<PAGE>
[LEXINGTON LOGO]
PROSPECTUS MAY 3, 1999
THE LEXINGTON FUNDS(R)
<TABLE>
<S> <C> <C> <C>
DOMESTIC EQUITY FUNDS INTERNATIONAL AND GLOBAL FIXED-INCOME FUNDS AND PRECIOUS METALS FUNDS
FUNDS MONEY MARKET FUNDS
LEXINGTON GROWTH AND LEXINGTON GLOBAL LEXINGTON GNMA LEXINGTON GOLDFUND,
INCOME FUND, INC. CORPORATE LEADERS INCOME FUND, INC. INC.
FUND, INC.
LEXINGTON SMALLCAP LEXINGTON INTERNATIONAL LEXINGTON GLOBAL INCOME LEXINGTON SILVER FUND,
FUND, INC. FUND, INC. FUND INC.
LEXINGTON WORLDWIDE LEXINGTON MONEY MARKET
EMERGING MARKETS TRUST
FUND, INC.
LEXINGTON SMALL CAP ASIA
GROWTH FUND, INC.
LEXINGTON TROIKA DIALOG
RUSSIA FUND, INC.
</TABLE>
The Securities and Exchange Commission has not approved nor disapproved the
shares of any of the Funds. The Securities and Exchange Commission also has not
determined whether this Prospectus is accurate or complete. Any person who tells
you that the Securities and Exchange Commission has made such an approval or
determination is committing a crime.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Domestic Equity Funds
Lexington Growth and Income Fund, Inc. ................... 4
Lexington SmallCap Fund, Inc. ............................ 6
International and Global Funds
Lexington Global Corporate Leaders Fund, Inc. ............ 8
Lexington International Fund, Inc. ....................... 10
Lexington Worldwide Emerging Markets Fund, Inc. .......... 12
Lexington Small Cap Asia Growth Fund, Inc. ............... 14
Lexington Troika Dialog Russia Fund, Inc. ................ 16
Fixed Income Funds and Money Market Funds
Lexington GNMA Income Fund, Inc. ......................... 18
Lexington Global Income Fund.............................. 20
Lexington Money Market Trust.............................. 22
Precious Metals Funds
Lexington Goldfund, Inc. ................................. 24
Lexington Silver Fund, Inc. .............................. 26
Risks of Investing
Risks of Investing in Mutual Funds........................ 28
Risks of Investing in Securities of Small Companies....... 28
Risks of Investing in Foreign Securities.................. 28
Risks of Investing in Lower Quality Debt Securities....... 29
Risks of Investing in Securities of Russian Companies..... 29
Non-diversified Portfolio................................. 29
Precious Metals........................................... 30
Temporary Defensive Position.............................. 30
Management of the Funds..................................... 31
Shareholder Information
Investment Options........................................ 37
What You Need to Know About Your Lexington Account........ 38
Becoming a Lexington Shareholder.......................... 38
Buying Additional Shares.................................. 38
Exchanging Shares......................................... 39
Minimum Account Balance................................... 39
Redeeming Your Shares..................................... 40
Redeeming by Written Instruction.......................... 40
Redeeming by Telephone.................................... 40
Redeeming by Check........................................ 41
Systematic Withdrawal Plan................................ 41
How Fund Shares are Priced................................ 41
Dividends and Capital Gain Distributions.................. 42
Taxes..................................................... 42
Distribution of Fund's Shares............................... 44
Financial Highlights........................................ 45
</TABLE>
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Growth and Income Fund's principal investment
OBJECTIVE objective is long-term capital appreciation. Income is a
secondary objective.
INVESTMENT The Lexington Growth and Income Fund, Inc. ("the Fund") will
STRATEGY invest at least 65% of its total assets in common stocks of
U.S. companies, which may include dividend paying securities
and securities convertible into shares of common stock. The
Fund seeks to invest in large, ably managed and well financed
companies. The investment approach is to identify high
quality companies with good earnings and price momentum which
sell at attractive valuations.
The Fund may invest the remaining 35% of its assets in
foreign securities and smaller capitalization companies.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price of one or more of the
companies in the Fund's portfolio. Due to the inherent
effects of the stock market, the value of the Fund will
fluctuate with the movement of the market as well as in
response to the activities of individual companies in the
Fund's portfolio.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
4
<PAGE>
DOMESTIC EQUITY FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 1989 through 1998. The
table shows how the average annual return compares with the most commonly used
index for its market segment for 1, 5 and 10 years (or since inception). You
should remember that past performance is not an indication of future
performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
--------------------
<S> <C>
1989 27.56%
1990 -10.27%
1991 24.87%
1992 12.36%
1993 13.22%
1994 -3.11%
1995 22.57%
1996 26.46%
1997 30.36%
1998 21.42%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
Growth &
Income Fund 21.42(%) 18.90(%) 15.76(%)
S&P 500 28.72(%) 24.09(%) 19.22(%)
----------------------------------------
1 Year 5 Year 10
Year
</TABLE>
- --------------------------------------------------------------------------------
During the ten year period shown in the above bar graph chart, the fund's
highest quarterly return was 21.95% for the fourth quarter in 1998 and the
fund's lowest quarterly return was -14.87% for the third quarter in 1990.
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)
Management Fees 0.63%
Rule 12b-1 Fees 0.25%
Other Fees 0.28%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.16%
</TABLE>
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. It also assumes that your
investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------
<S> <C> <C> <C>
$118.23 $368.48 $638.31 $1,408.96
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
5
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington SmallCap Fund's principal investment
OBJECTIVE objective is long-term capital appreciation. The Lexington
SmallCap Fund will seek to obtain its objective through
investment in equity securities and equivalents primarily
of domestic companies having market capitalizations of
less than $1 billion.
INVESTMENT The Lexington SmallCap Fund, Inc. (the "Fund") will invest at
STRATEGY least 90% of its assets in domestic companies having market
capitalizations between $20 million and $1 billion at the
time of investment. The Fund may invest the remaining 10% of
its assets in a similar manner, or in securities of companies
with market capitalizations below $20 million, above $1
billion, foreign companies with dollar denominated shares
traded in the United States, American Depository Shares or
Receipts, real estate investment trusts and cash. The Fund
will invest primarily in listed securities or those traded
over-the-counter.
In selecting investments for the Fund, Lexington Management
Corporation ("the Manager") and the sub-adviser have
established a universe of small capitalization stocks that
are screened using the sub-adviser's proprietary stock
selectivity model. The quality of each company including its
risk/reward prospects are reviewed and analyzed. This
approach takes into account both value and growth stocks.
Once the stocks are evaluated and ranked by expected future
relative price performance, the Manager and sub-adviser build
the portfolio, taking into account both sector and
diversification considerations.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price of one or more of the
companies in the Fund's portfolio. Due to the inherent
effects of the stock market, the value of the Fund will
fluctuate with the movement of the market as well as in
response to the activities of individual companies in the
Fund's portfolio. Also, the Fund's focus on small cap stocks
may expose investors to additional risks. Smaller companies
typically have more limited product lines, markets and
financial resources than larger companies, and their
securities may trade less frequently and in more limited
volume than those of larger, more mature companies. As a
result, small cap stocks, and therefore the Fund, may
fluctuate significantly more in value than larger cap stocks
and funds that focus on them.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
6
<PAGE>
DOMESTIC EQUITY FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance since inception (01/02/96)
through 12/31/98. The table shows how the average annual returns compares with
the most commonly used index for its market segment for 1, 5 and 10 years (or
since inception). You should remember that past performance is not an indication
of future performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP FUND
--------------
<S> <C>
1996 17.50%
1997 10.47%
1998 6.73%
</TABLE>
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
SmallCap Fund 6.73(%) 11.51(%)
Russell 2000 Index -2.55(%) 11.56(%)
---------------------------------------
1 Year Since
Inception
(01/02/96)
</TABLE>
- --------------------------------------------------------------------------------
During the three year period shown in the above bar graph chart, the fund's
highest quarterly return was 15.04% for the fourth quarter in 1998 and the
fund's lowest quarterly return was -11.43% for the fourth quarter in 1997.
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)*
Management Fees 1.00%
Rule 12b-1 Fees 0.25%
Other Fees 1.67%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 2.92%
</TABLE>
* In 1998, 0.33% of the management fee was voluntarily waived
by the Manager, and as a result, net expenses were actually
2.59%.
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$295.04 $903.65 $1,537.84 $3,242.41
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
7
<PAGE>
LEXINGTON GLOBAL CORPORATE LEADERS FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Global Corporate Leaders Fund's investment
OBJECTIVE objective is to seek long-term growth of capital through
investment in equity securities and equity equivalents of
foreign and U.S. companies.
INVESTMENT The Lexington Global Corporate Leaders Fund, Inc. (the
STRATEGY "Fund") normally invests at least 65% of its total assets in
a diversified portfolio of blue chip securities that the
Manager believes represent "corporate leaders" in their
respective industries.
The Fund may invest in the securities of companies and
governments of the following regions:
- Asia Region (including Japan);
- Europe;
- Latin America;
- Africa;
- North America (including U.S. and Canada); and,
- Other areas and countries as the Manager may decide from
time to time.
The Fund will normally invest in at least three different
countries. The Fund intends to select the countries,
currencies and companies that provide the greatest potential
for long- term growth.
The Fund may invest 35% of its total assets in:
- securities of smaller capitalization companies;
- debt securities; and
- other investments.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price of one of the companies in
the Fund's portfolio. Due to the inherent effects of stock
markets, the value of the Fund will fluctuate with the
movements as well as in response to the activities of
individual companies in the Fund's portfolio. By investing in
foreign stocks, the Fund exposes shareholders to additional
risks. Some foreign stock markets tend to be more volatile
than the U.S. market due to economic and political
instability and regulatory conditions in these countries. In
addition, most of the foreign securities in which the Fund
invests are denominated in foreign currencies, whose values
may decline against the U.S. dollar.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
8
<PAGE>
INTERNATIONAL FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 1989 through 1998. The
table shows how the average annual return compares with the most commonly used
index for its market segment for 1, 5 and 10 years (or since inception). You
should remember that past performance is not an indication of future
performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL CORPORATE LEADERS FUND
-----------------------------
<S> <C>
89 25.10%
90 -16.75%
91 15.55%
92 -3.55%
93 31.88%
94 1.84%
95 10.69%
96 16.43%
97 6.90%
98 19.06%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
Global Corporate
Leaders Fund 19.06(%) 10.81(%) 9.84(%)
MSCI-World Index 24.80(%) 15.77(%) 10.70(%)
------------------------------------------
1 Year 5 Year 10
Year
</TABLE>
- --------------------------------------------------------------------------------
During the ten year period shown in the above bar graph chart, the fund's
highest quarterly return was 16.76% for the fourth quarter in 1998 and the
fund's lowest quarterly return was -18.32% for the third quarter in 1990.
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)
Management Fees 1.00%
Rule 12b-1 Fees None
Other Fees 1.12%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 2.12%
</TABLE>
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$215.05 $663.92 $1,139.01 $2,451.76
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
9
<PAGE>
LEXINGTON INTERNATIONAL FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington International Fund's investment objective is
OBJECTIVE to seek long-term growth of capital through investment in
equity securities and equity equivalents of companies
outside of the U.S.
INVESTMENT The Lexington International Fund, Inc. (the "Fund") will
STRATEGY invest at least 65% of its total assets in securities and
equivalents of companies outside of the U.S. The Fund
generally invests the remaining 35% of its total assets in a
similar manner, but may invest those assets in companies in
the United States, in debt securities or other investments.
The Fund intends to provide investors with the opportunity to
invest in a portfolio of securities of companies and
governments located throughout the world. In making the
allocation of assets among the various countries and
geographic regions, the Fund considers such factors as
prospects for relative economic-growth; expected levels of
inflation and interest rates; government polices influencing
business conditions; the range of investment opportunities
available to international investors; and other pertinent
financial, tax, social, political and national factors -- all
in relation to the prevailing prices of the securities in
each country or region. The Fund does not anticipate
concentrating its investments in any particular region.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price of one or more of the
companies in the Fund's portfolio. Due to the inherent
effects of stock markets, the value of the Fund will
fluctuate with the movement of the markets as well as in
response to the activities of individual companies in the
Fund's portfolio. By investing in foreign stocks, the Fund
exposes shareholders to additional risks. Foreign stock
markets tend to be more volatile than the U.S. market due to
economic and political instability and regulatory conditions
in some countries. In addition, most of the foreign
securities in which the Fund invests are denominated in
foreign currencies, whose values may decline against the U.S.
dollar.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
10
<PAGE>
INTERNATIONAL FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance since inception (01/03/94)
through 1998. The table shows how the average annual return compares with the
most commonly used index for its market segment for 1, 5 and 10 years (or since
inception). You should remember that past performance is not an indication of
future performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL FUND
------------------
<S> <C>
94 5.87%
95 5.77%
96 13.57%
97 1.61%
98 19.02%
</TABLE>
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
International Fund 19.02(%) 9.00(%)
EAFE 20.33(%) 9.25(%)
----------------------------------------------
1 Year Since Inception
(01/03/94)
</TABLE>
- --------------------------------------------------------------------------------
During the five year period shown in the above bar graph chart, the fund's
highest quarterly return was 17.09% for the fourth quarter in 1998 and the
fund's lowest quarterly return was -10.65% for the fourth quarter in 1997.
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)*
Management Fees 1.00%
Rule 12b-1 Fees 0.25%
Other Fees 1.00%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 2.25%
</TABLE>
* In 1998, 0.50% of the management fee was voluntarily waived
by the Manager, and as a result, net expenses were actually
1.75%.
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$228.09 $703.27 $1,204.94 $2,584.93
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
11
<PAGE>
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Worldwide Emerging Markets Fund's investment
OBJECTIVE objective is to seek long-term growth of capital primarily
through investment in equity securities and equity
equivalents of emerging market companies.
INVESTMENT The Lexington Worldwide Emerging Markets Fund, Inc. (the
STRATEGY "Fund") will invest at least 65% of its total assets
according to its investment objective. The Fund's definition
of emerging markets includes, but is not limited to, the
following:
- Africa: Botswana, Egypt, Ghana, Ivory Coast, Kenya,
Mauritius, Morocco, Namibia, South Africa, Swaziland,
Tunisia, Zambia and Zimbabwe;
- Asia: Bahrain, Bangladesh, China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore,
South Korea, Sri Lanka, Taiwan and Thailand;
- Europe: Croatia, Cyprus, Czech Republic, Estonia, Finland,
Greece, Hungary, Latvia, Lithuania, Poland, Portugal,
Romania, Russia, Slovakia and Slovenia;
- The Middle East: Israel, Jordan, Lebanon, Oman and Turkey;
- Latin America: Argentina, Bolivia, Brazil, Chile,
Colombia, Ecuador, Mexico, Nicaragua, Peru and Venezuela.
The Manager of the Fund considers an emerging markets company
to be any company domiciled in an emerging market country, or
any company that derives 50% or more of its total revenue
from either goods or services produced or sold in countries
with emerging markets.
The Fund may invest the remaining 35% of its assets in equity
securities without regard to whether the issuer qualifies as
an emerging market company, debt securities denominated in
the currency of an emerging market country or issued or
guaranteed by an emerging market company or the government of
an emerging market country, short-term or medium-term debt
securities or other types of securities.
The Fund's investment approach is to focus on positive
returns through long-term capital gains. The investment
strategy is based on a top-down approach that compares macro
trends, such as economics, politics, industry trends, and
commodity trends on a relative basis. Countries are grouped
regionally and globally and ranked based on their macro
scores. Once specific countries are identified as relative
outperformers, specific companies are selected as
investments. The selection process for selecting individual
companies is based on fundamental research, industry themes,
and identifying specific catalysts for growth.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price of one of the companies in
the Fund's portfolio. In addition, the risks of investing in
emerging markets are considerable. Emerging stock markets
tend to be more volatile than the U.S. market due to the
relative immaturity, and occasional instability, of their
political and economic systems. In the past many emerging
markets restricted the flow of money into or out of their
stock markets, and some continue to impose restrictions on
foreign investors. These markets tend to be less liquid and
offer less regulatory protection for investors. The economies
of emerging countries may be predominately based on only a
few industries or on revenue from particular commodities,
international aid and other assistance. In addition, most of
the foreign securities in which the Fund invests are
denominated in foreign currencies, whose values may decline
against the U.S. dollar.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
12
<PAGE>
INTERNATIONAL FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 1989 through 1998*. The
table shows how the average annual return compares with the most commonly used
index for its market segment for 1, 5 and 10 years (or since inception). You
should remember that past performance is not an indication of future
performance.
* Prior to June 17, 1991, the Fund operated under a different investment
objective.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
WORLDWIDE EMERGING MARKETS FUND
-------------------------------
<S> <C>
89 28.11%
90 -14.44%
91 24.19%
92 3.77%
93 63.37%
94 -13.81%
95 -5.93%
96 7.38%
97 -11.40%
98 -29.06%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
Worldwide
Emerging
Markets Fund -29.06(%) -11.36(%) 2.36(%)
MSCI
Emerging
Markets Free -25.34(%) -9.27(%) 10.95(%)
EAFE 20.33(%) 9.25(%) 5.86(%)
-----------------------------------------
1 Year 5 Year 10
Year
-----------------------------------------------------------------------------------------------------
During the ten year period shown in the above bar graph chart, the fund's highest quarterly return
was 31.81% for the fourth quarter in 1993 and the fund's lowest quarterly return was -26.18% for the
third quarter in 1998.
</TABLE>
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)
Management Fees 1.00%
Rule 12b-1 Fees 0.25%
Other Fees 0.60%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.85%
</TABLE>
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$187.91 $581.69 $1,000.66 $2,169.16
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
13
<PAGE>
LEXINGTON SMALL CAP ASIA GROWTH FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Small Cap Asia Growth Fund's investment
OBJECTIVE objective is to seek long-term capital appreciation
primarily by investing in equity securities and equity
equivalents of companies in the Asia Region having market
capitalizations of less than $1 billion.
INVESTMENT The Lexington Small Cap Asia Growth Fund, Inc. (the "Fund")
STRATEGY will normally invest at least 65% of its total assets in
equity securities of smaller companies in the Asia Region.
The Fund will primarily invest in listed securities but may
also invest in unlisted securities.
The Fund intends to invest primarily in companies which:
- have proven management;
- are undervalued and under-researched by the investment
community;
- are within industry sectors with strong growth prospects;
and
- which have potential investment returns that are superior
to the Asian market as a whole.
The Fund may invest 35% of its total assets in:
- companies with market capitalizations of $1 billion or
more;
- companies outside the Asia Region (e.g. Australia or New
Zealand);
- debt securities; and
- other investments.
The Fund considers the following countries to be in the Asia
Region:(1)
<TABLE>
<S> <C> <C> <C> <C>
Bangladesh India Malaysia Singapore Taiwan
China Indonesia Pakistan Sri Lanka Thailand
Hong Kong Korea The Philippines Vietnam
</TABLE>
The Fund will normally invest in at least three different
countries. The Fund does not intend to invest in Japanese
securities.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price in one of the companies in
the Fund's portfolio. The Fund's volatility may be increased
by its heavy concentration in emerging Asian markets as they
tend to be much more volatile than the U.S. market due to
their relative immaturity and instability. The economies of
emerging countries may be predominately based on only a few
industries or on revenue from particular commodities,
international aid and other assistance. Some emerging Asian
countries, such as Malaysia in 1998, have restricted the flow
or money into or out of the country. Emerging markets also
tend to be less liquid and offer less regulatory protection
for investors. Since mid-1997 Asia has faced serious economic
problems and disruptions, causing substantial losses for some
investors. Also, most of the securities in which the Fund
invests are denominated in foreign currencies, whose values
may decline against the U.S. dollar.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
(1) The Fund considers a company to be within the Asia Region
if its principal securities' trading market is located in
the Asia Region.
14
<PAGE>
INTERNATIONAL FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance since inception (07/03/95)
through 12/31/98. The table shows how the average annual return compares with
the most commonly used index for its market segment for 1, 5 and 10 years (or
since inception). You should remember that past performance is not an indication
of future performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CROSBY SMALL CAP ASIA GROWTH FUND
---------------------------------
<S> <C>
95 -4.39%
96 25.50%
97 -42.32%
98 -19.41%
</TABLE>
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
Crosby Small Cap
Asia Growth Fund -19.41(%) -14.82(%)
MSCI All Country
Far East ex-Japan -4.83(%) -13.21(%)
EAFE 20.33(%) 10.24(%)
---------------------------------------
1 Year Since
Inception
(07/03/95)
---------------------------------------------------------------------------------------------------
During the four year period shown in the above bar graph chart, the fund's highest quarterly return
was 23.43% for the fourth quarter in 1998 and the fund's lowest quarterly return was -41.41% for
the fourth quarter in 1997.
</TABLE>
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as % of
offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)*
Management Fees 1.25%
Rule 12b-1 Fees None
Other Fees 1.61%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 2.86%
</TABLE>
* In 1998, 0.36% of the management fee was voluntarily waived
by the Manager, and as a result, net expenses were actually
2.50%.
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$289.06 $885.87 $1,508.50 $3,185.46
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
15
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Troika Dialog Russia Fund's investment
OBJECTIVE objective is to seek long-term capital appreciation
through investment primarily in equity securities of
Russian companies.
INVESTMENT The Lexington Troika Dialog Russia Fund, Inc. (the "Fund")
STRATEGY seeks to achieve its objective by investing at least 65% of
its total assets in equity securities and equity equivalents
of Russian companies. The Fund may invest the other 35% of
its total assets in debt securities issued by Russian
companies and debt securities issued or guaranteed by the
Russian government. The Fund may also invest in the equity
securities of issuers outside of Russia which the Fund
believes will experience growth in revenue and profits from
participation in the development of the economies of the
former Soviet Union.
PRINCIPAL The Fund's investments will include investments in Russian
RISKS companies that have characteristics and business
relationships common to companies outside of Russia, and as a
result, outside economic forces may cause fluctuations in the
value of securities held by the Fund.
Additional risks associated with investing in securities of
Russian issuers include:
- The lack of available reliable financial information which
has been prepared and audited in accordance with U.S. or
Western European generally accepted accounting principles
and auditing standards;
- The extremely volatile and often illiquid nature of the
secondary market for Russian securities;
- A cumbersome share registration system for recording
ownership of Russian securities which may adversely affect
a person's ability to prove ownership.
- The potential for unfavorable action such as
expropriation, dilution, devaluation, default or excessive
taxation by the Russian government or any of its agencies
or political subdivisions with respect to investments in
Russian securities by or for the benefit of foreign
entities.
The Fund is a non-diversified investment company. There is
additional risk associated with being non-diversified, since
a greater proportion of total assets may be invested in a
single company.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
16
<PAGE>
INTERNATIONAL FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance since inception (07/03/96)
through 12/31/98. The table shows how the average annual return compares with
the most commonly used index for its market segment for 1, 5 and 10 years (or
since inception). You should remember that past performance is not an indication
of future performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
TROIKA DIALOG RUSSIA FUND
-------------------------
<S> <C>
96 -9.01%
97 67.50%
98 -82.99%
</TABLE>
<TABLE>
<S> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH
12/31/98
Troika Dialog
Russia Fund -82.99(%) -40.63(%)
Moscow Times
Index -79.62(%) -30.08(%)
Russian Trading
System Index -85.15(%) -41.79(%)
--------------------------------------
1 Year Since
Inception
(07/03/96)
--------------------------------------------------------------------------------------------------
During the three year period shown in the above bar graph chart, the fund's highest quarterly
return was 46.00% for the first quarter in 1997 and the fund's lowest quarterly return was -64.89%
for the third quarter in 1998.
</TABLE>
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable)+ 2.00%
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)*
Management Fees 1.25%
Rule 12b-1 Fees 0.25%
Other Fees 1.14%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 2.64%
</TABLE>
* In 1998, expenses were reduced by 0.80% as a result of
redemption fee proceeds. Net expenses were actually 1.84%.
+ The 2.00% redemption fee only applies to shares held less
than 365 days.
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$471.84 $820.41 $1,400.12 $2,973.44
</TABLE>
You would pay the following expenses if you did not redeem your
shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$267.12 $820.41 $1,400.12 $2,973.44
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
17
<PAGE>
LEXINGTON GNMA INCOME FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington GNMA Income Fund's investment objective is
OBJECTIVE to seek 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.
INVESTMENT Under normal conditions, the Lexington GNMA Income Fund, Inc.
STRATEGY (the "Fund") will invest at least 80% of the value of its
total assets in Government National Mortgage Association
("GNMA") mortgage-backed securities (also known as "GNMA
Certificates").(2) The remaining assets of the Fund will be
invested in other securities issued or guaranteed by the U.S.
Government, including U.S. Treasury securities.
PRINCIPAL Through investment in GNMA securities, the Fund may expose
RISKS you to certain risks which may cause you to lose money.
Mortgage prepayments are affected by the level of interest
rates and other factors, including general economic
conditions and the underlying location and age of the
mortgage. In periods of rising interest rates, the prepayment
rate tends to decrease, lengthening the average life of a
pool of GNMA securities. In periods of falling interest
rates, the prepayment rate tends to increase, shortening the
life of a pool. Because prepayments of principal generally
occur when interest rates are declining, it is likely that
the Fund may have to reinvest the proceeds of prepayments at
lower interest rates than those of their previous
investments. If this occurs, the Fund's yields will decline
correspondingly.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
(2) Please refer to the statement of additional information
for a complete description of GNMA certificates and
Modified Pass through GNMA Certificates. The Fund intends
to use the proceeds from principal payments to purchase
additional GNMA Certificates or other U.S. Government
guaranteed securities.
18
<PAGE>
FIXED-INCOME FUNDS AND MONEY MARKET FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 1989 through 1998. The
table shows how the average annual return compares with the most commonly used
index for its market segment for 1, 5 and 10 years (or since inception). You
should remember that past performance is not an indication of future
performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GNMA INCOME FUND
----------------
<S> <C>
89 15.60%
90 9.23%
91 15.75%
92 5.19%
93 8.06%
94 -2.07%
95 15.91%
96 5.71%
97 10.20%
98 7.52%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
GNMA Income Fund 7.52(%) 7.29(%) 8.98(%)
Lehman Brothers
Mortgage-Backed
Securities Index 6.96(%) 7.23(%) 9.13(%)
----------------------------------------
1 Year 5 Year 10 Year
</TABLE>
- --------------------------------------------------------------------------------
During the ten year period shown in the above bar graph chart, the fund's
highest quarterly return was 8.88% for the second quarter in 1989 and the
fund's lowest quarterly return was -2.42% for the first quarter in 1994.
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)
Management Fees 0.57%
Rule 12b-1 Fees None
Other Fees 0.44%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.01%
</TABLE>
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------
<S> <C> <C> <C>
$103.01 $321.54 $557.85 $1,236.24
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
19
<PAGE>
LEXINGTON GLOBAL INCOME FUND
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Global Income Fund's investment objective is
OBJECTIVE to seek high current income. Capital appreciation is a
secondary objective. The Lexington Global Income Fund
invests in a combination of foreign and domestic
high-yield, lower rated or unrated debt securities.
INVESTMENT The Lexington Global Income Fund (the "Fund") invests in a
STRATEGY variety of foreign and domestic high yield, lower rated or
unrated debt securities.
The Fund, under normal conditions, invests substantially all
of its assets in lower rated or unrated debt securities of
domestic companies, companies in developed foreign countries,
and companies in emerging markets. The credit quality of the
foreign debt securities which the Fund intends to buy is
generally equal to U.S. corporate debt securities known as
"junk bonds". The debt securities in which the Fund invests
consist of bonds, notes, debentures and other similar
instruments. The Fund may invest in debt securities issued by
foreign governments, their agencies and instrumentalities,
central banks, commercial banks and other corporate entities.
The Fund may invest up to 100% of its total assets in
domestic and foreign debt securities that are rated below
investment grade or are of comparable quality. The Fund may
also invest in securities that are in default as to payment
of principal and/or interest, and bank loan participations
and assignments.
The Fund's investment strategy stresses diversification to
help reduce the Fund's price volatility. Global fixed income
securities are divided into four categories. The categories
reflect whether the securities are U.S. dollar denominated or
not and whether borrowers are in developed markets or
emerging markets. The Fund then seeks to select the best
values in each of these four segments. The balance the Fund
maintains between these sectors attempts to limit the price
volatility.
PRINCIPAL Through investment in bonds, the Fund may expose you to
RISKS certain risks which may cause you to lose money. Junk bonds
have a higher risk of default, tend to be less liquid, and
may be more difficult to value. The Fund could lose money
because of foreign government actions, political instability,
or lack of adequate and accurate information. Currency and
investment risks tend to be higher in emerging markets.
The Fund is a non-diversified investment company. There is
additional risk associated with being non-diversified, since
a greater proportion of total assets may be invested in a
single company.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
20
<PAGE>
FIXED-INCOME FUNDS AND MONEY MARKET FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 1989 through 1998.* The
table shows how the average annual return compares with the most commonly used
index for its market segment for 1, 5 and 10 years (or since inception). You
should remember that past performance is not an indication of future
performance.
* Prior to December 31, 1994, the Fund operated under a different investment
objective.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL INCOME FUND
------------------
<S> <C>
89 7.40%
90 6.62%
91 10.03%
92 6.51%
93 10.90%
94 -6.52%
95 20.10%
96 13.33%
97 5.00%
98 8.21%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
Global Income
Fund 8.21(%) 7.65(%) 7.96(%)
Lehman
Brothers
Global Bond
Index 15.33(%) 8.43(%) 9.33(%)
---------------------------------------
1 Year 5 10
Year Year
------------------------------------------------------------------------------------------
During the ten year period shown in the above bar graph chart, the fund's highest
quarterly return was 8.76% for the second quarter in 1995 and the fund's lowest quarterly
return was -6.61% for the first quarter in 1994.
</TABLE>
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as % of
offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)*
Management Fees 1.00%
Rule 12b-1 Fees 0.25%
Other Fees 0.64%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.89%
</TABLE>
* In 1998, 0.39% of the management fee was voluntarily waived
by the Manager, and as a result, net expenses were actually
1.50%.
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$191.94 $593.91 $1,021.27 $2,211.54
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
21
<PAGE>
LEXINGTON MONEY MARKET TRUST
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Money Market Trust's investment objective is
OBJECTIVE to seek as high a level of current income from short-term
investments as is consistent with the preservation of
capital and liquidity. The Lexington Money Market Trust
seeks to maintain a stable net asset value of $1 per
share.
INVESTMENT The Lexington Money Market Trust (the "Fund") will invest in
STRATEGY short-term money market instruments that have been rated in
one of the two highest rating categories by both S&P and
Moody's, both major rating agencies. The Fund invests in
short-term money market instruments (those with a remaining
maturity of 397 days or less) that offer attractive yields
and are considered to be undervalued relative to issues of
similar credit quality and interest rate sensitivity.
The Fund will also insure that its money market instruments
average weighted maturities do not exceed 90 days.
PRINCIPAL An investment in the Fund is not insured or guaranteed by the
RISKS Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money
by investing in the Fund.
22
<PAGE>
MONEY MARKET FUNDS
For information on the Fund's 7-day yield please call the Fund at
1-800-526-0056. You should remember that past performance is not an indication
of future performance.
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)*
Management Fees 0.50%
Rule 12b-1 Fees None
Other Fees 0.55%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.05%
Fee Waiver and/or Expense Reimbursement 0.05%
NET EXPENSES 1.00%
</TABLE>
* Lexington Management Corporation has contractually agreed to
reduce its management fee in order to limit the Fund's annual
total operating expenses (exclusive of taxes and interest) to
1.00%. This agreement has a one-year term, renewable at the
end of each fiscal year.
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------
<S> <C> <C> <C>
$102.00 $318.40 $552.46 $1,224.62
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
FEES AND EXPENSES 23
<PAGE>
LEXINGTON GOLDFUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Goldfund's investment objective is to attain
OBJECTIVE capital appreciation and such hedge against the loss of
buying power of the U.S. Dollar as may be obtained through
investment in gold and securities of companies engaged in
mining or processing gold throughout the world.
INVESTMENT Under normal conditions the Lexington Goldfund, Inc. (the
STRATEGY "Fund") will invest at least 65% of the value of its total
assets in gold and the equity securities of companies engaged
in mining or processing gold ("gold-related securities"). The
Fund may also invest in other precious metals, including
platinum, palladium and silver. The Fund intends to invest
less than half of the value of its assets in gold and other
precious metals.
The Fund's performance and ability to meet its objective will
be largely dependent on the market value of gold. The
portfolio manager seeks to maximize on advances and minimize
on declines by monitoring and anticipating shifts in the
relative values of gold related companies throughout the
world. A substantial portion of the Fund's investments will
be in the securities of foreign issuers.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price in one of the companies in
the Fund's portfolio. Due to the inherent effects of the
stock market, the value of the Fund will fluctuate with the
movement of the market as well as in response to the
activities of individual companies in the Fund's portfolio.
In addition, the Fund's focus on precious metals and precious
metal stocks may expose the investor to additional risks. The
market for gold or other precious metals is concentrated in
countries that have the potential for instability and the
market for gold and other precious metals is widely
unregulated. As a result, the price of precious gold and
precious metal stocks, and therefore the Fund, may fluctuate
significantly.
The Fund is a non-diversified investment company. There is
additional risk associated with being non-diversified, since
a greater proportion of total assets may be invested in a
single company.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
24
<PAGE>
PRECIOUS METAL FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 1989 through 1998. The
table shows how the average annual return compares with the most commonly used
index for its market segment for 1, 5 and 10 years (or since inception). You
should remember that past performance is not an indication of future
performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<S> <C>
1989 23.62%
1990 -20.65%
1991 -6.14%
1992 -20.51%
1993 86.96%
1994 -7.28%
1995 -1/89%
1996 7.84%
1997 -42.98%
1998 -6.39%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
Goldfund -6.39(%) -12.14(%) -3.28(%)
Gold Bullion -0.83(%) -6.02(%) -3.50(%)
S&P 500 28.72(%) 24.09(%) 19.22(%)
----------------------------------------
1 Year 5 Year 10 Year
</TABLE>
- --------------------------------------------------------------------------------
During the ten year period shown in the above bar graph chart, the fund's
highest quarterly return was 34.36% for the second quarter in 1993 and the
fund's lowest quarterly return was -29.07% for the fourth quarter in 1997.
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)
Management Fees 0.92%
Rule 12b-1 Fees 0.25%
Other Fees 0.57%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 1.74%
</TABLE>
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------
<S> <C> <C> <C>
$176.84 $547.99 $943.74 $2,051.67
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
25
<PAGE>
LEXINGTON SILVER FUND, INC.
RISK/RETURN SUMMARY
INVESTMENT - The Lexington Silver Fund's investment objective is to
OBJECTIVE maximize total return on its assets from long-term growth
of capital and income principally through investment in a
portfolio of securities which are engaged in the
exploration, mining, processing, fabrication or
distribution of silver ("silver-related companies") and in
silver bullion.
INVESTMENT Lexington Silver Fund, Inc. (the "Fund") will seek to achieve
STRATEGY its objective through investment in common stocks of
established silver-related companies and in silver bullion
which have the potential for long-term growth of capital or
income, or both. The common stocks of silver-related
companies in which the Fund intends to invest may or may not
pay dividends. The Fund may also invest in other types of
securities of silver-related companies including convertible
securities, preferred stocks, bonds, notes and warrants. When
the Manager believes that the return on debt securities will
equal or exceed the return on common stocks, the Fund may, in
pursuing its objective of maximizing growth and income,
substantially increase its holding in debt securities.
The securities in which the Fund invests include issues of
established silver-related companies domiciled in the United
States, Canada and Mexico as well as other silver producing
countries throughout the world. At least 80% of the Fund's
assets will be invested in established silver-related
companies which have been in business more than three years.
Approximately 80% of silver is provided as a by-product or
co-product of other mining operations, such as gold mining.
The Fund has the ability to significantly increase its
exposure to silver by increasing its holding of silver
bullion.
PRINCIPAL Through stock investment, the Fund may expose you to common
RISKS stock risks which may cause you to lose money if there is a
sudden decline in the share price in one of the companies in
the Fund's portfolio. Due to the inherent effects of the
stock market, the value of the Fund will fluctuate with the
movement of the market as well as in response to the
activities of individual companies in the Fund's portfolio.
In addition, the Fund's focus on precious metals and precious
metal stocks may expose the investor to additional risks. The
market for silver is relatively limited, the sources of
silver are concentrated in countries that have the potential
for instability and the market for silver is widely
unregulated. As a result, the price of silver, and therefore
the Fund, may fluctuate significantly.
The Fund is a non-diversified investment company. There is
additional risk associated with being non-diversified, since
a greater proportion of total assets may be invested in a
single company.
For a more detailed risk discussion involving investments in
this Fund, please read "Risks of Investing" on page 28.
26
<PAGE>
PRECIOUS METAL FUNDS
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance since inception (01/02/92)
through 12/31/98. The table shows how the average annual returns compares with
the most commonly used index for its market segment for 1, 5 and 10 years (or
since inception). You should remember that past performance is not an indication
of future performance.
PAST FUND PERFORMANCE The chart at the left below shows the risk of
investing in the Fund and how the Fund's total return has varied from
year-to-year. The chart at the right compares the Fund's performance with
the most commonly used index for its market segment. Of course, past
performance is no guarantee of future results.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SILVER FUND
-----------
<S> <C>
92 -19.01%
93 76.52%
94 -8.37%
95 12.37%
96 2.38%
97 -8.05%
98 -29.64%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AVERAGE ANNUAL RETURNS THROUGH 12/31/98
Silver Fund
S&P 500 -29.64(%) - 7.37(%) 0.96(%)
Silver 28.72(%) 24.09(%) 19.51(%)
Bullion -16.51(%) -0.43(%) 3.39(%)
----------------------------------------
1 Year 5 Year Since
Inception
(01/02/92)
</TABLE>
- --------------------------------------------------------------------------------
During the seven year period shown in the above bar graph chart, the fund's
highest quarterly return was 28.47% for the second quarter in 1993 and the
fund's lowest quarterly return was -18.60% for the fourth quarter in 1994.
This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.
FEES AND
EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a %
of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends/Distributions None
Redemption Fee (as a % of amount redeemed, if applicable) None
Exchange Fee None
30-Day Redemption/Exchange Fee None
Maximum Account Fee None
ANNUAL FUND OPERATING EXPENSES (Paid from Fund assets)
Management Fees 1.00%
Rule 12b-1 Fees None
Other Fees 1.37%
- ------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 2.37%
</TABLE>
Example of Expenses: This example is intended to help you
compare the cost of investing in the Fund with the cost of
investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for
the time periods indicated and then redeem all of your shares
at the end of those periods. This example also assumes that
your investment has a 5% annual return each year and that the
operating expenses remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------
<S> <C> <C> <C>
$240.12 $739.46 $1,265.42 $2,706.22
</TABLE>
See "Management of the Fund" for more complete descriptions of
such costs and expenses.
27
<PAGE>
RISKS OF INVESTING
RISKS OF INVESTING IN MUTUAL FUNDS
The following risks are common to all mutual funds and, therefore, apply to the
Funds:
- - Market Risk. The market value of a security may go up or down, sometimes
rapidly and unpredictably. A decline in market value may cause a security to
be worth less than it was at the time of purchase. Market risk applies to
individual securities, a particular sector or the entire economy.
- - Manager Risk. Fund management affects Fund performance. A Fund may lose money
if the Fund manager's investment strategy does not achieve the Fund's
objective or the manager does not implement the strategy properly.
- - Year 2000 Risk. Preparing for Year 2000 is a high priority for the Manager.
The Manager is diligently working with external partners, suppliers, vendors
and other service providers to ensure that the systems with which it
interacts will remain operational at all times. The Manager does not
anticipate that the move to Year 2000 will have a material impact on its
ability to continue to provide the Funds with service at current levels;
however, the Manager cannot make any assurances that the steps it has taken
to ensure Year 2000 compliance will be successful. In addition, there can be
no assurance that Year 2000 issues will not affect the companies in which the
Funds invest or worldwide markets and economies.
RISKS OF INVESTING IN SECURITIES OF SMALL COMPANIES
The following risks apply to all mutual funds that invest in securities of small
companies (market value of less than U.S. $1 billion) including Lexington
SmallCap Fund, Lexington Small Cap Asia Growth Fund and Lexington Troika Dialog
Russia Fund.
Investing in small companies generally involve greater risk than investing in
larger companies for the following reasons, among others:
- - limited product lines;
- - limited markets or financial or managerial resources;
- - their securities may be more susceptible to losses and risks of bankruptcy;
- - their securities may trade less frequently and with lower volume, leading to
greater price fluctuations; and,
- - their securities are subject to increased volatility and reduced liquidity
due to limited market making and arbitrage activities.
RISKS OF INVESTING IN FOREIGN SECURITIES
The following risks apply to all mutual funds that invest in foreign securities
including Lexington Small Cap Asia Growth Fund, Lexington Global Corporate
Leaders Fund, Lexington Goldfund, Lexington Growth and Income Fund, Lexington
International Fund, Lexington Global Income Fund, Lexington Silver Fund,
Lexington Troika Dialog Russia Fund and Lexington Worldwide Emerging Markets
Fund.
- - Legal System and Regulation Risk. Foreign countries have different legal
systems and different regulations concerning financial disclosure, accounting
and auditing standards. Corporate financial information that would be
disclosed under U.S. law may not be available. Foreign accounting and
auditing standards may render a foreign corporate balance sheet more
difficult to understand and interpret than one subject to U.S. law and
standards. Additionally, government oversight of foreign stock exchanges and
brokerage industries may be less stringent than in the U.S.
28
<PAGE>
RISKS OF INVESTING
- - Currency Risk. Most foreign stocks are denominated in the currency of the
stock exchange where they are traded. The Fund's Net Asset Value is
denominated in U.S. dollars. The exchange rate between the U.S. dollar and
most foreign currencies fluctuates; therefore, the Net Asset Value of the
Fund will be affected by a change in the exchange rate between the U.S.
dollar and the currencies in which the Fund's stocks are denominated. The
Fund may also incur transaction costs associated with exchanging foreign
currencies into U.S. dollars.
- - Stock Exchange and Market Risk. Foreign stock exchanges generally have less
volume than U.S. stock exchanges. Therefore, it may be more difficult to buy
or sell shares of foreign securities, which increases the volatility of share
prices on such markets. Additionally, trading on foreign stock markets may
involve longer settlement periods and higher transaction costs.
- - Expropriation Risk. Foreign governments may expropriate the Fund's
investments either directly by restricting the Fund's ability to sell a
security or by imposing exchange controls that restrict the sale of a
currency or by taxing the Fund's investments at such high levels as to
constitute confiscation of the security. There may be limitations on the
ability of the Fund to pursue and collect a legal judgment against a foreign
government.
RISKS OF INVESTING IN LOWER-QUALITY DEBT SECURITIES
The following risks apply to all mutual funds that invest in lower-quality debt
securities commonly referred to as "junk bonds" including Lexington Global
Income Fund and Lexington Troika Dialog Russia Fund.
Junk bonds are highly speculative. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of issuers of their
securities to make principal and interest payments than with higher-grade debt
securities.
RISKS OF INVESTING IN SECURITIES OF RUSSIAN COMPANIES
The following risks apply to all mutual funds that invest in securities of
Russian companies including Lexington Troika Dialog Russia Fund.
- - Political Risk. Since the breakup of the Soviet Union in 1991, Russia has
experienced and continues to experience dramatic political and social change.
Russia is undergoing a rapid transition from a centrally-controlled command
system to a more market-oriented democratic model. The Funds may be affected
unfavorably by political developments, social instability, changes in
government policies, and other political and economic developments.
- - Market Concentration and Liquidity Risk. The Russian securities markets are
substantially smaller, less liquid and more volatile than the securities
markets in the United States. A few issuers represent a large percentage of
market capitalization and trading volume. Due to these factors and despite
the Funds' policies on liquidity, it may be difficult for the Funds to buy or
sell some securities because of the poor liquidity.
- - Settlement and Custody Risk. Ownership of shares in Russian companies is
recorded by the companies themselves and by registrars instead of through a
central registration system. It is possible that the Funds' ownership rights
could be lost through fraud or negligence. Since the Russian banking
institutions and registrars are not guaranteed by the state, the Funds may
not be able to pursue claims on behalf of the Funds' shareholders.
NON-DIVERSIFIED PORTFOLIO
The following risks apply to all mutual funds that are non-diversified
investment companies including Lexington Goldfund, Lexington Silver Fund,
Lexington Global Income Fund and Lexington Troika Dialog Russia Fund.
29
<PAGE>
These Funds may invest a greater proportion of their total assets in a single
company, which increases risk. However, these Funds intend to comply with
diversification requirements of the federal tax law to qualify as regulated
investment companies. For more detailed information on the federal tax law
diversification requirement, see the tax section of the Fund's Statement of
Additional Information.
PRECIOUS METALS
The following risks apply to all mutual funds that invest in precious metals
including Lexington Goldfund and Lexington Silver Fund.
Precious metal investments have the following characteristics:
- - earn no income;
- - transaction and storage costs may be higher; and
- - the Fund will realize gain only with an increase in the market price.
TEMPORARY DEFENSIVE POSITION
When the Funds anticipate unusual market or other conditions, they may
temporarily depart from their goal and invest substantially in high-quality
short-term investments. This could help the Fund avoid losses but may mean lost
opportunities.
30
<PAGE>
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
Lexington Management Corporation (LMC), a wholly-owned subsidiary of Lexington
Global Asset Managers, Inc. ("LGAM"), is the investment adviser to the Lexington
Funds. LMC and its predecessor companies, registered investment advisers under
the Investment Advisers Act of 1940, as amended, were established in 1938. LMC
is located at P.O. Box 1515, Park 80 West Plaza Two, Saddle Brook, New Jersey
07663. Descendants of Lunsford Richardson, Sr., their spouses, trusts and other
related entities have a controlling interest in LGAM. LMC advises private
clients as well as the Lexington Funds. LMC supervises and assists in the
overall management of the Funds, subject to the oversight by the Board of
Directors or Trustees.
SUB-ADVISERS
Lexington SmallCap Fund. Market Systems Research Advisors, Inc. ("MSR Advisors")
is the sub-adviser of Lexington SmallCap Fund. MSR Advisors is located at 80
Maiden Lane, New York, NY 10038. MSR Advisors provides investment advice and
management to Lexington SmallCap Fund. MSR is 65% owned by LGAM and 35% owned by
Frank A. Peluso, the President and C.E.O. of MSR Advisors.
Lexington Small Cap Asia Growth Fund. Crosby Asset Management (US) Inc. (Crosby)
is the sub-adviser of the Lexington Small Cap Asia Growth Fund. Crosby is
located at 32/F Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road,
Central, Hong Kong. Crosby is a subsidiary of Crosby Group, Hong Kong. Crosby
provides investment advice and management to Lexington Small Cap Asia Growth
Fund.
Lexington Troika Dialog Russia Fund. Troika Dialog Asset Management (TDAM) is
the sub-adviser of Lexington Troika Dialog Russia Fund. TDAM is located at
Romanov Pereulok #4, 103875 Moscow, Russia. TDAM provides investment advice and
management to Lexington Troika Dialog Russia Fund. TDAM is a majority owned
subsidiary of The Bank of Moscow.
Lexington Worldwide Emerging Markets Fund. Stratos Advisors, Inc. (Stratos) is
the sub-adviser of Lexington Worldwide Emerging Markets Fund. Stratos is located
at 20 Exchange Place, 52nd Floor, New York, NY 10005. Stratos provides
investment advice and management to Lexington Worldwide Emerging Markets Fund.
31
<PAGE>
PORTFOLIO MANAGERS
LEXINGTON SMALLCAP FUND
[DEMICHELE PHOTO]
ROBERT M. DEMICHELE. Mr. DeMichele is one of three lead managers of a
portfolio management team that manages the Lexington SmallCap Fund.
Mr. DeMichele is Chairman and Chief Executive Officer of LMC. He is
also the Chairman of the Investment Strategy Group. In addition, he
is President of Lexington Global Asset Managers, Inc., LMC's parent
company. He holds similar offices in other companies owned by
Lexington Global Asset Managers, Inc., as well as the Lexington
Funds. Prior to joining LMC in 1981, Mr. DeMichele was a Vice President at A.G.
Becker, Inc., the securities division of Warburg, Paribus, Becker, an
international investment banking firm. From 1973 to 1981, Mr. DeMichele held
several positions, the most recent managing A.G. Becker's Funds Evaluation and
Consulting Group for both the East and West Coasts. Mr. DeMichele graduated from
Union College with a B.A. Degree in Economics and from Cornell University with
an M.B.A. in Finance.
ALAN H. WAPNICK. Please see biography under Lexington Growth and
Income Fund.
[PELUSO PHOTO]
FRANK A. PELUSO. Mr. Peluso is one of three lead managers of a
portfolio management team that manages the Lexington SmallCap Fund.
He has 36 years investment experience. Mr. Peluso is President and
Chief Executive Officer of MSR, the sub-adviser to the Fund. Mr.
Peluso utilizes a proprietary analytical system to identify
securities with performance potential which he believes to be
exceptional. In addition, Mr. Peluso's proprietary data is used by
professional money managers, insurance companies, brokerage firms,
banks, mutual fund companies and pension funds. In 1976, he established
Marketiming Inc. (currently named Market Systems Research, Inc., a fully-owned
subsidiary of MSR). He was with MSR since its inception in 1986. Mr. Peluso
graduated from Princeton University and completed a year of post-graduate study
at Columbia University, and two years of post-graduate study at Princeton
University with a Fellowship in Mathematics.
LEXINGTON GROWTH AND INCOME FUND
[WAPNICK PHOTO]
ALAN H. WAPNICK. Mr. Wapnick is a member of an investment management
team that manages the Lexington Global Corporate Leaders Fund and
Lexington SmallCap Fund. Mr. Wapnick is the lead manager for
Lexington Growth and Income Fund. Mr. Wapnick is Senior Vice
President, Director of Domestic Investment Equity Strategy of LMC.
Prior to joining LMC in 1986, Mr. Wapnick was an equity analyst with
Merrill Lynch, J.&W. Seligman, Dean Witter and most recently Union
Carbide Corporation. Mr. Wapnick graduated from Dartmouth College and
received an M.B.A. from Columbia University.
LEXINGTON GLOBAL CORPORATE LEADERS FUND
[SALER PHOTO]
RICHARD T. SALER. Mr. Saler is a member of an investment management
team that manages the Lexington Global Corporate Leaders Fund. He is
the lead manager of an investment management team for Lexington
International Fund. Mr. Saler is Senior Vice President, Director of
International Investment Strategy of LMC. Mr. Saler is responsible
for international investment analysis and portfolio management at
LMC. He has thirteen years of investment experience. Mr. Saler has
focused on international markets since first joining LMC in 1986. In 1991 he was
a strategist with Nomura Securities and rejoined LMC in 1992. Mr. Saler
graduated from New York University with a B.S. Degree in Marketing and from New
York University's Graduate School of Business Administration with an M.B.A. in
Finance.
32
<PAGE>
PORTFOLIO MANAGERS
[SCHWARTZ PHOTO]
PHILIP A. SCHWARTZ, CFA. Mr. Schwartz is also a member of an
investment management team that manages the Lexington Global
Corporate Leaders Fund and Lexington International Fund. Mr. Schwartz
is a Vice President at LMC, a Chartered Financial Analyst and a
member of the New York Society of Security Analysts. He is
responsible for international investment analysis and portfolio
management at LMC, and has twelve years of investment experience.
Prior to joining LMC in 1993, Mr. Schwartz was Vice President of
European Research Sales with Cheuvreux De Virieu in Paris and New York, serving
the institutional market. Prior to Cheuvreux, he was affiliated with Olde and
Co. and Kidder, Peabody as a stockbroker. Mr. Schwartz earned his B.A. and M.A.
Degrees from Boston University.
ALAN H. WAPNICK. Please see biography under Lexington Growth and Income Fund.
LEXINGTON INTERNATIONAL FUND
RICHARD T. SALER. Please see biography under Lexington Global
Corporate Leaders Fund.
PHILLIP A. SCHWARTZ, CFA. Please see biography under Lexington Global
Corporate Leaders Fund.
LEXINGTON WORLDWIDE EMERGING MARKETS FUND
[VIEGAS PHOTO]
ALFREDO M. VIEGAS. Mr. Viegas is a member of the portfolio management
team for Lexington Worldwide Emerging Markets Fund. Mr. Viegas is
Chief Executive Officer and Senior Portfolio Manager of Stratos. In
1995, Mr. Viegas established VZB Partners LLC ("VZB"), an offshore
investment manager. Mr. Viegas is responsible for corporate analysis
and bottom-up research. He has concentrated on analyzing equity
opportunities not only in emerging markets but also in newly
developing or frontier markets where the quality of public available information
is scarce and direct research is imperative. Prior to VZB, Mr. Viegas was Vice
President and Latin American Equity Strategist for emerging markets with Salomon
Brothers from 1993 to 1995. From 1991 to 1993, he was a research analyst with
Morgan Stanley. Mr. Viegas is a graduate of Wesleyan University with a B.A. in
Classics and Medieval History.
[ZAIDI PHOTO]
MOHAMMED ZAIDI. Mr. Zaidi is a member of the Portfolio Management
team for the Lexington Worldwide Emerging Markets Fund. Mr. Zaidi is
a Portfolio Manager at Stratos. Mr. Zaidi is responsible for
fundamental corporate analysis with a particular focus on Asian and
Middle Eastern markets as well as the Risk Control Officer. Mr. Zaidi
has been a Portfolio Manager at VZB since 1997. Mr. Zaidi was Chief
Financial Officer and a Partner at Paradigm Software, Inc. from 1992
to 1995. Mr. Zaidi is a graduate of the University of Pennsylvania
with a B.S. in Economics from the Wharton School. Mr. Zaidi also holds an M.B.A.
in Finance from M.I.T. Sloan School of Management.
LEXINGTON SMALL CAP ASIA GROWTH FUND
[LAM PHOTO]
CHRISTINA LAM. Ms. Lam is the lead manager on a portfolio management
team that manages the Lexington Small Cap Asia Growth Fund. Ms. Lam
is Vice President and Portfolio Manager of the Lexington Small Cap
Asia Growth Fund. Ms. Lam joined Crosby Asset Management in 1991. She
is responsible for the investment management of the listed equity
portfolios under the management of Crosby Asset Management. After
graduating with a Law Degree with Honors from Warwick University, she
qualified as a Barrister from Lincoln's Inn in London. In 1987 she joined
Schroder Securities Limited in Hong Kong as an investment analyst, where her
coverage included the utilities, industrials and retail sectors and
conglomerates.
33
<PAGE>
LEXINGTON TROIKA DIALOG RUSSIA FUND
[MC CARTHY PHOTO]
TIMOTHY D. MCCARTHY is a member of the portfolio management team that
manages the Lexington Troika Dialog Russia Fund. Mr. McCarthy has a
B.S. degree in Economics from the State University of New York at
Oneonta and an M.B.A. from the State University of New York at
Binghamton. He joined Troika Dialog, Moscow in July, 1998. Prior to
May, 1998 he was an Executive Director with Alfa Asset Management,
Moscow. From January, 1995 to March, 1997 he was co-founder and
director of Capital Regent Securities, a Moscow based investment and advisory
firm. From June, 1990 to December, 1994 he was a consultant and senior
consultant with Deloitte & Touche Management Consulting in New York.
[HISEY PHOTO]
RICHARD M. HISEY, C.F.A. Mr. Hisey is a member of the portfolio
management team and investment strategist for the Lexington Troika
Dialog Russia Fund. Mr. Hisey is Managing Director and Chief
Financial Officer of LMC. He is also a Vice President and a member of
the Board of Directors of the Lexington Family of Mutual Funds. Mr.
Hisey is Executive Vice President and Chief Financial Officer of
Lexington Global Assets Managers, Inc., the parent company of LMC. He
sits on the Investment Company Institute's Accounting/Treasurers,
International and Tax Committees. He is a Chartered Financial Analyst and is a
member of the New York Society of Security Analysts. Prior to joining LMC in
1986, Mr. Hisey was a Senior Financial Analyst for Richardson Vicks, Inc. Mr.
Hisey is a graduate with Distinction of the University of Connecticut with a
Bachelor of Arts in Soviet and Eastern European Studies. His undergraduate work
included studies at Middlebury College and at Leningrad State University in the
former Soviet Union. He also holds an M.B.A. from the University of Connecticut.
[VARDANIAN PHOTO]
RUBEN VARDANIAN is a member of the portfolio management team that
manages the Lexington Troika Dialog Russia Fund. Mr. Vardanian is
Chairman of the Board of Troika Dialog Asset Management. He is Vice
Chairman of the Board of Directors of the Depository Clearing
Company, Moscow. He is a member of the expert council of the Federal
Securities Commission of Russia and a Director of the Russian Trading
System (RTS). He is also Chairman of the Board of Directors of the
Russian Capital markets self-regulatory organization (NAUFOR). Mr. Vardanian
received a Masters Degree with Distinction from the Finance Department of Moscow
State University. He received post-graduate training with Banca CRT in Italy and
with the Emerging Markets Division of Merrill Lynch in New York.
[TEPLUKHIN PHOTO]
PAVEL TEPLUKHIN. Dr. Teplukhin is a member of the portfolio
management team that manages the Lexington Troika Dialog Russia Fund.
He is the President of Troika Dialog Asset Management. Dr. Teplukhin
received a diploma in Economics and a Doctorate in Economic Analysis
and Statistics from Moscow State University. He also received a
Master of Science in Economics/ Macroeconomics from the London School
of Economics. From 1993 to 1996, Dr. Teplukhin was Economic Adviser
to the First Deputy Prime Minister at the Ministry of Finance of the Russian
Federation.
[LARICHEV PHOTO]
OLEG LARICHEV is a member of the portfolio management team that
manages the Lexington Troika Dialog Russia Fund. Mr. Larichev
received a Master of Arts in Economics from the New Economic School,
Moscow and a Diploma in Computer Graphics from Moscow State
University. He has been associated with Troika Dialog, Moscow since
September, 1996. Prior to September, 1996 he was an economics expert
with the Russian European Center for Economic Policy. Prior to April,
1995 he held part-time positions with the World Bank and the Moscow
office of the London School of Economics.
34
<PAGE>
PORTFOLIO MANAGERS
BOARD OF ADVISERS. The Board of Advisers to the Lexington Troika Dialog Russia
Fund is composed of experts in Russian political and economic affairs. The Board
of Advisers provides LMC and the Board of Directors with periodic updates on
political and macroeconomic conditions and trends in Russia, and their political
implication for the overall investment environment in Russia. As a result, LMC
and the Board of Directors will be better able to oversee and safeguard the
assets of Lexington Troika Dialog Russia Fund. The members of the Board of
Advisers are:
KEITH BUSH is a Senior Associate -- Russian and Eurasian Studies at the Center
for Strategic and International Studies in Washington, D.C. Prior to 1994, Mr.
Bush was the Director of Radio Free Europe's Radio Liberty Research area. Mr.
Bush has published more than 1,000 analyses on developments in the former Soviet
Union.
MARIN J. STRMECKI is the Director of Programs for the Smith Richardson
Foundation. Prior to 1994, Dr. Strmecki served as a Legislative Assistant to
U.S. Senator Orrin Hatch. Prior to 1993, Dr. Strmecki served as a Special
Assistant for Public Policy on the Policy Planning Staff of the U.S. Office of
the Secretary, Department of Defense. Prior to 1992, Dr. Strmecki served as a
Professional Staff Member of the Foreign Relations Committee of the U.S. Senate.
Dr. Strmecki also served as a Foreign Policy Consultant to former U.S. President
Richard M. Nixon from 1990 to 1994.
LEXINGTON GNMA INCOME FUND
[JAMISON PHOTO]
DENIS P. JAMISON, CFA. Mr. Jamison manages the Lexington GNMA Income
Fund, Lexington Money Market Trust and Lexington Global Income Fund.
Mr. Jamison is Senior Vice President and Director of Fixed Income
Strategy of LMC. Mr. Jamison is responsible for fixed-income
portfolio management. He is a Chartered Financial Analyst and a
member of the New York Society of Security Analysts. Prior to joining
LMC in 1981, Mr. Jamison spent nine years at Arnold Bernhard &
Company, an investment counseling and financial services organization. At
Bernhard, he was a Vice President supervising the security analyst staff and
managing investment portfolios. He is a specialist in government, corporate and
municipal bonds. Mr. Jamison graduated from the City College of New York with a
B.A. in Economics.
[MC CARTHY PHOTO]
ROSEANN G. MCCARTHY. Ms. McCarthy is a co-manager of the Lexington
GNMA Income Fund and the Lexington Money Market Trust. Ms. McCarthy
is an Assistant Vice President of LMC. Prior to joining the Fixed
Income Department in 1997, she was Mutual Fund Marketing and Research
Coordinator. Prior to 1995, Ms. McCarthy was Fund Statistician and a
Shareholder Service Representative for the Lexington Funds. Ms.
McCarthy is a graduate of Hofstra University with a B.B.A. in
Marketing and has an M.B.A. in Finance from Seton Hall University.
LEXINGTON GLOBAL INCOME FUND
DENIS P. JAMISON, CFA. Please see biography under Lexington GNMA
Income Fund.
35
<PAGE>
LEXINGTON MONEY MARKET TRUST
DENIS P. JAMISON, CFA. Please see biography under Lexington GNMA
Income Fund.
ROSEANN G. MCCARTHY. Please see biography under Lexington GNMA Income
Fund.
LEXINGTON GOLDFUND
[VAIL PHOTO]
JAMES A. VAIL, CFA. Mr. Vail manages the Lexington Goldfund and the
Lexington Silver Fund. Mr. Vail is a Vice President of LMC and is
responsible for precious metals analysis and portfolio management at
LMC. He is a Chartered Financial Analyst, a member of the New York
Society of Security Analysts and has 25 years of investment
experience. Prior to joining LMC in 1991, Mr. Vail held investment
research positions with Chemical Bank, Oppenheimer & Co., Robert
Fleming Inc. and most recently, Beacon Trust Company, where he was a
Senior Investment Analyst. Mr. Vail is a graduate of St. Peter's College with a
B.S. and holds an M.B.A. in Finance from Seton Hall University.
LEXINGTON SILVER FUND
JAMES A. VAIL, CFA. Please see biography under Lexington Goldfund.
MANAGEMENT FEES AND EXPENSE LIMITS
Each Fund pays a management fee at an annual rate based on its average daily net
assets, to LMC as follows: Growth and Income Fund pays 0.75% on the first $100
million of average daily net assets, 0.60% on the next $50 million, 0.50% on the
next $100 million and 0.40% thereafter. SmallCap Fund pays 1.00%. Global
Corporate Leaders Fund pays 1.00%. International Fund pays 1.00%. Worldwide
Emerging Markets Fund pays 1.00%. Small Cap Asia Growth Fund pays 1.25%. Russia
Fund pays 1.25%. GNMA Income Fund pays 0.60% on the first $150 million, 0.50% on
the next $250 million, 0.45% on the next $400 million, and 0.40% thereafter.
Global Income Fund pays 1.00%. Money Market Trust pays 0.50%. Goldfund pays
1.00% on the first $50 million and 0.75% thereafter. Silver Fund pays 1.00% on
the first $30 million and 0.75% thereafter.
GNMA Income Fund and Money Market Trust have contractual expense limitations
with LMC. The agreements have a one-year term, renewable at the end of each
fiscal year. GNMA Income Fund's annual expenses are limited to 1.50% of average
daily net assets up to $30 million, and 1.00% thereafter. Money Market Trust's
annual expenses are limited to 1.00%. LMC has voluntarily agreed to limit annual
expenses to 2.50% of average daily net assets for each of the Funds except for
Russia Fund, GNMA Income Fund and Money Market Trust. This limit is exclusive of
12b-1 fees. With respect to Russia Fund, LMC has voluntarily agreed to limit
annual expenses to 3.35% of average daily net assets, inclusive of 12b-1 fees.
These voluntary limits became effective January 1, 1999, and may be terminated
at any time.
36
<PAGE>
INVESTMENT OPTIONS
TO OPEN A NEW ACCOUNT, COMPLETE AND MAIL THE NEW ACCOUNT APPLICATION
INCLUDED WITH THIS PROSPECTUS.
- --------------------------------------------------------------------------------
Mail your completed application, any checks and correspondence to the
Transfer Agent:
TRANSFER AGENT
State Street Bank and Trust Company
c/o National Financial Data Services
Lexington Funds
P.O. Box 419648
Kansas City, Missouri 64141-6648
OVERNIGHT MAIL
State Street Bank and Trust Company
c/o National Financial Data Services
Lexington Funds
330 W. 9th Street
Kansas City, MO 64105
Checks should be made payable to: The Lexington Funds
Call a Lexington shareholder service representative Monday through
Friday between 9:00 A.M. and 5:00 P.M. Eastern time for information on the
Funds or your account, at:
(800) 526-0056 OR (201) 845-7300 FOR SERVICE M-F 9 A.M.- 5 P.M. EASTERN
TIME
(800) 526-0052 FOR 24 HOUR ACCOUNT INFORMATION "LEXLINE"
(800) 526-0057 FOR 24 HOUR PROSPECTUS INFORMATION
Trade requests received after 4 P.M. Eastern time (1 P.M. Pacific time)
will be executed at the following business day's closing price.
Once an account is established you can:
- SELL OR EXCHANGE SHARES BY PHONE.
Contact the Lexington Funds at 800-526-0056.
- BUY OR EXCHANGE SHARES ONLINE.
Go to WWW.LEXINGTONFUNDS.COM. and follow our online instructions to
enable this service.
- BUY, SELL OR EXCHANGE SHARES BY MAIL.
Mail buy/sell order(s), investment or redemption instructions and any
required payment by check:
State Street Bank and Trust Company
c/o National Financial Data Services
Lexington Funds
P.O. Box 419648
Kansas City, Missouri 64141-6648
- BUY SHARES BY WIRING FUNDS.
To: State Street Bank and Trust Company DDA Account #99043713;
[Lexington Fund you are investing in]
For credit to: [shareholder(s) name]
Account number:
ABA Routing #011000028
37
<PAGE>
SHAREHOLDER INFORMATION
WHAT YOU NEED TO KNOW ABOUT YOUR LEXINGTON ACCOUNT
You pay no sales charges to invest in The Lexington Funds. The minimum initial
investment for the Funds (except Lexington Troika Dialog Russia Fund) is $1,000,
and the minimum subsequent investment is $50. The minimum initial investment for
Lexington Troika Dialog Russia Fund is $5,000. The minimum initial investment
for IRAs is $250. Under certain conditions we may waive these minimums for
qualified plan accounts. If you buy shares through a broker or investment
advisor, they may apply different requirements. All investments must be made in
U.S. dollars. In addition, we reserve the right to reject any purchase.
BECOMING A LEXINGTON SHAREHOLDER
To open a new account:
- - BY MAIL. Send your completed application, with a check payable to The
Lexington Funds, to the appropriate address. Your check must be in U.S.
dollars and drawn only on a bank located in the United States. We do not
accept third-party checks, "starter" checks, credit-card checks, traveler's
checks, instant-loan checks or cash investments. We may impose a charge on
checks that do not clear.
- - BY WIRE. Call us at 800-526-0056 to let us know that you intend to make your
initial investment by wire. Tell us your name and the amount you want to
invest. We will give you further instructions and a fax number to which you
should send your completed New Account application. To ensure that we handle
your investment accurately, include complete account information in all wire
instructions.
Then request your bank to wire money from your account to the attention of:
State Street Bank and Trust Company
DDA account #99043713
[Lexington Fund you are investing in]
For credit to: [shareholder(s) name]
Shareholder(s) account #
ABA Routing #011000028
Please note that your bank may charge a wire transfer fee.
BUYING ADDITIONAL SHARES
- - BY MAIL. Complete the form at the bottom of any Lexington statement and mail
it with your check payable to The Lexington Funds. Or mail the check with a
signed letter noting the name of the Fund in which you want to invest, your
account number and telephone number.
- - "LEX-O-MATIC" THE AUTOMATIC INVESTMENT PLAN:
- A shareholder may make additional purchases of shares automatically on a
monthly or quarterly basis with the automatic investing plan,
"Lex-O-Matic."
- You may not use a "Lex-O-Matic" investment to open a new account. The
minimum investment amount must still be made into the Fund. The minimum
Lex-O-Matic investment amount is $50.
- Your bank must be a member of the Automated Clearing House.
- To establish "Lex-O-Matic," attach a voided check (checking account) or
preprinted deposit slip (savings account) from your bank account to your
Lexington Account Application or a "Lex-O-Matic" Application.
38
<PAGE>
SHAREHOLDER INFORMATION
- Investments will automatically be transferred into your Lexington Account
from your checking or savings account.
- Investments may be transferred either monthly or quarterly on or about the
15th day of the month.
- You should allow 20 business days for this service to become effective.
- You may cancel or change the amount of your Lex-O-Matic at any time
provided that a letter is sent to the Transfer Agent ten days prior to the
scheduled investment date. Your request will be processed upon receipt.
By investing in the Lexington Funds, you appoint the Transfer Agent as your
agent to establish an open account to which all shares purchased will be
credited, along with any dividends and capital gain distributions which are paid
in additional shares (see "Dividends and Distributions"). Stock certificates
will be issued, upon written request, for full shares of Lexington Funds.
Certificates will not be issued for 30 days after payment is received. In order
to facilitate redemptions and transfers, most shareholders elect not to receive
certificates.
You may purchase shares of the Lexington Funds through broker-dealers or
financial institutions that have selling agreements with LFD. Broker-dealers and
financial institutions that process such orders for customers may charge a fee
for their services. The fee may be avoided by purchasing shares directly from
the Lexington Funds.
EXCHANGING SHARES
Shares of the Lexington Funds may be exchanged for shares of equivalent value of
any Lexington Fund. If an exchange involves investing in a Lexington Fund not
already owned, the dollar amount of the exchange must meet the minimum initial
investment amount of the new Fund. An exchange will result in a recognized gain
or loss for income tax purposes. Exchanges of over $500,000 may take three days
to complete.
You may make exchange requests in writing or by telephone. Telephone exchanges
may only be made if you have completed a Telephone Authorization form which is
included on your new account application, or you can request it separately by
calling shareholder services at 800-526-0056. Telephone exchanges may not be
made within 7 calendar days of a previous exchange.
If not a new account, the minimum exchange required is $500; $250 for Individual
Retirement Accounts.
Telephone exchanges may only involve shares held on deposit by the Transfer
Agent, not shares held in certificate form by the shareholder.
Any new account established by a shareholder will also have the privilege of
exchange by telephone in the Lexington Funds unless you decline this privilege
on the application or the transfer agent is notified by the shareholder in
writing to remove the privilege. All accounts involved in a telephonic exchange
must have the same dividend option, registration and social security number as
the account from which the shares are transferred.
MINIMUM ACCOUNT BALANCES
Due to the costs of maintaining small accounts, we require a minimum combined
account balance of $1,000. If your account balance falls below that amount for
any reason other than market fluctuations, we will ask you to add to your
account. If your account balance is not brought up to the minimum or you do not
send us other instructions, we will redeem your shares and send you the
proceeds. We believe that this policy is in the best interests of all our
shareholders.
39
<PAGE>
REDEEMING YOUR SHARES
The Funds will redeem all or any portion of your outstanding shares upon
request. Redemptions can be made on any day that the NYSE is open for trading.
The redemption price is the net asset value per share next determined after the
shares are validly tendered for redemption and such request is received by the
Transfer Agent. Payment of redemption proceeds is made promptly regardless of
when redemption occurs and normally within three business days after receipt of
all documents in proper form by our transfer agent, including a written
redemption order with appropriate signature guarantee. Redemption proceeds will
be mailed or wired in accordance with the shareholder's instructions. The Funds
may suspend the right of redemption under certain extraordinary circumstances in
accordance with the rules of the SEC. In the case of shares purchased by check
and redeemed shortly after the purchase, the Transfer Agent will not mail
redemption proceeds until it has been notified that the monies used for the
purchase have been collected, which may take up to 15 days from the purchase
date. Shares tendered for redemptions through brokers or dealers (other than the
Distributor) may be subject to a service charge by such brokers or dealers.
Procedures for requesting a redemption are set forth below.
A 2% redemption fee will be charged on the redemption of shares of the Lexington
Troika Dialog Russia Fund held less than 365 days. The redemption fee will not
apply to shares representing the reinvestment of dividends and capital gains
distributions. The redemption fee will be applied on a share by share basis
using the "first shares in, first shares out" (FIFO) method. Therefore, the
oldest shares are sold first.
The transfer agent will restrict the mailing of redemption proceeds to a
shareholder address of record within 30 days of such address being changed,
unless the shareholder provides a signature guaranteed letter of instruction.
REDEEMING BY WRITTEN INSTRUCTION
Write a letter giving your name, account number, the name of the fund from which
you wish to redeem and the dollar amount or number of shares you wish to redeem.
Signature-guarantee your letter if you want the redemption proceeds to be made
payable and/or mailed to a party other than the account owner(s) as registered
in our records, your predesignated bank account or if the dollar amount of the
redemption exceeds $25,000. Signature guarantees may be provided by an eligible
guarantor institution such as a commercial bank, an NASD member firm such as a
stockbroker, a savings association or national securities exchange. Notary
Publics are not acceptable Guarantors. Contact the Transfer Agent for more
information.
If a redemption request is sent to the Fund in New Jersey, it will be forwarded
to the Transfer Agent and the effective date of redemption will be the date
received by the Transfer Agent. Checks for redemption proceeds will normally be
mailed within three business days. Shareholders who redeem all their shares will
receive a check representing the value of the shares redeemed plus the accrued
dividends if applicable through the date of redemption. Where shareholders
redeem only a portion of their shares, all dividends declared but unpaid will be
distributed on the next dividend payment date.
REDEEMING BY TELEPHONE
- - Shares of the Fund may be redeemed by telephone. Call the Fund toll free at
1-800-526-0056. New applicants may decline this privilege by checking the
appropriate box on the application.
40
<PAGE>
SHAREHOLDER INFORMATION
- - For shareholders who have not previously authorized the redemption privilege
a redemption authorization and signature guarantee must be given before a
shareholder may redeem by telephone. Authorization forms may be obtained by
calling the Fund at 800-526-0056.
- - Telephone redemption privileges may be cancelled by instructing the Transfer
Agent in writing. Your request will be processed upon receipt.
- - Exchange by telephone. (See "Exchanging Shares")
REDEEMING BY CHECK
- - Check writing is available on the Money Market Trust at no charge.
- - The minimum amount per check is $100 or more up to $500,000. Checks for less
than $100 or over $500,000 will not be honored.
- - All checks require only one signature unless otherwise indicated. Checks will
be returned to you at the end of each month.
- - Redemption checks are free, but a charge of $15.00 may be imposed for any
stop payments requested.
- - Redemption checks should not be used to close your account.
- - Redemptions by check are available for shares for which share certificates
have not been issued, and may not be used to redeem shares purchased by check
which have been on the books of the Fund for less than 15 days.
SYSTEMATIC WITHDRAWAL PLAN
Under a Systematic Withdrawal Plan, a shareholder with an account value of
$10,000 or more in a fund may receive (or have sent to a third party) periodic
payments (by check or electronic funds). If the proceeds are to be mailed to a
third party a signature guarantee is required. The minimum payment amount is
$100 from each Fund account. Payments may be made either monthly, quarterly,
semi-annually or annually on the 28th of each month. If the 28th falls on a
weekend or a holiday, the withdrawal will occur on the preceding business day.
The redemption will result in the recognition of a gain or loss for income tax
purposes.
HOW FUND SHARES ARE PRICED
How and when we calculate the Funds' price or net asset value (NAV) determines
the price at which you will buy or sell shares. The net asset value of each fund
is determined once daily as of 4:00 p.m., New York time, on each day that the
NYSE is open for trading. Per share net asset value is calculated by dividing
the value of each fund's total net assets by the total number of that fund's
shares then outstanding.
As more fully described in the Statement of Additional Information, portfolio
securities are valued using current market valuations: either the last reported
sales price or, in the case of securities for which there is no reported last
sale and fixed-income securities, the mean between the closing bid and asked
prices. Securities traded over-the-counter are valued at the mean between the
last current bid and asked prices. Securities for which market quotations are
not readily available or which are illiquid are valued at their fair values as
determined in good faith under the supervision of the Funds' officers, and by
the Manager and the Boards, in accordance with methods that are specifically
authorized by the Boards. Short-term obligations with maturities of 60 days or
less are valued at amortized cost as reflecting fair value. When Fund management
deems it appropriate, prices obtained for the day of valuation from a third
party pricing service will be used to value portfolio securities.
41
<PAGE>
The value of securities denominated in foreign currencies and traded on foreign
exchanges or in foreign markets will be translated into U.S. dollars at the last
price of their respective currency denomination against U.S. dollars quoted by a
major bank or, if no such quotation is available, at the rate of exchange
determined in accordance with policies established in good faith by the Boards.
Because the value of securities denominated in foreign currencies must be
translated into U.S. dollars, fluctuations in the value of such currencies in
relation to the U.S. dollar may affect the net asset value of fund shares even
without any change in the foreign-currency denominated values of such
securities.
Because foreign securities markets may close before the Funds determine their
net asset values, events affecting the value of portfolio securities occurring
between the time prices are determined and the time the Funds calculate their
net asset values may not be reflected unless the Manager, under supervision of
the Board, determines that a particular event would materially affect a fund's
net asset value.
- - Foreign Funds. Several of our Funds invest in securities denominated in
foreign currencies and traded on foreign exchanges. To determine their value, we
convert their foreign-currency price into U.S. dollars by using the exchange
rate last quoted by a major bank. Exchange rates fluctuate frequently and may
affect the U.S. dollar value of foreign-denominated securities, even if their
market prices do not change. In addition, some foreign exchanges are open for
trading when the U.S. market is closed. As a result, a Fund's foreign
securities -- and its price -- may fluctuate during periods when you can't buy,
sell or exchange shares in the Fund.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund distributes substantially all its net investment income and net
capital gains to shareholders each year.
- - You are not guaranteed any distributions.
- - The Board of Directors has discretion in determining the amount and frequency
of the distributions.
- - Unless you request cash distributions in writing, all dividends and other
distributions will be reinvested automatically in additional shares and
credited to the shareholders' account.
Distributions Affect NAV.
- - The Funds will pay distributions as of the record date.
- - Dividends and capital gains waiting distribution are included in each Fund's
daily NAV.
Buying a Dividend. If you buy shares of a Fund just before a distribution, you
will pay the full price for the shares and receive a portion of the purchase
price back as a taxable distribution when the distribution is made.
TAXES
Each Fund intends to qualify as a regulated investment company, which means that
it pays no federal income tax on the earnings or capital gains it distributes to
its shareholders. The following statements apply with respect to each Fund:
- - Ordinary dividends from the Fund are taxable as ordinary income and dividends
from the Fund's long-term capital gains are taxable as capital gain.
- - Dividends are treated in the same manner for federal income tax purposes
whether you receive them in the form of cash or additional shares. They may
also be subject to state and local taxes.
42
<PAGE>
SHAREHOLDER INFORMATION
- - Dividends from the Lexington GNMA Income Fund, Inc. that are attributable to
interest on certain U.S. Government obligations may be exempt from certain
state and local income taxes. The extent to which ordinary dividends are
attributable to U.S. Government obligations will be provided from the Fund.
- - Certain dividends paid to you in January will be taxable as if they had been
paid the previous December.
- - We will mail you tax statements annually showing the amounts and tax status
of the distributions you received.
- - When you sell (redeem) or exchange shares of a Fund, you must recognize any
gain or loss. However, as long as Lexington Money Market Trust's NAV per
share does not deviate from $1.00, there will be no gain or loss.
- - Under certain circumstances, a Fund may be in a position to "pass-through" to
you the right to a credit or deduction for foreign taxes paid by the Fund.
- - Because your tax treatment depends on your purchase price and tax position,
you should keep your regular account statements for use in determining your
tax.
- - You should review the more detailed discussion of federal income tax
considerations in the Statement of Additional Information, which is available
for free by calling 1-800-526-0056.
***We provide this tax information for your general information. You should
consult your own tax adviser about the tax consequences of investing in a
Fund.***
43
<PAGE>
DISTRIBUTION OF FUND'S SHARES
DISTRIBUTION PLAN. The following Funds have adopted a plan under Rule 12b-1 for
the sale and distribution of shares:
- - Lexington Goldfund;
- - Lexington Global Income Fund;
- - Lexington Growth and Income Fund;
- - Lexington International Fund;
- - Lexington SmallCap Fund;
- - Lexington Troika Dialog Russia Fund; and
- - Lexington Worldwide Emerging Markets Fund.
Under the distribution plan, the Funds may pay fees up to 0.25% of their average
daily net assets for distribution services.
SHAREHOLDER SERVICING AGREEMENTS. The Funds may enter into Shareholder Servicing
Agreements with one or more Shareholder Servicing Agents to provide various
services to shareholders as follows:
- - Each Agent receives fees up to 0.25% of the average daily net assets of the
Fund.
- - LMC may pay additional fees from its past profits, at no additional costs to
the Funds.
- - Each Agent may waive all or a portion of the fees.
- - If a Fund has a distribution plan, the Agents will receive fees of up to
0.25% of the average daily assets from the distribution plan.
44
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table on the following pages are intended to help you
understand the Fund's financial performance for the past 5 years. Certain
information reflects financial highlights for a single share. The total returns
in the table represent the rate that an investor would have earned (or lost) on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by KPMG LLP, whose report,
along with the Fund's financial statements, are included in the annual report,
which is available upon request.
45
<PAGE>
DOMESTIC EQUITY FUNDS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS GROWTH AND INCOME FUND SMALLCAP FUND
PER SHARE OPERATING PERFORMANCE 1998 1997 1996 1995 1994 1998 1997 1996(a)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.27 $18.56 $15.71 $14.36 $16.16 $11.39 $11.73 $10.00
Net investment income (loss) -- 0.05 0.07 0.22 0.17 (0.02) (0.19) (0.18)
Net realized and unrealized gain (loss)
from investment operations 4.30 5.46 4.08 3.00 (0.68) 0.75 1.41 1.94
Total income (loss) from investment
operations 4.30 5.51 4.15 3.22 (0.51) 0.73 1.22 1.76
Less distributions:
Distributions from net investment
income -- (0.07) (0.13) (0.22) (0.16) -- -- --
Distributions in excess of net
investment income -- -- -- -- -- -- -- --
Distributions from net realized gains (2.66) (3.73) (1.17) (1.65) (0.91) (0.22) -- --
Distributions in excess of net
realized gains -- -- -- -- (0.22) -- (1.56) (0.03)
Total distributions (2.66) (3.80) (1.30) (1.87) (1.29) (0.22) (1.56) (0.03)
Net asset value, end of period $21.91 $20.27 $18.56 $15.71 $14.36 $11.90 $11.39 $11.73
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 21.42% 30.36% 26.46% 22.57% (3.11)% 6.73% 10.47% 17.50%
RATIOS/SUPPLEMENTAL DATA
Net asset, end of period (thousands) $245,790 $228,037 $200,309 $138,901 $124,829 $8,172 $9,565 $8,061
Ratio of expenses to average net
assets, before reimbursement or waiver 1.16% 1.17% 1.13% 1.09% 1.15% 2.92% 2.57% 3.04%
Ratio of expenses to average net
assets, net of reimbursement or waiver 1.16% 1.17% 1.13% 1.09% 1.15% 2.59% 2.57% 2.48%
Ratio of net investment income (loss)
to average net assets, before
reimbursement or waiver 0.06% 0.21% 0.43% 1.38% 1.06% (2.00)% (1.78)% (2.34)%
Ratio of net investment income (loss)
to average net assets, net of
reimbursement or waiver 0.06% 0.21% 0.43% 1.38% 1.06% (1.67)% (1.78)% (1.78)%
Portfolio Turnover Rate 63.20% 88.15% 101.12% 159.94% 63.04% 145.94% 39.09% 60.92%
</TABLE>
<TABLE>
<S> <C>
* Annualized.
(a) SmallCap Fund commenced operations on January 2, 1996.
(b) Small Cap Asia Growth Fund commenced operations on July 3,
1995.
</TABLE>
46
<PAGE>
GLOBAL AND INTERNATIONAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SMALL CAP ASIA GROWTH FUND GLOBAL CORPORATE LEADERS FUND
1998 1997 1996 1995(b) 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$7.06 $12.24 $9.76 $10.00 $10.59 $11.28 $11.32 $11.17 $13.51
-- (0.05) (0.05) 0.02 0.99 0.03 0.01 0.09 0.02
(1.37) (5.13) 2.54 (0.24) 1.02 0.73 1.84 1.10 0.23
(1.37) (5.18) 2.49 (0.22) 2.01 0.76 1.85 1.19 0.25
-- -- -- (0.02) (0.80) (0.09) (0.16) (0.29) --
-- -- (0.01) -- -- -- -- (0.13) --
-- -- -- -- (2.34) (1.36) (1.73) (0.62) (2.46)
-- -- -- -- -- -- -- -- (0.13)
-- -- (0.01) (0.02) (3.14) (1.45) (1.89) (1.04) (2.59)
$5.69 $7.06 $12.24 $9.76 $9.46 $10.59 $11.28 $11.32 $11.17
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
(19.41)% (42.32)% 25.50% (4.39)%* 19.06% 6.90% 16.43% 10.69% 1.84%
$18,278 $13,867 $23,796 $8,936 $17,803 $35,085 $37,223 $53,614 $67,392
2.86% 2.30% 2.64% 3.51%* 2.12% 1.75% 1.90% 1.67% 1.61%
2.50% 2.30% 2.42% 1.75%* 2.12% 1.75% 1.90% 1.67% 1.61%
(0.57)% (0.32)% (0.86)% (1.24)%* (0.06)% 0.23% 0.11% 0.48% 0.14%
(0.21)% (0.32)% (0.64)% 0.52%* (0.06)% 0.23% 0.11% 0.48% 0.14%
193.48% 187.41% 176.49% 40.22%* 137.33% 177.48% 128.05% 166.35% 83.40%
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL FUND
PER SHARE OPERATING PERFORMANCE 1998 1997 1996 1995 1994(c)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.10 $10.86 $10.60 $10.37 $10.00
Net investment income (loss) 0.17 0.07 (0.02) (0.01) (0.08)
Net realized and unrealized gain (loss) from
investment operations 1.74 0.10 1.45 0.61 0.67
Total income (loss) 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 -- -- -- (0.35) --
Distributions from net realized gains (0.34) (0.80) (0.97) (0.02) (0.10)
Distributions in excess of net realized gains -- -- -- -- (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%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands) $24,000 $19,949 $18,891 $17,855 $17,843
Ratio of expenses to average net assets, before
reimbursement or waiver 2.25% 2.15% 2.45% 2.46% 2.39%
Ratio of expenses to average net assets, net of
reimbursement or waiver 1.75% 1.75% 2.45% 2.46% 2.39%
Ratio of net investment income (loss) to average
net assets, before reimbursement or waiver (0.16)% 0.13% (0.39)% (0.12)% (0.94)%
Ratio of net investment income (loss) to average
net assets, net of reimbursement or waiver 0.35% 0.53% (0.39)% (0.12)% (0.94)%
Portfolio Turnover Rate 143.67% 122.56% 113.55% 137.72% 100.10%
</TABLE>
<TABLE>
<S> <C>
* Annualized.
# (before, or net of) reimbursement or waiver or redemption
fee proceeds.
(c) International Fund commenced operations on January 3, 1994.
(d) The Fund's commencement of operations was June 3, 1996 with
the investment of its initial capital. The Fund's
registration statement with the Securities and Exchange
Commission became effective on July 3, 1996. Financial
results prior to the effective date of the Fund's
registration statement are not presented in this Financial
Highlights Table.
</TABLE>
48
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
GLOBAL INCOME FUND RUSSIA FUND WORLDWIDE EMERGING MARKETS FUND
1998 1997 1996 1995 1994 1998 1997 1996(d) 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.58 $11.22 $10.75 $9.80 $10.95 $17.50 $11.24 $12.12 $10.18 $11.49 $10.70 $11.47
0.90 1.04 1.01 0.96 0.46 0.15 (0.01) (0.05) 0.12 0.01 -- 0.08
(0.07) (0.50) 0.36 0.95 (1.16) (14.70) 7.57 (0.51) (3.08) (1.32) 0.79 (0.76)
0.83 0.54 1.37 1.91 (0.70) (14.55) 7.56 (0.56) (2.96) (1.31) 0.79 (0.68)
(0.87) (0.91) (0.86) (0.96) (0.45) (0.07) -- -- (0.09) -- -- (0.08)
-- -- -- -- -- -- -- -- -- -- -- (0.01)
(0.18) (0.27) (0.04) -- -- (0.24) (1.30) (0.32) -- -- -- --
-- -- -- -- -- -- -- -- -- -- -- --
(1.05) (1.18) (0.90) (0.96) (0.45) (0.31) (1.30) (0.32) (0.09) -- -- (0.09)
$10.36 $10.58 $11.22 $10.75 $9.80 $2.64 $17.50 $11.24 $7.13 $10.18 $11.49 $10.70
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
8.21% 5.00% 13.33% 20.10% (6.52)% (82.99)% 67.50% (9.01)%* (29.06)% (11.40)% 7.38% (5.93)%
$36,407 $23,668 $29,110 $12,255 $10,351 $19,147 $137,873 $13,846 $65,323 $137,686 $254,673 $265,544
1.89% 2.17% 2.33% 3.07% 1.80% 2.64% 2.89%# 5.07%*# 1.85% 1.82% 1.76% 1.88%
1.50% 1.50% 1.50% 2.75% 1.50% 1.84% 1.85%# 2.65%*# 1.85% 1.82% 1.76% 1.88%
10.99% 8.99% 9.49% 9.48% 4.18% 0.57% (1.14)%# (3.69)%*# 1.14% 0.09% (0.01)% 0.70%
11.38% 9.66% 10.32% 9.80% 4.48% 1.36% (0.11)%# (1.27)%*# 1.14% 0.09% (0.01)% 0.70%
45.25% 117.94% 71.83% 164.72% 10.20% 65.76% 66.84% 115.55% 107.19% 112.05% 86.26% 92.85%
1994
<S> <C>
$13.96
(0.01)
(1.92)
(1.93)
--
--
(0.47)
(0.09)
(0.56)
$11.47
- -------------------------------
- -------------------------------
<S> <C>
(13.81)%
$288,581
1.65%
1.65%
(0.06)%
(0.06)%
79.56%
</TABLE>
49
<PAGE>
PRECIOUS METALS FUNDS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
GOLDFUND
<CAPTION>
PER SHARE OPERATING PERFORMANCE 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $3.24 $5.97 $6.24 $6.37 $6.90
Net investment income (loss) -- -- 0.02 -- 0.03
Net realized and unrealized gain (loss) from
investment operations (0.21) (2.52) 0.50 (0.12) (0.53)
Total income (loss) from investment operations (0.21) (2.52) 0.52 (0.12) (0.50)
Less distributions:
Distributions from net investment income -- (0.21) (0.79) (0.01) (0.03)
Distributions in excess of net investment income -- -- -- -- --
Distributions from net realized gains -- -- -- -- --
Distributions in excess of net realized gains -- -- -- -- --
Total distributions -- (0.21) (0.79) (0.01) (0.03)
Net asset value, end of period $3.03 $3.24 $5.97 $6.24 $6.37
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (6.39)% (42.98)% 7.84% (1.89)% 7.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands) $50,841 $53,707 $109,287 $135,779 $159,435
Ratio of expenses to average net assets, before
reimbursement or waiver 1.74% 1.65% 1.60% 1.70% 1.54%
Ratio of expenses to average net assets, net of
reimbursement or waiver 1.74% 1.65% 1.60% 1.70% 1.54%
Ratio of net investment income (loss) to average net
assets, before reimbursement or waiver 0.08% 0.17% (0.32)% 0.07% 0.50%
Ratio of net investment income (loss) to average net
assets, net of reimbursement or waiver 0.08% 0.17% (0.32)% 0.07% 0.50%
Portfolio Turnover Rate 28.93% 38.32% 31.04% 40.41% 23.77%
</TABLE>
<TABLE>
<S> <C>
* Annualized.
(e) Six month period ended December 31, 1998. The Fund changed
its fiscal year-end from June 30th to December 31st.
(f) Fiscal year-end June 30th.
</TABLE>
50
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SILVER FUND
1998(e) 1998(f) 1997(f) 1996(f) 1995(f) 1994(f)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.26 $3.95 $4.46 $4.00 $3.92 $3.52
(0.01) (0.02) (0.04) (0.03) (0.03) (0.02)
)
(0.52 (0.66) (0.43) 0.51 0.11 0.42
(0.53) (0.68) (0.47) 0.48 0.08 0.40
-- -- -- -- -- --
-- (0.01) (0.04) (0.02)
-- -- -- -- -- --
-- -- -- -- -- --
-- (0.01) (0.04) (0.02) -- --
$2.73 $3.26 $3.95 $4.46 $4.00 $3.92
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(16.26)% (17.32)% (10.76)% 12.02% 2.04% 11.36%
$25,560 $34,921 $42,035 $73,945 $65,517 $49,499
2.37%* 1.90% 1.96% 1.73% 1.82% 1.84%
2.37%* 1.90% 1.96% 1.73% 1.82% 1.84%
(0.61)%* (0.54)% (0.78)% (0.72)% (0.83)% (0.82)%
(0.61)%* (0.54)% (0.78)% (0.72)% (0.83)% (0.82)%
5.68% 28.78% 18.76% 44.30% 44.22% 5.28%
</TABLE>
51
<PAGE>
FIXED-INCOME FUNDS AND MONEY MARKET FUNDS
<TABLE>
<CAPTION>
GNMA INCOME FUND
PER SHARE OPERATING PERFORMANCE 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.40 $8.12 $8.19 $7.60 $8.32
Net investment income (loss) 0.48 0.51 0.53 0.58 0.55
Net realized and unrealized gain (loss)
from investment operations 0.13 0.29 (0.08) 0.59 (0.72)
Total income (loss) from investment
operations 0.61 0.80 0.45 1.17 (0.17)
Less distributions:
Distributions from net investment
income (0.48) (0.52) (0.52) (0.58) (0.55)
Distributions in excess of net
investment income -- -- -- -- --
Distributions from net realized gains -- -- -- -- --
Distributions in excess of net
realized gains -- -- -- -- --
Total distributions (0.48) (0.52) (0.52) (0.58) (0.55)
Net asset value, end of period $8.53 $8.40 $8.12 $8.19 $7.60
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN 7.52% 10.20% 5.71% 15.91% (2.07)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (thousands) $273,591 $158,071 $133,777 $130,681 $132,108
Ratio of expenses to average net
assets, before reimbursement or waiver 1.01% 1.01% 1.05% 1.01% 0.98%
Ratio of expenses to average net
assets, net of reimbursement or waiver 1.01% 1.01% 1.05% 1.01% 0.98%
Ratio of net investment income (loss)
to average net assets, before
reimbursement or waiver 5.85% 6.28% 6.56% 7.10% 6.90%
Ratio of net investment income (loss)
to average net assets, net of
reimbursement or waiver 5.85% 6.28% 6.56% 7.10% 6.90%
Portfolio Turnover Rate 54.47% 134.28% 128.76% 30.69% 37.15%
</TABLE>
52
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET TRUST
1998 1997 1996 1995 1994
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00
0.0455 0.0458 0.0441 0.0495 0.0330
-- -- -- -- --
0.0455 0.0458 0.0441 0.0495 0.0330
(0.0455) (0.0458) (0.0441) (0.0495) (0.0330)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
(0.0455) (0.0458) (0.0441) (0.0495) (0.0330)
$1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------
---------------------------------------------------------------------
4.64% 4.68% 4.50% 5.06% 3.35%
$87,488 $95,149 $97,526 $88,786 $111,805
1.05% 1.04% 1.04% 1.08% 1.02%
1.00% 1.00% 1.00% 1.00% 1.00%
4.51% 4.55% 4.37% 4.87% 3.30%
4.56% 4.58% 4.41% 4.95% 3.32%
-- -- -- -- --
</TABLE>
53
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information (SAI) provides a more
complete discussion about the Lexington Funds and is
incorporated by reference, which means that it is considered a
part of this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports to shareholders have more
information about each Lexington Fund's investments, including
a discussion about the market conditions and investment
strategies that significantly affected the Fund's performance
during its last fiscal year.
TRADEMARKS
Lexington(R) and Global Corporate Leaders(R) are registered
trademarks of Lexington Management Corporation.
REVIEWING OR OBTAINING ADDITIONAL INFORMATION
You may obtain a copy of the SAI and the annual and semi-annual
reports (free of charge) by contacting a broker-dealer or other
financial intermediaries that sell the Fund's shares or by
writing or calling:
THE LEXINGTON FUNDS(R)
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Attn: Shareholder Services
Tel: (800) 526-0056 or (201) 845-7300
----------------------------------------------------------------
www.lexingtonfunds.com
[LOGO]
You may also obtain a copy of the SAI and the annual and
semi-annual reports (for a fee) by contacting the Public
Reference Room of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C., telephone 800-SEC-0330.
You may also obtain this information by visiting the SEC's
Worldwide Website at http://www.sec.gov.
Investment Company Act File No. 811-0865 (Growth and Income);
811-7413 (SmallCap); 811-5113 (Global Corporate Leaders);
811-8172 (International); 811-1838 (Worldwide); 811-7287 (Small
Cap Asia Growth); 811-7587 (Russia); 811-2401 (GNMA Income);
811-4675 (Global Income); 811-2701 (Money Market); 811-2881
(Goldfund); 811-4111 (Silver).
50
<PAGE>
<PAGE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF ADDITIONAL INFORMATION
May 3, 1999
This statement of additional information which is not a prospectus,
should be read in conjunction with the current prospectus of Lexington Money
Market Trust (the "Trust"), dated May 3, 1999, as it may be revised from time
to time. To obtain a copy of the Trust's prospectus at no charge, please
write to the Trust at P.O. Box 1515/Park 80 West - Plaza Two, Saddle Brook,
New Jersey 07663 or call the following toll-free numbers:
Shareholder Services: 1-800-526-0056
24 Hour Account Information: 1-800-526-0052
Lexington Management Corporation ("LMC") serves as the Trust's
investment adviser. Lexington Funds Distributor, Inc. ("LFD") serves as
distributor of shares of the Trust.
TABLE OF CONTENTS
PAGE
History of the Fund. . . . . . . . . . . . . . . . . . . . . 1
Investment Strategies and Risks of the Fund. . . . . . . . . 1
Investment Restrictions. . . . . . . . . . . . . . . . . . . 2
Portfolio Transactions . . . . . . . . . . . . . . . . . . . 3
Yield Calculation . . . . . . . . . . . . . . . . . . . . . .3
Management of the Fund . . . . . . . . . . . . . . . . . . . 4
Control Persons and Principal Holders of Securities . . . . .9
Investment Adviser, Administrator and Distributor. . . . . 10
Determination of Net Asset Value . . . . . . . . . . . . . 11
Telephone Exchange Provisions. . . . . . . . . . . . . . . 12
Tax Sheltered Retirement Plans . . . . . . . . . . . . . . .14
Capital Stock of the Fund. . . . . . . . . . . . . . . . . .15
Dividend Distribution and Reinvestment Policy. . . . . . . .15
Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . .16
Custodian, Transfer Agent and Dividend Disbursing Agent. . .20
Counsel and Independent Auditors . . . . . . . . . . . . . .20
Financial Statements . . . . . . . . . . . . . . . . . . . .21
History of the Fund
- -------------------
Lexington Money Market Trust (the "Trust") is an organization commonly
referred to as a business trust formed under the laws of the Commonwealth of
Massachusetts on June 30, 1977. The Trust's declaration was restated on
March 2, 1979 to reflect a change in the Trust's name from "Banner Redi-
Resources Trust" to "Lexington Money Market Trust". The Fund is a
diversified open-end management investment company.
Investment Strategies and Risks of the Fund
- --------------------------------------------
In order to achieve its objective of seeking as high a level of current
income as is available from short term investments and consistent with the
preservation of capital and liquidity, the Trust will invest its assets in
the following money market instruments: (l) Obligations issued, or guaranteed
as to interest and principal, by the Government of the United States or any
agency or instrumentality thereof; (2) U.S. dollar denominated time deposits,
certificates of deposit and bankers' acceptances of U.S. banks and their
London and Nassau branches and of U.S. branches of foreign banks, provided
that the bank has total assets of one billion dollars; (3) Commercial paper
of U.S. corporations, rated Al, A2 by Standard & Poor's Corporation or Pl,
P2 by Moody's Investors Service, Inc. or, if not rated, of such issuers
having outstanding debt rated A or better by either of such services, or debt
obligations of such issuers maturing in two years or less and rated A or
better; (4) Repurchase agreements under which the Trust may acquire an
underlying debt instrument for a relatively short period subject to the
obligation of the seller to repurchase, and of the Trust to resell, at a
fixed price. The underlying security must be of the same quality as those
described herein, although the usual practice is to use U.S. Government or
government agency securities. The Trust will enter into repurchase
agreements only with commercial banks and dealers in U.S. Government
securities. Repurchase agreements when entered into with dealers, will be
fully collateralized including the interest earned thereon during the entire
term of the agreement. If the institution defaults on the repurchase
agreement, the Trust will retain possession of the underlying securities.
In addition, if bankruptcy proceedings are commenced with respect to the
seller, realization on the collateral by the Trust may be delayed or limited
and the Trust may incur additional costs. In such case the Trust will be
subject to risks associated with changes in the market value of the
collateral securities. The Trust intends to limit repurchase agreements to
institutions believed by LMC to present minimal credit risk. The Trust will
not enter into repurchase agreements maturing in more than seven days if the
aggregate of such repurchase agreements would exceed 10% of the total assets
of the Trust; or (5) Other money market instruments.
Foreign Branches of U.S. Banks
The obligations of London and Nassau branches of U.S. banks may be
general obligations of the parent bank in addition to the issuing branch, or
may be limited by the terms of a specific obligation and by governmental
regulation. Payment of interest and principal upon these obligations may
also be affected by governmental action in the country of domicile of the
branch (generally referred to as "sovereign risk"). In addition, evidences
of ownership of portfolio securities may be held outside of the U.S., and the
Trust may be subject to the risks associated with the holding of such
property overseas. Examples of governmental actions would be the imposition
of currency controls, interest limitations, seizure of assets, or the
declaration of a moratorium. Obligations of U.S. branches of foreign banks
may be general obligations of the parent bank in addition to the issuing
branch, or may be limited by the terms of a specific obligation and by
Federal and state regulation as well as by governmental action in the country
in which the foreign bank has its head office. While the Trust will
carefully consider these factors on making such investments, there are no
limitations on the percentage of the Trust's portfolio which may be invested
in any one type of instrument.
The Investment Policies stated above are fundamental and may not be
changed without shareholder approval. The Trust may not invest in securities
other than the types of securities listed above and is subject to other
specific restrictions as detailed under "Investment Restrictions" below.
Investment Restrictions
- -----------------------
The following investment restrictions adopted by the Trust may not be
changed without the affirmative vote of a majority (defined as the lesser of:
67% of the shares represented at a meeting at which 50% of outstanding shares
are present, or 50% of outstanding shares) of its outstanding shares. The
Trust may not: (l) purchase any securities other than money market
instruments or other debt securities maturing within two years of the date
of purchase; (2) borrow an amount which is in excess of one-third of its
total assets taken at market value (including the amount borrowed); and then
only from banks as a temporary measure for extraordinary or emergency
purposes. The Trust will not borrow to increase income but only to meet
redemption requests which might otherwise require undue disposition of
portfolio securities. The Trust will not invest while it has borrowings
outstanding; (3) pledge its assets except in an amount up to 15% of the value
of its total assets taken at market value in order to secure borrowings made
in accordance with number (2) above; (4) sell securities short unless at all
times while a short position is open the Trust maintains a long position in
the same security in an amount at least equal thereto; (5) write or purchase
put or call options; (6) purchase securities on margin except the Trust may
obtain such short term credit as may be necessary for the clearance of
purchases and sales of portfolio securities; (7) make investments for the
purpose of exercising control or management; (8) purchase securities of other
investment companies, except in connection with a merger, consolidation,
acquisition or reorganization; (9) make loans to other persons, provided that
the Trust may purchase money market securities or enter into repurchase
agreements and lend securities owned or held by it as provided herein; (10)
lend its portfolio securities, except in conformity with the guidelines set
forth below; (11) concentrate more than 25% of its total assets, taken at
market value at the time of such investment, in any one industry, except U.S.
Government and U.S. Government agency securities and U.S. bank obligations;
(12) purchase any securities other than U.S. Government or U.S. Government
agency securities, if immediately after such purchase more than 5% of its
total assets would be invested in securities of any one issuer for more than
three business days; (taken at market value) (13) purchase or hold real
estate, commodities or commodity contracts; ( 14 ) invest more than 5% of its
total assets (taken at market value) in issues for which no readily available
market exists or with legal or contractual restrictions on resale except for
repurchase agreements; (15) act as an underwriter (except as it may be deemed
such as to the sale of restricted securities); or (16) enter into reverse
repurchase agreements.
Lending of portfolio securities: As stated in number (10) above,
subject to guidelines established by the Trustees and by the Securities and
Exchange Commission, the Trust, from time-to-time, may lend portfolio
securities to brokers, dealers, corporations or financial institutions and
receive collateral which will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Such
collateral will be either cash or fully negotiable U. S. Treasury or agency
issues. If cash, such collateral will be invested in short term securities,
the income from which will increase the return to the Trust. However, a
portion of such incremental return may be shared with the borrower. If
securities, the usual procedure will be for the borrower to pay a fixed fee
to the Trust for such time as the loan is outstanding. The Trust will retain
substantially all rights of beneficial ownership as to the loaned portfolio
securities including rights to interest or other distributions and will have
the right to regain record ownership of loaned securities in order to
exercise such beneficial rights. Such loans will be terminable at any time.
The Trust may pay reasonable fees to persons unaffiliated with it in
connection with the arranging of such loans.
Portfolio Transactions
- ----------------------
Portfolio securities are normally purchased directly from the issuer
or from an underwriter or market maker for money market instruments.
Therefore, usually no brokerage commissions were paid by the Trust.
Transactions are allocated to various dealers by LMC in its best judgment.
Dealers are selected primarily on the basis of prompt execution of orders at
the most favorable prices. The Trust has no obligation to deal with any
dealer or group of dealers. Particular dealers may be selected for research
or statistical and other services to enable LMC to supplement its own
research and analysis with that of such firms. Information so received will
be in addition to and not in lieu of the services required to be performed
by LMC under the investment advisory agreement and the expenses of LMC will
not necessarily be reduced as a result of the receipt of such supplemental
information.
Yield Calculation
- -----------------
The Trust provides current yield and effective yield quotations, which
are calculated in accordance with the regulations of the Securities and
Exchange Commission, based upon changes in account value during a recent
seven-day base period.
Current yield quotations are computed by annualizing (on a 365-day
basis) the "base period return". The "base period return" is computed by
determining the net change exclusive of capital changes in the value of the
account, divided by the value of the account at the beginning of the base
period. Effective yield is computed by compounding the "base period return".
Based upon dividends actually credited to the shareholders' accounts (i.e.:
based upon net investment income), the current yield to an investor in the
Trust during the last seven calendar days of its fiscal year ended December
31, 1998 was at an annual rate of 4.34% and the effective yield was at an
annual rate of 4.43%. The average weighted maturity of investments was 19
days. The current and effective yield are affected by market conditions,
portfolio quality, portfolio maturity, type of instruments held and operating
expenses. The Trust attempts to keep its net asset value per share at $1.00,
but attainment of this objective is not guaranteed. This Statement of
Additional Information may be in use for a full year and it can be expected
that these yields will fluctuate substantially from the example shown above.
The current and effective yield figures are not a representation of
future yield as the Trust's net income and expenses will vary based on many
factors, including changes in short term money market yields generally and
the types of instruments in the Trust's portfolio. The stated yield of the
Trust may be useful in reviewing the Trust's performance and in providing a
basis for comparison with other investment alternatives. However, unlike
bank deposits and other investments which pay fixed yields for stated periods
of time, the yield of the Trust fluctuates. In addition, other investment
companies may calculate yield on a different basis and may purchase
securities for their portfolios which have different qualities and maturities
than those of the Trust's portfolio securities.
Management of the Fund
- ----------------------
The Fund's Trustees and executive officers, their ages as of the Fund's
most recent fiscal year-end, their principal occupations and former
affiliations are set forth below:
+ S.M.S. CHADHA (61), TRUSTEE. 3/16 Shanti Niketan, New Delhi 21, India.
Secretary, Ministry of External Affairs, New Delhi, India; Head of Foreign
Service Institute, New Delhi, India; Special Envoy of the Government of
India; Director, Special Unit for Technical Cooperation among Developing
Countries, United Nations Development Program, New York.
*+ ROBERT M. DEMICHELE (54), PRESIDENT AND CHAIRMAN. P.O. Box 1515, Saddle
Brook, N.J. 07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; President and Director, Lexington Global Asset Managers, Inc.;
Chairman and Chief Executive Officer, Lexington Funds Distributor, Inc.;
Chairman of the Board, Market Systems Research, Inc. and Market Systems
Research Advisors, Inc.; Director, Chartwell Re Corporation, Claredon
National Insurance Company, The Navigator's Group, Inc., Unione Italiana
Reinsurance, Vanguard Cellular Systems, Inc. and Weeden &Co.; Vice Chairman
of the Board of Trustees, Union College and Trustee, Smith Richardson
Foundation.
+ BEVERLEY C. DUER (69), DIRECTOR. 340 East 72nd Street, New York, N.Y. 10021
Private Investor. Formerly Manager, Operations Research Department, CPC
International Inc.
*+ BARBARA R. EVANS (38), TRUSTEE. 5 Fernwood Road, Summit, N.J. 07901. Private
Investor, formerly, Assistant Vice President and Securities Analyst,
Lexington Management Corporation.
*+ RICHARD M. HISEY (40), DIRECTOR and VICE PRESIDENT. P.O. Box 1515, Saddle
Brook, N.J. 07663. Managing Director, Chief Financial Officer and
Director, Lexington Management Corporation; Chief Financial Officer, Vice
President and Director, Lexington Funds Distributor, Inc; Chief Financial
Officer, Market Systems Research Advisers, Inc.; Executive Vice President,
Chief Financial Officer and General Manager - Mutual Funds, Lexington Global
Asset Managers, Inc.
*+ LAWRENCE KANTOR (51), VICE PRESIDENT AND TRUSTEE. P.O. Box 1515, Saddle
Brook, N.J. 07663. Managing Director, Executive Vice President and Director,
Lexington Management Corporation; Executive Vice President and Director,
Lexington Funds Distributor, Inc.; Executive Vice President, Lexington
Global Asset Managers, Inc.,
+ JERARD F. MAHER (53), TRUSTEE. 300 Raritan Center Parkway, Edison, N.J.
08818. General Counsel, Federal Business Center; Counsel, Ribis, Graham
&Curtin.
+ ANDREW M. MCCOSH (58), TRUSTEE. 12 Wyvern Park, Edinburgh EH92 JY, Scotland,
U.K. Professor of the Organisation of Industry and Commerce, Department of
Business Studies, The University of Edinburgh, Scotland..
+ DONALD B. MILLER (72), TRUSTEE. 10725 Quail Covey Drive, Boynton Beach,
Florida 33436. Chairman, Horizon Media, Inc.; Trustee, Galaxy Funds;
Director, Maguire Group of Connecticut; prior to January 1989, President,
Director and C.E.O., Media General Broadcast Services.
+ JOHN G. PRESTON (66), TRUSTEE. 3 Woodfield Road, Wellesley, Massachusetts
02181. Associate Professor of Finance, Boston College, Boston, Massachusetts.
+ ALLEN H. STOWE (61), TRUSTEE. 3674 Fifth and Ocean Avenues, Normandy Beach,
New Jersey 08739. President, Dartmouth Co-operative Society Co., Inc.
*+ DENIS P. JAMISON (51), VICE PRESIDENT AND PORTFOLIO MANAGER. P.O. Box 1515,
Saddle Brook, NJ 07663. Senior Vice President, Director of Fixed Income
Investment Strategy, Lexington Management Corporation.
*+ LISA CURCIO (39), VICE PRESIDENT AND SECRETARY. P.O. Box 1515, Saddle Brook,
N.J. 07663. Senior Vice President and Secretary, Lexington Management
Corporation; Vice President and Secretary, Lexington Funds Distributor, Inc.;
Secretary, Lexington Global Asset Managers, Inc.
*+ RICHARD J. LAVERY, CLU, CHFC (45), VICE PRESIDENT. P. O. Box 1515, Saddle
Brook, N.J. 07663. Senior Vice President, Lexington Management Corporation;
Vice President, Lexington Funds Distributor, Inc.
*+ JANICE A. CARNICELLI (39), VICE PRESIDENT. P. O. Box 1515, Saddle Brook, N.J.
07663.
*+ CHRISTIE CARR-WALDRON (31),TREASURER, P.O. Box 1515, Saddle Brook, N.J.07663.
Prior to October 1992, Senior Accountant, KPMG Peat Marwick LLP.
*+ CATHERINE DIFALCO (29), ASSISTANT TREASURER. P.O. Box 1515, Saddle Brook, New
Jersey 07663. Prior to October 1997, Manager, Fund Accounting.
*+ SIOBHAN GILFILLAN (35), ASSISTANT TREASURER. P.O. Box 1515, Saddle Brook,
N.J. 07663.
*+ JOAN K. LEDERER (32), ASSISTANT TREASURER. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to April 1997, Director of Investment Accounting, Diversified
Investment Advisors, Inc. Prior to April 1996, Assistant Vice President,
PIMCO.
*+ SHERI MOSCA (35), ASSISTANT TREASURER. P. O. Box 1515, Saddle Brook, N.J.
07663.
*+ PETER CORNIOTES (36), ASSISTANT SECRETARY. P. O. Box 1515, Saddle Brook, N.J.
07663. Vice President and Assistant Secretary, Lexington Management
Corporation. Assistant Secretary, Lexington Funds Distributor, Inc.
*+ ENRIQUE FAUST (38), ASSISTANT SECRETARY, P.O. Box 1515, Saddle Brook, N.J.
07663. Assistant Vice President, Lexington Management Corporation. Prior to
March 1994, Blue Sky Compliance Coordinator, Lexington Group of Investment
Companies.
* "Interested person" and/or "affiliated person" as defined in the
Investment Company Act of 1940, as amended.
+ Messrs. Chada, Corniotes, DeMichele, Duer, Faust, Hisey, Jamison,
Kantor, Lavery, Maher, McCosh, Miller, Preston and Stowe, and Mmes.
Carnicelli, Carr-Waldron, Curcio, DiFalco, Evans, Gilfillan, Lederer
and Mosca hold similar offices with some or all of the other
registered investment companies advised and/or distributed by
Lexington Management Corporation or Lexington Funds Distributor, Inc.
The Board of Trustees met 5 times during the twelve months ended
December 31, 1998, and each of the Trustees attended at least 75% of
those meetings.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each
meeting of the Board of Trustee or any committee thereof up to a maximum
of $9,000 per year for Trustees living outside the U.S. and $6,000 per
year for Trustee living within the U.S. Each Trustee who is not an
affiliate of the advisor is compensated for his or her services according
to a fee schedule which recognizes the fact that each Trustee also serves
as a Trustee of other investment companies advised by LMC. Each Trustee
receives a fee, allocated among all investment companies for which the
Trustee serves.
Set forth below is information regarding compensation paid or
accrued during the period January 1, 1998 to December 31, 1998 for each
Trustee:
- --------------------------------------------------------------------------------
AGGREGATE TOTAL COMPENSATION NUMBER OF
NAME OF TRUSTEE COMPENSATION FROM FROM FUND AND DIRECTORSHIPS IN
FUND FUND COMPLEX FUND COMPLEX
- --------------------------------------------------------------------------------
S.M.S. Chadha $1,712 $27,068 15
- --------------------------------------------------------------------------------
Robert M. DeMichele 0 0 16
- --------------------------------------------------------------------------------
Beverley C. Duer $2,045 $35,518 16
- --------------------------------------------------------------------------------
Barbara R. Evans 0 0 15
- --------------------------------------------------------------------------------
Richard M. Hisey 0 0 7
- --------------------------------------------------------------------------------
Lawrence Kantor 0 0 15
- --------------------------------------------------------------------------------
Jerard F. Maher $1,712 $30,518 16
- --------------------------------------------------------------------------------
Andrew M. McCosh $1,712 $27,818 15
- --------------------------------------------------------------------------------
Donald B. Miller $1,712 $27,818 15
- --------------------------------------------------------------------------------
Frances Olmsted* $1,400 $16,800 N/A
- --------------------------------------------------------------------------------
John G. Preston $1,712 $27,818 15
- --------------------------------------------------------------------------------
Margaret W. Russell* $1,456 $23,228 N/A
- --------------------------------------------------------------------------------
Philip C. Smith* $1,280 $19,200 N/A
- --------------------------------------------------------------------------------
Allen H. Stowe $1,712 $12,340 8
- --------------------------------------------------------------------------------
Frances A. Sunderland* $1,200 $16,800 N/A
- --------------------------------------------------------------------------------
*Retired
Retirement Plan for Eligible Directors/Trustees
Effective September 12, 1995, the Trustees instituted a Retirement Plan
for Eligible Directors/Trustees (the "Plan") pursuant to which each
Director/Trustee (who is not an employee of any of the Funds, the Advisor,
Administrator or Distributor or any of their affiliates) may be entitled to
certain benefits upon retirement from the Board. Pursuant to the Plan, the
normal retirement date is the date on which the eligible Director/Trustee has
attained age 65 and has completed at least ten years of continuous and
non-forfeited service with one or more of the investment companies advised
by LMC (or its affiliates) (collectively, the "Covered Funds"). Each eligible
Director/Trustee is entitled to receive from the Covered Fund an annual
benefit commencing on the first day of the calendar quarter coincident with
or next following his date of retirement equal to 5% of his compensation
multiplied by the number of such Director/Trustee's years of service (not in
excess of 15 years) completed with respect to any of the Covered Portfolios.
Such benefit is payable to each eligible Trustee in quarterly installments
for ten years following the date of retirement or the life of the
Director/Trustee. The Plan establishes age 72 as a mandatory retirement age
for Directors/Trustees; however, Director/Trustees serving the Funds as of
September 12, 1995 are not subject to such mandatory retirement.
Directors/Trustees serving the Funds as of September 12, 1995 who elect
retirement under the Plan prior to September 12, 1996 will receive an annual
retirement benefit at any increased compensation level if compensation is
increased prior to September 12, 1997 and receive spousal benefits (i.e., in
the event the Director/Trustee dies prior to receiving full benefits under
the Plan, the Director/Trustee's spouse (if any) will be entitled to receive
the retirement benefit within the 10 year period.)
Retiring will be eligible to serve as Honorary Trustees for one year
after retirement and will be entitled to be reimbursed for travel expenses
to attend a maximum of two meetings.
Set forth in the table below are the estimated annual benefits payable
to an eligible Trustee upon retirement assuming various compensation and
years of service classifications. As of December 31, 1998, the estimated
credited years of service for Trustees Chadha, Duer, Maher, McCosh, Miller,
Preston and Stowe are 3, 20, 3, 3, 24, 20 and 3, respectively.
HIGHEST ANNUAL COMPENSATION PAID BY ALL FUNDS
---------------------------------------------
$20,000 $25,000 $30,000 $35,000
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT UPON RETIREMENT
------ ----------------------------------------
15 $15,000 $18,750 $22,500 $26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500
Control Persons and Principal Holders of Securities
- ---------------------------------------------------
As of February 19, 1999, the following persons are known by fund
management to have owned beneficially, directly or indirectly, 5% or more of
the outstanding shares of Lexington Money Market Trust: Lexington Management
Corporation, Park 80 West Plaza Two, Saddle Brook, NJ 07663, 5%.
Investment Adviser, Administrator and Distributor
- -------------------------------------------------
LMC, P.O. Box 1515/Park 80 West Plaza Two, Saddle Brook, New Jersey
07663, is the investment adviser to the Trust and, as such, advises and makes
recommendations to the Trust with respect to its investments and investment
policies.
Under the terms of the investment advisory agreement with LMC, as
compensation for its services to the Trust, LMC receives monthly from the
Trust a fee at the annual rates of 0.5% of that portion of the average daily
net assets of the Trust not exceeding $500 million and 0.45% of the average
daily net assets of the Trust in excess of $500 million, computed monthly.
All fees and expenses are accrued daily and deducted before payment of
dividends to investors. Such agreement provides that if in any fiscal year
the aggregate expenses of the Trust, exclusive of taxes, brokerage, interest
and extraordinary expenses, but including the fees payable to the adviser,
exceed 1% of the average daily net assets, LMC will refund monthly to the
Trust or bear any such excess. LMC received from the Trust under the
advisory agreement the following net fees as of the fiscal year ended
December 31, 1996, $450,030, December 31, 1997, $455,446 and December 31,
1998 $455,434. The investment advisory agreement will automatically
terminate if assigned and may be terminated by either party upon 60 days'
notice. The terms of the agreement and any renewal thereof must be approved
at least annually by a majority of its trustees, including a majority of
trustees who are not parties to the agreement or "interested persons" of such
parties, as such term is defined under the Investment Company Act of 1940,
as amended.
Under the terms of the advisory agreement LMC also pays the Trust's
expenses for office rent, utilities, telephone, furniture and supplies
utilized for the Trust's principal office and the salaries and payroll
expense of officers and trustees of the Trust who are also employees of LMC
or its affiliates in carrying out its duties under the investment advisory
agreement. The Trust pays all its other expenses, including custodian and
transfer fees, legal and registration fees, audit fees, printing of
prospectuses, shareholder reports and communications required for regulatory
purposes or for distribution to existing shareholders, computation of net
asset value, mailing of shareholder reports and communications, portfolio
brokerage, taxes and independent trustees' fees, and furnishes LFD, at
printer's overrun cost paid by LFD, such copies of its prospectus and annual,
semi-annual and other reports and shareholder communications as may
reasonably be required for sales purposes. In addition, the Trust will bear
any costs associated with the securities loan program (any such loans will
increase the return to the shareholders).
LMC serves as investment adviser to other investment companies and
private and institutional investment accounts. Included among these clients
are persons and organizations which own significant amounts of capital stock
of LMC's parent (see below). These clients pay fees which LMC considers
comparable to the fee levels for similarly served clients. LMC's accounts
are managed independently with reference to the applicable investment
objectives and current security holdings but on occasion more than one fund
or counsel account may seek to engage in transactions in the same security
at the same time. To the extent practicable, such transactions will be
effected on a pro-rata basis in proportion to the respective amounts of
securities to be bought and sold for each portfolio, and the allocated
transactions will be averaged as to price. While this procedure may
adversely affect the price or volume of a given Trust transaction, LMC
believes that the ability of the Trust to participate in combined
transactions may generally produce better executions overall.
LFD also serves as distributor for Trust shares under a Distribution
Agreement which is subject to annual approval by a majority of the Trustees,
including a majority of those who are not "interested persons".
LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited
to, maintaining general ledger accounts, regulatory compliance, preparation
of financial information for semiannual and annual reports, preparing
registration statements, calculating net asset values, shareholder
communications and supervision of the custodian of, transfer agent and
provides facilities for such services. The Fund pays LMC a fee, payable
monthly, equal to the pro-rata portion of LMC(acute accent)Is actual cost in
providing such services and facilities.
Of the trustees, officers or employees ("affiliated persons") of the
Trust, Messrs. Corniotes, DeMichele, Faust, Hisey, Kantor, Jamison and
Lavery and Mmes. Carnicelli, Carr-Waldron, Curcio, Dubis, Gilfillan, Lederer
and Mosca (see "Management of the Trust") may also be deemed affiliates of
LMC by virtue of being officers, directors or employees thereof. As of
February 19, 1999, all officers and trustees of the Trust as a group were
beneficial owners of less than 1% of the shares of the Trust.
LMC and LFD are wholly-owned subsidiaries of Lexington Global Asset
Managers, Inc., a Delaware corporation with offices at Park 80 West, Plaza
Two, Saddle Brook, New Jersey 07663. Descendants of Lunsford Richardson,
Sr., their spouses, trusts and other related entities have a majority voting
control of the outstanding shares of Lexington Global Asset Managers, Inc.
Determination of Net Asset Value
- --------------------------------
The Fund calculates net asset value as of the close of normal trading
on the New York Stock Exchange (currently 4:00 p.m., Eastern time, unless
weather, equipment failure or other factors contribute to an earlier closing
time) each business day and at such other times and/or such other days as
there is sufficient trading in money market instruments to affect materially
the Trust's net asset value per share. It is expected that the New York
Stock Exchange will be closed on Saturdays and Sundays and on New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Substantially all of the Trust's net
income calculated from the immediately preceding determination of net income,
is declared daily as dividends.
For the purpose of determining the price at which shares are issued and
redeemed, the net asset value per share is calculated immediately after the
daily dividend declaration by: (a) valuing all securities and instruments as
set forth below; (b) deducting the Trust's liabilities; and (c) dividing the
resulting amount by the number of shares outstanding. As discussed below,
it is the intention of the Trust to maintain a net asset value per share of
$1.00. The Trust's portfolio instruments are valued on the basis of
amortized cost. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. While this method provides certainty in valuation,
it may result in periods during which the value, as determined by amortized
cost, is higher or lower than the price the Trust would receive if it sold
its portfolio. During periods of declining interest rates, the daily yield
on shares of the Trust computed as described above may be higher than a like
computation made by a fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all its
portfolio instruments. Thus, if the use of amortized cost by the Trust
results in a lower aggregate portfolio value on a particular day, a
prospective investor in the Trust would be able to obtain a somewhat higher
yield than would result from an investment in a fund utilizing solely market
values, and existing investors in the Trust would receive less investment
income. The converse would apply in a period of rising interest rates.
The Trust's use of amortized cost and the maintenance of the Trust's
per share net value at $1.00 is based on its election to operate under the
provisions of Rule 2a-7 under the Investment Company Act of 1940. As a
condition of operating under that rule, the Trust must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of thirteen months or less, and
invest only in securities which are determined by the Board of Trustees to
present minimal credit risks and which are of high quality as required by the
Rule, or in the case of any instrument not so rated, considered by the Board
of Trustees to be of comparable quality. Securities in the Trust will
consist of money market instruments that have been rated (or whose issuer's
short-term debt obligations are rated) in one of the two highest categories
(i.e., "Al/Pl") by both Standard & Poor's Corporation ("S&P") and Moody's
Investors Services, Inc. ("Moody's"), two nationally recognized statistical
rating organizations ("NRSRO").
The Trust may invest up to 5% of its assets in any single "Tier I"
security (other than U.S. Government securities), measured at the time of
acquisition; however, it may invest more than 5% of its assets in a single
Tier 1 security for no more than three business days. A "Tier I" security
is one that has been rated (or the issuer of such security has been rated)
by both S&P and Moody's in the highest rating category or, if unrated, is of
comparable quality. A security rated in the highest category by only one
of these NRSROs is also considered a Tier 1 security.
In addition, the Trust may invest not more than 5% of its assets in
"Tier 2" securities. A Tier 2 security is a security that is (a) rated in
the second highest category by either S&P or Moody's or (b) an unrated
security that is deemed to be of comparable quality by the Trust's investment
advisor. The Trust may invest up to 1% of its assets in any single Tier 2
security.
The Trust may invest only in a money market instrument that has a
remaining maturity of 13 months (397 days) or less, provided that the Trust's
average weighted maturity is 90 days or less.
The Board of Trustees has also agreed, as a particular responsibility
within the overall duty of care owed to its shareholders, to establish
procedures reasonably designed, taking into account current market conditions
and the Trust's investment objective, to stabilize the net asset value per
share as computed for the purposes of sales and redemptions at $1.00. These
procedures include periodic review, as the Board deems appropriate and at
such intervals as are reasonable in light of current market conditions, of
the relationship between the amortized cost value per share and a net asset
value per share based upon available indications of market value. In such
review, investments for which market quotations are readily available are
valued at the most recent bid price or quoted yield equivalent for such
securities or for securities of comparable maturity, quality and type as
obtained from one or more of the major market makers for the securities to
be valued. Other investments and assets are valued at fair value, as
determined in good faith by the Board of Trustees.
Telephone Exchange Provisions
- -----------------------------
Exchange instructions may be given in writing or by telephone.
Telephone exchanges may only be made if a Telephone Authorization form has
been previously executed and filed with LFD. Telephone exchanges are
permitted only after a minimum of seven (7) days have elapsed from the date
of a previous exchange. Exchanges may not be made until all checks in payment
for the shares to be exchanged have been cleared.
Telephonic exchanges can only involve shares held on deposit at State
Street Bank and Trust Company (the "Agent"); shares held in certificate form
by the shareholder cannot be included. However, outstanding certificates can
be returned to the Agent and qualify for these services. Any new account
established with the same registration will also have the privilege of
exchange by telephone in the Lexington Funds. All accounts involved in a
telephonic exchange must have the same registration and dividend option as
the account from which the shares were transferred and will also have the
privilege of exchange by telephone in the Lexington Funds in which these
services are available.
By checking the box on the New Account Application authorizing
telephone exchange services, a shareholder constitutes and appoints LFD as
the true and lawful attorney to surrender for redemption or exchange any and
all non-certificate shares held by the Agent in account(s) designated, or in
any other account with the Lexington Funds, present or future which has the
identical registration, with full power of substitution in the premises.
This selection also authorizes and directs LFD to act upon any instruction
from any person by telephone for exchange of shares held in any of these
accounts. In acting on a request to exchange, LFD is authorized to purchase
shares of any other Lexington Fund that is available, provided the
registration and mailing address of the shares to be purchased are identical
to the registration of the shares being redeemed. The shareholder also
agrees that neither LFD, the Agent, or the Fund(s) will be liable for any
loss, expense or cost arising out of any requests effected in accordance with
this authorization which would include requests effected by impostors or
persons otherwise unauthorized to act on behalf of the account. LFD, the
Agent, and the Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if they do not employ
reasonable procedures they may be liable for any losses due to unauthorized
or fraudulent instructions. The following identification procedures may
include, but are not limited to, the following: account number, registration
and address, taxpayer identification number and other information particular
to the account. In addition, all telephone exchange and telephone redemption
transactions will take place on recorded telephone lines and each transaction
will be confirmed in writing by the Fund. If the shareholder is an entity
other than an individual, it may be required to certify that certain persons
have been duly elected and are now legally holding the titles given and that
the said corporation, trust, unincorporated association, etc. is duly
organized and existing and has the power to take action called for by this
continuing authorization. LFD reserves the right to cease to act as attorney
subject to the above appointment upon thirty (30) days written notice to the
address of record.
Exchange Authorizations forms, Telephone Authorization forms and
prospectuses of the other funds may be obtained from LFD.
LFD has made arrangements with certain dealers to accept instructions
by telephone to exchange shares of the Fund or shares of one of the other
Lexington Funds at net asset value as described above. Under this procedure,
the dealer must agree to indemnify LFD and the funds from any loss or
liability that any of them might incur as a result of the acceptance of such
telephone exchange orders. A properly signed Exchange Authorization must be
received by LFD within 5 days of the exchange request. LFD reserves the
right to reject any telephone exchange request. In each such exchange, the
registration of the shares of the Fund being acquired must be identical to
the registration of the shares of the Fund being exchanged. Any telephone
exchange orders so rejected may be processed by mail.
This exchange offer is available only in states where shares of the
Fund being acquired may legally be sold and may be modified or terminated at
any time by the Fund. Broker-dealers who process exchange orders on behalf
of their customers may charge a fee for their services. Such fee may be
avoided by making requests for exchange directly to the Fund or Agent.
Tax Sheltered Retirement Plans
- ------------------------------
The Fund makes available a variety of Prototype Pension and Profit
Sharing Plans including a 401(k) Salary Reduction Plan and a 403(b)(7)
Plan. Plan services are available by contacting the Shareholder Services
Department of the Distributor at 1-800-526-0056.
Individual Retirement Account (IRA): Individuals may make tax
deductible contributions to their own Individual Retirement Accounts
("IRA") established under Section 408 of the Internal Revenue Code of 1986,
as amended (the "Code"). Married investors filing a joint return (i) neither
of whom is an active participant in an employer sponsored retirement plan,
or (ii) for 1999 who have an adjusted gross income of $51,000 or less
($31,000 or less for single taxpayers) may each make a $2,000 annual
deductible IRA contribution. For adjusted gross incomes over $51,000
($31,000 for single taxpayers), the IRA deduction limit is generally
phased out ratably over the next $10,000 of adjusted gross income, subject
to a minimum $200 deductible contribution. Investors who are not able
to deduct a full $2,000 IRA contribution because of the limitations may
make a non-deductible contribution to their IRA to the extent a deductible
contribution is not allowed. Federal income tax on accumulations earned
on deductible or non-deductible contributions is deferred until such
time as these amounts are deemed distributed to an investor. Rollovers
are also permitted. The Disclosure statement required by the Internal
Revenue Service ("IRS") is provided by the Fund.
Roth IRA: Individuals may make non-deductible contributions to their
own Roth Individual Retirement Accounts ("Roth IRAs") under Section 408A of
the Code. Generally, Roth IRAs are subject to many of the same rules as
Traditional IRAs. Most important with a Roth IRA: there is no income tax on
qualified withdrawals. In addition, unlike a Traditional IRA, there is no
prohibition on making contributions to a Roth IRA after an individual reaches
age 70 1/2, and there are no required minimum withdrawals beginning at that age.
Total contributions to all of an individual's Traditional and Roth IRAs may
not exceed $2,000 per year (other limitations may apply). The $2,000 maximum
contribution amount is reduced by any amounts contributed in the same year
to a Traditional IRA or another Roth IRA. Married investors filing a joint
return may not make a Roth IRA contribution for a year in which his or her
joint adjusted gross income is $160,000 or greater (for unmarried investors,
$110,000 or greater), and the amount allowed as a contribution is phased out
ratably for married investors with an adjusted gross income of more than
$150,000, but less than $160,000 (for unmarried investors, more than $95,000,
but less than $110,000). Married investors filing separate returns may not
contribute to a Roth IRA in a year in which his or her adjusted gross income
is $10,000 or more (the allowed contribution amount is phased out ratably
over the first $10,000 of this investor's adjusted gross income). The
Disclosure statement required by the IRS is provided by the Fund upon opening
a Roth IRA.
The minimum initial investment to establish a tax-sheltered plan
through the Fund is $250 for both Keogh Plans and IRA Plans. Subsequent
investments are subject to a minimum of $50 for each account.
Self-Employed Retirement Plan (HR-10): Self-employed individuals may
make tax deductible contributions to a prototype defined contribution pension
plan or profit sharing plan. There are, however, a number of special rules
which apply when self-employed individuals participate in such plans.
Currently purchase payments under a self-employed plan are deductible
only to the extent of the lesser of (i) $30,000 or (ii) 25% of the
individual's earned annual income (as defined in the Code) and in applying
these limitations not more than $150,000 of "earned income" may be taken into
account.
Corporate Pension and Profit Sharing Plans: The Fund makes available
a Prototype Defined Contribution Pension Plan and a Prototype Profit Sharing
Plan.
All purchases and redemptions of Fund shares pursuant to any one
of the Fund's tax sheltered plans must be carried out in accordance with the
provisions of the Plan. Accordingly, all plan documents should be reviewed
carefully before adopting or enrolling in the plan. Investors should
especially note that a penalty tax of 10% may be imposed by the IRS
on early withdrawals under corporate, Keogh or IRA Plans. It is
recommended by the IRS that an investor consult a tax adviser before
investing in the Fund through any of these plans.
An investor participating in any of the Fund's special plans has no
obligation to continue to invest in the Fund and may terminate the Plan with
the Fund at any time. Except for expenses of sales and promotion, executive
and administrative personnel, and certain services which are furnished by
LMC, the cost of the plans generally is borne by the Fund; however, each IRA
Plan account is subject to an annual maintenance fee of $12.00 charged by the
Agent.
Capital Stock of the Fund
- -------------------------
The Fund has one class of stock which has no preemptive rights.
Dividend Distribution and Reinvestment Policy
- ----------------------------------------------
Substantially all of the Trust's net income will be declared as a
dividend daily. The net income of the Trust (from the immediately preceding
determination thereof) consists of: (i) all interest income accrued on the
portfolio assets of the Trust; (ii) plus or minus all realized and unrealized
gains and losses on portfolio assets of the Trust; and (iii) less all
expenses of the Trust. Interest income includes discounts earned (including
original issue and market discount) on discount paper accrued ratably to the
date of maturity. All distributions will be reinvested automatically in
additional shares unless specific instructions otherwise are received by the
Agent. Dividends are declared, reinvested daily and distributed monthly in
the form of additional full and fractional shares at net asset value. Since
the net income will be declared as a dividend each time the net income of the
Trust is determined, the net asset value per share will normally remain at
one dollar per share immediately after each such dividend declaration and
determination. If the net income on any one day is a negative amount (for
example, if a sharp rise in interest rates causes realized and unrealized
losses on portfolio assets in excess of interest income), the Trust will
first offset the negative amount against the accrued dividends of each
account. If the negative amount should exceed such accrued dividends, the
Trust will reduce the number of outstanding shares by treating each
shareholder as having contributed to the capital of the Trust that number of
full and fractional shares in the account of such shareholder which
represents the amount of such excess at the time of the determination. Each
shareholder will be deemed to have agreed to such contribution in these
circumstances by his investment in the Trust. This procedure will permit the
net asset value per share of the Trust to be maintained at a constant value
of $1.00 per share. If in the view of the Trustees it is inadvisable to
continue the practice of maintaining the net asset value of one dollar per
share, the Trustees reserve the right to alter the procedure. Shareholders
will be notified promptly of any such alteration. Shareholders will be
notified annually of the tax status of all distributions.
Tax Matters
- -----------
Information set forth in the Prospectus and this SAI is only a summary
of certain key tax considerations generally affecting purchasers of shares
of the Trust. The following is only a summary of certain additional tax
considerations generally affecting the Trust and its shareholders that are
not described in the Prospectus. No attempt has been made to present a
complete explanation of the federal, state and local tax treatment of the
Trust or the implications to shareholders, and the discussions here and in
the Trust's Prospectus are not intended as substitutes for careful tax
planning. Accordingly, potential purchasers of shares of the Trust are urged
to consult their tax advisers with specific reference to their own tax
circumstances. In addition, the tax discussion in the Prospectus and this
SAI is based on tax law in effect on the date of the Prospectus and this SAI;
such laws and regulations may be changed by legislative, judicial or
administrative action, sometimes with retroactive effect.
Qualification as a Regulated Investment Company
The Trust has elected to be taxed as a regulated investment company for
federal income tax purposes under Subchapter M of the Code. As a regulated
investment company, the Trust is not subject to federal income tax on the
portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes
to shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Trust made during
the taxable year or, under specified circumstances, within twelve months
after the close of the taxable year, will be considered distributions of
income and gains of the taxable year and will therefore count toward
satisfaction of the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies (the "Income
Requirement").
In general, gain or loss recognized by the Trust on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Trust at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Trust held the debt obligation.
In general, for purposes of determining whether capital gain or loss
recognized by the Trust on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset
is used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset
so used, (2) the asset is otherwise held by the Trust as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the
Trust grants a qualified covered call option (which, among other things, must
not be deep-in-the-money) with respect thereto) or (3) the asset is stock and
the Trust grants an in-the-money qualified covered call option with respect
thereto. In addition, the Trust may be required to defer the recognition of
a loss on the disposition of an asset held as part of a straddle to the
extent of any unrecognized gain on the offsetting position.
Any gain recognized by the Trust on the lapse of, or any gain or loss
recognized by the Trust from a closing transaction with respect to, an option
written by the Trust will be treated as a short-term capital gain or loss.
Certain transactions that may be engaged in by the Trust (such as
regulated futures contracts and options on futures contracts) will be subject
to special tax treatment as "Section 1256 contracts." Section 1256 contracts
are treated as if they are sold for their fair market value on the last
business day of the taxable year, even though a taxpayer's obligations (or
rights) under such contracts have not terminated (by delivery, exercise,
entering into a closing transaction or otherwise) as of such date. Any gain
or loss recognized as a consequence of the year-end deemed disposition of
Section 1256 contracts is taken into account for the taxable year together
with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. Any capital
gain or loss for the taxable year with respect to Section 1256 contracts
(including any capital gain or loss arising as a consequence of the year-end
deemed sale of such contracts) is generally treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. The Trust, however,
may elect not to have this special tax treatment apply to Section 1256
contracts that are part of a "mixed straddle" with other investments of the
Trust that are not Section 1256 contracts.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss)
for any taxable year, to elect (unless it made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Trust
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the
Trust' taxable year, at least 50% of the value of the Trust' assets must
consist of cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and securities of other issuers (as to
each of which the Trust has not invested more than 5% of the value of the
Trust' total assets in securities of such issuer and does not hold more than
10% of the outstanding voting securities of such issuer), and no more than
25% of the value of its total assets may be invested in the securities of any
one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Trust
controls and which are engaged in the same or similar trades or businesses.
Generally, an option (call or put) with respect to a security is treated as
issued by the issuer of the security, not the issuer of the option. However,
with regard to forward currency contracts, there does not appear to be any
formal or informal authority which identifies the issuer of such instrument.
For purposes of asset diversification testing, obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government such as
the Government National Mortgage Corporation, the Federal Agricultural
Mortgage Corporation, the Farm Credit System Financial Assistance
Corporation, a Federal Home Loan Bank, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, and the Student Loan
Marketing Association are treated as U.S. Government securities.
If for any taxable year the Trust does not qualify as a regulated
investment company, all of its taxable income (including its net capital
gain) will be subject to tax at regular corporate rates without any deduction
for distributions to shareholders, and such distributions will be taxable to
the shareholders as ordinary dividends to the extent of the Trust' current
and accumulated earnings and profits. Such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year
ending November 30 or December 31, for its taxable year (a "taxable year
election")). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company
is treated as having distributed any amount on which it is subject to income
tax for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain)
by the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar
year (and, instead, include such gains and losses in determining ordinary
taxable income for the succeeding calendar year).
The Trust intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income
prior to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Trust may in certain circumstances
be required to liquidate portfolio investments to make sufficient
distributions to avoid excise tax liability.
Trust Distributions
The Trust anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will not qualify for the 70%
dividends-received deduction for corporate shareholders.
The Trust may either retain or distribute to shareholders its net
capital gain for each taxable year. The Trust currently intends to
distribute any such amounts. Net capital gain that is distributed and
designated as a capital gain dividend will be taxable to shareholders as
long-term capital gain, regardless of the length of time the shareholder has
held his shares or whether such gain was recognized by the Trust prior to the
date on which the shareholder acquired his shares.
Distributions by the Trust that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital
to the extent of (and in reduction of) the shareholder's tax basis in his
shares; any excess will be treated as gain realized from a sale of the
shares, as discussed below.
Distributions by the Trust will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested
in additional shares of the Trust (or of another fund). Shareholders
receiving a distribution in the form of additional shares will be treated as
receiving a distribution in an amount equal to the fair market value of the
shares received, determined as of the reinvestment date. In addition, if the
net asset value at the time a shareholder purchases shares of the Trust
reflects realized but undistributed income or gain, or unrealized
appreciation in the value of the assets held by the Trust, distributions of
such amounts will be taxable to the shareholder in the manner described
above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the
Trust into account in the year in which they are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Trust) on December
31 of such calendar year provided such dividends are actually paid in January
of the following year. Shareholders will be advised annually as to the U.S.
federal income tax consequences of distributions made (or deemed made) to
them during the year.
The Trust will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain
dividends, and the proceeds of redemption of shares, paid to any shareholder
(1) who has failed to provide a correct taxpayer identification number, (2)
who is subject to backup withholding for failure properly to report the
receipt of interest or dividend income, or (3) who has failed to certify to
the Trust that it is not subject to backup withholding or that it is an
"exempt recipient" (such as a corporation).
Sale or Redemption of Shares
The Trust seeks to maintain a stable net asset value of $1.00 per
share; however, there can be no assurance that the Trust will be able to
accomplish this goal. If the net asset value varies from $1.00 per share,
an investor will recognize gain or loss on the sale or redemption of shares
of the Trust in an amount equal to the difference between the proceeds of the
sale or redemption and the investor's adjusted tax basis in the shares. A
shareholder will recognize gain or loss on the sale or redemption of shares
of the Trust in an amount equal to the difference between the proceeds of the
sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Trust within 30 days before or
after the sale or redemption. In general, any gain or loss arising from (or
treated as arising from) the sale or redemption of shares of the Trust will
be considered capital gain or loss and will be long-term capital gain or loss
if the shares were held for longer than one year. However, any capital loss
arising from the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of the amount of
capital gain dividends received on such shares. For this purpose, the
special holding period rules of Code Section 246(c)(3) and (4) generally will
apply in determining the holding period of shares. Capital losses in any
year are deductible only to the extent of capital gains plus, in the case of
a noncorporate taxpayer, $3,000 of ordinary income.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation,
or foreign partnership ("foreign shareholder"), depends on whether the income
from the Trust is "effectively connected" with a U.S. trade or business
carried on by such shareholder.
If the income from the Trust is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income
dividends paid to the shareholder will be subject to U.S. withholding tax at
the rate of 30% (or lower applicable treaty rate) on the gross amount of the
dividend. Such a foreign shareholder would generally be exempt from U.S.
federal income tax on gains realized on the sale or redemption of shares of
the Trust, capital gain dividends and amounts retained by the Trust that are
designated as undistributed capital gains.
If the income from the Trust is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income and
capital gain dividends received in respect of, and any gains realized upon
the sale of, shares of the Trust will be subject to U.S. federal income tax
at the rates applicable to U.S. taxpayers.
In the case of a noncorporate foreign shareholder, the Trust may be
required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding (or subject to
withholding at a reduced treaty rate), unless the shareholder furnishes the
Trust with proper notification of its foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
the Trust, including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions
may have a retroactive effect.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies may differ from
the rules for U.S. federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in the Trust.
Custodian, Transfer Agent and Dividend Disbursing Agent
- -------------------------------------------------------
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New
York 10036 has been retained to act as the Custodian for the Fund's
portfolio securities including those to be held by foreign banks and
foreign securities depositories which qualify as eligible foreign
custodians under the rules adopted by the S.E.C. and for the Fund's domestic
securities and other assets. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02181, has been retained to act as
the transfer agent and dividend disbursing agent. Neither Chase
Manhattan Bank, N.A. nor State Street Bank and Trust Company have any
part in determining the investment policies of the Fund or in determining
which portfolio securities are to be purchased or sold by the Fund or in the
declaration of dividends and distributions.
Counsel and Independent Auditors
- --------------------------------
Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New
York 10022 will pass upon legal matters for the Fund in connection with the
offering of its shares. KPMG LLP, 345 Park Avenue, New York, New York 10154,
has been selected as independent auditors for the Fund for the fiscal year
ending December 31, 1999.
<PAGE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998
<TABLE>
<CAPTION> YIELD TO
MATURITY
PRINCIPAL MATURITY ON DATE OF VALUE
AMOUNT SECURITY DATE PURCHASE (NOTE 1)
============== =================================================== ========== ============ =============
<S> <C> <C> <C> <C>
COMMERCIAL PAPER: 90.7%
$ 3,900,000 American Express Company .......................... 01/14/99 5.22% $ 3,892,803
4,000,000 American General Finance Corporation .............. 01/27/99 5.22 3,985,324
2,500,000 American Honda Finance Corporation ................ 01/29/99 5.22 2,490,142
1,500,000 American Honda Finance Corporation ................ 01/12/99 5.23 1,497,663
800,000 Bell Atlantic Network Funding, Inc. ............... 01/20/99 5.46 797,741
3,500,000 Bemis Company, Inc. ............................... 01/20/99 5.32 3,490,358
2,800,000 Block Financial Corporation ....................... 01/22/99 5.45 2,791,311
1,000,000 Block Financial Corporation ....................... 01/08/99 5.22 999,008
1,000,000 Central Illinois Light Company .................... 02/03/99 5.61 994,958
1,465,000 Central Illinois Light Company .................... 01/19/99 5.41 1,461,118
420,000 Central Illinois Light Company .................... 01/14/99 5.41 419,196
4,200,000 Chrysler Financial Company ........................ 02/11/99 5.39 4,174,935
4,000,000 CSC Enterprises ................................... 02/02/99 5.39 3,981,333
4,200,000 Deere and Company ................................. 01/15/99 5.42 4,191,343
1,000,000 Duke Capital Corporation .......................... 01/04/99 6.34 999,479
2,400,000 Ford Motor Credit Company ......................... 01/11/99 5.43 2,396,460
1,100,000 Ford Motor Credit Company ......................... 01/05/99 5.47 1,099,344
1,100,000 General Electric Capital Corporation .............. 02/10/99 5.37 1,093,608
1,000,000 General Electric Capital Corporation .............. 02/04/99 5.39 995,042
300,000 General Electric Capital Corporation .............. 01/11/99 5.41 299,558
1,500,000 General Motors Acceptance Corporation ............. 01/27/99 5.20 1,494,518
2,000,000 General Motors Acceptance Corporation ............. 01/20/99 5.27 1,994,564
4,000,000 IBM Corporation ................................... 01/19/99 5.36 3,989,500
4,000,000 Knight-Ridder, Inc. ............................... 01/13/99 5.61 3,992,667
4,000,000 Merrill Lynch and Company, Inc. ................... 01/28/99 5.24 3,984,700
254,000 Merrill Lynch and Company, Inc. ................... 01/15/99 5.22 253,497
4,300,000 Prudential Funding Corporation .................... 01/26/99 5.19 4,284,920
1,310,000 Procter and Gamble Company ........................ 01/22/99 5.13 1,306,164
3,000,000 Progress Capital Holdings, Inc. ................... 01/13/99 5.31 2,994,800
1,000,000 Progress Capital Holdings, Inc. ................... 01/13/99 5.30 998,270
1,400,000 Sears Roebuck Acceptance Corporation .............. 01/25/99 5.20 1,395,277
1,300,000 Sears Roebuck Acceptance Corporation .............. 01/11/99 5.43 1,298,086
3,000,000 USAA Capital Corporation .......................... 01/21/99 5.37 2,991,250
400,000 USAA Capital Corporation .......................... 01/21/99 5.32 398,844
3,200,000 Volkswagen of America, Inc. ....................... 01/04/99 5.33 3,198,600
2,700,000 Xerox Credit Corporation .......................... 01/12/99 5.36 2,695,669
-----------
TOTAL COMMERCIAL PAPER (cost $79,322,050).......... 79,322,050
-----------
</TABLE>
<PAGE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998 (continued)
<TABLE>
<CAPTION>
YIELD TO
MATURITY
PRINCIPAL MATURITY ON DATE OF VALUE
AMOUNT SECURITY DATE PURCHASE (NOTE 1)
============== ======================================================= ========== ============ =============
<S> <C> <C> <C> <C>
ADJUSTABLE RATE NOTE: 8.2%
$ 3,200,000 Community Health System, Inc. Series A
First Union National Bank* ........................... 10/01/03 6.05% $ 3,200,000
4,000,000 Virginia State Housing Development Authority
Series C* ............................................ 01/01/47 6.00 4,000,000
-----------
TOTAL ADJUSTABLE RATE NOTE (cost $7,200,000)........... 7,200,000
-----------
TOTAL INVESTMENTS: 98.9%
(cost $86,522,050+) (Note 1).......................... 86,522,050
Other assets in excess of liabilities: 1.1% ........... 966,319
-----------
TOTAL NET ASSETS: 100.0% (equivalent to $1.00
per share on 87,488,369 shares outstanding) .......... $87,488,369
===========
</TABLE>
* Seven day demand Floating Rate Note.
+ Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
<PAGE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $86,522,050) (Note 1) ....................................... $86,522,050
Cash .................................................................................... 82,980
Receivable for shares sold .............................................................. 1,267,478
Dividends and interest receivable ....................................................... 32,508
-----------
Total Assets ............................................................................ 87,905,016
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ........................................ 34,838
Payable for shares redeemed ............................................................. 283,206
Accrued expenses ........................................................................ 98,603
-----------
Total Liabilities ....................................................................... 416,647
-----------
NET ASSETS (equivalent to $1.00 per share on 87,488,369 shares outstanding)
(Note 3) .............................................................................. $87,488,369
===========
NET ASSETS consist of:
Shares of beneficial interest - $.10 par value per share ................................ $ 8,748,837
Additional paid-in capital - unlimited authorized shares of beneficial interest at no par
value .................................................................................. 78,739,532
-----------
TOTAL NET ASSETS ........................................................................ $87,488,369
===========
</TABLE>
LEXINGTON MONEY MARKET TRUST
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest income ....................................................... $5,067,649
EXPENSES
Investment advisory fee (Note 2) ................................... $ 455,434
Transfer agent and shareholder servicing expenses (Note 2) ......... 206,558
Accounting expenses (Note 2) ....................................... 83,150
Printing and mailing expenses ...................................... 59,720
Registration fees .................................................. 30,958
Professional fees .................................................. 30,415
Directors' fees and expenses ....................................... 20,984
Computer processing fees ........................................... 18,670
Custodian expenses ................................................. 16,060
Other expenses ..................................................... 37,129
---------
Total expenses .................................................... 959,078
Less: expenses recovered under contract with
investment adviser (Note 2) ...................................... (47,843) 911,235
--------- ----------
Net investment income ............................................. 4,156,414
----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... $4,156,414
==========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
LEXINGTON MONEY MARKET TRUST
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Net investment income .................................................... $ 4,156,414 $ 4,174,353
Distributions to shareholders from net investment income ................. (4,156,414) (4,174,353)
Decrease in net assets from capital share transactions (Note 3) .......... (7,660,816) (2,377,208)
------------ ------------
Net decrease in net assets ............................................... (7,660,816) (2,377,208)
NET ASSETS
Beginning of period .................................................... 95,149,185 97,526,393
------------ ------------
End of period .......................................................... $ 87,488,369 $ 95,149,185
============ ============
</TABLE>
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington Money Market Trust (the "Trust") is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended. The Trust's investment objective is to seek a high level of current
income from short-term investments as is consistent with the preservation of
capital and liquidity. The following is a summary of significant accounting
policies followed by the Trust in the preparation of its financial statements:
INVESTMENTS Security transactions are accounted for on a trade date basis.
Investments are valued at amortized cost, which approximates market value. Under
this valuation method, a portfolio instrument is valued at cost and any discount
or premium is amortized on a constant basis to the maturity of the instrument.
Interest income is accrued as earned.
FEDERAL INCOME TAXES It is the Trust'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 is required.
DIVIDENDS Dividends are declared daily from the total of net investment
income and net realized gain (loss) on investments.
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 Trust pays
an investment advisory fee to Lexington Management Corporation ("LMC") at an
annual rate of 0.50% of the Trust's average daily net assets up to $500 million
and 0.45% of its average daily net assets in excess of $500 million. LMC is
required to reimburse the Trust for any expenses, including the investment
adviser's fee but excluding interest and taxes, in excess of 1.0% of the Trust's
average daily net assets. Reimbursement for the year ended December 31, 1998
amounted to $47,843 and is set forth in the statement of operations.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
LEXINGTON MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE (continued) The
Trust also reimburses LMC for certain expenses, including accounting and
shareholder servicing costs of $175,762 which are incurred by the Trust, but
paid by LMC.
3. SHARES OF BENEFICIAL INTEREST
Transactions (at $1.00 per share) in shares were as follows:
<TABLE>
<CAPTION>
Year ended
December 31, 1998 December 31, 1997
------------------- ------------------
<S> <C> <C>
Shares sold .................................... 88,962,867 116,527,395
Shares issued to shareholders on reinvestment of
dividends ..................................... 3,802,714 3,869,183
---------- -----------
92,765,581 120,396,578
Shares redeemed ................................ (100,426,397) (122,773,786)
------------ ------------
Net decrease ................................... (7,660,816) (2,377,208)
============ ============
</TABLE>
4. CASH
In order to facilitate the clearing process for redemptions by check, the Trust
maintains a compensating balance with its transfer agent. At December 31, 1998,
this compensating balance amounted to $58,900 and is included in cash in the
statement of assets and liabilities.
5. TAX INFORMATION (UNAUDITED)
For the year ended December 31, 1998, the percentage of ordinary income
dividends paid by the Fund derived from agency and direct obligations of the
United States government were as follows:
U.S. Treasury............................... 0.10%
Federal Home Loan Bank...................... 1.94
- --------------------------------------------------------------------------------
LEXINGTON MONEY MARKET TRUST
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- ------- ------- ------- -------
Income from investment operations:
Net investment income ............................. 0.0455 0.0458 0.0441 0.0495 0.0330
Less distributions:
Distributions from net investment income .......... (0.0455) (0.0458) (0.0441) (0.0495) (0.0330)
-------- --------- --------- --------- ---------
Net asset value, end of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ========= =========
Total return ....................................... 4.64* 4.68% 4.50% 5.06% 3.35%
Ratio to average net assets:
Expenses, before reimbursement or waivers ......... 1.05% 1.04% 1.04% 1.08% 1.02%
Expenses, net of reimbursement or waivers ......... 1.00% 1.00% 1.00% 1.00% 1.00%
Net investment income, before reimbursement
or waivers ....................................... 4.51% 4.55% 4.37% 4.87% 3.30%
Net investment income .............................. 4.56% 4.58% 4.41% 4.95% 3.32%
Net assets, end of period (000's omitted) .......... $ 87,488 $ 95,149 $ 97,526 $ 88,786 $111,805
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Lexington Money Market Trust:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Money Market
Trust as of December 31, 1998, the related statement of operations for the year
then 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 five-year period then ended. These financial statements and financial
highlights are the responsibility of the Trust'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 Money Market Trust as of December 31, 1998, 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 LLP
New York, New York
February 8, 1999