In contrasting newly coined lexical and phrasal adjective-noun combinations as e.g. Blautee (‘blue_tea’) versus blauer Tee (‘blue tea’), the present paper argues in favour of a different semantic make-up of phrasal versus lexical modification in German. Whereas the former triggers direct modification along the lines of ordinary predicate modification, the latter involves a mediating free variable to be instantiated at the conceptual level. The analysis accounts for interpretational differences between phrasal and lexical adjectival modification in the cases of incompatible attribution and negation. Furthermore, the proposal made here supports the assumption of a particular naming function of lexical units. Additional evidence will be drawn from the observation that non-predicative adjectives and comparatives are ruled out in adjective-noun compounds and that adjectives projected word-internally contribute atemporal properties. Finally, it is shown that despite the particular naming function of lexical units a straightforward identification of lexical adjective-noun structures with kind-referring expressions is too strong a conclusion.