexington International Fund, Inc. underperformed in the fourth quarter due to
the portfolio's "value" tilt. Holdings in European cyclicals and emerging
markets where better value existed did not perform as well as European growth
and financial stocks. For the year, the Fund benefitted from an underweighting
of Japan which declined 15.5% in U.S. dollar terms on the unmanaged Morgan
Stanley Capital International Japan Index**. Sweden and Finland were the
standout markets in 1996 with dollar returns of 37.2% and 33.9% respectively on
the unmanaged Morgan Stanley Capital International (EAFE) Index**. Holdings in
Eastern Europe also provided strong gains. Falling inflation, budget cutting and
corporate restructuring led to sharp rises in equities. The Fund had small
positions in these markets as interest rates fell more than anticipated.
The unmanaged Morgan Stanley Capital International European Index**
appreciated 21.1% in 1996. European equities were propelled by falling interest
rates and corporate restructuring. As Europe moves toward a single currency,
interest rates in Finland, Sweden, and Spain fell dramatically. These markets
responded with stocks rising 35-40%. Surprisingly, Italian interest rates fell
almost 4% yet equities only gained 12.6%. The outlook for European equities
remains favorable. Growth will continue to be muted by high unemployment levels.
However, interest rates are likely to stay low due to budget cutting measures
and low inflation. European companies are finally addressing shareholder
concerns regarding competitiveness and profitability. Companies which have
demonstrated a commitment to enhancing shareholder value through cost cutting,
divestitures and share buy backs have been rewarded with higher share prices.
This trend should continue over the next several years. Growth in Europe is
likely to surprise on the upside in Germany and Switzerland as their weak
currencies are stimulating exports. Cyclical stocks offer good value in these
markets.
Japanese equities continued to underperform the world. Most of the decline
came in the fourth quarter as austere budget measures heightened fears of slow
growth and weak profits for 1997. Japanese equities remain unattractive as both
the public and private sector have been slow to restructure. A further sharp
fall in equities could provide an opportunity as pressure would increase for
restructuring to accelerate. The Japanese market has only rewarded investors who
own "Nifty Fifty" stocks. These stocks are well known companies such as Sony,
Canon, and Toyota which are competitive on an international basis. The portfolio
has concentrated holdings in these stocks.
Emerging markets saw great divergence in 1997 as winners included Poland up
57%, Hungary 104% and Brazil 38%. However, on the negative side Thailand fell
38% and Korea declined 38%. Currently, most emerging markets look very
attractive as they have underperformed developed markets for three years. Latin
America is enjoying accelerating economic
1
<PAGE>
activity which will positively impact profits. Asian markets generally remain
attractive due to expected declines in interest rates and attractive valuation
levels.
International equities look attractive under current conditions. The Fund
remains overweight in emerging markets such as Malaysia, Philippines, and Chile
due to expectations of falling interest rates, strong profit growth and
attractive stock prices. European equities are also favored with a focus on
value cyclicals and restructuring companies. Finally, the Fund remains
underweighted in Japanese equities with positions primarily in large world class
companies. Further sharp falls could lead to opportunities in domestic cyclicals
particularly if private and public sector restructuring emerges from the ruins.
Sincerely,
Richard T. Saler Robert M. DeMichele
Portfolio Manager President
February, 1997 February, 1997
CHART/BEGIN
Printed version of this shareholder report contains a
graphic chart indicating the comparison of change in
value of a $10,000 investment in Lexington
International Fund, Inc., and the unmanaged Morgan
Stanley Capital International (EAFE) Index from
1/3/94 through 12/31/96
CHART/END
*13.57% and 8.34% are the one year and since commencement (1/3/94) average
annual standard total returns, respectively, for the period ended December 31,
1996. 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.
**All country and regional returns are from the corresponding Morgan Stanley
Capital International Indices. Returns are dollar based with net dividends
reinvested.
2
<PAGE>
(left column)
Lexington International Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS: 97.8%
Australia: 1.0%
34,125 QBE Insurance Group, Ltd. ............................ $ 179,699
----------
Austria: 2.2%
4,300 Bank Austria AG (Preferred Shares) ................... 166,612
1,300 Wienerberger Baustoffindustrie AG .................... 251,856
----------
418,468
----------
Belgium: 1.3%
800 Credit Communal Holding/Dexia2 ....................... 72,912
1,900 Credit Communal Holding/Dexia1,2 ..................... 173,165
----------
246,077
----------
Brazil: 1.0%
22,000 Aracruz Celulose S.A. (ADR) .......................... 181,500
----------
Canada: 1.6%
7,200 Jetform Corporation .................................. 130,500
25,900 Noranda Forest, Inc. ................................. 175,734
----------
306,234
----------
Chile: 3.0%
27,850 Antofagasta Holdings Plc ............................. 162,043
16,000 Banco Santander (ADR) ................................ 240,000
11,400 Maderas y Sinteticos Sociedad
Anonima S.A. (ADR) ................................. 159,600
----------
561,643
----------
Finland: 1.0%
10,800 Valmet Corporation ................................... 188,396
----------
France: 6.8%
2,580 Alcatel Alsthom ...................................... 206,847
4,300 Elf Aquitaine S.A. (ADR) ............................. 194,575
5,900 Lafarge .............................................. 353,292
2,010 SGS-Thomson Microelectronics N.V.2 ................... 141,894
3,130 Sidel ................................................ 214,939
1,550 Societe Generale de Surveillance
Holding S.A. "B" ................................... 167,262
----------
1,278,809
----------
Germany: 4.6%
7,300 Continental AG ....................................... 131,211
2,900 Daimler-Benz AG2 ..................................... 199,467
3,900 Deutsche Bank AG ..................................... 181,953
4,300 Hoechst AG ........................................... 202,847
346 Sto AG (Preferred shares) ............................ 162,772
----------
878,250
----------
Greece: 1.9%
2,500 Ergo Bank S.A. ....................................... 126,718
13,600 Hellenic Telecommunications
Organization S.A. .................................. 232,354
----------
359,072
----------
(right column)
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
Hong Kong: 5.2%
37,000 Citic Pacific, Ltd. .................................. $ 214,777
379,000 Guangdong Investments ................................ 365,036
297,000 National Mutual Asia, Ltd. ........................... 282,217
73,000 Peregrine Investment Holdings, Ltd. .................. 125,048
----------
987,078
----------
Hungary: 0.6%
2,000 Pick Szeged Rt. ...................................... 118,404
----------
Indonesia: 1.5%
51,000 PT Semen Cibinong .................................... 143,556
77,500 PT Tambang Timah ..................................... 141,058
----------
284,614
----------
Ireland: 2.8%
29,000 Allied Irish Banks Plc ............................... 194,368
108,800 Jefferson Smurfit Group .............................. 330,541
----------
524,909
----------
Italy: 3.0%
6,100 Bulgari S.p.A. ....................................... 123,565
22,400 Istituto Mobiliare Italiano S.p.A. ................... 190,632
54,400 Stet Societa' Finanziaria Telefonica
S.p.A. ............................................. 246,616
----------
560,813
----------
Japan: 14.4%
3,857 Amway Japan, Ltd. .................................... 123,615
9,000 Canon, Inc. .......................................... 198,501
23,000 Citizen Watch Company, Ltd. .......................... 164,470
3,000 CSK Corporation ...................................... 78,573
200 H.I.S. Company, Ltd. ................................. 9,649
2,200 Maruco Company, Ltd. ................................. 73,731
13,000 Matsushita Electric Industrial
Company, Ltd. ...................................... 211,683
51,000 Mazda Motor Corporation .............................. 181,907
10,000 Nitto Denko Corporation .............................. 146,463
11,000 Nomura Securities Company, Ltd. ...................... 164,901
9 NTT Data Communications Systems
Corporation ........................................ 262,859
18,000 Sodick2 .............................................. 148,876
6,100 Sony Corporation ..................................... 398,888
6,000 Tokyo Electron, Ltd. ................................. 183,510
7,000 Toyota Motor Corporation ............................. 200,827
19,000 Yamato Kogyo Company, Ltd. ........................... 175,153
----------
2,723,606
----------
Malaysia: 5.7%
27,000 Arab Malaysian Finance Bhd ........................... 150,742
3,000 Berjaya Sports Toto Bhd .............................. 14,967
26,000 Hong Leong Credit Bhd ................................ 163,690
76,000 Magnum Corporation Bhd ............................... 147,456
101,000 MBF Capital Bhd ...................................... 163,967
31,000 Sime Darby Bhd ....................................... 122,134
20,000 Sime Darby Bhd1 ...................................... 78,796
58,000 Tanjong Plc .......................................... 231,954
----------
1,073,706
----------
3
<PAGE>
(left column)
Lexington International Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996 (continued)
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
Mexico: 1.3%
15,000 Tubos De Acero De Mexico S.A.
(ADR)2 ............................................. $ 238,125
----------
Netherlands: 0.8%
3,880 Philips Electronics N.V. ............................. 157,018
----------
New Zealand: 4.0%
198,800 Brierley Investments, Ltd. ........................... 184,002
78,600 Carter Holt Harvey, Ltd. ............................. 178,263
35,100 Fisher & Paykel Industries, Ltd. ..................... 137,636
81,300 Fletcher Challenge Building .......................... 249,870
----------
749,771
----------
Norway: 2.2%
35,100 Fokus Banken A.S. .................................... 213,328
12,000 Saga Petroleum A.S. .................................. 201,084
----------
414,412
----------
Philippines: 2.7%
446,300 C & P Homes, Inc. .................................... 229,089
261,450 Filinvest Land, Inc.2 ................................ 81,517
24,000 Manila Electric Company "B" .......................... 196,198
----------
506,804
----------
Poland: 2.2%
4,900 Debica S.A.2 ......................................... 109,631
10,242 Elektrim Towarzystwo Handlowe S.A. ................... 93,092
3,535 Wedel S.A. ........................................... 174,247
985 Zaklady Piwowarski w Zywcu S.A. ...................... 45,798
----------
422,768
----------
Portugal: 1.0%
3,000 Telecel-Communicacaoes Pessoais,
S.A.1,2 ............................................ 191,304
----------
Russia: 1.2%
4,900 LUKoil Holdings of Russia (ADR) ...................... 228,242
----------
Singapore: 4.9%
21,000 City Developments, Ltd. .............................. 189,160
43,200 Clipsal Industries, Ltd. ............................. 157,248
53,000 DBS Land, Ltd. ....................................... 195,129
36,000 Inchcape Bhd ......................................... 125,077
44,000 Jardine Strategic Holdings, Ltd. ..................... 159,280
38,000 Want Want Holdings2 .................................. 99,940
----------
925,834
----------
Spain: 3.4%
1,000 Banco Popular Espanol S.A. ........................... 196,041
3,600 Banco Santander S.A. ................................. 229,990
5,800 Repsol S.A. .......................................... 222,056
----------
648,087
----------
(right column)
Number of
Shares
or Principal Amount
Amount Security (Note 1)
- --------------------------------------------------------------------------------
Sweden: 2.2%
2,890 Astra AB ............................................. $ 142,637
15,900 Skandinaviska Enskilda Banken ........................ 163,005
4,100 Svenska Handelsbanken ................................ 117,691
-----------
423,333
-----------
Switzerland: 4.4%
150 ABB AG ............................................... 186,003
180 Nestle S.A. .......................................... 192,639
37 Roche Holdings AG .................................... 286,996
300 Winterthur Schweizerische
Versicherungs-Gesellschaft ......................... 172,932
-----------
838,570
-----------
Thailand: 0.5%
9,000 BEC World Public Company, Ltd.2 ...................... 81,435
8,500 Property Perfect Public Company, Ltd. ................ 8,785
-----------
90,220
-----------
United Kingdom: 9.4%
149,600 Aegis Group Plc ...................................... 156,166
30,100 British Telecommunications Plc ....................... 203,207
17,700 D.F.S. Furniture Company Plc ......................... 182,800
55,600 Grand Metropolitan Plc ............................... 436,731
12,060 RTZ Corporation Plc .................................. 193,277
88,500 Tomkins Plc .......................................... 406,643
45,100 Vodafone Group Plc ................................... 190,248
-----------
1,769,072
-----------
TOTAL COMMON STOCKS
(Cost $16,920,539) ................................. 18,474,838
-----------
SHORT-TERM INVESTMENTS: 5.7%
$1,100,000 United States Treasury Bill,
5.16%, due 04/17/97
(Cost $1,083,514) .................................. 1,083,577
-----------
TOTAL INVESTMENTS: 103.5%
(Cost $18,004,053+) (Note 1) ....................... 19,558,415
Liabilities in excess of other assets:
(3.5%) ............................................. (667,447)
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $10.86 per share on
1,738,991 shares outstanding) ...................... $18,890,968
===========
1Restricted security (Note 8).
2Non-income producing security.
ADR-American Depository Receipt.
+Aggregate cost for Federal income tax purposes is $18,017,876.
4
<PAGE>
Lexington International Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996 (continued)
- --------------------------------------------------------------------------------
At December 31, 1996, the composition of the Fund's net assets by industry
concentration was as follows: Banking 12.6%
(left column)
Banking .................... 12.6%
Capital Equipment .......... 6.3
Construction & Housing ..... 1.2
Consumer durable ........... 9.7
Consumer non durable ....... 6.3
Electric & Electronics ..... 5.0
Energy Sources ............. 4.5
(middle)
Financial Services ......... 10.5
Health & Personal Care ..... 2.3
Materials .................. 15.7
Merchandising .............. 1.0
Multi-industry ............. 8.5%
Real Estate ................ 2.5
Services ................... 4.4
(right)
Telecommunications ......... 5.6
Trade ...................... 0.5
Utilities .................. 1.0
Other assets ............... 2.4
-----
Total Net Assets ...........100.0%
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
Lexington International Fund, Inc.
Statement of Assets and Liabilities
December 31, 1996
<TABLE>
<S> <C>
Assets
Investments, at value (cost $18,004,053) (Note 1) ............................................. $19,558,415
Receivable for investment securities sold ..................................................... 779,484
Dividends and interest receivable ............................................................. 11,649
Foreign taxes recoverable ..................................................................... 15,616
Deferred organization expenses, net (Note 1) .................................................. 21,848
-----------
Total Assets ............................................................................. 20,387,012
-----------
Liabilities
Due to custodian bank ......................................................................... 697,420
Due to Lexington Management Corporation (Note 2) .............................................. 15,414
Payable for investment securities purchased ................................................... 473,645
Distributions payable ......................................................................... 115,821
Accrued expenses .............................................................................. 179,733
Unrealized loss on open forward contracts (Note 7) ............................................ 14,011
-----------
Total Liabilities ........................................................................ 1,496,044
-----------
Net Assets (equivalent to $10.86 per share on 1,738,991 shares outstanding) (Note 4) .......... $18,890,968
===========
Net Assets consist of:
Capital stock-authorized 1,000,000,000 shares,
$.001 par value per share ................................................................... $ 1,739
Additional paid-in capital (Note 1) ........................................................... 17,515,385
Distributions in excess of net investment income (Note 1) ..................................... (56,485)
Accumulated net realized loss on investments and foreign currency transactions (Note 1) ....... (109,189)
Net unrealized appreciation of investments and foreign currency transactions .................. 1,539,518
-----------
Total Net Assets ......................................................................... $18,890,968
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
6
<PAGE>
Lexington International Fund, Inc.
Statement of Operations
Year ended December 31, 1996
<TABLE>
<S> <C> <C>
Investment Income
Dividends ............................................................$ 369,432
Interest ............................................................. 73,726
----------
443,158
Less: foreign tax expense ............................................ 50,291
----------
Total investment income ......................................... $ 392,867
Expenses
Investment advisory fee (Note 2) ................................... 190,486
Custodian fees ..................................................... 72,419
Distribution expenses (Note 3) ..................................... 47,446
Printing and mailing ............................................... 31,981
Transfer agent and shareholder servicing
expenses (Note 2) ................................................ 29,390
Accounting expense (Note 2) ........................................ 20,422
Registration fees .................................................. 17,861
Professional fees .................................................. 16,501
Directors' fees and expenses ....................................... 15,440
Amortization of deferred organization costs (Note 1) .............. 9,613
Computer processing fees ........................................... 8,690
Other expenses ..................................................... 6,352
----------
Total expenses 466,601
----------
Net investment loss (73,734)
Realized and Unrealized Gain on Investments (Note 5)
Net realized gain on:
Investments .................................................... 1,564,268
Foreign currency transactions .................................. 597,532
----------
Net realized gain ............................................ 2,161,800
Net change in unrealized appreciation on:
Investments .................................................... 710,807
Foreign currency translations of other assets and liabilities .. (333,257)
----------
Net change in unrealized appreciation ........................ 377,550
----------
Net realized and unrealized gain ............................. 2,539,350
----------
Increase in Net Assets Resulting from Operations ..................... $2,465,616
==========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
7
<PAGE>
Lexington International Fund, Inc.
Statement of Changes in Net Assets
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net investment loss ................................................ $ (73,734) $ (20,029)
Net realized gain from investments and foreign
currency transactions ............................................ 2,161,800 511,634
Net change in unrealized appreciation of investments
and foreign currency translations ................................ 377,550 500,347
----------- -----------
Net increase in net assets resulting from operations .......... 2,465,616 991,952
Distributions to shareholders from net investment income ........... (319,185) (398,985)
Distributions to shareholders in excess of net investment income
(Note 1) ......................................................... - (172,849)
Distributions to shareholders from net realized gains from security
transactions (Note 1) ............................................ (1,538,614) (33,076)
Increase (decrease) in net assets from capital share transactions
(Note 4) ......................................................... 428,512 (375,760)
----------- -----------
Net increase in net assets ......................................... 1,036,329 11,282
Net Assets:
Beginning of period .............................................. 17,854,639 17,843,357
----------- -----------
End of period (including distributions in excess of net investment
income of $56,485 and $172,849, respectively) .................. $18,890,968 $17,854,639
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
8
<PAGE>
Lexington International Fund, Inc.
Notes to Financial Statements
December 31, 1996 and 1995
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 these changes.
9
<PAGE>
Lexington International Fund, Inc.
Notes to Financial Statements
December 31, 1996 and 1995 (continued)
Deferred Organization Expenses Organization expenses aggregating $48,067
have been deferred and are being amortized on a straight-line basis over five
years.
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. The
investment advisory contract provides that the total annual expenses of the Fund
(including management fees, but excluding interest, taxes, brokerage commissions
and extraordinary expenses) will not exceed the level of expenses which the Fund
is permitted to bear under the most restrictive expense limitation imposed by
any state in which shares of the Fund are offered for sale. No reimbursement was
required for the year ended December 31, 1996.
The Fund also reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $38,676 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 year ended December 31,
1996 were $47,446 and are set forth in the statement of operations.
4. Capital Stock
Transactions in capital stock were as follows:
Year ended Year ended
December 31, 1996 December 31, 1995
-------------------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares sold ....................... 317,658 $3,566,613 179,998 $1,853,463
Shares issued on reinvestment
of dividends .................... 149,131 1,605,600 39,453 417,018
------- --------- ------- ---------
466,789 5,172,213 219,451 2,270,481
Shares redeemed ................... (412,925) (4,743,701) (255,544) (2,646,241)
------- --------- ------- ---------
Net increase (decrease) ........... 53,864 $ 428,512 (36,093) $(375,760)
======= ========= ======= =========
10
<PAGE>
Lexington International Fund, Inc.
Notes to Financial Statements
December 31, 1996 and 1995 (continued)
5. Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales of securities for the year
ended December 31, 1996, excluding short-term securities, were $19,713,660 and
$20,850,074 respectively.
At December 31, 1996, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$2,120,483 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $594,788.
6. Investment and Concentration Risks
The Fund's investments in foreign securities may involve risks not present
in domestic investments. Since foreign securities may be denominated in a
foreign currency and involve settlement and pay interest or dividends in foreign
currencies, changes in the relationship of these foreign currencies to the U.S.
dollar can significantly affect the value of the investments and earnings of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments.
In addition to the risks described above, risks may arise from forward
foreign currency contracts as a result of the potential inability of
counterparties to meet the terms of their contracts.
7. Forward Foreign Exchange Contracts
At December 31, 1996, the Fund was committed to sell foreign currencies
under the following forward foreign exchange contracts:
Unrealized
Settlement Contract Contract Current Loss at
Security Date Amount Rate Rate 12/31/96
-------- ---------- -------- -------- ------- ----------
New Zealand Dollar ....... 04/01/97 $ 558,418 0.686 0.703 ($14,011)
========
8. Restricted Securities
The following securities were purchased under Rule 144A of the Securities
Act of 1933 and, unless registered under the Act or exempted from registration,
may be sold only to qualified institutional investors.
Acquisition Average cost Market % of Net
Security Date Shares per share Value Assets
-------- ----------- ------ --------- ------- --------
Credit Communal Holding/Dexia .......11/20/96 1,900 $86.53 $173,165 0.92%
Sime Darby Bhd ......................11/26/96 20,000 3.56 78,796 0.42%
Telecel-Communicacaoes Pessoais, S.A.12/09/96 3,000 50.66 191,304 1.01%
-------- -----
$443,265 2.35%
======== =====
Pursuant to guidelines adopted by the Fund's Board of Directors, these
unregistered securities have 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.
11
<PAGE>
Lexington International Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of period .......................... $10.60 $10.37 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment loss ......................................... (0.02) (0.01) (0.08)
Net realized and unrealized gain on investments and foreign
currency holdings ......................................... 1.45 0.61 0.67
------ ------ ------
Total income from investment operations ..................... 1.43 0.60 0.59
------ ------ ------
Less distributions:
Distributions from net investment income .................... (0.20) - -
Dividends 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 ................................ $10.86 $10.60 $10.37
====== ====== ======
Total return .................................................. 13.57% 5.77% 5.87%
Ratio to average net assets:
Expenses .................................................... 2.45% 2.46% 2.39%
Net investment loss ......................................... (0.39%) (0.12%) (0.94%)
Portfolio turnover rate ....................................... 113.55% 137.72% 100.10%
Average commissions paid on equity security transactions* ..... $0.03% - -
Net assets at end of period (000's omitted) ................... $18,891 $17,855 $17,843
</TABLE>
*In accordance with recent SEC disclosure guidelines, the average commissions
are calculated for the current period, but not for prior periods.
12
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Lexington International Fund, Inc.:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington International
Fund, Inc. as of December 31, 1996, and the related statements of operations for
the year then ended, the statement of changes in net assets for each of the
years in the two year period then ended and the financial highlights for each of
the years in the two year period then ended and for the period from January 3,
1994 (commencement of operations) to December 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian. As to securities
purchased and sold, but not received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington International Fund, Inc. as of December 31, 1996, 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 two year period then ended and for the period from
January 3, 1994 (commencement of operations) to December 31, 1994, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 10, 1997
13
<PAGE>
(left column)
LEXINGTON
INVESTOR SERVICES
- -----------------------------------------
As a Lexington shareholder, you should be
aware of the many services available to
you.
No Load-The Lexington Funds are no load
funds. That is, investments and
redemptions are made without any sales
charges, commissions or redemption fees.
--------
Free Telephone Exchange-Investments in
the Lexington Funds may be exchanged for
shares of a different Lexington Fund at
any time.
--------
Check Writing Privileges-Lexington Money
Market Trust and Lexington Tax Free Money
Fund permit investors immediate access to
their funds with check writing for
withdrawals from their account.
--------
Tax Sheltered Plans-IRA, Keogh, Pension,
and Profit Sharing Prototype Plans are
available to qualified individuals. These
plans offer investment flexibility
through the Share Exchange Service,
simplified record keeping, convenience
and investment supervision.
--------
Custodial Accounts for Minors-Investments
may be made on behalf of minors under the
Uniform Gifts to Minors Act currently in
effect in all states.
--------
Systematic Withdrawal Plan-An investor
may elect to receive a fixed amount from
his or her account each month or quarter,
subject to certain minimums.
--------
Complete Record Keeping-A statement is
provided for every transaction in
addition to a year-end statement with tax
information.
(right column)
The Lexington Group of
No Load Investment Companies
Lexington Worldwide Emerging Markets Fund, Inc.
- -Seeks long-term growth of capital primarily through invest-
ment 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.
Lexington Tax Free Money Fund, Inc.-Seeks current income
exempt from Federal income taxes while maintaining stability
of principal, liquidity and preservation of capital.
For more complete information about any of the Lexington Funds and a prospectus
which includes management fee and expenses call the distributor toll-free at
1-800-526-0056. Read the prospectus carefully before you invest or send money.
14
<PAGE>
(left column)
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 * Account Balances * Exchanges *
Last Transactions * Total Return * 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.
(right column)
-----------------------------------
LEXINGTON
-----------------------------------
-----------------------------------
LEXINGTON
INTERNATIONAL
FUND, INC.
(filled box)
Seeks long-term growth of capital,
primarily through investment in
common stocks of companies
domiciled in foreign countries.
(filled box)
ANNUAL REPORT
DECEMBER 31, 1996
The Lexington Group
of No Load
Investment Companies
-----------------------------------
