LEXINGTON INTERNATIONAL FUND INC
N-30D, 1999-03-01
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DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
     We  are  pleased  to report that the Lexington International Fund performed
well  on  both  an  absolute  and  relative  basis  during  1998.  The Lexington
International  Fund  returned  19.02%*  in  1998 while the average international
fund,  according  to  Lipper, Inc., advanced 13.0%. The unmanaged Morgan Stanley
Capital  International  EAFE  Index  appreciated  a  strong  20.3% for the year.
During  the  fourth quarter Lexington International Fund gained 17.1%* against a
group  average  of 16.4% according to Lipper, Inc. The EAFE Index rose 20.7% due
to the strong performance of large companies.

     The  bulk  of  relative performance occurred in the third quarter as losses
were  minimized  due  to  the  Fund's high exposure to defensive sectors such as
tobacco  and  pharmaceuticals.  Avoiding  hard  hit  sectors  such as banks also
proved  instrumental  to  strong  performance. As stocks fell to more attractive
levels,  additions  to  telecoms and banks allowed the Fund to maintain its lead
in the strong fourth quarter recovery.

     The  hyper bull market in Europe and the United States continues to astound
even  the  most  optimistic  bulls. For example, Finnish stocks led by Nokia led
European  equities  with  a  gain  of  122%.  Belgium  stocks advanced 68% while
Italian  equities  rose 53%. The world's economic problems have not been solved,
risk  continues  to  remain  on the downside. However, led by a wave of interest
rate  cuts  in  the  United  States and Europe, investors piled back into equity
markets.

     The  U.S.  economy  remains  the  key  to  the  global markets. U.S. growth
remains  surprisingly  strong  with  little  inflation.  Consumers have been the
driving  force  for strong U.S. GDP growth. There are signs that the consumer is
contributing  to  the  building  financial  bubble  as  indicated  by  the stock
valuations  in  some  sectors of the U.S. market. We all know that at some point
this  is  unsustainable.  The  risk of an economic slowdown and resulting profit
disappointment could lead to a lower U.S. stock market.

     On  the European front, Europe is already experiencing an economic slowdown
despite  falling interest rates. The manufacturing sector is in recession in the
U.K.,  while  unemployment  levels  still remain high on the continent. Japanese
economic  growth  continues  to be negative. It remains problematical as to when
the  Japanese  economy  begins to improve and the banking industry addresses its
bad  loan  problems.  At  the  same  time  there  are  bright  spots, such as an
improvement in Korea and Thailand.

     Liquidity  driven  markets  can  last  longer than most expect, but the end
will  probably  be  painful.  The  challenge is to participate in rising markets
while  also  staying defensive to protect against the likelihood of the declines
from  these  over  valued  levels. Therefore, we have focused your Fund in areas
that  allow  us  to maintain a well-diversified portfolio with a healthy respect
for risk.

     The  strategy  remains  to  maintain a diversified portfolio with a healthy
respect  for  risk.  Defensive sectors such as food, tobacco and pharmaceuticals
continue  to be favored. Given a weakening global economic environment, earnings
risk  remains  high. Europe remains a long-term opportunity in which the Fund is
well represented.

     On  January  1, 1999 the Euro was born. Eleven European nations have formed
one  currency  with  the UK, Denmark and Sweden opting out. The Euro will be the
first  challenge  to  the  dollar  since  World War II. There are many potential
ramifications  to the Euro and its impact on equity prices. However, the markets
have  had years to adjust and in fact have benefitted by sharp falls in interest
rates.  One  single  currency will allow companies to be more efficient and plan
with  greater  certainty.  Conversely,  pricing  will  be more transparent which
could pressure profit margins in certain industries.


                                       1


<PAGE>


     Our  job  is  to  monitor  events  in  Europe and select companies that can
benefit  under  the new currency. Japan is still struggling, but there are small
signs  that  there  is  the  potential for better times ahead if corporate Japan
begins to get serious about enhancing shareholder value.


                          Sincerely,





/s/ Richard T. Saler                 /s/ Richard T. Saler
- --------------------------           ------------------------------
Richard T. Saler                     Richard T. Saler
Portfolio Manager                    President
February, 1999                       February, 1999




- --------------------------------------------------------------------------------

             COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
                     LEXINGTON INTERNATIONAL FUND, INC. AND
        THE UNMANAGED MORGAN STANLEY CAPITAL INTERNATIONAL (EAFE) INDEX


[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED REPORT]


                    Lexington
Year              International          EAFE
                       Fund
======================================================
1/3/94               $10,000            $10,000
12/31/94             $10,587            $10,778
12/31/95             $11,198            $11,986
12/31/96             $12,717            $12,711
12/31/97             $12,922            $12,937
12/31/98             $15,380            $15,567


                      AVERAGE ANNUAL STANDARD TOTAL RETURNS
                         FOR THE PERIOD ENDED 12/31/98
FUND/INDEX               1 YEAR         SINCE INCEPTION
                                             1/3/94
- ----------               ------         ---------------
Lexington International
Fund                     19.02%                9.00%

MSCI-(EAFE) Index        20.33%                9.25%


This graph,  prepared in  accordance  with SEC  regulations,  compares a $10,000
investment in the Fund with a similar  investment in the Morgan Stanley  Capital
International  (EAFE) Index. Results for the Fund and the Morgan Stanley Capital
International  (EAFE) Index include the reinvestment of all dividend and capital
gain distributions.  The Fund commenced operations on 1/3/94.  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 it is not predictive of future market
results.

- --------------------------------------------------------------------------------






* 19.02%  and  9.00%  are  the  one year and since commencement (1/3/94) average
  annual  standard  total  returns,  respectively, for the period ended December
  31,  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.


                                       2


<PAGE>


LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998


<TABLE>
<CAPTION>


    NUMBER OF                                                                  VALUE
      SHARES                             SECURITY                            (NOTE 1)
==========================================================================================
<S>                 <C>                                                <C>
                    COMMON STOCKS: 91.1%
                    AUSTRALIA: 2.1%
  127,900           Foster's Brewing Group, Ltd. ....................   $ 346,743
    6,200           OzEmail, Ltd. (ADR) .............................     137,369
                                                                        ---------
                                                                          484,112
                                                                        ---------
                    CANADA: 2.9%
   19,400           Imax Corporation2 ...............................     614,738
   25,280           Yogen Fruz World-Wide, Inc.2 ....................      86,410
                                                                        ---------
                                                                          701,148
                                                                        ---------
                    DENMARK: 1.1%
    2,010           Tele Danmark A/S ................................     271,291
                                                                        ---------
                    FINLAND: 1.7%
    3,300           Nokia Oyj "Class A" .............................     404,085
                                                                        ---------
                    FRANCE: 11.5%
    2,040           Alcatel .........................................     249,796
    5,420           Axa-UAP .........................................     785,928
    6,800           Elf Aquitaine S.A. (ADR) ........................     385,050
    5,300           Schlumberger, Ltd. - NY Shares ..................     244,462
    7,800           SEITA ...........................................     488,721
    2,370           Vivendi .........................................     615,198
                                                                        ---------
                                                                        2,769,155
                                                                        ---------
                    GERMANY: 2.2%
   11,100           Dresdner Bank AG ................................     466,520
      800           Kamps AG ........................................      51,876
                                                                        ---------
                                                                          518,396
                                                                        ---------
                    HONG KONG: 1.2%
  280,000           JCG Holdings, Ltd. ..............................      90,357
  312,000           Mandarin Oriental International, Ltd. ...........     196,560
                                                                        ---------
                                                                          286,917
                                                                        ---------
                    HUNGARY: 1.2%
    9,300           Magyar Tavkozlesi RT. (ADR) .....................     277,256
                                                                        ---------
                    IRELAND: 0.9%
    2,400           ICON plc (ADR)2 .................................      79,950
   20,150           Ryanair Holdings plc2 ...........................     144,209
                                                                        ---------
                                                                          224,159
                                                                        ---------
                    ISRAEL: 2.4%
   14,300           Teva Pharmaceutical Industries, Ltd.
                    (ADR) ...........................................     583,172
                                                                        ---------
                    ITALY: 2.2%
   71,000           Istituto Nazionale delle Assicurazioni ..........     188,212
   40,900           Telecom Italia SpA ..............................     348,975
                                                                        ---------
                                                                          537,187
                                                                        ---------
                    JAPAN: 13.2%
    8,000           Able, Inc.2 .....................................     248,234
   36,000           Asahi Diamond Industries Company,
                     Ltd.3 ..........................................     179,367
    6,300           Doutor Coffee Company, Ltd.3 ....................     209,448
    7,000           Ito-Yokado Company, Ltd.3 .......................     490,263
   46,000           National House Industrial Company,
                    Ltd.3 ...........................................     391,909
    2,900           Oriental Land Company, Ltd.3 ....................     132,149
    3,100           Paris Miki, Inc. ................................      71,456
    7,400           Rinnai Corporation ..............................     129,635
   37,000           Seino Transportation Company, Ltd. ..............     211,903
    4,700           Softbank Corporation ............................     283,342
   21,000           Sumitomo Forestry Company, Ltd. .................     150,802
   13,000           Tostem Corporation ..............................     258,164
        4           Yahoo Japan Corporation2 ........................     301,073
   20,000           Yamato Kogyo Company, Ltd. ......................     115,961
                                                                        ---------
                                                                        3,173,706
                                                                        ---------
                    NETHERLANDS: 7.1%
   11,000           ABN-AMRO Holding NV .............................     231,527
    1,800           Equant NV - NY Shares2 ..........................     122,062
   17,700           Koninklijke Ahold NV ............................     654,554
    5,400           Koninklijke KPN NV ..............................     270,479
    8,900           Koninklijke Numico NV ...........................     424,449
                                                                        ---------
                                                                        1,703,071
                                                                        ---------
                    NEW ZEALAND: 3.3%
   83,200           Carter Holt Harvey, Ltd. ........................      74,717
   37,000           Sky City, Ltd. ..................................     140,728
  107,900           Tranz Rail Holdings, Ltd. .......................     247,946
   46,800           Tranz Rail Holdings, Ltd. (ADR) .................     318,825
                                                                        ---------
                                                                          782,216
                                                                        ---------
                    NORWAY: 2.7%
   29,900           Saga Petroleum AS ...............................     272,754
   49,310           Storebrand ASA2 .................................     372,150
                                                                        ---------
                                                                          644,904
                                                                        ---------
                    SPAIN: 5.2%
    3,771           Mapfre Vida Seguros .............................     141,587
   22,900           Tabacalera S.A. .................................     587,485
   11,730           Telefonica S.A. .................................     522,377
                                                                        ---------
                                                                        1,251,449
                                                                        ---------
                    SWEDEN: 3.3%
  217,062           Swedish Match AB ................................     789,994
                                                                        ---------
                    SWITZERLAND: 7.8%
      113           Nestle AG .......................................     245,995
      294           Novartis AG .....................................     577,947
      376           Rentenanstalt-Societe Suisse
                    Assurances Vie ..................................     279,232
       45           Roche Holding AG ................................     549,115
</TABLE>

                                       3


<PAGE>

LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998 (continued)

 NUMBER OF                                           VALUE
   SHARES                 SECURITY                  (NOTE 1)
=========== ==================================== =============
            COMMON STOCKS (CONTINUED):
            SWITZERLAND (CONTINUED):
      730   UBS AG .............................  $   224,291
                                                  -----------
                                                    1,876,580
                                                  -----------
            UNITED KINGDOM: 19.1%
  150,900   Aegis Group plc ....................      220,311
   71,000   Aegis Group plc1 ...................      103,659
   63,600   British Steel plc ..................       94,178
   30,100   British Telecommunications plc .....      453,478
   19,400   Cadbury Schweppes plc ..............      330,846
   72,600   D.F.S. Furniture Company plc .......      227,693
   37,700   Devro plc ..........................      107,574
   35,800   Diageo plc .........................      407,418
  100,500   George Wimpey plc ..................      181,425
   14,400   Glaxo Welcome plc ..................      495,466
  127,000   Inchcape plc .......................      271,524
   95,700   Polypipe plc .......................      181,517
   72,700   Regent Inns plc ....................      122,773
   37,600   Rentokil Initial plc ...............      283,392
   21,260   Rio Tinto plc ......................      247,253
   40,700   SmithKline Beecham plc .............      568,820
   18,000   Vodafone Group plc .................      292,296
                                                  -----------
                                                    4,589,623
                                                  -----------
            TOTAL COMMON STOCKS
            (cost $19,316,758)..................   21,868,421
                                                  -----------


 NUMBER OF SHARES
        OR                                                        VALUE
 PRINCIPAL AMOUNT                   SECURITY                     (NOTE 1)
================== ========================================== =============
                   PREFERRED STOCKS: 2.2%
                   GERMANY: 2.2%
         4,310     Rhoen-Klinikum AG ........................  $   439,921
           386     Sto AG ...................................       90,386
                                                               -----------
                   TOTAL PREFERRED STOCKS
                   (cost $632,692) ..........................      530,307
                                                               -----------
                   U.S. GOVERNMENT OBLIGATION: 2.2%
    $2,018,000     U.S. Strip Bond, 0.00%, due
                   05/15/23 (cost $480,841)..................      534,286
                                                               -----------
                   SHORT-TERM INVESTMENT: 4.2%
                   U.S. GOVERNMENT AGENCY OBLIGATION
     1,000,000     Federal Home Loan Mortgage
                   Corporation, 4.50%, due 01/04/99
                   (cost $999,646)...........................      999,646
                                                               -----------
                   TOTAL INVESTMENTS: 99.7%
                   (cost $21,429,937+) (Note 1)..............   23,932,660
                   Other assets in excess of liabilities:
                   0.3% .....................................       67,055
                                                               -----------
                   TOTAL NET ASSETS: 100.0%
                   (equivalent to $11.61 per share on
                   2,067,783 shares outstanding) ............  $23,999,715
                                                               ===========

1 Restricted Security (Note 8).
2 Non-income producing security.
3 Some  or  all  of this security is segregated for forward foreign currency
  contracts (Notes 1 and 7).
ADR - American Depository Receipt.
+ Aggregate cost for Federal income tax purposes is $21,459,304.

                             --------------------

At December 31, 1998,  the  composition of the Fund's net assets by industry was
as follows:



Banking ............................   3.8%
Capital Equipment ..................   3.3
Construction & Housing .............   2.4
Consumer Durable Goods .............   0.5
Consumer Non-durable Goods .........  17.7
Electrical & Electronics ...........   2.2
Energy Sources .....................   2.7
Financial Services .................   7.7%
Health & Personal Care .............  13.4
Materials ..........................   5.5
Merchandising ......................   4.9
Real Estate ........................   1.9
Services ...........................   9.9
Telecommunications .................  12.4
Trade ..............................   1.1%
Transportation .....................   3.9
U.S. Government Agency &
    Obligations ....................   6.4
Other Assets .......................   0.3
                                     -----
 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
December 31, 1998



ASSETS
Investments, at value (cost $21,429,937)
  (Note 1) .......................................   $23,932,660
Cash .............................................       458,577
Receivable for investment securities sold ........            21
Dividends and interest receivable ................        11,600
Foreign taxes recoverable ........................        16,955
                                                     -----------
    Total Assets .................................    24,419,813
                                                     -----------
LIABILITIES
Due to Lexington Management Corporation
  (Note 2) .......................................        39,335
Payable for investment securities purchased ......        64,200
Distributions payable ............................       115,108
Accrued expenses .................................        36,703
Unrealized loss on open forward contracts
  (Note 7) .......................................       164,752
                                                     -----------
    Total Liabilities ............................       420,098
                                                     -----------
NET ASSETS (equivalent to $11.61 per share on
  2,067,783 shares outstanding) (Note 4) .........   $23,999,715
                                                     ===========
NET ASSETS consist of:
Capital stock - authorized 500,000,000
  shares, $.001 par value per share ..............   $     2,068
Additional paid-in capital (Note 1) ..............    21,128,423
Undistributed net investment income (Note 1) .....       154,188
Accumulated net realized gain on investments
  and foreign currency transactions (Note 1) .....       376,139
Unrealized appreciation of investments and
  foreign currency translation of other assets
  and liabilities ................................     2,338,897
                                                     -----------
    TOTAL NET ASSETS .............................   $23,999,715
                                                     ===========


LEXINGTON INTERNATIONAL FUND, INC.
STATEMENT OF OPERATIONS
Year ended December 31, 1998


INVESTMENT INCOME
  Dividends ............................  $ 412,745
  Interest .............................    101,131
                                          ---------
                                            513,876
  Less: foreign tax expense ............     56,705
                                          ---------
   Total investment income .............                  $  457,171
EXPENSES
  Investment advisory fee (Note 2)......    217,864
  Custodian expenses ...................     72,018
  Transfer agent and shareholder
     servicing expenses (Note 2) .......     33,014
  Professional fees ....................     32,314
  Printing and mailing expenses ........     30,805
  Distribution expenses (Note 3) .......     19,670
  Directors' fees and expenses .........     17,886
  Accounting expenses (Note 2) .........     17,775
  Registration fees ....................     17,006
  Amortization of deferred
     organization costs (Note 1) .......     12,213
  Computer processing fees .............      7,474
  Other expenses .......................     13,007
                                          ---------
   Total expenses ......................    491,046
   Less: expenses recovered
      under contract with
      investment adviser (Note 2) ......    109,634          381,412
                                          ---------       ----------
   Net investment income ...............                      75,759
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 5)
Net realized gain on:
  Investments ..........................  1,294,568
   Foreign currency transactions .......     80,197
                                          ---------
    Net realized gain ..................                   1,374,765
Net change in unrealized
 appreciation (depreciation) on:
   Investments .........................  2,399,709
   Foreign currency translation of
      other assets and liabilities .....   (254,033)
                                          ---------
    Net change in unrealized
       appreciation (depreciation)......                   2,145,676
                                                          ----------
     Net realized and
        unrealized gain ................                   3,520,441
                                                          ----------
INCREASE IN NET ASSETS RESULTING
     FROM OPERATIONS ...................                  $3,596,200
                                                          ==========


  The Notes to Financial Statements are an integral part of these statements.

                                       5

<PAGE>

LEXINGTON INTERNATIONAL FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31, 1998 and 1997


<TABLE>
<CAPTION>
                                                                                      1998              1997
                                                                                ---------------   ---------------
<S>                                                                               <C>              <C>
Net investment income .......................................................     $    75,759      $    111,647
Net realized gain from investments and foreign currency transactions ........       1,374,765         1,524,350
Net change in unrealized appreciation (depreciation) of investments
 and foreign currency translation ...........................................       2,145,676        (1,346,297)
                                                                                  -----------      ------------
  Net increase in net assets resulting from operations ......................       3,596,200           289,700
Distributions to shareholders from net investment income (Note 1) ...........        (116,960)         (245,229)
Distributions to shareholders from net realized gains from
 security transactions (Note 1) .............................................        (695,462)       (1,451,487)
Increase in net assets from capital share transactions (Note 4) .............       1,266,820         2,465,165
                                                                                  -----------      ------------
  Net increase in net assets ................................................       4,050,598         1,058,149

NET ASSETS:
 Beginning of period ........................................................      19,949,117        18,890,968
                                                                                  -----------      ------------
 End of period (including undistributed net investment income of $154,188
  and distributions in excess of net investment income of $81,791 in
  1998 and 1997, respectively) ..............................................     $23,999,715      $ 19,949,117
                                                                                  ===========      ============
</TABLE>

     .

  The Notes to Financial Statements are an integral part of these statements.
                                       6


<PAGE>


LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 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.

The  Fund  authorizes its custodian to place and maintain equity securities in a
segregated  account  of the Fund having a value equal to the aggregate amount of
the  Fund's  commitments  under  forward foreign currency contracts entered into
with respect to position hedges.

     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, 1998,
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.


                                       7


<PAGE>


LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)

1. SIGNIFICANT ACCOUNTING POLICIES (continued)

     DEFERRED  ORGANIZATION  COSTS Organization  costs  aggregating $48,067 have
been fully amortized as of December 31, 1998.

     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  disclosure 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 $109,634 for the year
ended December 31, 1998, and is set forth in the statement of operations.

The   Fund  reimburses  LMC  for  certain  expenses,  including  accounting  and
shareholder  servicing costs of $39,838 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,
1998, were $19,670 and are set forth in the statement of operations.

4. CAPITAL STOCK
Transactions in capital stock were as follows:

<TABLE>
<CAPTION>
                                                                                   Year ended
                                                              December 31, 1998                  December 31, 1997
                                                       --------------------------------   -------------------------------
                                                           Shares           Amount            Shares           Amount
                                                       -------------   ----------------   -------------   ---------------
<S>                                                    <C>             <C>                <C>             <C>
Shares sold ........................................     1,005,127      $  11,440,387         305,117      $  3,577,373
Shares issued on reinvestment of dividends .........        58,468            669,485         149,918         1,506,676
                                                         ---------      -------------         -------      ------------
                                                         1,063,595         12,109,872         455,035         5,084,049
Shares redeemed ....................................      (970,855)       (10,843,052)       (218,983)       (2,618,884)
                                                         ---------      -------------        --------      ------------
Net increase .......................................        92,740      $   1,266,820         236,052      $  2,465,165
                                                         =========      =============        ========      ============
</TABLE>

5. INVESTMENT TRANSACTIONS
The  cost  of purchases and proceeds from sales of securities for the year ended
December  31,  1998,  excluding  short-term  securities,  were  $31,555,131  and
$29,396,736 respectively.

At  December  31,  1998,  the  aggregate  gross  unrealized appreciation for all
securities  in  which  there  is  an  excess  of value over tax cost amounted to
$3,726,861  and  aggregate  gross  unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $1,253,505.


                                       8


<PAGE>


LEXINGTON INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 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 CONTRACT

At  December 31, 1998, the Fund was committed to sell foreign currency under the
following forward foreign exchange contract:



<TABLE>
<CAPTION>
                                             Contract            Contract                          Unrealized
                          Settlement          Amount              Amount                             Loss at
       Contract              Date        (Local Currency)     (U.S. Dollar)        Value        December 31, 1998
- ----------------------   ------------   ------------------   ---------------   -------------   ------------------
<S>                      <C>            <C>                  <C>               <C>             <C>
Japanese Yen .........    03/15/99         137,199,721          $1,050,373      $1,215,125         $ (164,752)
                                                                                                   ==========
</TABLE>

8. RESTRICTED SECURITY

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
         Security                Date        Shares       Per Share        Value       Net Assets
- -------------------------   -------------   --------   --------------   -----------   -----------
<S>                         <C>             <C>        <C>              <C>           <C>
Aegis Group plc .........   04/27/98        71,000     $ 1.36           $103,659      0.43%
                                                                        ========      ====
</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.


9. TAX INFORMATION (UNAUDITED)

The  following  tax  information  represents  the  designation  of  various  tax
benefits relating to the year ended December 31, 1998:
The  percentage  of  ordinary income distributions paid by the Fund derived from
agency and direct obligations of the United States government were as follows:

          U.S. Treasury.................................. 0.63%
          Federal Home Loan Bank......................... 1.53
          Federal Home Loan Mortgage Corporation......... 1.93
          Federal National Mortgage Association.......... 0.06


The  Fund designates $695,462, whether taken in shares or cash, as 20% long-term
capital gain distributions.

                                       9


<PAGE>


LEXINGTON INTERNATIONAL FUND, INC.
FINANCIAL HIGHLIGHTS

Selected per share data for a share outstanding throughout the period:

<TABLE>
<CAPTION>
                                                                                                            January 3, 1994
                                                                                                            (commencement of
                                                                    Year ended December 31,                  operations) to
                                                     -----------------------------------------------------    December 31,
                                                          1998         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) ......................     0.17          0.07       (0.02)        (0.01)        (0.08)
 Net realized and unrealized gain
  on investments and foreign
   currency transactions ...........................     1.74          0.10        1.45          0.61          0.67
                                                      -------       -------     -------       -------       -------
Total income from investment operations ............     1.91          0.17        1.43          0.60          0.59
                                                      -------       -------     -------       -------       -------
Less distributions:
 Distributions from net investment income ..........    (0.06)        (0.13)      (0.20)           --            --
 Distributions in excess of net investment income
  (temporary book-tax difference) ..................       --            --          --         (0.35)           --
 Distributions from net realized gains .............    (0.34)        (0.80)      (0.97)        (0.02)        (0.10)
 Distributions in excess of net realized gains
  (temporary book-tax difference) ..................       --            --          --            --         (0.12)
                                                      -------       -------     -------       -------       -------
Total distributions ................................    (0.40)        (0.93)      (1.17)        (0.37)        (0.22)
                                                      -------       -------     -------       -------       -------
Net asset value, end of period .....................  $ 11.61       $ 10.10     $ 10.86       $ 10.60       $ 10.37
                                                      =======      ========     =======      ========      ========
Total return .......................................   19.02%         1.61%      13.57%         5.77%         5.87%
Ratio to average net assets:
 Expenses, before reimbursement or waivers .........    2.25%         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 .......................................  (0.16)%         0.13%     (0.39)%       (0.12)%       (0.94)%
 Net investment income (loss) ......................    0.35%         0.53%     (0.39)%       (0.12)%       (0.94)%
Portfolio turnover rate ............................  143.67%       122.56%     113.55%       137.72%       100.10%
Net assets, end of period (000's omitted) ..........  $24,000       $19,949     $18,891       $17,855       $17,843
</TABLE>

      

                                       10


<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, 1998, and the related statement of operations for
the  year  ended,  the statements of changes in net assets for each of the years
in  the two-year period then ended, and the financial highlights for each of the
years  in  the  four-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  and  financial  highlights.  Our procedures included confirmation of
securities  owned  as of December 31, 1998, by correspondence with the custodian
and  brokers.  An  audit  also includes assessing the accounting principles used
and  significant estimates made by management, as well as evaluating the overall
financial   statement  presentation.  We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In  our opinion, the financial statements and financial highlights referred
to  above  present  fairly,  in all material respects, the financial position of
Lexington  International  Fund,  Inc. as of December 31, 1998, the result 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 four-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 LLP
New York, New York
February 8, 1999

                                       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.

                    -----------------------------------------
                                    LEXINGTON
                    -----------------------------------------


                                [GRAPHIC OMITTED]

                                    LEXINGTON
                                  INTERNATIONAL
                                   FUND, INC.

                    -----------------------------------------

                       Seeks long-term growth of capital,
                         primarily through investment in
                           common stocks of companies
                         domiciled in foreign countries
                             and the United States.
                    -----------------------------------------
 
                                 ANNUAL REPORT
                                DECEMBER 31, 1998

                               The Lexington Group
                                   of NO LOAD
                              Investment Companies





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