Dear Fellow Shareholders:
The Lexington Emerging Markets Fund appreciated 8.1%* for the second
quarter. For the first half of 1995 the Fund is down 0.6%*. The unmanaged Morgan
Stanley Emerging Market Index (the "Index") rose 9.7% for the quarter, but was
still down 4.31% for the first six months. The average emerging market fund,
according to Lipper Analytical Services, Inc., rose 8.6% during the quarter, and
was down 3.2% through June 30, 1995.
The Fund performed in line with its peers but underperformed the Index
during the quarter. The main reason for the underperformance was holdings in
cash while the Index is fully invested. However, the Fund benefitted from high
cash levels early in the year which helped reduce losses. Due to our positive
outlook for the emerging markets, cash levels are now only 5% versus a peak of
35% in the first quarter.
The emerging markets had a strong second quarter due to several factors. A
strong rally in the U.S. bond and stock markets had a positive influence on
emerging market equities. Due to severe declines in 1994 and the first quarter
of 1995, many stocks reached attractive valuation levels and were technically
oversold. Mexican equities led a strong rebound in Latin America. The economic
stabilization plan, with U.S. support has at least initially stabilized the
Mexican economy. In fact, the Mexican Peso appreciated against the dollar as
investors gained more confidence in the economy. Although Mexico will face a
recession in 1995, there are additional positive signs. Inflation seems to have
peaked and is now falling. Most importantly, Mexico is now enjoying a trade
surplus and has already returned to foreign debt markets. Mexico's turnaround
has had a positive effect on other emerging markets with particular emphasis on
Latin America. The Asian markets also performed well during the quarter. The
interest rate environment improved as U.S. bond yields fell thus propelling
stocks. Asian markets are highly sensitive to U.S. interest rate movement as
most Asian currencies are linked to the U.S. dollar. Elsewhere, the Israeli
market roared to a 13.7% return for domestically traded shares. Shares responded
to interest rate cuts by the Bank of Israel and attractive valuation levels due
to last year's sharp selloff of the equity market.
We remain positive on emerging markets for the rest of 1995. However,
emerging markets could be vulnerable to a strengthening of the U.S. economy. A
stronger U.S. economy could lead to higher interest rates and lower stock prices
in many markets. We believe this would only be a temporary correction and thus
would hold on to quality issues. Latin American markets enjoyed strong
performances during the quarter. However, at current levels, equity prices are
susceptible to further economic shocks. The Fund remains slightly underweight in
Latin markets and unless valuation levels improve we will remain underweight.
Due to improving economic prospects and attractive prices, the Fund retains
approximately 15% in Eastern Europe and Israel. Finally, we remain positive on
Asia and would consider adding to positions in Korea and Taiwan.
Also included in this semi-annual report to shareholders is a summary of the
results of the shareholder meeting held on April 19, 1995. All of the proposals
were approved by a majority of shareholders.
We appreciate your continued support and would welcome the opportunity to
discuss any questions you may have about your investment.
Sincerely,
Richard T. Saler Robert M. DeMichele
Portfolio Manager President
July, 1995 July, 1995
*2.50% and 0.11% are the one year and since commencement (3/30/94) average
annual standard total returns, respectively, for the period ended June 30, 1995.
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.
1
<PAGE>
Results of Annual Meeting of Shareholders held April 19, 1995 (unaudited)
Total Outstanding Shares as of February 1, 1995: 494,871
<TABLE>
1.Directors Elected: Robert M. DeMichele, Beverley C. Duer, Barbara R. Evans, Lawrence Kantor, Donald B.
Miller, Francis Olmsted, John G. Preston, Margaret W. Russell, Philip C. Smith and Francis A. Sunderland
<CAPTION>
Votes Votes
Votes For Against Abstained
--------- ------- ---------
<S> <C> <C> <C>
2. Selection of KPMG Peat Marwick LLP as Independent Auditors ........ 450,749 28,062 13,282
3. Amendment to fundamental restriction concerning senior
securities ...................................................... 426,520 10,120 55,452
4. Amendment to fundamental restriction concerning borrowing ......... 378,647 92,181 21,265
5. Elimination of fundamental restriction concerning ability to
pledge, mortgage or hypothecate ................................. 377,936 88,461 25,696
6. Amendment to fundamental restriction concerning underwriting ...... 398,812 37,791 55,490
7. Amendment to fundamental restriction concerning real estate ....... 403,200 69,721 19,172
8. Amendment to fundamental restriction concerning lending ........... 383,083 51,477 57,532
9. Elimination of fundamental restriction concerning joint trading
accounts ........................................................ 381,079 53,469 57,544
10. Amendment to fundamental restriction concerning commodities ....... 382,621 54,020 55,452
11. Elimination of fundamental restriction concerning margin and
short sales ..................................................... 374,930 93,560 23,603
12. Amendment to fundamental restriction concerning
concentrations .................................................. 421,463 15,786 57,596
13. Separation of fundamental restriction concerning diversification
and securities of affiliates .................................... 385,899 50,716 55,478
14. Elimination of fundamental restriction concerning securities of
other investment companies ...................................... 394,493 35,573 62,027
15. Elimination of fundamental restriction concerning securities of
issuers in operation less than three (3) years .................. 378,643 55,892 57,558
16. Elimination of fundamental restriction concerning investment for
control ......................................................... 398,670 35,700 57,723
17. Elimination of fundamental restriction concerning warrants ........ 374,720 88,164 29,210
18. Elimination of fundamental restriction concerning restricted and
illiquid securities ............................................. 372,710 92,736 26,647
19. Elimination of fundamental restriction concerning investment in
oil, gas and minerals ........................................... 416,872 55,111 20,110
</TABLE>
2
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 1995 (unaudited)
<TABLE>
<CAPTION>
Number of
Shares
or Principal Value
Amount Security (Note 1)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS: 90.3%
ARGENTINA: 2.6%
17,500 Central Costanera S.A. "B" ...................................................... $ 56,541
14,500 Perez Companc ................................................................... 60,919
1,000 Transportadora de Gas del Sur, S.A. ............................................. 2,080
5,200 Transportadora de Gas del Sur, S.A. (ADR) ....................................... 54,600
----------
174,140
----------
AUSTRIA: 0.5%
400 Bank Austria AG ................................................................. 33,273
----------
BRAZIL: 8.3%
3,466 Aracruz Celulose S.A. (ADR) ..................................................... 40,725
46,000 Centrais Electricas Brasileiras S.A. ............................................ 12,500
7,594,500 Cia Acos Especiais Itabir (Preferred shares) .................................... 57,053
1,284,000 Compania Siderurgica Nacional ................................................... 29,029
2,200 Compania Vale do Rio Doce (ADR) (Preferred shares) .............................. 84,978
190,000 Coteminas (Preferred shares) .................................................... 59,892
1,273,950 Energetica de Minas Gerais ...................................................... 25,202
369,000 Petroleo Brasileiro S.A. (Preferred shares) ..................................... 32,086
9,000 Souza Cruz S.A. ................................................................. 68,479
690,000 Telecomunicacoes de Sao Paulo S.A. (Preferred shares) ........................... 85,875
55,446,000 Usinas Siderurgicas de Minas Gerais S.A. (Preferred shares) ..................... 62,075
----------
` 557,894
----------
CHILE: 3.9%
2,500 Banco Comercial S.A. GRD1 ....................................................... 40,625
1,800 Banco O'Higgins (ADR) ........................................................... 41,400
4,800 Banco Osorno y La Union (ADR) ................................................... 66,600
1,000 Chile Fund, Inc. ................................................................ 53,750
2,150 Madeco, S.A. (ADR) .............................................................. 61,815
----------
264,190
----------
CZECH REPUBLIC: 0.1%
90 Inzenyrske a Prumyslove Stavby A.S. ............................................. 7,315
----------
GREECE: 2.8%
500 AEGEK ........................................................................... 11,130
3,250 Delta Dairy S.A. (Preferred shares) ............................................. 62,584
410 Etba Leasing .................................................................... 7,540
3,200 Michaniki S.A. .................................................................. 50,152
1,500 Titan Cement Company ............................................................ 57,034
----------
188,440
----------
HONG KONG: 11.7%
92,000 Cafe de Coral Holdings, Ltd. .................................................... 22,949
18,000 Cheung Kong (Holdings) Ltd. ..................................................... 89,104
10,000 Dao Heng Bank Group Ltd. ........................................................ 30,502
23,000 Hang Lung Development Company ................................................... 36,564
19,000 Hang Seng Bank .................................................................. 144,888
19,000 Henderson Land Development Company Ltd. ......................................... 104,123
87,000 Hopewell Holdings ............................................................... 73,655
6,000 HSBC Holdings Plc ............................................................... 76,967
27,000 Hysan Development Company Ltd. .................................................. 61,768
33,000 New World Development Company Ltd. .............................................. 109,829
27,000 Peregrine Investment Holdings Ltd. .............................................. 38,386
----------
788,735
----------
HUNGARY: 0.4%
480 Pick Szeged ..................................................................... 25,786
----------
</TABLE>
3
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
Number of
Shares
or Principal Value
Amount Security (Note 1)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDIA: 1.0%
6,400 The India Fund, Inc. ............................................................ $ 65,600
----------
INDONESIA: 7.8%
15,000 PT Argha Karya Prima Industries ................................................. 11,118
25,000 PT Astra International .......................................................... 44,362
500 PT Bank Bali .................................................................... 1,269
4,000 PT Bank International Indonesia ................................................. 12,354
18,500 PT HM Sampoerna ................................................................. 145,440
28,000 PT Hero Supermarket ............................................................. 50,628
26,600 PT Indah Kiat Pulp & Paper Corporation .......................................... 39,433
1,000 PT Indosat (ADR) ................................................................ 38,250
13,000 PT Lippo Bank ................................................................... 22,922
6,000 PT Modern Photo Film Company .................................................... 32,614
23,000 PT Semen Cibinong ............................................................... 72,327
54,000 PT Sinar Mas Agro Resources Agricultural Production and Technology Corporation .. 57,008
----------
527,725
----------
ISRAEL: 7.1%
10 Africa-Israel Investments Ltd. .................................................. 11,983
84,000 Bank Hapoalim ................................................................... 132,287
11,000 Bezek Israeli Telecommunication Corporation Ltd. ................................ 27,814
220 First International Bank of Israel .............................................. 27,276
5,600 First Israel Fund, Inc.* ........................................................ 66,500
7,000 Israel Land Development ......................................................... 21,026
730 Koor Industries Ltd. ............................................................ 62,311
6,000 Osem Investment Ltd. ............................................................ 46,410
2,200 Teva Pharmaceutical Industries Ltd. (ADR) ....................................... 82,500
----------
478,107
----------
MALAYSIA: 8.0%
14,400 Aokam Perdana Bhd ............................................................... 35,748
6,000 AMMB Holdings Bhd ............................................................... 71,399
16,000 Berjaya Singer Bhd .............................................................. 19,039
17,000 Cement Industries of Malaysia Bhd ............................................... 56,852
6,000 Commerce Assets Holdings Bhd .................................................... 30,775
6,000 Genting Bhd ..................................................................... 59,335
8,000 Malayan Banking Bhd ............................................................. 63,356
16,000 New Straits Times Press Bhd ..................................................... 49,569
25,000 Sime Darby Bhd .................................................................. 69,757
10,000 Sungei Way Holdings Bhd ......................................................... 40,828
9,000 Tanjong Plc ..................................................................... 31,021
3,000 Tenaga Nasional Bhd ............................................................. 12,248
----------
539,927
----------
MEXICO: 3.4%
3,600 Grupo Casa Autrey, S.A. de C.V. (ADR) ........................................... 53,550
3,000 Grupo Televisa S.A. de C.V. (ADR) ............................................... 61,125
2,170 San Luis CPO .................................................................... 47,951
5,100 Transportacion Maritima Mexicana S.A. de C.V. "L" (ADR) ......................... 31,875
7,000 Tubos de Acero de Mexico S.A. (ADR) ............................................. 34,563
----------
229,064
----------
PAKISTAN: 0.6%
5,600 Pakistan Investment Fund, Inc. .................................................. 37,800
----------
PHILIPPINES: 4.2%
46,750 Ayala Land, Inc. "B" ............................................................ 54,104
13,700 Bacnotan Cement Corporation ..................................................... 16,661
186,250 Filinvest Land Inc. ............................................................. 54,070
92,750 International Container Terminal Service Inc. ................................... 64,586
94,000 J.G. Summit Holdings "B" ........................................................ 27,289
3,000 Manila Electric Company "B" ..................................................... 24,127
6,500 San Miguel Corporation "B" ...................................................... 27,030
31,200 Universal Robina Corporation .................................................... 15,912
----------
283,779
----------
</TABLE>
4
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
Number of
Shares
or Principal Value
Amount Security (Note 1)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
POLAND: 2.4%
500 Bank Slaski S.A. ................................................................ $ 29,908
520 E. Wedel S.A. ................................................................... 30,437
5,000 Elektrim Towarzystwo Handlowe S.A. .............................................. 17,624
7,300 Polifarb S.A. ................................................................... 40,234
2,500 Universal S.A. .................................................................. 9,346
500 Zaklady Piwowarski W Zywcu S.A. ................................................. 37,812
----------
165,361
----------
PORTUGAL: 1.7%
3,300 Banco Fomento ................................................................... 29,815
3,964 Portugal Telecom ................................................................ 75,969
600 Uniao Cervejeira, S.A. .......................................................... 10,143
----------
115,927
----------
SINGAPORE: 9.7%
6,000 Development Bank of Singapore Ltd. .............................................. 68,313
3,000 Fraser & Neave Ltd. ............................................................. 34,586
4,000 Hitachi Zosen Singapore Ltd. .................................................... 2,807
30,000 Jurong Cement Ltd. .............................................................. 94,951
5,000 Jurong Engineering Ltd. ......................................................... 29,359
14,000 Keppel Corporation Ltd. ......................................................... 114,285
38,000 Neptune Orient Lines Ltd. ....................................................... 44,081
8,000 Oversea-Chinese Banking Corporation Ltd. ........................................ 88,793
15,500 Overseas Union Bank Ltd. ........................................................ 97,672
25,000 Pacific Carriers Ltd. ........................................................... 23,272
9,000 Sembawang Corporation Ltd. ...................................................... 54,779
----------
652,898
----------
SOUTH AFRICA: 6.0%
300 Anglo American Corporation of South Africa Ltd. (ADR) ........................... 16,050
4,300 Anglo American Platinum (ADR) ................................................... 30,745
5,400 Barlow Ltd. (ADR) ............................................................... 55,013
4,300 JCI Ltd. (ADR) .................................................................. 29,858
4,300 Johnnies Industrial Corporation (ADR) ........................................... 45,527
3,100 Liberty Life Association of Africa Ltd. (ADR) ................................... 85,653
4,400 Rustenburg Platinum Holdings Ltd. (ADR) ......................................... 90,751
800 Samancor Ltd. (ADR) ............................................................. 10,450
1,400 South African Breweries Ltd. (ADR) .............................................. 39,725
----------
403,772
----------
SOUTH KOREA: 0.2%
400 Pohang Iron & Steel Company Ltd. (ADR) .......................................... 11,800
----------
TAIWAN: 0.8%
2,350 Taiwan Fund, Inc.* .............................................................. 51,406
----------
THAILAND: 5.4%
600 Advanced Info Service Plc ....................................................... 8,899
3,100 Land and House Company Ltd. ..................................................... 65,329
6,000 Matichon Public Company Ltd. .................................................... 30,881
1,900 Nation Publishing Group Company, Ltd. ........................................... 3,080
24,000 NTS Steel Groups Company, Ltd. .................................................. 46,930
4,500 Phatra Thanakit Company, Ltd. ................................................... 37,578
10,000 Quality House Company Ltd. ...................................................... 45,795
1,900 Saha Pathanapibul Company, Ltd. ................................................. 3,542
2,600 Siam City Cement Company, Ltd. .................................................. 41,304
1,200 The Siam Cement Company, Ltd. ................................................... 76,644
----------
359,982
----------
UNITED KINGDOM: 1.0%
13,700 Antofagasta Holdings Plc ........................................................ 70,515
----------
</TABLE>
5
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
June 30, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
Number of
Shares
or Principal Value
Amount Security (Note 1)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES: 0.1%
300 Freeport McMoran Copper & Gold .................................................. $ 6,188
----------
VENEZUELA: 0.6%
3,240 Cermanic Carobobo (ADR)* ........................................................ 3,402
4,600 Mantex (ADR)* ................................................................... 22,425
2,050 Mavesa S.A. C.A. (ADR)* ......................................................... 5,896
1,845 Mavesa , S.A. (ADR)*1 ........................................................... 5,304
----------
37,027
----------
TOTAL COMMON STOCKS (cost $5,951,743) ........................................... 6,076,651
----------
SHORT-TERM INVESTMENTS: 5.9%
$200,000 U.S. Treasury Bills 5.65%, due 07/06/95 ......................................... 199,843
200,000 U.S. Treasury Bills 5.58%, due 08/03/95 ......................................... 198,977
----------
TOTAL SHORT-TERM INVESTMENTS (cost $398,820) .................................... 398,820
----------
TOTAL INVESTMENTS: 96.2% (cost $6,350,563(D)) ................................... 6,475,471
Other assets in excess of liabilities: 3.8% ..................................... 252,503
----------
TOTAL NET ASSETS: 100.0%
(equivalent to $9.80 per share on 686,619 shares outstanding) ................. $6,727,974
==========
</TABLE>
At June 30, 1995, the composition of the Fund's net assets by industry
concentration was as follows:
(Left Column)
Banking ........................ 16.7%
Capital Equipment .............. 3.3%
Consumer Durable ............... 1.0
Consumer NonDurable ............ 10.3
Energy ......................... 0.9
Energy Sources ................. 1.3
Financial Services ............ 2.5
Health Care .................... 1.2
Materials ...................... 19.8
(Right Column)
Multi-Industry ................. 10.9%
Precious Metals ................ 0.7
Real Estate .................... 8.8
Services ....................... 8.3
Telecommunications ............. 2.8
U.S. Government obligations .... 5.9
Utilities ...................... 1.8
Other net assets ............... 3.8
-----
Total Net Assets ........... 100.0%
=====
(ADR)-American Depository Receipt.
1Restricted Security.
*Non-income producing securities.
(D)Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
6
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Assets and Liabilities
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost $6,350,563) (Note 1) .......................... $6,475,471
Cash .................................................................................... 60,919
Receivable for shares sold .............................................................. 50,066
Receivable for securities sold .......................................................... 104,438
Dividends and interest receivable ....................................................... 15,858
Foreign taxes recoverable ............................................................... 133
Deferred organization expenses, net (Note 1) ............................................ 16,722
Due from Lexington Management Corporation (Note 2) ...................................... 28,430
----------
Total Assets .................................................................. 6,752,037
----------
Liabilities
Accrued expenses ........................................................................ 24,063
----------
Total Liabilities ............................................................. 24,063
----------
Net Assets (equivalent to $9.80 per share
on 686,619 shares outstanding) (Note 3) ............................................... $6,727,974
==========
Net Assets consist of:
Capital stock-authorized 500,000,000 shares, $.001 par value per share .................. $ 687
Additional paid-in capital .............................................................. 6,994,667
Undistributed net investment income ..................................................... 55,784
Accumulated net realized loss on investments and foreign currency hodlings .............. (448,142)
Net unrealized appreciation of investments and foreign currency holdings ................ 124,978
----------
$6,727,974
==========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
7
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Operations
June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Investment Income
Interest Income .......................................................... $ 36,865
Dividend Income .......................................................... 62,594
----------
99,459
Less: Foreign tax expense ................................................ 8,634
----------
Total investment income $ 90,825
Expenses
Investment advisory fee (Note 2) ......................................... 22,792
Accounting and shareholder services fees (Note 2) ........................ 2,095
Custodian and transfer agent fees ........................................ 42,095
Printing and mailing ..................................................... 9,155
Registration fees ........................................................ 878
Directors' fees .......................................................... 5,210
Audit and legal fees ..................................................... 12,330
Deferred organization expenses (Note 1) .................................. 2,220
Computer processing fees ................................................. 4,095
Other expenses ........................................................... 4,943
----------
Total expenses ....................................................... 105,813
Less: expenses recovered under contract with investment
adviser (Note 2) ................................................... 70,426 35,387
---------- --------
Net investment income ............................................ 55,438
Realized and Unrealized Gain (Loss) on Investments (Note 4)
Realized loss on investments and foreign currency transactions
(excluding short-term securities):
Proceeds from sales .................................................. 1,459,093
Cost of securities sold .............................................. 1,820,972
----------
Net realized loss ................................................ (361,879)
Unrealized appreciation of investments:
End of period ........................................................ 124,978
Beginning of period .................................................. (227,855)
----------
Change during period ............................................. 352,833
--------
Net realized and unrealized loss on investments .................. (9,046)
--------
Increase in Net Assets Resulting from Operations ............................. $ 46,392
========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
8
<PAGE>
Lexington Emerging Markets Fund, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
March 30, 1994
Six months ended (Commencement
June 30, 1995 of Operations) to
(unaudited) December 31, 1994
---------------- -----------------
<S> <C> <C>
Net investment income ..................................................... $ 55,438 $ 14,482
Net realized loss from investment transactions ............................ (361,879) (2,132)
Unrealized appreciation (depreciation) of investments
and foreign currency holdings .......................................... 352,833 (227,855)
---------- ----------
Net increase (decrease) in net assets resulting from operations ......... 46,392 (215,505)
Distributions to shareholders from net investments income ................. _ (10,100)
Distributions to shareholders in excess of net realized
gain on investments (Note 1) ............................................ _ (88,168)
Increase in net assets from capital share transactions (Note 3) ........... 2,057,766 4,937,589
---------- ----------
Net increase in net assets .................................... 2,104,158 4,623,816
Net Assets
Beginning of period ....................................................... 4,623,816 0
---------- ----------
End of period (including undistributed net investment income of
$55,784 and $346, respectively) ......................................... $6,727,974 $4,623,816
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
Notes to Financial Statements
June 30, 1995 (unaudited) and December 31, 1994
Note 1-Significant Accounting Policies
Lexington Emerging Markets Fund, Inc. (the "Fund") is an open end diversified
management investment company registered under the Investment Company Act of
1940, as amended. With the exception of shares held in connection with initial
capital of the Fund, shares of the Fund are currently being offered to
participating insurance companies for allocation to certain accounts for the
purpose of funding variable annuity contracts and variable annuity life
insurance policies. The Fund commenced operations on March 30, 1994. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements:
Securities: Security transactions are accounted for on a trade date basis.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Investments are stated market value based on closing
prices reported by the exchange on which the securities are traded, on the last
business day of the period or, for over-the-counter securities, at the average
between bid and asked prices. Securities for which market quotations are not
readily available and other assets are valued at fair value as determined by
management and approved in good faith by the Board of Directors. Short-term
securities are stated at amortized cost, which approximates market value. All
Investments quoted in foreign currency are valued in U.S. dollars on the basis
of the foreign currency exchange rate prevailing at the close of business.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Interest income 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. 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 settled.
Distributions: During the current year, the Fund adopted Statement of
Position 93-2: Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions by Investment
Companies. Accordingly, as of December 31, 1994, book and tax basis differences
amounting to $4,036 have been reclassified from distributions in excess of net
realized gains to undistributed net investment income. Net investment income,
net realized gains, and net assets were not affected by this change.
Distribution in excess of net realized gains reflect temporary book-tax
differences arising from Internal Revenue Code ("IRC") Excise Tax distribution
requirements, associated post-October Loss deferral provisions, which
effectively allow the deferral of net realized capital losses to the next year,
and gains resulting from wash sales.
9
<PAGE>
Lexington Emerging Markets Fund, Inc.
Notes to Financial Statements
June 30, 1995 (unaudited) and December 31, 1994 (continued)
Federal Income Taxes: It is the Fund's intention to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes has been made.
Deferred Organization Expenses: Organization expenses aggregating $22,290
have been deferred and are being amortized on a straight-line basis over five
years.
Note 2-Investment Advisory Fee and Other Transactions with Affiliate
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at the rate of .85% of average daily net assets. LMC has agreed to
voluntarily limit the total expenses of the Fund (excluding interest, taxes,
brokerage commissions and extraordinary expenses but including management fee
and operating expenses) to an annual rate of 1.30% of the Fund's average net
assets. For the six months ended June 30, 1995 expense reimbursement amounted to
$70,426 and is set forth in the statement of operations.
The Fund also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs, which are incurred by the Fund, but paid by LMC.
Note 3-Capital Stock
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
March 30, 1994
Six months ended (Commencement of
June 30, 1995 Operations) to
(unaudited) December 31, 1994
--------------------- ---------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ......................................... 403,719 $3,793,120 497,613 $5,246,882
Shares issued on reinvestment of dividends .......... - - 9,946 98,265
------- ---------- ------- ----------
403,719 3,793,120 507,559 5,345,147
Shares redeemed ..................................... (186,115) (1,735,354) (38,544) (407,558)
------- ---------- ------- ----------
Net increase ....................................... 217,604 $2,057,766 469,015 $4,937,589
======= ========== ======= ==========
</TABLE>
Note 4-Purchases and Sales of Investment Securities
The cost of purchases and proceeds from sales of securities for the six months
ended June 30, 1995, excluding short-term securities, were $5,926,355 and
$1,459,093 , respectively.
At June 30, 1995, aggregate gross unrealized appreciation for all securities
and foreign currency holdings (including foreign currency receivables and
payables) in which there is an excess of value over tax cost amounted to
$445,936 and aggregate gross unrealized depreciation for which there is an
excess of tax cost over value amounted to $320,958.
Note 5-Investment and Concentration Risks
The Fund's investment 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 develop- ments, 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 from the potential inability of counterparties to
meet the terms of their contracts.
10
<PAGE>
Lexington Emerging Markets Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
March 30, 1994
Six months ended (Commencement
June 30, 1995 of Operations) to
(unaudited) December 31, 1994
---------------- -----------------
<S> <C> <C>
Net asset value, beginning of period ............................ $ 9.86 $10.00
------ ------
Income from investment operations:
Net investment income ....................................... 0.08 0.03
Net realized and unrealized gain (loss) on investments ...... (0.14) 0.04
------ ------
Total income (loss) from investment operations .......... (0.06) 0.07
------ ------
Less distributions:
Dividend from net investment income ......................... - (0.02)
Distributions in excess of net realized capital gains ....... - (0.19)
------ ------
Total distributions ..................................... _ (0.21)
------ ------
Net asset value, end of period .................................. $ 9.80 $ 9.86
====== ======
Total return ............................................ (1.22%)* 0.76%*
Ratio to average net assets:
Expenses, before reimbursement .............................. 3.95%* 6.28%*
Expenses, net of reimbursement .............................. 1.32%* 1.30%*
Net investment income (loss), before reimbursement .......... (0.56%)* (4.29%)*
Net investment income ....................................... 2.07%* 0.70%*
Portfolio turnover .............................................. 71.02%* 71.21%*
Net assets at end of period (000's omitted) ..................... $6,728 $4,624
<FN>
-----------
*Annualized
</FN>
</TABLE>
11
<PAGE>
(Left Column)
Lexington
Emerging Markets 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
This report has been prepared for the information
of the shareholders of Lexington Emerging Markets
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
EMERGING
MARKETS
FUND, INC.
(square box)
Seeks long-term growth of capital
primarily through investment in
equity securities of
companies domiciled in, or doing
business in, emerging countries
and emerging markets.
(square box)
SEMI-ANNUAL REPORT
JUNE 30, 1995
The Lexington Group
of No Load
Investment Companies
--------------------------------------------------
