================================================================================
LEXINGTON
================================================================================
================================================================================
LEXINGTON
STRATEGIC
INVESTMENTS
FUND, INC.
----------------------------------------
Seeks capital appreciation.
The Fund's investments
are concentrated in the
common stock of gold
and other precious metals
mining compnies located
in the Republic of South Africa.
----------------------------------------
ANNUAL REPORT
JUNE 30, 1997
================================================================================
<PAGE>
DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
During the first half of 1997, the U.S. gold price declined by 11.5%. A
brief rally in late February was aborted by forward selling by the producers
together with Central Bank selling, including the recent well publicized sale by
Australia of 167 tons, representing two-thirds of its holdings. Added to this
was the heavy short selling by commodity and hedge funds taking advantage of
persistent fears of further Central Bank selling related to the establishment of
the European Monetary Union. Despite evidence that these fears were overdone,
including a major reversal by the German Treasury in its efforts to revalue its
gold reserves, gold bullion investors stepped back as the fund short sellers
continued to sell. Even a 17% increase in fabrication demand, stimulated by the
lower prices, failed to stem the decline in gold bullion prices. The result has
been that a huge short position has been built up.
In South Africa itself, the weak U.S. gold price was exacerbated by a
strengthening local currency so that the gold price when denominated in that
currency was down by 12.3%. This decline in local gold prices was reflected in
an average decline for the highly leveraged South African gold shares of 33.2%
as represented by the unmanaged Financial Times Africa Gold Mine Index compared
with a decline of 23.6% for the broader unmanaged Financial Times All Gold
Index. The Fund declined by 35.5%* compared to a decline of 24.4% for the
average gold fund monitored by Lipper Analytical Services, Inc. Productivity
measures instituted by the South African gold mining industry are too long term
in nature to have counteracted a sharp increase in public holidays and
profitability was decimated with operating margins brought down to record low
levels. Efforts by the industry to implement full calendar operations were
unsuccessful.
As we look forward from a period of disappointment there are signs of
optimism. The price of gold bullion at the time of writing is now lower than it
was prior to the major gold price rally in 1993 which produced a powerful upward
explosion in the prices of the South African gold shares. As already pointed out
demand for fabrication showed excellent growth in the first quarter and appears
to be set to continue at current bargain gold prices. Moreover, current gold
prices threaten to hasten closure of certain high cost mines while delaying many
new projects. Additionally, the specter of further Central Bank sales has been
alleviated by the hue and cry in Germany in reaction to even the thought of
revaluing their gold reserves whereas there have been questions raised about the
timing of the European Monetary Union. Receiving very little publicity is the
fact that 17 Central Banks actually added to their gold reserves last year while
there have been signs that some of the Far Eastern Central Banks may wish to
diversify their large and growing reserves into gold and away from an over
reliance on U.S. dollar reserves. Should these factors combine to produce a gold
price rally there would then be further impetus from the huge short positions
held by the funds and dealers. Higher gold prices would provide strong fuel to
the upward movement of the highly leveraged South African gold shares. The South
African gold mining industry is currently negotiating with the unions under
extreme pressure from a weak local gold price while the unions face the prospect
of widespread layoffs should some of the marginal mines be forced to close.
Common sense suggests a shared interest in productivity improvements and the
need for full calendar operations. The labor negotiations now taking place, if
successful, would be a major boost to the fortunes of the presently beleaguered
South African mining industry, an industry still vitally important to the
country itself in terms of foreign exchange earnings and employment.
1
<PAGE>
We appreciate your continued support and welcome the opportunity to discuss
any questions you may have about your investment.
Sincerely
/s/ Robert D. Radsch /s/ Robert M. DeMichele
- --------------------- -----------------------
Robert W. Radsch Robert M. DeMichele
Portfolio Manager President
August, 1997 August, 1997
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.,
THE S&P 500, THE JOHANNESBURG ALL GOLD INDEX AND
GOLD BULLION (LONDON SPOT - US DOLLARS)
Average Annual Total Returns for the period ended 6/30/97
Since Inception
Fund/Index Legend One Year Five Year (1/2/92)*
- -----------------------------------------------------------------------
Lexington Strategic
Investments Fund thick line (35.51%) 8.29% (0.41%)
- -----------------------------------------------------------------------
S&P 500 single line 34.71% 19.78% 17.67%
- -----------------------------------------------------------------------
thick
Gold Bullion dotted line (12.43%) (0.53%) (0.87%)
- ------------------------------------------------------------------------
Johannesburg All thin
Gold Index dotted line (43.95%) (12.03%) (2.84%)
- ------------------------------------------------------------------------
The actual line graph appearing in the printed version of this shareholder
report cannot appear in this electronic filing due to formatting restrictions,
however a description of the line graph is as follows:
The vertical column of the graph represents dollar amounts beginning with $5,000
and ending with $25,000 in increments of $5,000. The horizontal line of the
graph represents 1/2/92, 6/30/92 and December 31st of each year beginning 1992
and ending 1997. The Fund's legend begins with $9,412, and the other three
legends begin with $10,000. As of 6/30/97, the dollar amounts ended at:
S&P 500 $24,474
Gold Bullion 9,532
Lexington Strategic 9,200
Investment Fund
Johannesburg All 8,535
Gold Index
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, including the maximum sales charge (5.75%) made at its
inception, with a similar investment in the Standard & Poor's 500 Stock Index
("S&P 500"), the Johannesburg All Gold Index and a direct investment in silver
bullion. Results for the Fund and the S&P 500 include the reinvestment of all
dividend and capital gains distributions. The price of silver is subject to
substantial price fluctuations over short periods of time and may be affected by
unpredictable international monetary and political policies.
*The original inception date for the Fund was August 30, 1984. Prior to January,
1992 the Fund was managed by a different investment advisor. Investment results
for periods prior to that date are not shown in the graph. The Per Share Income
and Capital Changes Table in the Fund's prospectus contains performance data
that relates to prior periods. 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 their original cost. Total return represents past
performance and is not predictive of future performance.
*-39.19%, 6.97% and -1.51% are the one year, five year and since commencement
(1/2192) average annual standard total returns, respectively, for the period
ended June 30, 1997. Prior to January, 1992 the Fund was managed by a
different investment adviser. 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. These calculations include the
maximum 5.75% initial sales charge and assume reinvestment of dividends and
capital gains at net asset value. Total return represents past performance and
is not predictive of future results.
2
<PAGE>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997
Number of Value
Shares Security (Note 1)
- -----------------------------------------------------------------------------
PALLADIUM BULLION: 4.3%
6,923 fine ounces(1)
(Cost $1,130,528) .............................. $ 1,329,300
----------
COMMON STOCK: 89.6%
AUSTRALIA: 0.6%
900,000 Ghana Gold Mines, Ltd.(1)....................... 175,300
----------
CANADA: 2.6%
50,000 Etruscan Enterprises, Ltd.(1)................... 215,649
100,000 Golden Knight Resources, Inc.(1)................ 204,413
50,000 Namibian Minerals Corporation(1)................ 207,813
200,000 Vista Gold Corporation(1)....................... 179,768
----------
807,643
----------
GHANA: 3.7%
100,000 Ashanti Goldfields Company, Ltd. (GDR) ......... 1,168,751
----------
SOUTH AFRICA: 80.6%
28,000 Anglo American Gold Investment Company, Ltd. ... 1,688,443
23,800 Anglovaal, Ltd. "N" ............................ 634,941
658,326 Avgold Ltd.(1).................................. 645,910
150,000 Barnato Exploration, Ltd.(1).................... 429,938
179,800 Beatrix Mines, Ltd. ............................ 814,653
700,000 Blyvooruizicht Gold Mining Company, Ltd.(1)..... 385,842
509,000 Consolidated Mining Corporation, Ltd.(1)........ 61,724
49,000 De Beers Centenary AG .......................... 1,809,597
107,800 Driefontein Consolidated, Ltd. ................. 724,919
137,400 Durban Roodepoort Deep, Ltd. (Options)(1) ...... 74,302
359,900 East Rand Gold & Uranium Company, Ltd. ......... 503,879
400,000 Eastvaal Gold Holdings, Ltd.(1)................. 403,921
374,600 Elandsrand Gold Mining Company, Ltd. ........... 1,350,382
127,900 Evander Gold Mines, Ltd. ....................... 549,890
50,000 Free State Consolidated Gold Mines, Ltd. ....... 250,246
25,000 Free State Consolidated Gold Mines, Ltd. (ADR) . 125,000
30,500 Gold Fields of South Africa, ................... 719,539
255,630 Harmony Gold Mining, Ltd.(1).................... 1,169,502
800,000 HJ Joel Mining Company, Ltd.(1)................. 617,347
118,000 Impala Platinum Holdings, Ltd. ................. 1,320,350
95,300 JCI, Ltd. ...................................... 733,313
615,900 Lebowa Platinum Mines, Ltd.(1).................. 651,812
200,000 New East Daggafontein Mines Ltd. ............... 440,961
3
<PAGE>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
June 30, 1997(continued)
Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
SOUTH AFRICA (CONTINUED):
100,000 New Wits, Ltd. ....................................... $ 291,035
850,000 Oryx Gold Holdings, Ltd.(1)........................... 862,080
139,700 Randfontein Estates Gold Mining Company
Witwatersrand, Ltd. (ADR) .......................... 292,611
49,500 Randgold and Exploration Company, Ltd.(1)............. 218,276
87,000 Rustenburg Platinum Holdings, Ltd .................... 1,592,093
635 Rustenburg Platinum Holdings, Ltd. (ADR) ............. 11,673
75,000 Southvaal Holdings, Ltd .............................. 1,504,782
175,900 St. Helena Gold Mines, Ltd. .......................... 872,608
21,700 Vaal Reefs Exploration & Mining Company, Ltd.......... 1,047,791
200,000 West Rand Consolidated Mines, Ltd.(1)................. 352,769
97,700 Western Areas Gold Mining Company, Ltd. .............. 657,000
44,500 Western Deep Levels, Ltd. ............................ 1,071,896
11,200 Western Deep Levels, Ltd. (ADR) ...................... 269,500
----------
25,150,525
----------
United Kingdom: 2.1%
315,000 Lonrho Plc .......................................... 668,424
----------
Total Common Stock
(Cost $42,821,940) .................................. 27,970,643
----------
PREFERRED STOCK: 0.9%
South Africa: 0.9%
67,400 Durban Roodepoort Deep, Ltd.
(Cost $403,535) ..................................... 295,722
----------
TOTAL INVESTMENTS: 94.8% (Cost $44,356,003+)
(Note 1) ........................................... 29,595,665
Other assets in excess of liabilities: 5.2% ......... 1,607,830
----------
TOTAL NET ASSETS: 100.0% (equivalent to
$1.78 per share on 17,493,770 shares outstanding) . $31,203,495
===========
ADR--American Depository Receipt.
GDR--Global Depository Receipt.
(1) Non-income producing security.
+ Aggregate cost for Federal income tax purposes is $44,994,082.
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments, at value (cost $44,356,003) (Note 1) .............................................. $ 29,595,665
Cash ........................................................................................... 1,022,482
Receivable for investment securities sold ...................................................... 698,251
Receivable for shares sold ..................................................................... 58,638
Dividends and interest receivable .............................................................. 46,674
-------------
Total Assets ........................................................................... $ 31,421,710
-------------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ............................................... 26,931
Payable for shares redeemed .................................................................... 128,407
Accrued expenses ............................................................................... 62,877
-------------
Total Liabilities ...................................................................... 218,215
-------------
NET ASSETS (equivalent to $1.78 per share on 17,493,770 shares outstanding) (Note 3) ........... $ 31,203,495
=============
NET ASSETS consist of:
Capital stock--authorized 1,000,000,000 shares, $.001 par value per share ...................... $ 17,503
Additional paid-in capital (Note 1) ............................................................ 85,074,360
Undistributed net investment income (Note 1) ................................................... 152,145
Accumulated net realized loss on investments and foreign currency transactions
(Notes 1 and 6) .............................................................................. (39,279,783)
Unrealized depreciation on investments and foreign currency transactions ....................... (14,760,730)
-------------
Total Net Assets .......................................................................... $ 31,203,495
=============
NET ASSET VALUE, REDEMPTION PRICE PER SHARE .................................................... $1.78
=====
OFFERING PRICE PER SHARE (100/94.25 of $1.78 adjusted to nearest cent) ......................... $1.89
=====
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
LEXINGTON
STRATEGIC INVESTMENTS FUND, INC.
STATEMENT OF OPERATIONS
Year ended June 30, 1997
INVESTMENT INCOME
Dividends .............................. $ 1,429,708
Interest ............................... 120,511
------------
1,550,219
Less: foreign tax expense .............. 7,585
------------
Total investment income .............. $1,542,634
Expenses
Investment advisory fee
(Note 2) ............................. 444,480
Transfer agent and
shareholder servicing
expense (Note 2) ..................... 199,387
Printing and mailing expenses .......... 78,044
Accounting expenses (Note 2) ........... 47,843
Custodian expense ...................... 35,057
Registration fees ...................... 28,198
Professional fees ...................... 21,673
Directors' fees and expenses ........... 15,874
Amortization of deferred
organization costs (Note 1) .......... 14,129
Computer processing fees ............... 12,072
Other expenses ......................... 41,423
------------
Total expenses ....................... 938,180
------------
Net investment income ............. 604,454
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 4)
Net realized loss on:
Investments .......................... (538,116)
Foreign currency
transactions ....................... (25,935)
------------
Net realized loss ................ (564,051)
Net change in unrealized
appreciation on:
Investments .......................... (19,335,561)
Foreign currency
translation of other
assets and liabilities ............. 4,582
------------
Net change in unrealized
appreciation ....................... (19,330,979)
------------
Net realized and
unrealized loss .................. (19,895,030)
------------
DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................ $(19,290,576)
============
LEXINGTON
STRATEGIC INVESTMENTS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Years ended June 30, 1997 and 1996
1997 1996
---------- ----------
Net investment income .................... $ 604,454 $ 395,188
Net realized gain/(loss) from
investments and foreign
currency transactions ................. (564,051) 3,521,548
Net change in unrealized
appreciation of investments
and foreign currency
translations .......................... (19,330,979) 10,372,701
----------- -----------
Increase (decrease) in
net assets resulting
from operations ................... (19,290,576) 14,289,437
Distributions to shareholders
from net investment income ............ (768,498) (731,482)
Decrease in net assets from
capital share transactions
(Note 3) .............................. (6,901,652) (49,452,448)
----------- -----------
Net decrease in
net assets ...................... (26,960,726) (35,894,493)
NET ASSETS
Beginning of period ................... 58,164,221 94,058,714
----------- -----------
End of period (including
undistributed net
investment income of
$152,145 and $342,235
respectively) ....................... $31,203,495 $58,164,221
=========== ===========
The Notes to Financial Statements are an integral part of these statements.
6
<PAGE>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington Strategic Investments 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 capital
appreciation. The investment concentration is currently in the common stock of
gold and other precious metals mining companies. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements:
INVESTMENTS Security transactions are accounted for on a trade date basis.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Securities traded on a recognized stock exchange are
valued at the last sales price reported by the exchange on which the securities
are traded. If no sales price is recorded, the mean between the last bid and
asked prices is used. Securities traded on the over-the-counter market and
palladium bullion are valued at the mean between the last current bid and asked
price. Short-term securities having a maturity of 60 days or less are stated at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available and other assets are valued by Fund
management in good faith under the direction of the Fund's Board of Directors.
All investments quoted in foreign currencies are valued in U.S. dollars on the
basis of the foreign currency exchange rates prevailing at the close of
business. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income, adjusted for amortization of premiums and
accretion of discounts, is accrued as earned.
FOREIGN CURRENCY TRANSACTIONS Foreign currencies (and receivables and
payables denominated in foreign currencies) are translated into U.S. dollar
amounts at current exchange rates. Translation gains or losses resulting from
changes in exchange rates and realized gains and losses on the settlement of
foreign currency transactions are reported in the statement of operations. In
addition, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk in the purchase or sale of securities
denominated in foreign currency. The Fund may also enter into such contracts to
hedge against changes in foreign currency exchange rates on portfolio positions.
These contracts are marked to market daily, by recognizing the difference
between the contract exchange rate and the current market rate as unrealized
gains or losses. Realized gains or losses are recognized when contracts are
closed and are reported in the statement of operations. There were no foreign
currency exchange contracts outstanding at June 30, 1997.
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 June 30, 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.
7
<PAGE>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996 (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED REORGANIZATION EXPENSES Reorganization expenses aggregating
$140,435 have been fully amortized as of June 30, 1997.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 1.00% of the Fund's average daily net assets up to
$30 million and at an annual rate of 0.75% thereafter. For 1997, LMC has agreed
to voluntarily limit the total expenses of the Fund (including management fees,
but excluding interest, taxes, brokerage commissions and extraordinary expenses)
to an annual rate at 2.50% of the Fund's average daily net assets. No
reimbursement was required for the year ended June 30, 1997.
The Fund reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $97,461, which are incurred by the Fund, but paid
by LMC.
3. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
June 30, 1997 June 30, 1996
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Shares sold ......................................... 40,011,394 $99,573,956 67,142,109 $191,811,160
Shares issued on reinvestment of dividends .......... 304,025 681,017 237,847 623,166
---------- ----------- ---------- -----------
40,315,419 100,254,973 67,379,956 192,434,326
Shares redeemed ..................................... (43,519,439) (107,156,625) (84,083,047) (241,886,774)
---------- ----------- ---------- -----------
Net decrease ...................................... (3,204,020) $(6,901,652) (16,703,091) $(49,452,448)
========== =========== ========== ===========
</TABLE>
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of securities for the year ended
June 30, 1997 excluding short-term securities, were $38,786,329 and $45,803,623,
respectively.
At June 30, 1997, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$1,164,369 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $16,562,786.
8
<PAGE>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 and 1996 (continued)
5. INVESTMENT AND CONCENTRATION RISKS
The Fund makes significant investments in foreign securities and has a policy of
investing in precious metals and in the securities of companies engaged in the
exploration, mining, processing, fabrication and distribution of natural
resources. There are certain risks involved in investing in foreign securities
or concentrating in specific industries that are in addition to the usual risks
inherent in other domestic investments. These risks include those resulting from
potentially adverse political and economic developments as well as the possible
imposition of foreign exchange or other foreign governmental restrictions or
laws, 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.
6. FEDERAL INCOME TAXES--CAPITAL LOSS CARRYFORWARDS
As of June 30, 1997, $11,422,434 of capital loss carryforwards have expired and
have been reclassified to additional paid-in capital. Capital loss
carryforwards(1) available for federal income tax purposes as of June 30, 1997
are:
$ 13,348,932 expiring in 1998;
1,703,574 expiring in 1999;
14,932,782 expiring in 2000;
591,575 expiring in 2001;
753,540 expiring in 2002;
2,902,447 expiring in 2003;
4,076,418 expiring in 2004; and
518,308 expiring in 2005.
To the extent any future capital gains are offset by these losses, such
gains may not be distributed to shareholders.
(1) Temporary book-tax differences of $452,207 are the result of losses
generated from wash sales.
7. TAX INFORMATION (UNAUDITED)
The percentage of investment company taxable income eligible for the dividends
received deduction available to certain corporate shareholders with respect to
the fiscal year ended June 30, 1997 is 1.02%.
9
<PAGE>
LEXINGTON STRATEGIC INVESTMENTS FUND, INC.
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended June 30,
-------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 2.81 $ 2.51 $ 2.48 $ 2.30 $ 1.26
--------- --------- --------- --------- ---------
Income (loss) from investment operations:
Net investment income 0.03 0.02 0.04 0.04 0.03
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions (1.02) 0.31 0.03 0.18 1.01
--------- --------- --------- --------- ---------
Total income (loss) from investment
operations (0.99) 0.33 0.07 0.22 1.04
Less distributions:
Distributions from net investment
income (0.04) (0.03) (0.04) (0.04) --
--------- --------- --------- --------- ---------
Net asset value, end of period $ 1.78 $ 2.81 $ 2.51 $ 2.48 $ 2.30
========= ========= ========= ========= =========
Total return* (35.51)% 13.02% 2.47% 9.26% 82.54%
Ratio to average net assets:
Expenses, before reimbursement
or waivers 1.93% 1.77% 1.70% 1.76% 3.76%
Expenses, net of reimbursement
or waivers 1.93% 1.77% 1.70% 1.76% 2.78%
Net investment income, before
reimbursement or waivers 1.24% 0.44% 1.54% 2.00% 2.05%
Net investment income 1.24% 0.44% 1.54% 2.00% 3.03%
Portfolio turnover rate 85.10% 84.44% 115.91% 25.66% 4.80%
Average commission paid on equity
security transactions** $ 0.01 $ 0.03 -- -- --
Net assets, end of period (000's omitted) $ 31,203 $ 58,164 $ 94,059 $ 73,500 $ 43,816
</TABLE>
*Sales load is not reflected in total return.
**In accordance with SEC disclosure guidelines, the average commissions are
calculated for the years beginning after June 1996 but not for prior periods.
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Lexington Strategic Investments Fund, Inc.
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Strategic
Investments Fund, Inc. as of June 30, 1997, and the related statements of
operations for the year ended, the statement of changes in net assets for each
of the years in the two year period then ended and the financial highlights for
each of the years in the five-year period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1997 by correspondence with the custodian. As to securities purchased and
sold, but not received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Strategic Investments Fund, Inc. as of June 30, 1997, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
August 1, 1997
11
<PAGE>
LEXINGTON
INVESTOR SERVICES
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AS A LEXINGTON SHAREHOLDER, YOU SHOULD BE AWARE OF THE MANY SERVICES AVAILABLE
to you.
NO LOAD--The Lexington Funds are no load funds. That is, investments and
redemptions are made without any sales charges, commissions or redemption fees.
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FREE TELEPHONE EXCHANGE--Investments in the Lexington Funds may be exchanged for
shares of a different Lexington Fund at any time.
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CHECK WRITING PRIVILEGES--Lexington Money Market Trust and Lexington Tax Free
Money Fund permit investors immediate access to their funds with check writing
for withdrawals from their account.
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TAX SHELTERED PLANS--IRA, Keogh, Pension, and Profit Sharing Prototype Plans are
available to qualified individuals. These plans offer investment flexibility
through the Share Exchange Service, simplified record keeping, convenience and
investment supervision.
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CUSTODIAL ACCOUNTS FOR MINORS--Investments may be made on behalf of minors under
the Uniform Gifts to Minors Act currently in effect in all states.
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SYSTEMATIC WITHDRAWAL PLAN--An investor may elect to receive a fixed amount from
his or her account each month or quarter, subject to certain minimums.
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COMPLETE RECORD KEEPING--A statement is provided for every transaction in
addition to a year-end statement with tax information.
THE LEXINGTON GROUP OF
NO LOAD INVESTMENT COMPANIES
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.--Seeks long-term growth of
capital primarily through investment in the equity securities of companies
domiciled in, or doing business in, emerging countries and emerging markets.
LEXINGTON GLOBAL FUND, INC.--Seeks long-term growth of capital primarily through
investment in common stocks of companies domiciled in foreign countries and the
United States.
LEXINGTON INTERNATIONAL FUND, INC.--Seeks long-term growth of capital through
investment in companies domiciled in foreign countries.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.--Seeks long- term capital appreciation
through investments primarily in equity securities of Russian companies.
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC. --Seeks long-term capital
appreciation through investment in companies domiciled in the Asia Region with a
market capitalization of less than $1 billion.
LEXINGTON RAMIREZ GLOBAL INCOME FUND--Seeks high current income. Capital
appreciation is a secondary objective. The Fund invests in a combination of
foreign and domestic high-yield, lower rated debt securities.
LEXINGTON GOLDFUND, INC.--Seeks capital appreciation through investment in gold
bullion and shares of gold mining companies.
LEXINGTON GROWTH AND INCOME FUND, INC.--Seeks capital appreciation over the
long-term through investments in the stocks of large, ably managed and well
financed companies.
LEXINGTON CORPORATE LEADERS TRUST FUND--Seeks capital growth and reasonable
income through investment in an equal number of shares of an established list of
American blue chip corporations.
LEXINGTON SMALLCAP VALUE FUND, INC.--Seeks long-term capital appreciation
through investment in common stocks of companies domiciled in the United States
with a market capitalization of less than $1 billion.
LEXINGTON CONVERTIBLE SECURITIES FUND--Seeks total return by providing capital
appreciation, current income and conservation of capital through investments in
a diversified portfolio of securities convertible into shares of common stock.
LEXINGTON GNMA INCOME FUND, INC.--Seeks to achieve a high level of current
income, consistent with liquidity and safety of principal, through investment
primarily in mortgage-backed GNMA ("Ginnie Mae") certificates that are
guaranteed as to the timely payment of principal and interest by the United
States Government.
LEXINGTON MONEY MARKET TRUST--Seeks a high level of current
income consistent with preservation of capital and liquidity through investments
in interest bearing short-term money market instruments.
LEXINGTON TAX FREE MONEY FUND, INC.--Seeks current income exempt from Federal
income taxes while maintaining stability of principal, liquidity and
preservation of capital.
For more complete information about any of the Lexington Funds and a prospectus
which includes management fee and expenses call the distributor toll-free at
1-800-526-0056. Read the prospectus carefully before you invest or send money.
12
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LEXINGTON
STRATEGIC INVESTMENTS FUND, INC.
Ivestment Aviser
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LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Distributor
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LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
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ALL SHAREHOLDER REQUESTS FOR SERVICES OF
ANY KIND SHOULD BE SENT TO:
Transfer Agent
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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
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This report has been prepared for the information of the shareholders of
Lexington Strategic Investments 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.
