Dear Shareholders:
- --------------------------------------------------------------------------------
The Lexington International Fund, Inc., declined 2.4%* during the second
quarter. The Fund advanced 12.8%* through the first half of the year. According
to Lipper Analytical Services, Inc., the average international fund gained .7%
during the latest quarter and 15.5% through the six month period ending June.
The unmanaged Morgan Stanley EAFE Index returned 1.1%** and 15.9%** for the
latest three and six month periods.
The Fund underperformed during the quarter due to several factors. The
United Kingdom, in which the Fund is overweight, declined 2% as earnings
disappointments accelerated. The U.K. was also hampered by another interest rate
hike from the Bank of England due to inflation concerns. A value bias continues
to restrain performance as larger expensive stocks continue to power ahead.
Shock waves from Asia continue to be felt around the world. Producers of
goods and commodities have suffered while consumers have benefited. The U.S.
economy is finally showing signs of slowing, particularly in the manufacturing
sector. However, due to low unemployment, rising stock prices and low interest
rates the American consumer remains strong. Earnings growth has weakened with
earnings now growing at a low single digit rate. U.S. profits are likely to
remain under pressure due to a strong dollar, rising wage pressure, and
weakening demand overseas. Most companies are unable to pass on rising cost
pressures by raising prices.
European economies have generally improved although it remains a mixed
bag. The U.K. appears headed for a recession. The yield curve is inverted due to
continued interest rate hikes by the Bank of England. A strong currency has
damaged the manufacturing sector, which is now in recession. Due to low
unemployment the consumer is holding up the front end of the economy although
recent retail sales suggest a slowing here as well. On the European continent
the news is somewhat better. Unemployment remains high but is finally showing
signs of improving. Consumption has also picked up perhaps due to rising stock
prices and falling unemployment. However, the export sector, which has been the
driver of most of the growth, may now be catching Asian flu. Europe is likely to
have its growth recovery muted due to weakening demand elsewhere, particularly
Asia and other emerging regions.
Asia remains and will continue to be the primary trouble spot. Many Asian
economies have seen demand collapse. GDP is falling at a double digit pace in
places like Indonesia. A solution will be difficult to find and will take
considerable time. Certainly, Japan remains an important variable. The Japanese
economy is suffering its worse recession since the Second World War. The economy
is fundamentally sick due to the massive bad loans held by Japanese banks.
Recent signs of greater political resolve to address the economic problems are
cause for some optimism. However, a solution will not reverse trends overnight.
As evidenced by the U.S. in the early 1990s, it can take several years to
recover from a banking problem. Japan's problems go beyond the banks and are
more severe than any the U.S. had to face. World growth is decelerating and this
trend should continue. Interest rates are likely to stay low while corporate
profits face increasing pressure.
1
<PAGE>
The focus on stock selection remains with companies which are able to meet
investor earnings expectations. Defensive sectors such as food, and drugs should
be less affected by global economic slowing. Europe remains attractive due to
corporate restructuring, and continued earnings momentum. The European consumer
is beginning to show a greater willingness to spend as unemployment levels have
begun to decline. A stronger consumer should offset a weakening manufacturing
sector in Europe, thus allowing corporate profits to increase. Japanese equities
are among the cheapest in the world. Pressure is mounting on government
officials to tackle the country's mounting problems. The Japanese economy is in
recession and an economic turnaround does not seem likely in the near term.
However, Japanese stocks are becoming more attractive on a risk/reward basis due
to low valuations and universal pessimism. If the government gets more
aggressive in addressing the financial sector restructuring and offers greater
tax cuts, Japanese equities are likely to perform well. Stock selection of
Japanese equities remains focused on cash rich companies trading at deep
discounts to book value.
Sincerely,
/s/Richard T. Saler /s/Robert M. DeMichele
------------------- ----------------------
Richard T. Saler Robert M. DeMichele
Portfolio Manager President
August, 1998 August, 1998
*2.42% and 8.75% are the one year and since commencement (1/3/94) average annual
standard total returns, respectively, for the period ended June 30, 1998.
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 all dividends
reinvested.
2
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF NET ASSETS
(Including the Portfolio of Investments)
June 30, 1998 (unaudited)
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS: 86.3%
Australia: 1.2%
114,900 Foster's Brewing Group, Ltd. .................... $ 270,376
-----------
Austria: 3.5%
4,830 Boehler - Uddeholm AG ........................... 319,109
1,790 Wienerberger
Baustoffindustrie AG ........................... 433,016
-----------
752,125
-----------
Canada: 6.3%
5,600 Hudson's Bay Company ............................ 128,334
24,600 Imax Corporation2 ............................... 558,113
7,900 Loewen Group, Inc. .............................. 213,300
53,380 Yogen Fruz World-Wide, Inc.2 .................... 475,524
-----------
1,375,271
-----------
France: 11.2%
1,420 Alcatel Alsthom ................................. 289,119
1,900 Axa-UAP ......................................... 213,694
2,700 Banque Nationale de Paris ....................... 220,608
5,000 Bouygues Offshore S.A. .......................... 215,017
5,300 Elf Aquitaine S.A. (ADR) ........................ 376,300
6,700 GrandVision S.A. ................................ 222,741
6,130 Sidel S.A. ...................................... 446,111
2,040 Vivendi ......................................... 435,598
-----------
2,419,188
-----------
Germany: 6.0%
610 Allianz AG ...................................... 203,273
2,600 Deutsche Bank AG ................................ 219,807
5,700 Hoechst AG ...................................... 286,574
3,910 Rhoen-Klinikum AG-Vorzugsakt .................... 386,660
3,100 VEBAAG .......................................... 208,409
-----------
1,304,723
-----------
Greece: 5.5%
2,200 Alpha Credit Bank ............................... 178,332
5,300 Athens Medical Care S.A. ........................ 104,335
3,400 Commercial Bank of Greece, S.A. ................. 252,195
19,888 Hellenic Tellecommunication
Organization S.A. ............................. 509,838
28,140 Michaniki S.A. .................................. 147,969
-----------
1,192,669
-----------
Hong Kong: 0.5%
280,000 JCG Holdings, Ltd. .............................. 77,692
49,000 Mandarin Oriental
International, Ltd. ............................. 27,930
-----------
105,622
-----------
Ireland:4.6%
17,200 Allied Irish Banks Plc .......................... 248,308
7,800 Elan Corporation Plc (ADR)2 ..................... 501,637
34,000 Ryanair Holdings Plc2 ........................... 240,916
-----------
990,861
-----------
Israel: 2.9%
77,000 Bank Hapoalim, Ltd.2 ............................ 232,835
11,300 Teva Pharmaceutical Industries,
Ltd (ADR) ..................................... 397,619
-----------
630,454
-----------
Italy: 0.9%
27,300 Telecom Italia SpA .............................. 199,457
-----------
Japan: 7.2%
8,500 Amway Japan, Ltd. ............................... 90,031
18,000 Asahi Diamond Industries
Company, Ltd. ................................. 81,061
3,500 Benesse Corporation ............................. 122,311
37,000 Bunka Shutter Company, Ltd. ..................... 102,641
5,600 Doutor Coffee Company, Ltd. ..................... 142,840
16,000 Mos Food Service, Inc. .......................... 190,222
41,000 National House Industrial
Company, Ltd. ................................. 314,032
3,100 Paris Miki, Inc. ................................ 40,675
48,000 Sakura Bank, Ltd. ............................... 124,509
47,000 Snow Brand Milk Products
Company, Ltd. ................................. 142,234
2,100 Tiemco, Ltd. .................................... 19,671
9,600 York-Benimaru Company, Ltd. ..................... 180,538
-----------
1,550,765
-----------
Norway: 2.8%
22,600 Saga Petroleum AS ............................... 347,532
29,500 Storebrand ASA2 ................................. 261,418
-----------
608,950
-----------
Philippines: 0.2%
836,300 C & P Homes, Inc2. .............................. 42,116
-----------
Portugal: 1.1%
10,000 Espirito Santo
Financial Group (ADR) .......................... 243,750
-----------
Singapore: 0.8%
48,000 Cerebos Pacific, Ltd. ........................... 62,504
35,000 Keppel Fels, Ltd. ............................... 104,618
-----------
167,122
-----------
3
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF NET ASSETS
(Including the Portfolio of Investments)
June 30, 1998 (unaudited) (continued)
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
Sweden: 4.9%
39,200 Castellum AB2 ................................... $ 462,047
10,200 Skandinaviska Enskilda Banken ................... 174,584
128,462 Swedish Match AB ................................ 426,867
-----------
1,063,498
-----------
Switzerland: 6.9%
157 Nestle AG ....................................... 335,983
266 Novartis AG ..................................... 442,629
340 Rentenanstalt- Societe Suisse
Assurances Vie ................................ 287,814
22 Roche Holding AG ................................ 216,039
210 Saurer AG2 ...................................... 214,595
-----------
1,497,060
-----------
United Kingdom: 19.8%
127,900 Aegis Group Plc ................................. 205,932
71,000 Aegis Group Plc1 ................................ 114,317
87,000 British Steel Plc ............................... 191,248
17,500 Cadbury Schweppes Plc ........................... 270,818
25,400 Capita Group Plc ................................ 218,468
45,200 D.F.S. Furniture Company Plc .................... 148,947
104,500 George Wimpey Plc ............................... 203,127
8,000 Glaxo Welcome Plc ............................... 240,131
18,300 Harvey Nichols Plc .............................. 71,906
13,300 J.D. Wetherspoon Plc ............................ 64,909
8,000 Oriflame International S.A. ..................... 59,399
8,700 PizzaExpress Plc ................................ 124,402
74,600 Polypipe Plc .................................... 181,104
22,289 Provident Financial Plc ......................... 349,578
65,600 Regent Inns Plc ................................. 206,867
32,260 Rio Tinto Plc ................................... 363,324
15,200 Royal Bank of Scotland Group Plc ................ 263,756
36,600 SmithKline Beecham Plc .......................... 446,706
36,800 Tomkins Plc ..................................... 199,706
28,100 Vodafone Group Plc .............................. 356,559
-----------
4,281,204
-----------
TOTAL COMMON STOCKS
(cost $17,021,843) .............................. 18,695,211
-----------
PREFERRED STOCKS: 2.6%
Germany: 1.7%
6,800 Fielmann AG ..................................... $ 237,525
346 Sto AG .......................................... 129,580
-------------
367,105
-------------
Italy: 0.9%
82,000 Fiat SpA ........................................ 202,100
-------------
TOTAL PREFERRED STOCKS
(cost $633,440) ................................. 569,205
-------------
U.S. GOVERNMENT OBLIGATIONS: 7.4%
$1,519,000 U.S.Strip Bond, 0.00%,
due 02/15/23 ................................... 375,239
5,000,000 U.S. Strip Bond, 0.00%,
due 05/15/23 ................................... 1,217,750
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(cost $1,516,916) ............................... 1,592,989
-------------
TOTAL INVESTMENTS: 96.3%
(cost $19,172,199) (Note 1) ..................... 20,857,405
Other assets in excess of
liabilities: 3.7% ............................. 807,325
-------------
TOTAL NET ASSETS: 100.0%
(equivalent to $11.39 per
share on 1,902,488
shares outstanding) ........................... $21,664,730
=============
1 Restricted Security (Note 8).
2 Non-income producing security.
ADR - American Depository Receipt.
+ Aggregate cost for Federal income tax purposes is $19,270,985.
--------------
At June 30, 1998, the composition of the Fund's net assets by industry was as
follows:
Banking ..................................... 10.0%
Capital Equipment ........................... 9.0
Construction & Housing ...................... 3.8
Consumer Durable Goods ...................... 1.0
Consumer Non-durable Goods .................. 9.6
Electrical & Electronics .................... 1.3
Energy Sources .............................. 3.3
Financial Services .......................... 6.4
Health &Personal Care ....................... 12.6
Materials ................................... 7.3
Merchandising ............................... 6.4
Multi-Industry .............................. 0.9
Real Estate ................................. 2.3
Services .................................... 9.0
Telecommunications .......................... 4.9
Transportation .............................. 1.1
U.S. Government
Obligations ............................... 7.4
Other Assets ................................ 3.7
------
Total Net Assets .......................... 100.0%
======
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (unaudited)
ASSETS
Investments, at value (cost $19,172,199) (Note 1) ...... $20,857,405
Cash ................................................... 247,369
Receivable for investment securities sold .............. 894,947
Receivable for shares sold ............................. 145
Dividends and interest receivable ...................... 44,446
Foreign taxes recoverable .............................. 23,895
Unrealized gain on open forward contracts (Note 7) ..... 7,056
Deferred organization expense, net (Note 1) ............ 8,113
-----------
Total Assets .................................... 22,083,376
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ....... 7,256
Payable for investment securities purchased ............ 373,362
Accrued expenses ....................................... 38,028
-----------
Total Liabilities ............................... 418,646
-----------
NET ASSETS (equivalent to $11.39 per share on
1,902,488 shares outstanding) (Note 4) ............... $21,664,730
===========
NET ASSETS consist of:
Capital stock -- authorized 500,000,000 shares,
$.001 par value per share ............................ $ 1,902
Additional paid in capital ............................. 19,306,959
Undistributed net investment income .................... 38,418
Accumulated net realized gain on investments
and foreign currency holdings ........................ 629,346
Unrealized appreciation on investments and
foreign currency holdings ............................ 1,688,105
-----------
TOTAL NET ASSETS ................................ $21,664,730
===========
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF OPERATIONS
Six months ended June 30, 1998 (unaudited)
INVESTMENT INCOME
Dividends ..................................... $ 297,370
Interest ...................................... 50,947
-----------
348,317
Less: foreign tax expense ..................... 39,995
-----------
Total investment income .............................. $ 308,322
EXPENSES
Investment advisory fee (Note 2) ........... 107,407
Custodian expenses ......................... 34,631
Distribution expenses (Note 3) ............. 26,852
Printing and mailing expenses .............. 15,968
Transfer agent and shareholder
servicing expenses (Note 2) .............. 15,530
Accounting expenses (Note 2) ............... 12,057
Registration fees .......................... 9,771
Directors' fees and expenses ............... 8,614
Professional fees .......................... 8,175
Amortization of deferred organization
costs (Note 1) ........................... 4,100
Computer processing fees ................... 3,230
Other expenses ............................. 5,282
------------
Total expenses .......................... 251,617
Less: expenses recovered under contract
with investment adviser (Note 2) .... 63,504 188,113
------------ ------------
Net investment income .................................... 120,209
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 5)
Net realized gain on:
Investments ............................. 681,072
Foreign currency transactions ........... 92,876
------------
Net realized gain .................................... 773,948
Net change in unrealized appreciation on:
Investments ............................. 1,582,192
Foreign currency translation of
other assets and liabilities ........ (87,308)
----------
Net change in unrealized appreciation .......................... 1,494,884
------------
Net realized and unrealized gain .................... 2,268,832
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $ 2,389,041
============
The Notes to Financial Statements are an integral part of this statement.
6
<PAGE>
<TABLE>
<CAPTION>
LEXINGTON INTERNATIONAL FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
------------- --------------
<S> <C> <C>
Net investment income ......................................................... $ 120,209 $ 111,647
Net realized gain from investments
and foreign currency transactions .......................................... 773,948 1,524,350
Net change in unrealized appreciation of investments
and foreign currency translation ........................................... 1,494,884 (1,346,297)
------------ ------------
Net increase in net assets
resulting from operations ........................................... 2,389,041 289,700
Distributions to shareholders from net investment income ...................... -- (245,229)
Distributions to shareholders from net realized gains from
security transactions ....................................................... -- (1,451,487)
Increase (decrease) in net assets from capital share transactions (Note 4) .... (673,428) 2,465,165
------------ ------------
Net increase in net assets ............................................... 1,715,613 1,058,149
NET ASSETS:
Beginning of period ........................................................ 19,949,117 18,890,968
------------ ------------
End of period (including undistributed net investment
income of $38,418 and distributions in excess of net
investment income of $81,791, 1998 and 1997, respectively) ............... $ 21,664,730 $ 19,949,117
============ ============
</TABLE>
7
The Notes to Financial Statements are an integral part of this statement.
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (unaudited) and December 31, 1997
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 Securities 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 prices is used. Securities traded on the over-the-counter market are
valued at the mean between the last current bid and asked prices. 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, 1997,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distribution under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this change.
DEFERRED ORGANIZATION EXPENSES Organization expenses aggregating $48,067
have been deferred and are being amortized on a straight-line basis over five
years.
8
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (unaudited) and December 31, 1997 (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (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 and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 1.00% of the Fund's average daily net assets. For
1998, LMC has voluntarily agreed to limit the total expenses of the Fund
(including management fees, but excluding interest, taxes, brokerage commissions
and extraordinary expenses) to an annual rate of 1.75% of the Fund's average
daily net assets. Total reimbursement was $63,504 for the six months ended June
30, 1998, and is set forth in the statement of operations.
The Fund reimburses LMC for certain expenses, including accounting and
shareholder servicing costs of $18,683 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,
1998, were $26,852 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, 1998 Year ended
(unaudited) December 31, 1997
------------------------ --------------------------
Shares Amount Shares Amount
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Shares sold ............................................ 172,667 $1,946,854 305,117 $3,577,373
Shares issued on reinvestment of dividends ............. -- -- 149,918 1,506,676
----------- ------------ ------------ -------------
172,667 1,946,854 455,035 5,084,049
Shares redeemed ........................................ (245,222) (2,620,282) (218,983) (2,618,884)
----------- ------------ ------------ -------------
Net increase (decrease) ................................ (72,555) $ (673,428) 236,052 $2,465,165
=========== ============ ============ =============
</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, 1998, excluding short-term securities, were $13,769,524 and
$12,199,331 respectively.
At June 30, 1998, the aggregate gross unrealized appreciation for all securities
in which there is an excess of value over tax cost amounted to $3,200,095 and
aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value amounted to $1,613,675.
9
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (unaudited) and December 31, 1997 (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, 1998, the Fund was committed to sell foreign currencies under the
following forward foreign exchange contracts:
<TABLE>
<CAPTION>
Contract Contract Unrealized
Settlement Amount Amount Gain (Loss) at
Contract Date (Local Currency) (U.S. Dollar) Value June 30, 1998
-------- ---------- -------------- ----------- -------- ---------------
<S> <C> <C> <C> <C> <C>
United Kingdom Pounds ............. 10/06/98 677,425 $1,118,733 $1,124,593 $(5,860)
Australian Dollar ................. 11/05/98 310,973 202,381 192,781 9,600
Canadian Dollar ................... 11/30/98 677,871 466,564 463,248 3,316
--------
$ 7,056
========
</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 Percent of Net
Security Date Shares Per Share Value Assets
------- ---------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Aegis Group Plc ............................... 04/27/98 71,000 $1.36 $114,317 0.53%
======== =====
</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.
10
<PAGE>
<TABLE>
<CAPTION>
LEXINGTON INTERNATIONAL FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
Six months ended Year ended December 31,
June 30, 1998 ----------------------------------------------------
(unaudited) 1997 1996 1995 1994
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ...................... $ 10.10 $10.86 $10.60 $10.37 $10.00
------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income (loss) ............. 0.06 0.07 (0.02) (0.01) (0.08)
Net realized and unrealized gain
on investments and foreign
currency transactions .................. 1.23 0.10 1.45 0.61 0.67
------- ------- ------- ------- -------
Total income from
investment operations .................. 1.29 0.17 1.43 0.60 0.59
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income ................................. -- (0.13) (0.20) -- --
Distributions in excess of
net investment income
(temporary book-tax difference) ........ -- -- -- (0.35) --
Distributions from net realized
gains .................................. -- (0.80) (0.97) (0.02) (0.10)
Distributions in excess of net
realized gains (temporary
book-tax difference) ................... -- -- -- -- (0.12)
------- ------- ------- ------- -------
Total distributions ........................ -- (0.93) (1.17) (0.37) (0.22)
------- ------- ------- ------- -------
Net asset value, end of period ............. $ 11.39 $10.10 $10.86 $10.60 $10.37
======== ====== ====== ====== ======
Total return ............................... 25.71%* 1.61% 13.57% 5.77% 5.87%
Ratio to average net assets:
Expenses, before reimbursement
or waivers ............................. 2.34%* 2.15% 2.45% 2.46% 2.39%
Expenses, net of reimbursement
or waivers ............................. 1.75%* 1.75% 2.45% 2.46% 2.39%
Net investment income (loss) before
reimbursement or waivers .............. 0.53%* 0.13% (0.39)% (0.12)% (0.94)%
Net investment income (loss) ............ 1.12%* 0.53% (0.39)% (0.12)% (0.94)%
Portfolio turnover rate .................... 122.75%* 122.56% 113.55% 137.72% 100.10%
Average commission paid on equity
security transactions** .................. $0.02 $0.01 $0.03 -- --
Net assets, end of period
(000's omitted) ......................... $21,665 $19,949 $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.
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
and 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.
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, 1998
The Lexington Group
of No Load
Investment Companies
