LEXINGTON GOLDFUND INC, 485BPOS, 2000-04-28

LEXINGTON GOLDFUND INC
485BPOS, 2000-04-28

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As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 2-72428
811-2881

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.

Post-Effective Amendment No. 23 X
and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 23 X

(Check appropriate box or boxes.)

LEXINGTON GOLDFUND, INC.
-----------------------
(Exact name of Registrant as specified in Charter)

Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
--------------------------------
(Address of principal executive offices)
Registrant's Telephone Number: (201) 845-7300

Lisa Curcio, Secretary
Lexington Goldfund, Inc.
Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
----------------------------------------
(Name and address of agent for service)

With a copy to:
Carl Frischling, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue, New York, NY 10022
------------------------------------

It is proposed that this filing will become effective May 1, 2000 pursuant
to Paragraph (b) of Rule 485.
------------------------------------

The Registrant has registered an indefinite number of shares pursuant
to Section 24(f) of the Investment Company Act of 1940. A Rule
24f-2 Notice for the Registrant's fiscal year ending December 31,
1999 was filed on March 31, 2000.

<PAGE>

Prospectus
May 1, 2000

Lexington Global and Domestic No-Load Mutual Funds

LEXINGTON/SM/

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.

DOMESTIC EQUITY

Lexington Growth and Income Fund, Inc.

INTERNATIONAL AND GLOBAL FUNDS

Lexington Global Corporate Leaders Fund, Inc.
Lexington International Fund, Inc.
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Global Technology Fund, Inc.
Lexington Small Cap Asia Growth Fund, Inc.
Lexington Troika Dialog Russia Fund, Inc.

FIXED-INCOME AND
MONEY MARKET FUNDS

Lexington GNMA Income Fund, Inc.
Lexington Global Income Fund
Lexington Money Market Trust

PRECIOUS METALS FUNDS

Lexington Goldfund, Inc.
Lexington Silver Fund, Inc.

<PAGE>

Table of Contents

<TABLE>
<S> <C>
Domestic Equity Funds
Lexington Growth and Income Fund, Inc. ............................. 2
International and Global Funds
Lexington Global Corporate Leaders Fund, Inc. ...................... 4
Lexington International Fund, Inc. ................................. 6
Lexington Worldwide Emerging Markets Fund, Inc. .................... 8
Lexington Global Technology Fund, Inc............................... 10
Lexington Small Cap Asia Growth Fund, Inc. ......................... 12
Lexington Troika Dialog Russia Fund, Inc. .......................... 14
Fixed Income Funds and Money Market Funds
Lexington GNMA Income Fund, Inc. ................................... 16
Lexington Global Income Fund........................................ 18
Lexington Money Market Trust........................................ 20
Precious Metals Funds
Lexington Goldfund, Inc. ........................................... 22
Lexington Silver Fund, Inc. ........................................ 24
Risks of Investing
Risks of Investing in Mutual Funds.................................. 26
Risks of Investing in Securities of Small Companies................. 26
Risks of Investing in Foreign Securities............................ 27
Risks of Investing in Lower Quality Debt Securities................. 27
Risks of Investing in Securities of Russian Companies............... 27
Non-diversified Portfolio........................................... 28
Precious Metals..................................................... 28
Temporary Defensive Position........................................ 28
Management of the Funds.............................................. 29
Shareholder Information
Investment Options.................................................. 35
What You Need to Know About Your Lexington Account.................. 36
Becoming a Lexington Shareholder.................................... 36
Buying Additional Shares............................................ 36
Exchanging Shares................................................... 37
Minimum Account Balance............................................. 37
Redeeming Your Shares............................................... 38
Redeeming by Written Instruction.................................... 38
Redeeming by Telephone.............................................. 39
Redeeming by Check.................................................. 39
Systematic Withdrawal Plan.......................................... 39
How Fund Shares are Priced.......................................... 39
Dividends and Capital Gain Distributions............................ 40
Taxes............................................................... 41
Distribution of Fund's Shares........................................ 42
Financial Highlights................................................. 43
</TABLE>

<PAGE>

Lexington Growth and Income Fund, Inc.

Risk/Return Summary

Investment . The Lexington Growth and Income Fund's principal
Objective investment objective is long-term capital
appreciation. Income is a secondary objective.

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

Investment The Lexington Growth and Income Fund, Inc. ("the Fund")
Strategy will 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.

For a more detailed risk discussion involving
investments in this Fund, please read "Risks of
Investing" on page 26.

- --
<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 1990 through 1999. 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>
| Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> | Lexington Growth 15.54% 23.17% 14.62%
- -10.27% 24.87% 12.36% 13.22% -3.11% 22.57% 26.46% 30.36% 21.42% 15.54% | and Income Fund
- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- |
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 | Standard & Poor's 500 21.04% 28.56% 18.21%
| Stock Price Index
| -----------------------------------------------
| 1 Year 5 Year 10 Year
</TABLE>

During the ten year period shown in the above 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 Fees and
you may pay if you buy and hold shares of the Expenses
Fund.

Annual Fund Operating Expenses (Paid from Fund assets)
Management Fees 0.62%
Rule 12b-1 Fees 0.25%
Other Fees 0.08%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 0.95%
</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>
$96.92 $302.71 $525.50 $1,166.38
</TABLE>

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington Global Corporate Leaders Fund, Inc.

Risk/Return Summary

Investment . The Lexington Global Corporate Leaders Fund's
Objective investment 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
Risks common 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 26.

- --
<PAGE>

INTERNATIONAL FUNDS

Bar Chart and Performance Table

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> | Lexington Growth 39.06% 17.93% 11.01%
- -16.75% 15.55% -3.55% 31.88% 1.84% 10.69% 16.43% 6.90% 19.06% 39.06% | and Corporate Leaders
- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- | Fund
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 |
| Morgan Stanley Capital 25.34% 20.25% 11.96%
| International World
| Index
| -----------------------------------------------
| 1 Year 5 Year 10 Year

</TABLE>

During the ten year period shown in the above graph chart, the Fund's highest
quarterly return was 25.16% for the fourth quarter in 1999 and the Fund's lowest
quarterly return was -18.32% for the third quarter in 1990.

This table describes the fees and expenses that Fees and
you may pay if you buy and hold shares of the Expenses
Fund.

<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 0.96%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 1.96%
</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>
$198.98 $615.27 $1,057.25 $2,285.28
</TABLE>

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington International Fund, Inc.

Risk/Return Summary

Investment . The Lexington International Fund's investment
Objective objective is 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")
Strategy will 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 policies 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
Risks common 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 26.

- --
<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 1999. 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.

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> | Lexington International 47.85% 16.52% 14.69%
5.87% 5.77% 13.57% 1.61% 19.02% 47.85% | Fund
- ----- ----- ----- ----- ----- ----- |
1994 1995 1996 1997 1998 1999 | Morgan Stanley Capital 27.30% 13.15% 12.30%
| International (EAFE)
| Index
| -----------------------------------------------
| 1 Year 5 Year Since
| Inception
| (01/03/94)
</TABLE>
During the six year period shown in the above graph chart, the Fund's highest
quarterly return was 27.01% for the fourth quarter in 1999 and the Fund's lowest
quarterly return was -10.65% for the fourth quarter in 1997.

Fees and
Expenses
This table describes the fees and expenses that
you may pay if you buy and hold shares of the
Fund.

<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 0.73%
- ------------------------------------------------------------------------
Total Fund Operating Expenses 1.98%
</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.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------
<S> <C> <C> <C>
$200.99 $621.36 $1,067.51 $2,306.25
</TABLE>

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington Worldwide Emerging Markets Fund, Inc.

Risk/Return Summary

Investment . The Lexington Worldwide Emerging Markets Fund's
Objective investment 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.
Strategy (the "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
Risks common 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 26.

- --
<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 1990 through 1999*. 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.

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> | Lexington Worldwide 112.58% 6.18% 7.68%
- -14.44% 24.19% 3.77% 63.37% -13.81% -5.93% 7.38% -11.40% -29.06% 112.58% | Emerging Markets Fund
- ------ ----- ----- ----- ------ ----- ----- ------ ------ ------ |
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 | Morgan Stanley Emerging 66.41% 2.00% 11.05%
| Markets Free Index
|
| Morgan Stanley Capital 27.30% 13.15% 7.33%
| International (EAFE)
| Index
| -----------------------------------------------
| 1 Year 5 Year 10 Year
</TABLE>

During the ten year period shown in the above graph chart, the Fund's highest
quarterly return was 78.49% for the fourth quarter in 1999 and the Fund's lowest
quarterly return was -26.18% for the third quarter in 1998.

This table describes the fees and expenses that Fees and
you may pay if you buy and hold shares of the Expenses
Fund.

<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 0.75%
- ------------------------------------------------------------------------
Total Fund Operating Expenses 2.00%
</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.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------
<S> <C> <C> <C>
$203.00 $627.45 $1,077.75 $2,327.17
</TABLE>

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington Global Technology Fund a series of Lexington Global Technology Fund,
Inc.

Risk/Return Summary

Investment The Lexington Global Technology Fund's investment
Objective objective is to seek long term growth of capital. This
objective may not be changed without the approval of
shareholders, and there is no assurance that the Fund
will achieve its objective.

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

Investment The Fund seeks to achieve its objective by investing at
Strategy least 80% of its total assets in equity securities or
equity equivalents of technology or information
infrastructure related companies. The Manager considers
technology or information age companies to be in the
following sectors: biotechnology, broadcasting and
media content, computers, electronic components and
equipment, electronic commerce and data services, data
processing, information systems, internet, medical
technology, networking, office automation, on-line
services, semiconductors, semiconductor capital
equipment, server hardware producers, software
companies, telecommunications, telecommunications
equipment and services, and companies involved in the
distribution, servicing, science and development of
these industries.

The Fund expects that such companies will be located
within Africa, Asia, Europe, the Middle East and Latin
America. However, the Fund is not limited to these
countries and may invest in any country so long as it
meets the Fund's objective. Many of the regions in
which the Fund will invest will include emerging market
countries.

The Fund's management uses a "bottom-up" approach in
stock selection focusing on those companies that it
believes have rising earnings expectations and rising
valuations. The Fund seeks growth companies with long-
term capital appreciation potential. In selecting
individual securities the Manager looks for companies
that it believes display or are expected to display the
following characteristics:

.Robust growth prospects

.High profit margins or return on capital

.Attractive valuations relative to expected earnings or
cash flow

.Quality management

.Unique technological and competitive advantages

The Fund generally sells a stock if the Manager
believes that its target price has been reached, its
earnings are disappointing, its revenue growth has
slowed or its underlying fundamentals have
deteriorated. In addition, the Manager will overlay a
top-down macro economic and political screening process
in order to assess country specific risks and enhance
returns. The Fund may invest in larger, more
established companies or in smaller or unseasoned
companies.

The Fund may invest the remaining 20% of its assets in
debt securities denominated in U.S. or foreign
currencies.

Principal Through stock investment, the Fund may expose you to
Risks common stock risks which may cause you to lose money if
there is a sharp or sudden decline in the share price
of one of the companies in the Fund's portfolio.
Investments in companies in the rapidly changing fields
of technology and science face special risks such as
competitive pressures and technological obsolescence
and may be subject to greater governmental regulation
than

- --
<PAGE>

INTERNATIONAL FUNDS

many other industries. In addition, the risks of
investing in foreign markets, especially 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 the countries 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. 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 discussion involving
investments in the Fund, please read "Risks of Fees and
Investing" on page 26. Expenses

This table describes the fees and expenses that
you may pay if you buy and hold shares of the
Fund.

<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
Maximum Account Fee None
Annual Fund Operating Expenses (Paid from Fund assets)
Management Fees 1.25%
Rule 12b-1 Fees None
Other Fees 1.75%
- ------------------------------------------------------------------------
Total Fund Operating Expenses* 3.00%
</TABLE>
+ The 2.00% redemption fee only applies to shares
held less than 90 days.
* The Manager has agreed to voluntarily waive a
portion of the management fee so that total net
operating expenses do not exceed 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.

<TABLE>
<CAPTION>
1 Year 3 Years
- -----------------------------------------------------
<S> <C>
$253.13 $778.52
</TABLE>

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<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
Strategy "Fund") 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.

.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)

Bangladesh India Malaysia Singapore Taiwan
China Indonesia Pakistan Sri Lanka Thailand
Hong Kong Korea The Vietnam
Philippines

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
Risks common 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 26.

(1) The Fund considers a company to be within the Asia
Region if its principal securities' trading market is
located in the Asia Region.

- --
<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 12/31/99. 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.

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> | Lexington Small Cap 57.29% -2.38%
- -4.39% 25.50% -42.32% -19.41% 57.29% | Asia Growth Fund
- ----- ----- ------ ------ ----- |
1995 1996 1997 1998 1999 | MSCI All Country Far East 67.83% 0.47%
| ex-Japan Index
|
| Morgan Stanley Capital 27.30% 13.99%
| International (EAFE) Index
| ---------------------------------------------
| 1 Year Since
| Inception
| (07/03/95)
</TABLE>

During the five year period shown in the above graph chart, the Fund's highest
quarterly return was 39.57% for the second quarter in 1999 and the Fund's lowest
quarterly return was -41.41% for the fourth quarter in 1997.

This table describes the fees and expenses that Fees and
you may pay if you buy and hold shares of the Expenses
Fund.

<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
This table describes the fees and expenses that
you may pay if you buy and hold shares of the
Fund.

Annual Fund Operating Expenses (Paid from Fund assets)*
Management Fees 1.25%
Rule 12b-1 Fees None
Other Fees 1.75%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 3.00%
</TABLE>
* In 1999, 0.50% 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.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 303.00 $ 927.30 $ 1,576.82 $ 3,317.77
</TABLE>

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<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
Strategy "Fund") 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
Risks Russian 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 26.

- --
<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 12/31/99. 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.

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> | Lexington Troika Dialog 159.76% -9.47%
- -9.01% 67.50% -82.99% 159.76% | Russia Fund
- ----- ----- ------ ------ |
1996 1997 1998 1999 | Moscow Times 243.06% -0.16%
| (MT) Index
|
| Russian Trading System 201.56% -6.85%
| (RTS) Index
| -----------------------------------------------
| 1 Year Since
| Inception
| (07/03/96)
</TABLE>
During the ten year period shown in the above graph chart, the Fund's highest
quarterly return was 95.36% for the fourth quarter in 1999 and the Fund's lowest
quarterly return was -64.89% for the third quarter in 1998.

Fees and
Expenses

This table describes the fees and expenses that
you may pay if you buy and hold shares of the
Fund.
<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 1.82%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 3.32%
</TABLE>
* In 1999, expenses were reduced by 1.09% as a
result of redemption fee proceeds. Net expenses
were actually 2.23%.
+ 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.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$538.15 $1,021.33 $1,731.14 $3,612.67
</TABLE>

You would pay the following expenses if you did
not redeem your shares:

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington GNMA Income Fund, Inc.

Risk/Return Summary

Investment . The Lexington GNMA Income Fund's investment objective
Objective is 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
Strategy Fund, Inc. (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
Risks Through investment in GNMA securities, the Fund may
expose 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 26.

(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.

- --
<PAGE>

FIXED-INCOME FUNDS AND MONEY MARKET FUNDS

Bar Chart and Performance Table

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> | Lexington GNMA 0.58% 7.87% 7.47%
9.23% 15.75% 5.19% 8.06% -2.07% 15.91% 5.71% 10.20% 7.52% 0.58% | Income Fund
- ------ ----- ----- ----- ----- ----- ----- ------ ------ ----- |
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 | Lehman Brothers 1.86% 7.98% 7.78%
| Mortgage-Backed
| Securities Index
| -----------------------------------------------
| 1 Year 5 Year 10 Year
</TABLE>

During the ten year period shown in the above graph chart, the Fund's highest
quarterly return was 5.85% for the third quarter in 1991 and the Fund's lowest
quarterly return was -2.42% for the first quarter in 1994.

This table describes the fees and expenses that Fees and
you may pay if you buy and hold shares of the Expenses
Fund.
<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 0.54%
Rule 12b-1 Fees None
Other Fees 0.45%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 0.99%
</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.

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington Global Income Fund

Risk/Return Summary

Investment . The Lexington Global Income Fund's investment
Objective objective is 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
Strategy in a 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 26.

- --
<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 1990 through 1999.* 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.

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> | Lexington Global -0.31% 9.04% 7.16%
6.62% 10.03% 6.51% 10.90% -6.52% 20.10% 13.33% 5.00% 8.21% -0.31% | Income Fund
- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- |
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 | Lehman Brothers -0.99% 7.88% 8.51%
| Global Treasury Index
| -----------------------------------------------
| 1 Year 5 Year 10 Year
|
</TABLE>

During the ten year period shown in the above 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.

Fees and
Expenses
This table describes the fees and expenses that
you may pay if you buy and hold shares of the
Fund.

<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 0.61%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 1.86%
</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.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------
<S> <C> <C> <C>
$188.92 $ 584.74 $ 1,005.81 $ 2,179.77
</TABLE>

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington Money Market Trust

Risk/Return Summary

Investment . The Lexington Money Market Trust's investment
Objective objective is 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
Strategy invest in 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
Risks by the 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.

- --
<PAGE>

MONEY MARKET FUNDS

Fees and
For information on the Fund's 7-day yield please Expenses
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 0.51%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 1.01%
Fee Waiver and/or Expense Reimbursement 0.01%
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.

<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.

-
<PAGE>

Lexington Goldfund, Inc.

Risk/Return Summary

Investment . The Lexington Goldfund's investment objective is to
Objective attain 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.
Strategy (the "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
Risks common 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 26.

- --
<PAGE>

PRECIOUS METAL FUNDS

Bar Chart and Performance Table

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> | Lexington Goldfund 8.58% -9.32% -4.53%
- -20.65% -6.14% -20.51% 86.96% -7.28% -1.89% 7.84% -42.98% -6.39% 8.58% |
- ------ ----- ------ ----- ----- ----- ----- ------ ----- ---- | Standard & Poor's 500 21.04% 28.56% 18.21%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 | Stock Price Index
|
| Gold Bullion 0.85% -5.41% -3.14%
| -----------------------------------------------
| 1 Year 5 Year 10 Year
</TABLE>

During the ten year period shown in the above 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.

Fees and
Expenses

This table describes the fees and expenses that
you may pay if you buy and hold shares of the
Fund.

<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 0.95%
Rule 12b-1 Fees 0.25%
Other Fees 0.74%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 1.94%
</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.

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<PAGE>

Lexington Silver Fund, Inc.

Risk/Return Summary

Investment . The Lexington Silver Fund's investment objective is
Objective to 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
Strategy achieve 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
Risks common 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 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 12/31/99. 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.

<TABLE>
<CAPTION>
[BAR CHART] | Average Annual Returns Through 12/31/99
|
<S> <C> <C> <C> <C> <C> <C> <C> | Lexington Silver Fund 8.70% -4.15% 1.89%
- -19.01% 76.52% -8.37% 12.37% 2.38% -8.05% -29.64% 8.70% |
- ------ ----- ------ ----- ----- ------ ------ ------ | Standard & Poor's 500 21.04% 28.56% 19.70%
1992 1993 1994 1995 1996 1997 1998 1999 | Stock Price Index
|
| Silver Bullion 6.49% 1.91% 4.08%
| -----------------------------------------------
| 1 Year 5 Year Since
| Inception
| (01/02/92)
</TABLE>
During the eight year period shown in the above 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 Fees and
you may pay if you buy and hold shares of the Expenses
Fund.

<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 1.11%
- ----------------------------------------------------------------------
Total Fund Operating Expenses 2.11%
</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.

See "Management of the Fund" for more complete
descriptions of such costs and expenses.

-
<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.

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
Global Technology 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.

- --
<PAGE>

RISKS OF INVESTING

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 Global Technology 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.

. 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-

-
<PAGE>

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, Lexington Global Technology Fund and Lexington
Troika Dialog Russia Fund.

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.

- --
<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.

LGAM has entered into an agreement with ReliaStar Financial Corporation
("ReliaStar") for ReliaStar to acquire LGAM. ReliaStar is a Minneapolis-based
holding company whose subsidiaries offer individuals and institutions life
insurance and annuities, employee benefit products and services, life and
health reinsurance, retirement plans, mutual funds, bank products and personal
finance education. Completion of the acquisition is subject to customary
conditions, including regulatory approvals and approval by LGAM shareholders.
Subject to approval by each Fund's Directors/Trustees and shareholders, each
Fund will enter into a new investment advisory agreement with Pilgrim
Investments, Inc., a subsidiary of ReliaStar.

Sub-Advisers

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. Crosby receives a sub-advisory fee from LMC.

Lexington Troika Dialog Russia Fund. Troika Dialog Asset Management (Cayman
Islands), Ltd. (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. TDAM receives
a sub-advisory fee from LMC.

Lexington Global Technology Fund; Lexington Worldwide Emerging Markets
Fund. Stratos Advisors, Inc. (Stratos) is the sub-adviser of Lexington
Worldwide Emerging Markets Fund and Lexington Global Technology Fund. Stratos
is located at 20 Exchange Place, 52nd Floor, New York, NY 10005. Stratos
provides investment advice and management, and receives a sub-advisory fee from
LMC.

-
<PAGE>

Portfolio Managers

Lexington Growth and Income Fund

Alan H. Wapnick. Mr. Wapnick is a member of an investment management team that
manages the Lexington Global Corporate Leaders 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

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 fourteen 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.

Alan H. Wapnick. Please see biography under Lexington Growth and Income Fund.

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 thirteen 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.

James A. Vail, CFA. Mr. Vail manages the Lexington Goldfund and the Lexington
Silver Fund, and is a member of the portfolio management team that manages
Lexington Global Corporate Leaders 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 26 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.

Frederick A. Brimberg. Mr. Brimberg is also a member of an investment
management team that manages the Lexington Global Corporate Leaders Fund. Mr.
Brimberg is a Vice President and is responsible for international equity
analysis at Lexington. He has 16 years investment experience. Prior to joining
Lexington in 1990, Mr. Brimberg was a General Partner of Brimberg & Company, a
New York Stock Exchange firm. He was formerly employed by Lehman Brothers Kuhn
Loeb, Inc. Mr. Brimberg is a graduate of Washington & Lee University with a
B.A. in Psychology and an M.B.A. in Finance from New York University's Graduate
School of Business Administration.

- --
<PAGE>

PORTFOLIO MANAGERS

Lexington Global Technology Fund

Lexington Worldwide Emerging Markets Fund

Alfredo M. Viegas. Mr. Viegas is Chief Executive Officer and Senior Portfolio
Manager at Stratos. Mr. Viegas is responsible for macro asset allocation across
developed and developing markets. 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. In 1995, Mr. Viegas established VZB Partners
LLC ("VZB"), an offshore investment manager. Prior to VZB, Mr. Viegas was an
emerging markets strategist 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.

Mohammed Zaidi. Mr. Zaidi is a Portfolio Manager at Stratos. Mr. Zaidi is
responsible for technology specific stock selection. Mr. Zaidi is also a
Portfolio Manager at VZB and has been 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.

Mustafa N. Zaidi. Mr. Zaidi is a member of the portfolio management team at
Stratos. Mr. Zaidi is responsible for determining the Fund's macro asset
allocation. The process employs a top-down political and macro-economic
framework. Mr. Zaidi is a founding partner of Stratos/VZB. Prior to joining
Stratos/VZB, he was a consultant to Salomon Brothers where he developed a
sovereign assessment model for South Asia and the Middle East. Mr. Zaidi holds
a BA degree with honors in Russian History and Economics from Brown University,
a Masters Degree in War Studies from King's College, London and was a doctoral
candidate at Oxford University, Balliol College.

Jason Sweidan. Mr. Sweidan is a member of the portfolio management team at
Stratos and is responsible for emerging markets technology issues and general
research. Mr. Sweidan is a generalist and is mainly charged with evaluating and
analyzing global industry trends. Mr. Sweidan has been at VZB Capital LLC and
Stratos Advisors, Inc., since 1998. Mr. Sweidan received his B.A. from Brandeis
University.

Michael Perry. Mr. Perry is a member of the portfolio management team at
Stratos, and is responsible for the media, technology and telecommunication
sectors. Mr. Perry is a founding partner and Chief Operating Officer of
Stratos/VZB. Prior to VZB, Mr. Perry was Operations Manager for Trans Ocean
Ltd. from 1993 to 1995. From 1991 to 1993, Mr. Perry was Director of
Engineering for the U.S. Merchant Marine Academy's Department of Continuing
Education. Mr. Perry is a graduate of The United States Merchant Marine Academy
with a B.S. in Marine Engineering and Marine Transportation. Mr. Perry also
holds a M.P.A. in Management from NYU and is a J.D. candidate at Brooklyn Law
School.

Lexington International Fund

Richard T Saler. Please see biography under Lexington Global Corporate Leaders
Fund.

Philip A. Schwartz, CFA. Please see biography under Lexington Global Corporate
Leaders Fund.

Lexington Small Cap Asia Growth Fund

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

-
<PAGE>

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.

Lexington Troika Dialog Russia Fund

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.

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.

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.

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.

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.

- --
<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

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.

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.

-
<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

James A. Vail, CFA. Please see biography under Lexington Global Corporate
Leaders Fund.

Lexington Silver Fund

James A. Vail, CFA. Please see biography under Lexington Global Corporate
Leaders Fund.

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. Global Corporate Leaders Fund
pays 1.00%. International Fund pays 1.00%. Worldwide Emerging Markets Fund pays
1.00%. Global Technology Fund pays 1.25%. 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.

- --
<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:

<TABLE>
<CAPTION>
Transfer Agent Overnight Mail
<S> <C>
State Street Bank and Trust
Company State Street Bank and Trust Company
c/o National Financial Data
Services c/o National Financial Data Services
Lexington Funds Lexington Funds
P.O. Box 219648 330 W. 9th Street
Kansas City, Missouri 64121-9648 Kansas City, MO 64105-1514
</TABLE>

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

or visit our website at www.lexingtonfunds.com

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, redemption or
exchange instructions and any required payment by check
to:

State Street Bank and Trust Company
c/o National Financial Data Services
Lexington Funds
P.O. Box 219648
Kansas City, Missouri 64121-9648

. 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

-
<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.

- --
<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 Lexington Funds
Distributor, Inc. 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.

-
<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, and a 2%
redemption fee will be charged on the redemption of shares of the Lexington
Global Technology Fund held less than 90 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.

- --
<PAGE>

SHAREHOLDER
INFORMATION

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.

. 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
$200 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.

-
<PAGE>

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.

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. 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 cannot 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 to be distributed 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.

- --
<PAGE>

SHAREHOLDER
INFORMATION

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
distributions 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.

. Dividends 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 each 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.***

-
<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 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.

- --
<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.

-
<PAGE>

Domestic Equity Funds

<TABLE>
<S> <C> <C> <C> <C> <C>
Financial Highlights
<CAPTION>
Growth and Income Fund
PER SHARE OPERATING
PERFORMANCE 1999 1998 1997 1996 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $21.91 $20.27 $18.56 $15.71 $14.36
Net investment income
(loss) 0.05 -- 0.05 0.07 0.22
Net realized and
unrealized gain (loss)
from investment
operations 3.33 4.30 5.46 4.08 3.00
Total income (loss) from
investment operations 3.38 4.30 5.51 4.15 3.22
Less distributions:
Distributions from net
investment income (0.05) -- (0.07) (0.13) (0.22)
Distributions in excess
of net investment income -- -- -- -- --
Distributions from net
realized gains (2.86) (2.66) (3.73) (1.17) (1.65)
Distributions in excess
of net realized gains -- -- -- -- --
Total distributions (2.91) (2.66) (3.80) (1.30) (1.87)
Net asset value, end of
period $22.38 $21.91 $20.27 $18.56 $15.71
------------------------------------------------------------------------------
Total return 15.54% 21.42% 30.36% 26.46% 22.57%
Ratios/Supplemental Data
Net asset, end of period
(thousands) $254,532 $245,790 $228,037 $200,309 $138,901
Ratio of expenses to
average net assets,
before reimbursement or
waiver 0.95% 1.16% 1.17% 1.13% 1.09%
Ratio of expenses to
average net assets, net
of reimbursement or
waiver 0.95% 1.16% 1.17% 1.13% 1.09%
Ratio of net investment
income (loss) to average
net assets, before
reimbursement or waiver 0.21% 0.06% 0.21% 0.43% 1.38%
Ratio of net investment
income (loss) to average
net assets, net of
reimbursement or waiver 0.21% 0.06% 0.21% 0.43% 1.38%
Portfolio Turnover Rate 86.31% 63.20% 88.15% 101.12% 159.94%
</TABLE>
*Annualized.
(a)Small Cap Asia Growth Fund commenced
operations on July 3, 1995.

- --
<PAGE>

Global and International Funds

FINANCIAL
HIGHLIGHTS

<TABLE>
<CAPTION>
Small Cap Asia Growth Fund Global Corporate Leaders Fund
1999 1998 1997 1996 1995(a) 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$5.69 $7.06 $12.24 $9.76 $10.00 $9.46 $10.59 $11.28 $11.32 $11.17
(0.10) -- (0.05) (0.05) 0.02 (0.02) 0.99 0.03 0.01 0.09
3.36 (1.37) (5.13) 2.54 (0.24) 3.67 1.02 0.73 1.84 1.10
3.26 (1.37) (5.18) 2.49 (0.22) 3.65 2.01 0.76 1.85 1.19
-- -- -- -- (0.02) (0.74) (0.80) (0.09) (0.16) (0.29)
-- -- -- (0.01) -- -- -- -- -- (0.13)
-- -- -- -- -- (0.08) (2.34) (1.36) (1.73) (0.62)
-- -- -- -- -- -- -- -- -- --
-- -- -- (0.01) (0.02) (0.82) (3.14) (1.45) (1.89) (1.04)
$8.95 $5.69 $7.06 $12.24 $9.76 $12.29 $9.46 $10.59 $11.28 $11.32
- ----------------------------------------------------------------------------------------------
57.29% (19.41)% (42.32)% 25.50% (4.39)%* 39.06% 19.06% 6.90% 16.43% 10.69%
$14,392 $18,278 $13,867 $23,796 $8,936 $19,617 $17,803 $35,085 $37,223 $53,614
3.00% 2.86% 2.30% 2.64% 3.51%* 1.96% 2.12% 1.75% 1.90% 1.67%
2.50% 2.50% 2.30% 2.42% 1.75%* 1.96% 2.12% 1.75% 1.90% 1.67%
(1.56)% (0.57)% (0.32)% (0.86)% (1.24)%* (0.65)% (0.06)% 0.23% 0.11% 0.48%
(1.05)% (0.21)% (0.32)% (0.64)% 0.52%* (0.65)% (0.06)% 0.23% 0.11% 0.48%
172.89% 193.48% 187.41% 176.49% 40.22%* 12.76% 137.33% 177.48% 128.05% 166.35%
</TABLE>

-
<PAGE>

<TABLE>
<CAPTION>
International Fund
PER SHARE OPERATING
PERFORMANCE 1999 1998 1997 1996 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $11.61 $10.10 $10.86 $10.60 $10.37
Net investment income
(loss) (0.01) 0.17 0.07 (0.02) (0.01)
Net realized and
unrealized gain (loss)
from investment
operations 5.46 1.74 0.10 1.45 0.61
Total income (loss) from
investment operations 5.45 1.91 0.17 1.43 0.60
Less distributions:
Distributions from net
investment income (0.03) (0.06) (0.13) (0.20) --
Distributions in excess of
net investment income -- -- -- -- (0.35)
Distributions from net
realized gains (3.58) (0.34) (0.80) (0.97) (0.02)
Distributions in excess of
net realized gains -- -- -- -- --
Total distributions (3.61) (0.40) (0.93) (1.17) (0.37)
Net asset value, end of
period $13.45 $11.61 $10.10 $10.86 $10.60
- -------------------------------------------------------------------------------
Total return 47.85% 19.02% 1.61% 13.57% 5.77%
Ratios/Supplemental Data
Net assets, end of period
(thousands) $25,304 $24,000 $19,949 $18,891 $17,855
Ratio of expenses to
average net assets,
before reimbursement or
waiver 1.98% 2.25% 2.15% 2.45% 2.46%
Ratio of expenses to
average net assets, net
of reimbursement or
waiver 1.98% 1.75% 1.75% 2.45% 2.46%
Ratio of net investment
income (loss) to average
net assets, before
reimbursement or waiver (0.21)% (0.16)% 0.13% (0.39)% (0.12)%
Ratio of net investment
income (loss) to average
net assets, net of
reimbursement or waiver (0.21)% 0.35% 0.53% (0.39)% (0.12)%
Portfolio Turnover Rate 143.82% 143.67% 122.56% 113.55% 137.72%
</TABLE>
* Annualized.
# (before, or net of) reimbursement or waiver
or redemption fee proceeds.
(b) 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.

- --
<PAGE>

FINANCIAL
HIGHLIGHTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------

Global Income Fund Russia Fund Worldwide Emerging Markets Fund

- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1999 1998 1997 1996(b) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10.36 $10.58 $11.22 $10.75 $9.80 $2.64 $17.50 $11.24 $12.12 $7.13 $10.18 $11.49 $10.70 $11.47
- ------------------------------------------------------------------------------------------------------------------------------------
1.16 0.90 1.04 1.01 0.96 0.18 0.15 (0.01) (0.05) (0.05) 0.12 0.01 -- 0.08
- ------------------------------------------------------------------------------------------------------------------------------------

(1.20) (0.07) (0.50) 0.36 0.95 3.99 (14.70) 7.57 (0.51) 8.05 (3.08) (1.32) 0.79 (0.76)
- ------------------------------------------------------------------------------------------------------------------------------------
0.04 0.83 0.54 1.37 1.91 4.17 (14.55) 7.56 (0.56) 8.00 (2.96) (1.31) 0.79 (0.68)
- ------------------------------------------------------------------------------------------------------------------------------------

(0.82) (0.87) (0.91) (0.86) (0.96) (0.07) (0.07) -- -- (0.03) (0.09) -- -- (0.08)
-- -- -- -- -- -- -- -- -- -- -- -- -- (0.01)
(0.05) (0.18) (0.27) (0.04) -- -- (0.24) (1.30) (0.32) -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- -- -- -- --
(0.87) (1.05) (1.18) (0.90) (0.96) (0.07) (0.31) (1.30) (0.32) (0.03) (0.09) -- -- (0.09)
- ------------------------------------------------------------------------------------------------------------------------------------
$9.45 $10.36 $10.58 $11.22 $10.75 $6.74 $2.64 $17.50 $11.24 $15.10 $7.13 $10.18 $11.49 $10.70
====================================================================================================================================
(0.31)% 8.21% 5.00% 13.33% 20.10% 159.76% (82.99)% 67.50% (9.01)%* 112.58% (29.06)% (11.40)% 7.38% (5.93)%

$31,696 $36,407 $23,668 $29,110 $12,255 $59,011 $19,147 $137,873 $13,846 $154,994 $65,323 $137,686 $254,673 $265,544
- ------------------------------------------------------------------------------------------------------------------------------------

1.86% 1.89% 2.17% 2.33% 3.07% 3.32%# 2.64%# 2.89%# 5.07%*# 2.00% 1.85% 1.82% 1.76% 1.88%
- ------------------------------------------------------------------------------------------------------------------------------------

1.86% 1.50% 1.50% 1.50% 2.75% 2.23%# 1.84%# 1.85%# 2.65%*# 2.00% 1.85% 1.82% 1.76% 1.88%
- ------------------------------------------------------------------------------------------------------------------------------------

11.52% 10.99% 8.99% 9.49% 9.48% 3.30%# 0.57%# (1.14)%# (3.69)%*# (0.66)% 1.14% 0.09% (0.01)% 0.70%
- ------------------------------------------------------------------------------------------------------------------------------------

11.52% 11.38% 9.66% 10.32% 9.80% 4.39%# 1.36%# (0.11)%# (1.27)%*# (0.66)% 1.14% 0.09% (0.01)% 0.70%
- ------------------------------------------------------------------------------------------------------------------------------------
24.56% 45.25% 117.94% 71.83% 164.72% 91.14% 65.76% 66.84% 115.55% 184.39% 107.19% 112.05% 86.26% 92.85%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Precious Metals Funds

<TABLE>
<CAPTION>
Goldfund
PER SHARE OPERATING
PERFORMANCE 1999 1998 1997 1996 1995
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $3.03 $3.24 $5.97 $6.24 $6.37
Net investment income
(loss) (0.01) -- -- 0.02 --
Net realized and
unrealized gain (loss)
from investment
operations 0.27 (0.21) (2.52) 0.50 (0.12)
Total income (loss) from
investment operations 0.26 (0.21) (2.52) 0.52 (0.12)
Less distributions:
Distributions from net
investment income -- -- (0.21) (0.79) (0.01)
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)
Net asset value, end of
period $3.29 $3.03 $3.24 $5.97 $6.24
- -------------------------------------------------------------------------------
Total return 8.58% (6.39)% (42.98)% 7.84% (1.89)%
Ratios/Supplemental Data
Net assets, end of period
(thousands) $72,516 $50,841 $53,707 $109,287 $135,779
Ratio of expenses to
average net assets,
before reimbursement or
waiver 1.94% 1.74% 1.65% 1.60% 1.70%
Ratio of expenses to
average net assets, net
of reimbursement or
waiver 1.94% 1.74% 1.65% 1.60% 1.70%
Ratio of net investment
income (loss) to average
net assets, before
reimbursement or waiver (0.02)% 0.08% 0.17% (0.32)% 0.07%
Ratio of net investment
income (loss) to average
net assets, net of
reimbursement or waiver (0.02)% 0.08% 0.17% (0.32)% 0.07%
Portfolio Turnover Rate 78.55% 28.93% 38.32% 31.04% 40.41%
</TABLE>
* Annualized.

(d) Fiscal year-end June 30th.

- --
<PAGE>

FINANCIAL
HIGHLIGHTS

<TABLE>
<CAPTION>
Silver Fund
1999 1998(c) 1998(d) 1997(d) 1996(d) 1995(d)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.73 $3.26 $3.95 $4.46 $4.00 $3.92
0.01 (0.01) (0.02) (0.04) (0.03) (0.03)
0.23 (0.52) (0.66) (0.43) 0.51 0.11
0.24 (0.53) (0.68) (0.47) 0.48 0.08
(0.01) -- -- -- -- --
-- -- (0.01) (0.04) (0.02) --
-- -- -- -- -- --
-- -- -- -- -- --
(0.01) -- (0.01) (0.04) (0.02) --
$2.96 $2.73 $3.26 $3.95 $4.46 $4.00
- --------------------------------------------------------------------------------------
8.70% (16.26)% (17.32)% (10.76)% 12.02% 2.04%
$25,413 $25,560 $34,921 $42,035 $73,945 $65,517
2.11% 2.37%* 1.90% 1.96% 1.73% 1.82%
2.11% 2.37%* 1.90% 1.96% 1.73% 1.82%
0.49% (0.61)%* (0.54)% (0.78)% (0.72)% (0.83)%
0.49% (0.61)%* (0.54)% (0.78)% (0.72)% (0.83)%
29.44% 5.68% 28.78% 18.76% 44.30% 44.22%
</TABLE>

-
<PAGE>

Fixed-Income Funds and Money Market Funds

<TABLE>
<CAPTION>
GNMA Income Fund
PER SHARE OPERATING
PERFORMANCE 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $8.53 $8.40 $8.12 $8.19 $7.60
Net investment income
(loss) 0.50 0.48 0.51 0.53 0.58
Net realized and
unrealized gain (loss)
from investment operations (0.45) 0.13 0.29 (0.08) 0.59
Total income (loss) from
investment Operations 0.05 0.61 0.80 0.45 1.17
Less distributions:
Distributions from net
investment Income (0.50) (0.48) (0.52) (0.52) (0.58)
Distributions in excess of
net investment income -- -- -- -- --
Distributions from net
realized gains -- -- -- -- --
Distributions in excess of
net realized gains -- -- -- -- --
Total distributions (0.50) (0.48) (0.52) (0.52) (0.58)
Net asset value, end of
period $8.08 $8.53 $8.40 $8.12 $8.19
- --------------------------------------------------------------------------------
Total return 0.58% 7.52% 10.20% 5.71% 15.91%
Ratios/Supplemental Data
Net assets, end of period
(thousands) $376,580 $273,591 $158,071 $133,777 $130,681
Ratio of expenses to
average net assets, before
reimbursement or waiver 0.99% 1.01% 1.01% 1.05% 1.01%
Ratio of expenses to
average net assets, net of
reimbursement or waiver 0.99% 1.01% 1.01% 1.05% 1.01%
Ratio of net investment
income (loss) to average
net assets, before
reimbursement or waiver 6.04% 5.85% 6.28% 6.56% 7.10%
Ratio of net investment
income (loss) to average
net assets, net of
reimbursement or waiver 6.04% 5.85% 6.28% 6.56% 7.10%
Portfolio Turnover Rate 25.10% 54.47% 134.28% 128.76% 30.69%
</TABLE>

- --
<PAGE>

RISKS OF INVESTING

<TABLE>
<CAPTION>
Money Market Trust
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00
0.0425 0.0455 0.0458 0.0441 0.0495
-- -- -- -- --
0.0425 0.0455 0.0458 0.0441 0.0495
(0.0425) (0.0455) (0.0458) (0.0441) (0.0495)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
(0.0425) (0.0455) (0.0458) (0.0441) (0.0495)
$1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------
4.34% 4.64% 4.68% 4.50% 5.06%
$97,850 $87,488 $95,149 $97,526 $88,786
1.01% 1.05% 1.04% 1.04% 1.08%
1.00% 1.00% 1.00% 1.00% 1.00%
4.25% 4.51% 4.55% 4.37% 4.87%
4.26% 4.56% 4.58% 4.41% 4.95%
-- -- -- -- --
</TABLE>

-
<PAGE>

LEXINGTON GLOBAL AND DOMESTIC NO-LOAD MUTUAL FUNDS

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 Management Corporation has trademark rights for use of the word
Lexington, as well as for certain slogans and logos.

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
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Attention: Shareholder Services
800.526.0056 Toll-Free
201.845.7300 Main Number
[email protected] Email
www.lexingtonfunds.com Website

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 or website www.sec.gov.

Investment Company Act File No. 811-0865 (Growth and Income); 811-5113 (Global
Corporate Leaders); 811-8172 (International); 811-1838 (Worldwide); 811-9649
(Global Technology); 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).

<PAGE>

LEXINGTON GOLDFUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

May 1, 2000

This Statement of Additional Information which is not a prospectus, should
be read in conjunction with the current prospectus, of Lexington Goldfund, Inc.
(the "Fund"), dated May 1, 2000 as it may be revised from time to time. To
obtain a copy of the Fund's prospectus at no charge, please write to the Fund 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
Institutional/Financial Adviser Services: 1-800-367-9160
24 Hour Account Information: 1-800-526-0052

Lexington Management Corporation ("LMC") is the Fund's investment adviser.
Lexington Funds Distributor, Inc. ("LFD") is the Fund's distributor.
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>

Page
<S> <C>
History of the Fund........................................................................................... 3

Investment Strategies and Risks of the Fund................................................................... 3

Investment Restrictions....................................................................................... 11

Portfolio Transactions and Turnover........................................................................... 13

Management of the Fund........................................................................................ 14

Control Persons and Principal Holders of Securities........................................................... 19

Investment Adviser, Administrator and Distributor............................................................. 19

Determination of Net Asset Value.............................................................................. 21

Distribution Plan............................................................................................. 22

Telephone Exchange Provisions................................................................................. 23

Tax Sheltered Retirement Plans................................................................................ 24

Capital Stock of the Fund..................................................................................... 26

Dividend Distribution and Reinvestment Policy................................................................. 26

Tax Matters................................................................................................... 26

Calculation of Performance Data............................................................................... 33

Custodian, Transfer Agent and Dividend Disbursing Agent....................................................... 34

Counsel and Independent Auditors.............................................................................. 34

Financial Statements.......................................................................................... 35
</TABLE>
<PAGE>

HISTORY OF THE FUND

Lexington Goldfund, Inc. (the "Fund") is a corporation formed under the
laws of the State of Maryland on May 11, 1988. The Fund was originally
organized as a Delaware corporation on December 3, 1975. The Fund is a non-
diversified open-end management investment company.

INVESTMENT STRATEGIES AND RISKS OF THE FUND

The Fund's performance and ability to meet its objective will generally be
largely dependent on the market value of gold. The Fund's professional
management seeks to maximize on advances and minimize on declines by monitoring
and anticipating shifts in the relative values of 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. A substantial portion of the Fund's investments will be in the
securities of foreign issuers. There can be no assurance that the Fund's
objective will be achieved.

The Fund is of the belief that a gold investment medium will over the long
term, protect capital from adverse monetary and political developments of a
national or international nature and, in the face of what appears to be
continuous worldwide inflation, may offer better opportunity for capital growth
than many other forms of investment. Throughout history, gold has been thought
of as the most basic monetary standard. Investments in gold may provide more of
a hedge against currencies with declining buying power, devaluation, and
inflation than other types of investments. Of course, there can be no assurance
that management's belief will be realized or that the investment objective will
be achieved.

To the extent that investments in gold and gold related securities
appreciate in value relative to the U.S. dollar, the Fund's investments may
serve to offset erosion in the purchasing power of the U.S. dollar.

The Fund may invest in debt securities of companies engaged in mining and
processing gold. These debt securities can be expected to be comparable to that
of other debt obligations and generally will not react to fluctuations in the
price of gold. An investment in the debt instruments of these companies,
therefore, cannot be expected to provide the hedge against inflation that may be
provided through investments in equity securities of companies engaged in such
activities and can be expected to fluctuate inversely with prevailing interest
rates.

It is anticipated that, except for temporary defensive or liquidity
purposes, 65% of the total assets of the Fund will be invested in gold and gold-
related securities. At any time management deems it advisable for defensive or
liquidity purposes, the Fund may hold cash or cash equivalents in the currency
of any major industrial nation, and invest in, or hold unlimited amounts of debt
obligations of the United States Government or its political subdivisions, and
money market instruments including repurchase agreements with maturities of
seven days or less and Certificates of Deposit.

It is LMC's present intention to manage the Fund's investments so that (i)
less than half of the value of its portfolio will consist of gold or other
precious metals and (ii) more than half of the value of its portfolio will be
invested in gold- related securities, including securities of foreign issuers.
Although the Fund's Board of Directors' present policy prohibits investments in
speculative securities trading at extremely low prices and in relatively
illiquid markets, investments in such securities can be made when and if the
Board determines such investments to be in the best interests of the Fund and
its shareholders. The policies set forth in this paragraph are subject to
change by the Board of Directors of the Fund, in its sole discretion.

The Fund may purchase stock equivalents including warrants, option,
convertible debt securities and depository receipts. The common stock
equivalents may be converted into or provide

3
<PAGE>

the holder with the right to common stock. These investments are made in order
to limit the risk of a substantial increase in the market price of a security
(or an adverse movement in its applicable currency).

A warrant typically is a long-term option that permits the holder to buy a
specified number of shares of the issuer's underlying common stock at a
specified exercise price by a particular expiration date. A warrant not
exercised or disposed of by its expiration date expires worthless.

The Fund may purchase put options on particular securities (or on
currencies in which those securities are denominated) in order to protect
against a decline in the market value of the underlying security below the
exercise price less the premium paid for the option (or an adverse movement in
the applicable currency relative to the U.S. dollar). Prior to expiration, most
options are expected to be sold in a closing sale transaction. Profit or loss
from the sale depends upon whether the amount received is more or less than the
premium paid plus transaction costs. The Fund may purchase put and call options
on stock indices in order to hedge against risks of stock market or industry
wide stock price fluctuations.

A convertible security is a fixed-income security (a bond or preferred
stock) that may be converted at a stated price within a specified period of time
into a certain quantity of the common stock of the same or a different issuer.
Convertible securities are senior to common stock in a corporation's capital
structure but are usually subordinated to similar non-convertible securities.
The price of a convertible security is influenced by the market value of the
underlying common stock.

Depositary receipts include American depositary receipts ("ADRs"), European
depositary receipts ("EDRs"), global depositary receipts ("GDRs") and other
similar instruments. Depositary receipts are receipts typically issued in
connection with a U.S. or foreign bank or trust company and evidence ownership
of underlying securities issued by a foreign corporation.

The Fund may also invest in other types of equity securities including
preferred stocks. A preferred stock is a class of capital stock that pays
dividends at a specified rate and that has preference over common stock in the
payment of dividends and the liquidation of assets. Preferred stock does not
normally carry voting rights.

The Fund may invest in high yield, lower rated debt securities known as
"junk bonds." Junk bonds are debt obligations rated below investment grade and
non-rated securities of comparable quality. Junk bonds are considered
speculative and thus pose a greater risk of default than investment grade
securities. Investments of this type are subject to greater risk of loss of
principal and interest, but in general provide higher yields than higher rated
debt obligations. Bonds issued by companies domiciled in emerging markets are
usually rated below investment grade.

The Fund may invest up to 10% of its total assets in shares of other
investment companies that invest in securities in which it may otherwise invest.

The Fund may invest in fixed-rate and floating- or variable-rate U.S.
government securities. The U.S. Government guarantees payments of interest and
principal of U.S. Treasury bills, notes and bonds, mortgage-related securities
and other securities issued by the U.S. government. Other securities issued by
U.S. government agencies or instrumentalities are supported only by the credit
of the agency or instrumentality, for example those issued by the Federal Home
Loan Bank, whereas others, such as those issued by the FNMA, Farm Credit System
and Student Loan Marketing Association, have an additional line of credit with
the U.S. Treasury.

Short-term U.S. government securities generally are considered to be among
the safest short-term investments. However, the U.S. government does not
guarantee the net asset value of the Funds' shares. With respect to U.S.
government securities supported only by the credit of the issuing

4
<PAGE>

agency or instrumentality or by an additional line of credit with the U.S.
Treasury, there is no guarantee that the U.S. government will provide support to
such agencies or instrumentalities. Accordingly, such U.S. government securities
may involve risk of loss of principal and interest.

Settlement Transactions- When the Fund enters into contracts for purchase
or sale of a portfolio security denominated in a foreign currency, it may be
required to settle a purchase transaction in the relevant foreign currency or
receive the proceeds of a sale in that currency. In either event, the Fund will
be obligated to acquire or dispose of such foreign currency as is represented by
the transaction by selling or buying an equivalent amount of United States
dollars. Furthermore, the Fund may wish to "lock in" the United States dollar
value of the transaction at or near the time of a purchase or sale of portfolio
securities at the exchange rate or rates then prevailing between the United
States dollar and the currency in which the foreign security is denominated.
Therefore, the Fund may, for a fixed amount of United States dollars, enter into
a forward foreign exchange contract for the purchase or sale of the amount of
foreign currency involved in the underlying securities transaction. In so doing,
the Fund will attempt to insulate itself against possible losses and gains
resulting from a change in the relationship between the United States dollar and
the foreign currency during the period between the date a security is purchased
or sold and the date on which payment is made or received. This process is
known as "transaction hedging".

To effect the translation of the amount of foreign currencies involved in
the purchase and sale of foreign securities and to effect the "transaction
hedging" described above, the Fund may purchase or sell foreign currencies on a
"spot" (i.e. cash) basis or on a forward basis whereby the Fund purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt of delivery at a specified date which may be any fixed
number of days in the future.

Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign dollar and the relevant foreign currency
when foreign securities are purchased or sold for settlement beyond customary
settlement time (as described below). Neither type of foreign currency
transaction will eliminate fluctuations in the prices of the Fund's portfolio or
securities or prevent loss if the price of such securities should decline.

Portfolio Hedging- Some or all of the Fund's portfolio will be denominated
in foreign currencies. As a result, in addition to the risk of change in the
market value of portfolio securities, the value of the portfolio in United
States dollars is subject to fluctuations in the exchange rate between such
foreign currencies and the United States dollar. When, in the opinion of LMC or
Crosby it is desirable to limit or reduce exposure in a foreign currency in
order to moderate potential changes in the United States dollar value of the
portfolio, the Fund may enter into a forward foreign currency exchange contract
by which the United States dollar value of the underlying foreign portfolio
securities can be approximately matched by an equivalent United States dollar
liability. This technique is known as "portfolio hedging" and moderates or
reduces the risk of change in the United States dollar value of the Fund's
portfolio only during the period before the maturity of the forward contract
(which will not be in excess of one year).

The Fund may hedge against changes in financial markets, currency rates and
interest rates. The Fund may hedge with "derivatives." Derivatives are
instruments whose value is lined to, or derived from, another instrument, like
an index or a commodity. The Fund, for hedging purposes only, may also enter
into forward foreign currency exchange contracts to increase its exposure to a
foreign currency that LMC expects to increase in value relative to the United
States dollar. The Fund will not attempt to hedge all of its foreign portfolio
positions and will enter into such transactions only to the extent, if any
deemed appropriate by the investment adviser or sub-adviser. Hedging against a
decline in the value of currency does not eliminate fluctuations in the prices
of portfolio securities or prevent losses if the prices of such securities
decline. The Fund will not enter into forward foreign currency exchange
transactions for speculative purposes. The Fund intends to limit transactions
as described

5
<PAGE>

in this paragraph to not more than 70% of the total Fund assets.

Futures, Swaps and Options on Futures - An interest rate futures contract
is an agreement to purchase or sell debt securities, usually U.S. government
securities, at a specified date and price. For example, the fund may sell
interest rate futures contracts (i.e., enter into a futures contract to sell the
underlying debt security) in an attempt to hedge against an anticipated increase
in interest rates and a corresponding decline in debt securities it owns. The
Fund will have collateral assets equal to the purchase price of the portfolio
securities represented by the underlying interest rate futures contracts it has
an obligation to purchase. The Fund may purchase and sell futures contracts and
related options under the following conditions: (a) the then-current aggregate
futures market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the Fund's total
assets, at market value; and (b) no more than 5% of the assets, at market value
at the time of entering into a contract, shall be committed to margin deposits
in relation to futures contracts.

Equity swaps allow the parties to exchange the dividend income or other
components of return on an equity investment (e.g., a group of equity securities
or an index) for a component of return on another non-equity or equity
investment Equity swaps transitions may be volatile and may present the fund
with counterparty risks.

Repurchase Agreements - A repurchase agreement is a contract under which
the Fund would acquire a security for a relatively short period (usually not
more than 7 days) subject to the obligations of the seller to repurchase and the
Fund to resell such security at a fixed time and price (representing the Fund's
cost plus interest). Under the Investment Company Act, repurchase agreements are
considered to be loans by the Fund and must be fully collateralized by
collateral assets. If the seller defaults on its obligations to repurchase the
underlying security, the Fund may experience delay or difficulty in exercising
its rights to realize upon the security, may incur a loss if the value of the
security declines and may incur disposition costs in liquidating the security.
The Fund intends to limit repurchase agreements to transactions with
institutions believed by LMC to present minimal credit risk. Although the
Fund may enter into repurchase agreements with respect to any portfolio
securities which it may acquire consistent with its investment policies and
restrictions, it is the Fund's present intention to enter into repurchase
agreements only with respect to obligations of the United States government or
its agencies or instrumentalities to meet anticipated redemptions or pending
investments or reinvestment of Fund assets in portfolio securities. The Fund
will enter into repurchase agreements only with member banks of the Federal
Reserve System and with "primary dealers" in United States government
securities. In addition if bankruptcy proceedings are commenced with respect to
the seller, be subject to risks associated with changes in market value of the
collateral securities. The Fund intends to limit repurchase agreements to
institutions believed by LMC to present minimal credit risk. The Fund will not
enter into repurchase agreements maturing in more than seven days if the
aggregate of such repurchase agreements and all other illiquid securities when
taken together would exceed 15% of the total assets of the Fund. The Fund
treats any securities subject to restrictions on repatriation for more than
seven days, and securities issued in connection with foreign debt conversion
programs that are restricted as to remittance of invested capital or profit, as
illiquid. The Fund also treats repurchase agreements with maturities in excess
of seven days as illiquid. Illiquid securities do not include securities that
are restricted from trading on formal markets for some period of time but for
which an active informal market exists, or securities that meet the requirements
of Rule 144A under the Securities Act of 1933 and that, subject to the review by
the Board of Directors and guidelines adopted by the Board of Directors, LMC has
determined to be liquid.

Reverse Repurchase Agreements - The Fund may purchase reverse repurchase
agreements. In a reverse repurchase agreement, the Fund sells to a financial
institution a security that it holds and agrees to repurchase the same security
at an agreed-upon price and date.

When Issued and Forward Commitment Securities - The Fund may make contracts
to purchase

6
<PAGE>

securities for a fixed price at a future date beyond customary settlement time
("forward commitments") because new issues of securities are typically offered
to investors, such as the Fund, on that basis. Forward commitments involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in value of the
Fund's other assets. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to settlement if the investment adviser deems it appropriate to do so. The
Fund may realize short-term profits or losses upon the sale of forward
commitments. The Fund may purchase U.S. government or other securities on a
"when-issued" basis and may purchase or sell securities on a "delayed delivery"
basis. The price is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. When-issued securities
and forward commitments may be sold prior to the settlement date, but the Fund
will enter into when-issued and forward commitments only with the intention of
actually receiving or delivering the securities. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to a fund. At the time the Fund enters into a
transaction on a when-issued or forward commitment basis, it supports its
obligation with collateral assets equal to the value of the when-issued or
forward commitment securities and causes the collateral assets to be marked to
market daily. There is a risk that the securities may not be delivered and that
the fund may incur a loss.

Forward Currency Contracts - A forward currency contract is a contract
individually negotiated and privately traded by currency traders and their
customers and creates an obligation to purchase or sell a specific currency for
an agreed-upon price at a future date. The Fund generally does not enter into
forward contracts with terms greater than one year. The Fund generally enters
into forward contracts only under two circumstances. First, if the Fund enters
into a contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security by
entering into a forward contract to buy the amount of a foreign currency needed
to settle the transaction. Second, if LMC believes that the currency of a
particular foreign country will substantially rise or fall against the U.S.
dollar, it may enter into a forward contract to buy or sell the currency
approximating the value of some or all of a fund's portfolio securities
denominated in such currency. The Fund will not enter into a forward contract
if, as a result, it would have more than one-third of total assets committed to
such contracts (unless it owns the currency that it is obligated to deliver or
has caused its custodian to segregate segregable assets having a value
sufficient to cover its obligations). Although forward contracts are used
primarily to protect the Fund from adverse currency movements, they involve the
risk that currency movements will not be accurately predicted.

Investors should recognize that investing in securities of foreign
companies and in particular securities of companies domiciled in or doing
business in emerging markets and emerging countries involves certain risk
considerations, including those set forth below, which are not typically
associated with investing in securities of U.S. companies.

Foreign Currency Considerations

The Fund's assets will be invested in securities of foreign companies and
substantially all income will be received by the Fund in foreign currencies.
However, the Fund will compute and distribute its income in dollars, and the
computation of income will be made on the date of its receipt by the Fund at the
foreign exchange rate in effect on that date. Therefore, if the value of the
foreign currencies in which the Fund receives its income falls relative to the
dollar between receipt of the income and the making of Fund distributions, the
Fund will be required to liquidate securities in order to make distributions if
the Fund has insufficient cash in dollars to meet distribution requirements.

The value of the assets of the Fund as measured in dollars also may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control regulations. Further, the Fund may incur costs in connection with
conversions between various currencies. Foreign exchange dealers realize a
profit based on the difference between the prices at which they are buying and
selling various

7
<PAGE>

currencies. Thus, a dealer normally will offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire immediately to resell that currency to the dealer. The Fund will conduct
its foreign currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market, or through
entering into forward or futures contracts to purchase or sell foreign
currencies.

Risks Associated With Hedging Transactions

Hedging transactions have special risks associated with them, including
possible default by the Counterparty to the transaction, illiquidity and, to the
extent the Adviser's view as to certain market movements is incorrect, the risk
that the use of a hedging transaction could result in losses greater than if it
had not been used. Use of call options could result in losses to the Fund, force
the sale or purchase of portfolio securities at inopportune times or for prices
lower than current market values, or cause the Fund to hold a security it might
otherwise sell.

Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result in
losses to the Fund if the currency being hedged fluctuates in value to a degree
or in a direction that is not anticipated. Further, the risk exists that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that the Fund is engaging in portfolio
hedging. Currency transactions are also subject to risks different from those of
other portfolio transactions. Because currency control is of great importance to
the issuing governments and influences economic planning and policy, purchases
and sales of currency and related instruments can be adversely affected by
government exchange controls, limitations or restrictions on repatriation of
currency, and manipulations or exchange restrictions imposed by governments.
These forms of governmental actions can result in losses to the Fund if it is
unable to deliver or receive currency or monies in settlement of obligations and
could also cause hedges it has entered into to be rendered useless, resulting in
full currency exposure as well as incurring transaction costs.

In addition, the Fund pays commissions and other costs in connection with
such investments. Losses resulting from the use of hedging transactions will
reduce the Fund's net asset value, and possibly income, and the losses can be
greater than if hedging transactions had not been used.

Risks of Hedging Transactions Outside the United States

When conducted outside the U.S., hedging transactions may not be regulated
as rigorously as in the U.S., may not involve a clearing mechanism and related
guarantees, and will be subject to the risk of government actions affecting
trading in, or the price of, foreign securities, currencies and other
instruments. The value of positions taken as part of non-U.S. hedging
transactions also could be adversely affected by: (1) other complex foreign
political, legal and economic factors; (2) lesser availability of data on which
to make trading decisions than in the U.S.; (3) delays in the Fund's ability to
act upon economic events occurring in foreign markets during non-business hours
in the U.S.; (4) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the U.S.; and (5) lower trading
volume and liquidity.

Investment and Repatriation Restrictions

Some foreign countries may have laws and regulations which currently
preclude direct foreign investment in the securities of their companies.
However, indirect foreign investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain foreign
countries through investment funds which have been specifically authorized. The
Fund may invest in these investment funds subject to the provisions of the 1940
Act as discussed below under "Investment Restrictions". If the Fund invests in
such investment funds, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and

8
<PAGE>

the fees of the Investment Manager), but also will bear indirectly similar
expenses of the underlying investment funds.

In addition, prior governmental approval for foreign investments may be
required under certain circumstances in some foreign countries, while the extent
of foreign investment in domestic companies may be subject to limitation in
other foreign countries. Foreign ownership limitations also may be imposed by
the charters of individual companies in foreign countries to prevent, among
other concerns, violation of foreign investment limitations.

Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
foreign countries. The Fund could be adversely affected by delays in or a
refusal to grant any required governmental approval for such repatriation.

Foreign Securities Markets

Trading volume on foreign country stock exchanges is substantially less
than that on the New York Stock Exchange. Further, securities of some foreign
companies are less liquid and more volatile than securities of comparable U.S.
companies. Similarly, volume and liquidity in most foreign bond markets is
substantially less than in the U.S. and, consequently, volatility of price can
be greater than in the U.S. Fixed commissions on foreign exchanges are generally
higher than negotiated commissions on U.S. exchanges, although the Fund
endeavors to achieve the most favorable net results on its portfolio
transactions and may be able to purchase the securities in which the Fund may
invest on other stock exchanges where commissions are negotiable.

Companies in foreign countries are not generally subject to uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements comparable to those applicable to U.S. companies. Consequently,
there may be less publicly available information about a foreign company than
about a U.S. company. Further, there is generally less governmental supervision
and regulation of foreign stock exchanges, brokers and listed companies than in
the U.S. Further, these Funds may encounter difficulties or be unable to pursue
legal remedies and obtain judgments in foreign courts.

Economic and Political Risks

The economies of individual foreign countries in which the Fund invests may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross domestic product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Further, the economies of
foreign countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been and may continue to be adversely affected
by economic conditions in the countries with which they trade. The export driven
nature of Asian economies is often dependent on the strength of their trading
partners in the United States and Europe, although growing intra-regional trade
is seen mitigating some of this external dependence.

With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the Fund's
investments in those countries. In addition, it may be more difficult to obtain
a judgement in a court outside of the United States.

Fluctuations in the Price of Gold

9
<PAGE>

The price of gold has been subject to dramatic downward and upward price
movements over short periods of time and may be affected by unpredictable
international monetary and political policies, such as currency devaluations or
revaluations, economic conditions within an individual country, trade
imbalances, or trade or currency restrictions between countries. The price of
gold, in turn, is likely to affect the market prices of securities of companies
mining or processing gold, and accordingly, the value of the Fund's investments
in such securities may also be affected.

Potential Effect of Concentration of Source of Supply and Control of Sales

The two largest national producers of gold bullion are the Republic of
South Africa and the United States of America. Changes in political and
economic conditions affecting either country may have direct impact on that
country's sales of gold. Under South African law, the only authorized sales
agent for gold produced in South Africa is the Reserve Bank of South Africa,
which through its retention policies controls the time and place of any sale of
South African bullion. The South African Ministry of Mines determines gold
mining policy. South Africa depends predominately on gold sales for the foreign
exchange necessary to finance its imports, and its sales policy is necessarily
subject to national economic and political developments.

Investments in Gold Bullion

Unlike certain more traditional investment vehicles such as savings
deposits and stocks and bonds, which may produce interest or dividend income,
gold bullion earns no income return. Appreciation in the market price of gold
is the sole manner in which the Fund will be able to realize gains on its
investment in gold bullion. Furthermore, the Fund may encounter storage and
transaction costs in connection with its ownership of gold bullion which may be
higher than those attendant to the purchase, holding and disposition of more
traditional types of investments.

International and Domestic Monetary Systems

Substantial amounts of gold bullion serving as primary official reserve
assets play a major role in the international monetary system. Since December
31, 1974, when it again became legal to invest in gold, several new markets have
developed in the United States. In connection with this legalization of gold
ownership, the U.S. Treasury and the International Monetary Fund embarked upon
programs to dispose of substantial amounts of gold bullion.

INVESTMENT RESTRICTIONS

The Fund's investment objective, as described under "investment policy" and
the following investment restrictions are matters or fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholders' meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. Under these investment restrictions:

(1) the Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase
securities in accordance with the Fund's investment program, including
reverse repurchase agreements, foreign exchange contracts, delayed
delivery and when-issued securities, which may be considered the
issuance of senior securities; (b) the Fund may engage in transactions
that may result in the issuance of a senior security to the extent
permitted under applicable regulations, interpretation of the 1940 Act
or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and
related options shall not be considered to involve the issuance of
senior securities; and (e) subject to

10
<PAGE>

fundamental restrictions, the Fund may borrow money as authorized by
the 1940 Act.

(2) at the end of each quarter of the taxable year, (i) with respect to at
least 50% of the market value of the Fund's assets, the Fund may
invest in cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other
securities of any one issuer limited for the purchases of this
calculation to an amount not greater than 5% of the value of the
Fund's total assets, and (ii) not more than 25% of the value of its
total assets be invested in the securities of any one issuer (other
than U.S. Government securities or the securities of other regulated
investment companies).

(3) the Fund will not concentrate its investments by investing more than
25% of its assets in the securities of issuers in any one industry.
This limit will not apply to gold and gold-related securities, and to
securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities.

(4) the Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase
securities of companies engaged in such activities, may enter into
transactions in financial and index futures contracts and related
options, and may enter into forward currency contracts. Transactions
in gold, platinum, palladium or silver bullion will not be subject to
this restriction.

(5) the Fund will not purchase real estate, interests in real estate or
real estate limited partnership interest except that, to the extent
appropriate under its investment program, the Fund may invest in
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which deal in real
estate or interests therein.

(6) the Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds,
debentures or other debt securities, including short-term obligations,
(b) enter into repurchase transactions and (c) lend portfolio
securities provided that the value of such loaned securities does not
exceed one-third of the Fund's total assets.

(7) the Fund will not borrow money, except that (a) the Fund may enter
into certain futures contracts and options related thereto; (b) the
Fund may enter into commitments to purchase securities in accordance
with the Fund's investment program, including delayed delivery and
when-issued securities and reverse repurchase agreements; (c) for
temporary emergency purposes, the Fund may borrow money in amounts not
exceeding 5% of the value of its total assets at the time when the
loan is made; (d) the Fund may pledge its portfolio securities or
receivables or transfer or assign or otherwise encumber then in an
amount not exceeding one-third of the value of its total assets; and
(e) for purposes of leveraging, the Fund may borrow money from banks
(including its custodian bank), only if, immediately after such
borrowing, the value of the Fund's assets, including the amount
borrowed, less its liabilities, is equal to at least 300% of the
amount borrowed, plus all assets fails to meet the 300% asset coverage
requirement relative only to leveraging, the Fund will, within three
days (not including Sundays and holidays), reduced its borrowings to
the extent necessary to meet the 300% test. The Fund will only invest
in reverse repurchase agreements up to 5% of the Fund's total assets.

(8) the Fund will not act as underwriter of securities except to the
extent that, in connection with the disposition of portfolio
securities by the Fund, the Fund may be

11
<PAGE>

deemed to be an underwriter under the provisions of the 1933 Act.

In additional to the above fundamental restrictions, the Fund has
undertaken the following non fundamental restrictions, which may be changed in
the future by the Board of Directors, without a vote of the shareholders of the
Fund:

(1) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced
price. Such securities include, but are not limited to, time deposits
and repurchase agreements with maturities longer than seven days.
Securities that may be resold under Rule 144A or securities offered
pursuant to Section 4(2) of the Securities Act of 1933, as amended,
shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security
is deemed to be liquid based on the trading markets for the specific
security and other factors.

(2) The Fund will not make short sales of securities, other than short
sales "against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts and related options, in the manner
otherwise permitted by the investment restrictions, policies and
investment programs of the Fund.

(3) The Fund will not write, purchase or sell puts or calls on underlying
securities. However, the Fund may invest up to 15% of the value of its
assets in warrants. This restriction on the purchase of warrants does
not apply to warrants attached to, or otherwise included in, a unit
with other securities.

(4) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures
market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the
Fund's total assets, at market value; and (b) no more than 5% of the
assets, at market value at the time of entering into a contract, shall
be committed to margin deposits in relation to futures contracts.

(5) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.

(6) The Fund will not invest for the purpose of exercising control over or
management of any company.

(7) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale
or purchase of marketable portfolio securities with other accounts
under the management of the investment adviser to save commissions or
to average prices among them is not deemed to result in a securities
trading account.

The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.

12
<PAGE>

PORTFOLIO TRANSACTIONS AND TURNOVER

As a general matter, purchases and sales of gold and portfolio securities
by the Fund are placed by LMC with brokers and dealers who in its opinion will
provide the Fund with the best combination of price (inclusive of brokerage
commissions) and execution for its orders. However, pursuant to the Fund's
investment management agreement, management consideration may be given in the
selection of broker-dealers to research provided and a fee higher than that
charged by another broker-dealer which does not furnish research services or
which furnishes research services deemed to be of lesser value, so long as the
criteria of Section 28(e) of the Securities Exchange Act of 1934 are met.
Section 28(e) of the Securities Exchange Act of 1934 was adopted in 1975 and
specifies that a person with investment discretion shall not be "deemed to have
acted unlawfully or to have breached a fiduciary duty" solely because such
person has caused the account to pay a higher commission than the lowest
available under certain circumstances, provided that the person so exercising
investment discretion makes a good faith determination that the commissions paid
are "reasonable in relation to the value of the brokerage and research services
provided . . . viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he exercises
investment discretion."

Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services ("soft dollars") might
exceed commissions that would be payable for execution services alone. Nor
generally can the value of research services to the Fund be measured. Research
services furnished might be useful and of value to LMC and its affiliates, in
serving other clients as well as the Fund.

On the other hand, any research services obtained by LMC or its affiliates
from the placement of portfolio brokerage of other clients might be useful and
of value to LMC in carrying out its obligations to the Fund. As a general
matter, it is the Fund's policy to execute in the U.S. all transactions with
respect to securities traded in the U.S. and to execute its gold transactions in
the U.S. except when better price and execution can, in the judgement of
management of the Fund, be obtained elsewhere. Over-the-counter purchases and
sales are normally made with principal market makers, except where, in the
opinion of management, the best executions are available elsewhere.

In addition, the Fund may from time to time allocate brokerage commissions
to firms which furnish research and statistical information to LMC or which
render to the Fund services which LMC is not required to provide. The
supplementary research supplied by such firms is useful in varying degrees and
is of indeterminable value. No formula has been established for the allocation
of business to such brokers.

The Fund paid brokerage commissions and portfolio turnover rates are as
follows:

<TABLE>
<CAPTION>
Total Brokerage Soft Dollar Portfolio Turnover
Commission Paid Commission Paid Rate
--------------- --------------- -------------------
<S> <C> <C> <C>
1997 $223,351 $ 42,728 38.32%
1998 $124,761 $ 31,159 28.93%
1999 $389,449 $110,507 78.55%
-------- -------- -----
</TABLE>

13
<PAGE>

MANAGEMENT OF THE FUND
----------------------

The Fund's Directors 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:

<TABLE>
<CAPTION>
Name Title Experience Over Past 5 Years
<S> <C> <C>
+ S.M.S. CHADHA (62) DIRECTOR Secretary, Ministry of External Affairs,
3/16 Shanti Niketan, New Delhi, India; Head of Foreign Service
New Delhi 21,India 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 (55) CHAIRMAN & Chairman and Chief Executive Officer,
P.O. BOX 1515 PRESIDENT Lexington Management Corporation;
Saddle Brook, NJ 07663 President and Director, Lexington Global
Asset Managers, 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 (70) DIRECTOR Private Investor. Formerly Manager,
340 East 72nd Street Operations Research Department, CPC
New York, NY 10021 International Inc.

*+ BARBARA R. EVANS (39) DIRECTOR Private Investor, formerly Assistant Vice
5 Fernwood Road President and Securities Analyst,
Summit, NJ 07901 Lexington Management Corporation.

+ JERARD F. MAHER (54) DIRECTOR General Counsel, Federal Business
300 Raritan Center Parkway Center; Counsel, Ribis, Graham & Curtin.
Edison, NJ 08818

+ ANDREW M. MCCOSH (59) DIRECTOR Professor of the Organisation of
12 Wyvern Park Industry and Commerce, Department of
Edinburgh EH92JY, Scotland U.K. Business Studies, The University of
Edinburgh, Scotland.
</TABLE>

14
<PAGE>

<TABLE>
<S> <C> <C>
+ DONALD B. MILLER (73) DIRECTOR Chairman, Horizon Media, Inc.; Trustee,
10725 Quail Covey Drive Galaxy Funds; Director, Maguire Group
Boynton Beach, Fl 33436 of Connecticut; prior to January 1989,
President, Director and C.E.O., Media
General Broadcast Services

+ ALLEN H. STOWE (62) DIRECTOR President, Dartmouth Co-operative
3674 Fifth & Ocean Aves. Society Co., Inc.
Normandy Beach, NJ 08739

*+ JAMES A. VAIL (55) VICE PRES. Vice President and Portfolio Manager
P.O. BOX 1515 AND (Domestic Equity and Precious Metals),
Saddle Brook, NJ 07663 PORTFOLIO Lexington Management Corporation.
MANAGER

*+ RICHARD M. HISEY (41) VICE PRES. Executive Vice President (Mutual Funds),
P.O. Box 1515 Chief Financial Officer, Managing
Saddle Brook, NJ 07663 Director and Director, Lexington
Management Corporation; Chief Financial
Officer, Vice President and Director,
Lexington Funds Distributor, Inc.; Chief
Financial Officer, Market Systems
Research Advisors, Inc.; Executive Vice
President (Mutual Funds) and Chief
Financial Officer, Lexington Global Asset
Mangers, Inc.

*+ LISA CURCIO (40) VICE PRES. Senior Vice President and Secretary,
P.O. BOX 1515 AND Lexington Management Corporation; Vice
Saddle Brook, NJ 07663 SECRETARY President and Secretary, Lexington
Funds Distributor, Inc.; Secretary,
Lexington Global Asset Managers, Inc.

*+ RICHARD J. LAVERY, CLU, ChFC VICE Senior Vice President, Lexington
(46) PRESIDENT Management Corporation; Vice
P.O. BOX 1515 President, Lexington Funds Distributor,
Saddle Brook, NJ 07663 Inc.

*+ JANICE CARNICELLI (40) VICE Vice President, Lexington Funds
P.O. BOX 1515 PRESIDENT
Saddle Brook, NJ 07663

*+ CHRISTIE CARR-WALDRON (32) TREASURER Treasurer, Lexington Funds
P.O. BOX 1515
Saddle Brook, NJ 07663
</TABLE>

15
<PAGE>

<TABLE>
<S> <C> <C>
*+ CHRISTINE SPELLMAN (33) ASSISTANT Assistant Vice President, Lexington
P.O. BOX 1515 VICE Funds. Prior to 1999, Manager of
Saddle Brook, NJ 07663 PRESIDENT Shareholder Services - Lexington Funds.

*+ CATHERINE DiFALCO (30) ASSISTANT Assistant Treasurer, Lexington Funds
P.O. BOX 1515 TREASURER
Saddle Brook, NJ 07663

*+ SIOBHAN GILFILLAN (36) ASSISTANT Assistant Treasurer, Lexington Funds
P.O. BOX 1515 TREASURER
Saddle Brook, NJ 07663

*+ SHERI MOSCA (36) ASSISTANT Assistant Treasurer, Lexington Funds.
P.O. BOX 1515 TREASURER
Saddle Brook, NJ 07663

*+ PETER CORNIOTES (37) ASSISTANT Vice President and Assistant Secretary,
P.O. BOX 1515 SECRETARY Lexington Management Corporation;
Saddle Brook, NJ 07663 Assistant Secretary, Lexington Funds
Distributor, Inc.

*+ ENRIQUE FAUST (39) ASSISTANT Assistant Vice President, Lexington
P.O. BOX 1515 SECRETARY Management Corporation
Saddle Brook, NJ 07663
</TABLE>

* "Interested person" and/or "affiliated person" as defined in the Investment
Company Act of 1940, as amended.

+ Messrs. Chadha, Corniotes, DeMichele, Duer, Faust, Hisey, Lavery, Maher,
McCosh, Miller, Stowe and Vail, and Mmes. Carnicelli, Carr-Waldron, Curcio,
DiFalco, Evans, Gilfillan, Mosca and Spellman 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. As a Director, Allen H. Stowe does not have voting
authority. The Board of Directors met 5 times during the twelve months
ended December 31, 1999, and each of the Directors attended at least 75% of
those meetings.

16
<PAGE>

REMUNERATION OF DIRECTORS AND CERTAIN EXECUTIVE OFFICERS:

Each Director is reimbursed for expenses incurred in attending each meeting
of the Board of Directors or any committee thereof up to a maximum of $9,000 per
year for Directors living outside the U.S. and $6,000 per year for Directors
living within the U.S. Each Director 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 Director also serves as a Director of other investment
companies advised by LMC. Each Director receives a fee, allocated among all
investment companies for which the Director serves.

Set forth below is information regarding compensation paid or accrued
during the period January 1, 1999 to December 31, 1999 for each Director:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Total Number of
Aggregate Compensation Directorships
Name of Director Compensation from from Fund and in
Fund Fund complex Fund Complex
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
S.M.S. Chadha $1,975 $24,006 15
- -----------------------------------------------------------------------------------------
Robert M. DeMichele 0 0 15
- -----------------------------------------------------------------------------------------
Beverly C. Duer $2,196 $29,656 15
- -----------------------------------------------------------------------------------------
Barbara R. Evans 0 0 15
- -----------------------------------------------------------------------------------------
Richard M. Hisey 0 0 8
- -----------------------------------------------------------------------------------------
Jerard F. Maher $1,738 $22,976 15
- -----------------------------------------------------------------------------------------
Andrew M. McCosh $1,975 $24,006 15
- -----------------------------------------------------------------------------------------
Donald B. Miller $1,975 $24,006 15
- -----------------------------------------------------------------------------------------
Frances Olmsted* $1,464 $16,800 N/A
- -----------------------------------------------------------------------------------------
John G. Preston $1,975 $24,006 15
- -----------------------------------------------------------------------------------------
Margaret W. Russell* $1,243 $18,000 N/A
- -----------------------------------------------------------------------------------------
Philip C. Smith* $1,326 $19,200 N/A
- -----------------------------------------------------------------------------------------
Allen H. Stowe $ 0 $12,712 15
- -----------------------------------------------------------------------------------------
Frances A. Sunderland* $1,246 $16,800 N/A
- -----------------------------------------------------------------------------------------
</TABLE>

* Retired

RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES

Effective September 12, 1995, the Directors 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

17
<PAGE>

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 Director 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 Directors will be eligible to serve as Honorary Directors 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 Director upon retirement assuming various compensation and years of
service classifications. As of December 31, 1999, the estimated credited years
of service for Directors Chadha, Duer, Maher, McCosh, Miller and Stowe are 4,
21, 4, 4, 25, and 3, respectively.

HIGHEST ANNUAL COMPENSATION PAID BY ALL FUNDS

$20,000 $25,000 $30,000 $35,000

<TABLE>
<CAPTION>
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT UPON RETIREMENT
<S> <C> <C> <C> <C>
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
</TABLE>

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of April 4, 2000, there are no persons known by fund management to have
owned beneficially, directly or indirectly, 5% or more of the outstanding shares
of Lexington Goldfund, Inc.

INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR

Lexington Management Corporation ("LMC"), P.O. Box 1515, Saddle Brook, New
Jersey 07663 is the investment adviser to the Fund. Lexington Funds Distributor,
Inc. ("LFD") is the distributor of Fund shares. LMC's services are provided and
its fee is paid pursuant to an investment management agreement, dated December
5, 1994 which will automatically terminate if assigned and which may be
terminated by either party upon 60 days' notice and was last approved on
November 29, 1999. The terms of the agreement and any renewal thereof must be
approved annually by a majority of the Fund's Board of Directors, including a
majority of directors 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. LMC makes recommendations to the Fund with respect to
its investments and investment policies.

18
<PAGE>

As compensation for its services, the Fund pays LMC a monthly management
fee LMC is paid an investment advisory fee at the annual rate of 1.00% of the
net assets of the Fund up to $50,000,000 and 0.75% of such, value in excess of
$50,000,000. LMC has agreed to reduce its management fee if necessary to keep
total operating expenses at or below 2.50% of the Fund's average daily net
assets. Total annual operating expenses may also be subject to state blue sky
regulations. LMC may terminate this voluntary reduction at any time. This fee is
computed on the basis of the Fund's average daily net assets and is payable on
the last business day of each month. This fee is higher than that paid by most
other investment companies. However, it is not necessarily greater than the
management fee of other investment companies with objectives and policies
similar to this Fund. LMC's investment advisory fee will be reduced for any
fiscal year by any amount necessary to prevent Fund expenses from exceeding the
most restrictive expense limitations imposed by the securities laws or
regulations of those states or jurisdictions in which the Fund's shares are
registered or qualified for sale.

Fund advisory fees paid to LMC:

Investment Advisory
Fiscal Year Ended Fees Paid to LMC
<S> <C>
1997 $769,527
1998 552,235
1999 583,491
</TABLE>

Under the terms of the investment management agreement, LMC pays the Fund's
expenses for office rent, utilities, telephone, furniture and supplies utilized
for the Fund's principal office and the salaries and payroll expense of officers
and directors of the Fund who are employees of LMC or its affiliates in carrying
out its duties under the investment management agreement. The Fund pays all its
other expenses, including custodian and transfer agent 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 directors' fees, and
furnishes LFD at printers overrun cost, such copies of its prospectus, annual,
semi-annual and other reports and shareholder communications as may be
reasonably required for sales purposes.

LMC as owner of the registered service mark "Lexington" will sublicense
to the Fund to include the word "Lexington" as part of its corporate name
subject to revocation by LMC in the event that the Fund ceases to engage LMC or
its affiliate as investment adviser or distributor.

LFD serves as distributor for Fund shares under a distribution agreement
which is subject to annual approval by a majority of the Fund's Board of
Directors, including a majority of directors who are not "interested persons."

LMC and LFD are wholly owned subsidiaries of Lexington Global Asset
Managers, Inc. ("LGAM"), a publicly traded corporation. Descendants of Lunsford
Richardson, Sr., their spouses, trusts and other related entities have a
majority voting control of outstanding shares of Lexington Global Asset
Managers, Inc. LGAM has entered into an agreement with ReliaStar Financial
Corporation ("ReliaStar") for ReliaStar to acquire LGAM. ReliaStar is a
Minneapolis-based holding company whose subsidiaries offer individuals and
institutions life insurance and annuities, employee benefit products and
services, life and health reinsurance, retirement plans, mutual funds, bank
products and personal finance education. Completion of the acquisition is
subject to customary conditions, including regulatory approvals and approval by
LGAM shareholders. Subject to approval by the Fund's Directors and shareholders,
the Fund will enter into a new investment advisory agreement with Pilgrim
Investments, Inc., a subsidiary of ReliaStar.

LMC also acts as administrator to the Fund and performs certain
administrative and accounting

19
<PAGE>

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, transfer agent and
provides facilities for such services. The Fund shall reimburse LMC for its
actual cost in providing such services, facilities and expenses.

Of the directors, officers or employees ("affiliated persons") of the Fund,
Messrs. Corniotes, DeMichele, Faust, Hisey, Lavery and Vail and Mmes.
Carnicelli, Carr-Waldron, Curcio, DiFalco, Gilfillan, Mosca and Spellman (see
"Management of the Fund"), may also be deemed affiliates of LMC by virtue of
being officers, directors or employees thereof. As of April 4, 2000, all
officers and directors of the Fund as a group owned of record and beneficially
less than 1% of the outstanding shares of the Fund.

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. It is expected that the New York Stock Exchange will be closed on
Saturdays and Sundays and on New Year's Day, King Holiday, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Per share net asset value is calculated by dividing the value of
the Fund's total net assets by the total number of the Fund's shares then
outstanding.

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 price. 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 Board, in accordance with methods that are specifically authorized by the
Board. Short-term obligations with maturities of 60 days or less are valued at
amortized cost as reflecting fair value.

Options are valued at the mean of the last bid and asked price on the
exchange where the option is primarily traded.

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 the Fund's shares
even without any change in the foreign-currency denominated values of such
securities.

Because foreign securities markets may close before the Fund determines its
net asset value, events affecting the value of portfolio securities occurring
between the time prices are determined and the time the Fund calculates its net
asset value may not be reflected unless the Manager, under supervision of the
Board, determines that a particular event would materially affect the Fund's net
asset value.

The price of gold bullion or other precious metals is determined by
measuring the mean between the closing bid and asked quotations of precious
metals bullion set at the time of the close of the New York Stock Exchange, as
supplied by the Fund's custodian bank or other broker-dealers or banks approved
by the Funds, on each date that the Exchange is open for business.

20
<PAGE>

DISTRIBUTION PLAN

The Fund has adopted a Distribution Plan (the "Plan") in accordance with
Rule 12b-1 under the Investment Company Act of 1940, which provides that the
Fund may pay distribution fees including payments to the Distributor, at an
annual rate not to exceed 0.25% of its average daily net assets for distribution
services.

Distribution payments will be made as follows: The Fund, either directly or
through the Adviser, may make payments periodically (i) to the Distributor or to
any broker-dealer (a "Broker") who is registered under the Securities Exchange
Act of 1934 and a member in good standing of the National Association of
Securities Dealers, Inc. and who has entered into a Selected Dealer Agreement
with the Distributor, (ii) to other persons or organizations ("Servicing
Agents") who have entered into shareholder processing and service agreements
with the Adviser or with the Distributor, with respect to Fund shares owned by
shareholders for which such Broker is the dealer or holder of record or such
servicing agent has a servicing relationship, or (iii) for expenses associated
with distribution of Fund shares, including the compensation of the sales
personnel of the Distributor; payments of no more than an effective annual rate
of 0.25%, or such lesser amounts as the Distributor determines appropriate.
Payments may also be made for any advertising and promotional expenses relating
to selling efforts, including but not limited to the incremental costs of
printing prospectuses, statements of additional information, annual reports and
other periodic reports for distribution to persons who are not shareholders of
the Fund; the costs of preparing and distributing any other supplemental sales
literature; costs of radio, television, newspaper and other advertising;
telecommunications expenses, including the cost of telephones, telephone lines
and other communications equipment, incurred by or for the Distributor in
carrying out its obligations under the Distribution Agreement.

Quarterly, in each year that this Plan remains in effect, the Fund's
Treasurer shall prepare and furnish to the Directors of the Fund a written
report, complying with the requirements of Rule 12b-1, setting forth the amounts
expended by the Fund under the Plan and purposes for which such expenditures
were made.

The Plan shall become effective upon approval of the Plan, the form of
Selected Dealer Agreement and the form of Shareholder Service Agreement, by the
majority votes of both (a) the Fund's Directors and the Directors who are not
interested persons (as defined in Section 2(a)(19) of the 1940 Act) of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Directors"), cast in
person at a meeting called for the purpose of voting on the Plan and (b) the
outstanding voting securities of the Fund, as defined in Section 2(a)(42) of the
1940 Act.

The Plan shall remain in effect for one year from its adoption date and may
be continued thereafter if the Plan and all related agreements are approved at
least annually a majority vote of the Directors of the Fund, including a
majority of the Qualified Directors cast in person at a meeting called for the
purpose of voting on such Plan and agreements. This Plan may not be amended in
order to increase materially the amount to be spent for distribution assistance
without shareholder approval. All material amendments to this Plan must be
approved by a vote of the Directors of the Fund, and of the Qualified Directors,
cast in person at a meeting called for the purpose of voting thereon.

The Plan may be terminated at any time by a majority vote of the Qualified
Directors who have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan or by vote of a majority of
the outstanding voting securities of the Fund, as defined in Section 2(a)(42) of
the 1940 Act.

While the Plan is in effect, the selection and nomination of the"non-
interested" Directors

21
<PAGE>

of the Fund will be committed to the discretion of the Qualified Directors
then in office.
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

22
<PAGE>

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

23
<PAGE>

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

The Fund intends to pay dividends annually from investment income, if
earned and as declared by its Board of Directors. The Board of Directors may, at
its discretion, elect to retain or declare and pay distributions from any
realized security profits.

Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund unless and until the shareholder notifies State Street Bank and Trust
Company (the "Agent") in writing that he wants to receive his payments in
cash.This request must be received by the Agent at least seven days before the
dividend record date. Upon receipt by the Agent of such written notice, all
further payments will be made in cash until written notice to the contrary is
received. An account of such shares owned by each shareholder will be maintained
by the Agent.

Shareholders whose accounts are maintained by the Agent will have the same
rights as other shareholders with respect to shares so registered (see "How to
Purchase Shares" in the Prospectus).

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
Fund. The following is only a summary of certain additional tax considerations
generally affecting the Fund 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 Fund or the implications to
shareholders, and the

24
<PAGE>

discussions here and in the Fund's Prospectus are not intended as substitutes
for careful tax planning. Accordingly, potential purchasers of shares of the
Fund 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 Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Code. As a regulated investment company, the Fund 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 Fund 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.

If the Fund has a net capital loss (i.e., an excess of capital losses
over capital gains) for any year, the amount thereof may be carried forward up
to eight years and treated as a short-term capital loss which can be used to
offset capital gains in such future years. As of December 31, 1999, the Fund
had capital loss carryforwards of approximately $972,568, $2,280,435,
$10,373,808, $12,120,643 and $28,511,823, which expire in 2000, 2001, 2005,
2006, and 2007, respectively. Under Code Sections 382 and 383, if the Fund
has an "ownership change," then the Fund's use of its capital loss
carryforwards in any year following the ownership change will be limited to an
amount equal to the net asset value of the Fund immediately prior to the
ownership change multiplied by the long-term tax-exempt rate (which is
published monthly by the Internal Revenue Service (the "IRS")) in effect for
the month in which the ownership change occurs (the rate for April, 2000 is
5.75%). The Fund will use its best efforts to avoid having an ownership
change. However, because of circumstances which may be beyond the control or
knowledge of the Fund, there can be no assurance that it will not have, or has
not already had, an ownership change. If the Fund has or has had an ownership
change, then any capital gain net income for any year following the ownership
change in excess of the annual limitation on the capital loss carryforwards
will have to be distributed by the Fund and will be taxable to shareholders as
described under "Fund Distributions" below.

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 Fund on the disposition of
an asset will be a capital gain or loss. In addition, gain will be recognized as
a result of certain constructive sales, including short sales "against the box."
However, gain recognized on the disposition of a debt obligation purchased by
the Fund 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 Fund held the debt
obligation. In addition, under the rules of Code section 988, gain or loss
recognized on the disposition of a debt obligation denominated in a foreign
currency or an option with respect thereto (but only to the extent attributable
to changes in

25
<PAGE>

foreign currency exchange rates), and gain or loss recognized on the disposition
of a foreign currency forward contract, futures contract, option or similar
financial instrument, or of foreign currency itself, except for regulated
futures contracts or non-equity options subject to Code Section 1256 (unless the
Fund elects otherwise), will generally be treated as ordinary income or loss.

In general, for purposes of determining whether capital gain or loss
recognized by the Fund 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 Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund 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 Fund grants
an in-the-money qualified covered call option with respect thereto. In addition,
the Fund 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 Fund on the lapse of, or any
gain or loss recognized by the Fund from a closing transaction with respect to,
an option written by the Fund will be treated as a short-term capital gain or
loss.

Certain transactions that may be engaged in by the Fund (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and 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
that year together with any other gain or loss that was previously recognized
upon the termination of Section 1256 contracts during the 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 Fund, 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 Fund that are not Section 1256
contracts.

The Fund may purchase securities of certain foreign investment funds
or trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the Fund invests in a PFIC, it has three
separate options. First, it may elect to treat the PFIC as a qualifying electing
fund (a "QEF"), in which case it will each year have ordinary income equal to
its pro rata share of the PFIC's ordinary earnings for the year and long-term
capital gain equal to its pro rata share of the PFIC's net capital gain for the
year, regardless of whether the Fund receives distributions of any such ordinary
earnings or capital gains from the PFIC. Second, for tax years beginning after
December 31, 1997, the Fund may make a mark-to-market election with respect to
its PFIC stock. Pursuant to such an election, the Fund will include as ordinary
income any excess of the fair market value of such stock at the close of any
taxable year over its adjusted tax basis in the stock. If the adjusted tax basis
of the PFIC stock exceeds the fair market value of such stock at the end of a
given taxable year, such excess will be deductible as ordinary loss in the
amount equal to the lesser of the amount of such excess or the net mark-to-
market gains on the stock that the Fund included in income in previous years.
The Fund's holding period with respect to its PFIC stock subject to the election
will commence on the first day of the following taxable year. If the Fund makes
the mark-to-market election in the first taxable year it holds PFIC stock, it
will not incur the tax described below under the third option.

Finally, if the Fund does not elect to treat the PFIC as a QEF and
does not make a mark-to-market election, then, in general, (1) any gain
recognized by the Fund upon a sale or other disposition of its interest in the
PFIC or any "excess distribution" (as defined) received by the Fund from the
PFIC will be allocated ratably over the Fund's holding period in the PFIC stock,
(2) the portion of

26
<PAGE>

such gain or excess distribution so allocated to the year in which the gain is
recognized or the excess distribution is received shall be included in the
Fund's gross income for such year as ordinary income (and the distribution of
such portion by the Fund to shareholders will be taxable as an ordinary income
dividend, but such portion will not be subject to tax at the Fund level), (3)
the Fund shall be liable for tax on the portions of such gain or excess
distribution so allocated to prior years in an amount equal to, for each such
prior year, (i) the amount of gain or excess distribution allocated to such
prior year multiplied by the highest tax rate (individual or corporate, as the
case may be) in effect for such prior year, plus (ii) interest on the amount
determined under clause (i) for the period from the due date for filing a return
for such prior year until the date for filing a return for the year in which the
gain is recognized or the excess distribution is received, at the rates and
methods applicable to underpayments of tax for such period, and (4) the
distribution by the Fund to shareholders of the portions of such gain or excess
distribution so allocated to prior years (net of the tax payable by the Fund
thereon) will again be taxable to the shareholders as an ordinary income
dividend.

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
(including, to the extent provided in Treasury Regulations, losses recognized
pursuant to the PFIC mark-to-market election) incurred after October 31 as if it
had been incurred in the succeeding year.

In addition to satisfying the requirements described above, the Fund
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 Fund's
taxable year, at least 50% of the value of the Fund's 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
Fund has not invested more than 5% of the value of its 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 Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (a
call or a put) with respect to a security is treated as issued by the issuer of
the security not the issuer of the option.

If for any taxable year the Fund 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 Fund's 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

27
<PAGE>

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 and ordinary gains or losses arising as a result of a PFIC
mark-to-market election (or upon an actual disposition of the PFIC stock subject
to such election) 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 Fund 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 Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.

Fund Distributions

The Fund 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 qualify for the 70% dividends-received deduction for
corporate shareholders only to the extent discussed below.

The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund 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 a shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% (58% for alternative minimum tax purposes) of the capital gain
recognized upon the Fund's disposition of domestic "small business" stock will
be subject to tax.

Conversely, if the Fund elects to retain its net capital gain, the
Fund will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each such
shareholder received a distribution of his pro rata share of such gain, with the
result that each shareholder will be required to report his pro rata share of
such gain on his tax return as long-term capital gain, will receive a refundable
tax credit for his pro rata share of tax paid by the Fund on the gain, and will
increase the tax basis for his shares by an amount equal to the deemed
distribution less the tax credit.

Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally available
to corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
Generally, a dividend received by the Fund will not be treated as a qualifying
dividend (1) if it has been received with respect to any share of stock that the
Fund has held for less than 46 days (91 days in the case of certain preferred
stock), excluding for this purpose under the rules of Code section 246(c)(3) and
(4) any period during which the Fund has an option to sell, is under a
contractual obligation to sell, has made and not closed a short sale of, is the
grantor of a deep-in-the-money or otherwise nonqualified option to buy, or has
otherwise diminished its risk of loss by holding other positions with respect
to, such (or substantially identical) stock; (2) to the extent that the Fund is
under an obligation (pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property;
or (3) to the extent that the stock on which the dividend is paid is treated as
debt-financed under the rules of Code section 246A. The 46-day holding period
must be satisfied during the 90-day period beginning 45 days prior

28
<PAGE>

to each applicable ex-dividend date; the 91-day holding period must be satisfied
during the 180-day period beginning 90 days before each applicable ex-dividend
date. Moreover, the dividends-received deduction for a corporate shareholder may
be disallowed or reduced (1) if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of the Fund or (2) by
application of Code section 246(b) which in general limits the dividends-
received deduction to 70% of the shareholder's taxable income (determined
without regard to the dividends-received deduction and certain other items).

Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum marginal
rate of 28% for noncorporate taxpayers and 20% for corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable income ("AMTI") over an
exemption amount. For purposes of the corporate AMT, the corporate dividends-
received deduction is not itself an item of tax preference that must be added
back to taxable income or is otherwise disallowed in determining a corporation's
AMTI. However, corporate shareholders generally will be required to take the
full amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining their adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.

Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax adviser regarding the
potential application of foreign tax credits.

Distributions by the Fund 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 Fund will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (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 Fund reflects realized but
undistributed income or gain or unrealized appreciation in the value of assets
held by the Fund distributions of such amounts to the shareholder will be
taxable in the manner described above, although economically they constitute a
return of capital to the shareholder.

Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which they are made. However, dividends
declared in October, November or December of

29
<PAGE>

any year and payable to shareholders of record on a specified date in such month
will be deemed to have been received by the shareholders (and made by the Fund)
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)
during the year.

The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of distributions and the proceeds of redemption of shares,
paid to any shareholder who (1) has failed to provide a correct taxpayer
identification number, (2) is subject to backup withholding for failure properly
to report the receipt of interest or dividend income, or (3) failed to certify
to the Fund that it is not subject to backup withholding or that it is an
"exempt recipient" (such as a corporation).

Sale or Redemption of Shares

A shareholder will recognize gain or loss on a sale or redemption of
shares of the Fund 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 Fund 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 Fund 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.

If a shareholder (i) incurs a sales load in acquiring shares of the
Fund, (ii) disposes of such shares less than 91 days after they are acquired,
and (iii) subsequently acquires shares of the Fund or another fund at a reduced
sales load on account of the shares disposed of, then the original sales load
(to the extent of the reduction in the sales load on the shares subsequently
acquired) shall not be taken into account in determining gain or loss on the
shares disposed of but shall be treated as incurred on the acquisition of the
shares subsequently acquired.

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 Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.

If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower applicable treaty rate) upon the gross amount of the
dividend. Furthermore, such foreign shareholder may be subject to U.S.
withholding tax at the rate of 30% (or lower applicable treaty rate) on the
gross income resulting from a Fund's election to treat any foreign taxes paid by
it as paid by its shareholders, but may not be allowed a deduction against this
gross income or a credit against this U.S. withholding tax for the foreign
shareholder's pro rata share of such foreign taxes which it is treated as having
paid. Such a foreign shareholder would generally be exempt from U.S. federal
income tax on gains realized on the sale of shares of a Fund, capital gain
dividends and amounts retained by the Fund that are designated as undistributed
capital gains.

If the income from the Fund is effectively connected with a U.S. trade
or business

30
<PAGE>

carried on by a foreign shareholder, then ordinary income and capital gain
dividends, and any gains realized upon a sale of shares of the Fund 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 Fund 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 Fund 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 Fund,
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 the 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 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 an investment in the Fund.

CALCULATION OF PERFORMANCE DATA

For the purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in terms
of total return. Under the rules of the Securities and Exchange Commission ("SEC
rules"), funds advertising performance must include total return quotes
calculated according to the following formula:

P(1+T)/n/ = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods or at the end of the
1, 5 or 10 year periods (or fractional portion thereof).

Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one, five and ten year periods or a shorter period dating from the effectiveness
of the Fund's Registration Statement. In calculating the ending redeemable
value, all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the prospectus on the reinvestment
dates during the period. Total return, or "T" in the formula above, is computed
by finding the average annual compounded rates of return over the 1, 5 and 10
year periods (or fractional portion thereof) that would equate the initial
amount invested to the ending redeemable value. Any recurring account charges
that might in the future be imposed by the Fund would be included at that time.

31
<PAGE>

The Fund may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Fund with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper Analytical Services, Inc., or with the performance of
the Standard and Poor's 500 Composite Stock Price Index or the Dow Jones
Industrial Average, the Fund calculates its aggregate total return for the
specified periods of time by assuming the investment of $10,000 in Fund shares
and assuming the reinvestment of each dividend or other distribution at net
asset value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. The Lexington Goldfund, Inc.'s
total return for the 1, 5 and 10 year periods ended December 31, 1999 is as
follows:

<TABLE>
<CAPTION>
Average Annual
Period Total Return
------ ---------------
<S> <C>
1 year ended December 31, 1999 8.58%
5 years ended December 31, 1999 -9.32%
10 years ended December 31, 1999 -4.53%
</TABLE>

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 and other assets 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. 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, 757 Third Avenue, New York, New York 10017, has been
selected as independent auditors for the Fund for the fiscal year ending
December 31, 2000.

<PAGE>

PART C. OTHER INFORMATION
- ------ -----------------
Item 24. Financial Statements and Exhibits - List
----------------------------------------
The Annual Report for the year ending December 31, 1999 was filed
electronically on February 28, 2000 (as form type N-30D).

(a) Financial statements:
---------------------
Report of Independent Auditors
dated February 7, 2000

Statement of Net Assets
(including the Portfolio of
Investments) at December 31, 1999

Statement of Assets and
Liabilities at December 31, 1999

Statement of Operations
for the year ended December 31, 1999

Statement of Changes in Net Assets for
the year ended December 31, 1999 and 1998

Notes to Financial Statements

Schedules II-VII and other Financial Statements, for which provisions
are made in the applicable accounting regulations of the Securities and
Exchange Commission, are omitted because they are not required under
the related instructions, they are inapplicable, or the required
information is presented in the financial statements or notes thereto.

(1) Includes the information required by Schedule I.

(2) Includes the information required by the Statement of Realized
Gain or Loss on Investments

<PAGE>

ITEM 24. Financial Statements and Exhibits - List
----------------------------------------
(b) Exhibits:

1. Articles of Incorporation - Filed electronically 4/29/96 -
Incorporated by reference

2. By-Laws - Filed electronically 3/3/97 -
Incorporated by reference

3. Not Applicable

4. Rights of Holders - Filed electronically 3/2/98
Incorporated by reference

5. Investment Advisory Agreement between Registrant
and Lexington Management Corporation - Filed
electronically 4/29/96 - Incorporated by reference

6. Distribution Agreement between Registrant and
Lexington Funds Distributor, Inc. - Filed
electronically 3/3/97 - Incorporated by reference

7. Retirement Plan for Eligible Directors - Filed
electronically 3/2/98 - Incorporated by reference

8a. Custodian Agreement between Registrant and Chase
Manhattan Bank - Filed 4/29/96 - Incorporated by reference

8b. Transfer Agency Agreement between Registrant and
State Street Bank and Trust Company - Filed
electronically 4/29/96 - Incorporated by reference

9. Form of Administrtive Services Agreement between
Registrant and Lexington Management Corporation - Filed
electronically 4/29/96 - Incorporated by reference

10. Opinion of Counsel as to Legality of Securities being
registered - Filed electronically 3/2/98 - Incorporated
by reference

11. Consents
(a) Consent of Counsel Filed electronically
(b) Consent of Independent Auditors Filed electronically

12. Not Applicable

13. Not Applicable

14. Retirement Plans - Filed electronically 4/29/96 -
Incorporated by reference

15. Distribution Plan under Rule 12b-1 and Related
Agreements - Filed electronically 3/3/97 -
Incorporated by reference

16. Performance Calculation - Filed electronically 3/2/98 -
Incorporated by reference

<PAGE>

Item 25. Persons Controlled by or under Common Control with Registrant
------------------------------------------------------------
Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each
such person indicate (1) if a company, the state or other sovereign
power under the laws of which it is organized, (2) the percentage of
voting securities owned or other basis of control by the person, if any,
immediately controlling it.

None.

Item 26. Number of Holders of Securities
-------------------------------
State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the number of
record holders of each class of securities of the Registrant.

The following information is given as of April 16, 2000:

Title of Class Number of Record Holders
--------------- ------------------------
Capital Stock 12,697
($0.001 par value)

Item 27. Indemnification
---------------
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of
the Registrant is insured or indemnified in any manner against any
liability which may be incurred in such capacity, other than insurance
provided by any director, officer, affiliated person or underwriter for
their own protection.

Under the terms of the Maryland General Corporation Law and the
Company's By-Laws, the Company may indemnify any person who was or is a
director, officer or employee of the Company to the maximum extent
permitted by the Maryland General Corporation Law; provided, however,
that Company only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made (i) by the Board of
Directors, by a majority vote of a quorum which consists of directors
who are neither "interested persons" of Company as defined in Section
2(a)(19) of the 1940 Act, nor parties to the proceeding, or (ii) if the
required quorum is not obtainable or if a quorum of such directors so
directs by independent legal counsel in a written opinion. No
indemnification will be provided by the Company to any director or
officer of the Company for any liability by the Company or Shareholders
to which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.

<PAGE>

Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Describe any other business, profession, vocation or employment of
a substantial nature in which the investment adviser of the Registrant,
and each director, officer or partner of any such investment adviser, is
or has been, at any time during the past two fiscal years, engaged for
his own account or in the capacity of director, officer, employee,
partner or trustee.

See Prospectus Part A and Statement of Additional Information Part
B ("Management of the Fund").

Item 29. Principal Underwriters
----------------------
(a) Lexington Money Market Trust
Lexington Growth and Income Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Global Income Fund
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Goldfund, Inc.
Lexington Global Corporate Leaders Fund, Inc.
Lexington Natural Resources Trust
Lexington Corporate Leaders Trust Fund
Lexington Silver Fund, Inc.
Lexington International Fund, Inc.
Lexington Emerging Markets Fund, Inc.
Lexington Small Cap Asia Growth Fund, Inc.
Lexington Troika Dialog Russia Fund, Inc.
Lexington Global Technology Fund, Inc.
<

<PAGE>

29 (b)

Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ------------------ ---------------------- --------------

Peter Corniotes* Assistant Secretary Asst. Secretary

Lisa Curcio* Vice President and Secretary
Secretary

Robert M. DeMichele* Chief Executive Officer Chairman of the
and Chairman Board and President

Richard M. Hisey* Chief Financial Officer, Vice President and
Vice President & Director Treasurer

Richard Lavery* Vice President Vice President

Janice McInerney* Assistant Treasurer None

*P.O. Box 1515
Saddle Brook, New Jersey 07663

<PAGE>

Item 30. Location of Accounts and Records
--------------------------------
With respect to each account, book or other document
required to be maintained by Section 31(a) of the 1940 Act and the Rules
(17 CFR 270, 31a-1 to 31a-3) promulgated thereunder, furnish the name
and address of each person maintaining physical possession of each such
account, book or other document.

The Registrant, Lexington Goldfund, Inc., Park 80 West -
Plaza Two, Saddle Brook, New Jersey 07662 will maintain physical
possession of each such account, book or other document of the Company,
except for those maintained by the Registrant's Custodian, State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02181, or Transfer Agent, State Street Bank and Trust Company, c/o
National Financial Data Services, 1004 Baltimore, Kansas City, Missouri
64105.

Item 31. Management Services
-------------------

Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B of this
Form (because the contract was not believed to be material to a
purchaser of securities of the Registrant) under which services are
provided to the Registrant, indicating the parties to the contract, the
total dollars paid and by whom for the last three fiscal years.

None.

Item 32. Undertakings -
--------------
The Registrant, Lexington Goldfund, Inc., undertakes to
furnish a copy of the Fund's latest annual report, upon request and
without charge, to every person to whom a prospectus is delivered.

The Registrant will hold a meeting of its public
shareholders, if requested to do so by the holders of at least 10
percent of the Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
director or directors and to assist in communications with other
shareholders.

<PAGE>

Registration No. 2-72428

Securities and Exchange Commission

Washington, D.C. 20549

Exhibits

Filed With

Form N-1A

LEXINGTON GOLDFUND, INC.

<PAGE>

EXHIBIT INDEX

The following documents are being filed electronically as exhibits to
this filing:

Consent of Counsel

Consent of Independent Auditors

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it has met
all of the requirements for effectiveness of this amendments to the
Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Amendment to be signed on its behalf by
the Undersigned, thereunto duly authorized, in the City of Saddle Brook
and State of New Jersey, on the 28th day of April, 2000.

LEXINGTON GOLDFUND, INC.

/s/ Robert M. DeMichele
________________________
By Robert M. DeMichele
Chairman of the Board

Pursuant to the requirements of the Securities Act of 1933, this
Amendment has been signed below by the following persons in the capacities
and on the dates indicated.

Signature Title Date

/s/ Robert M. DeMichele
__________________________ Chairman of the Board April 28, 2000
Robert M. DeMichele Principal Executive
Officer

/s/ Richard M. Hisey
__________________________ Principal Financial April 28, 2000
Richard M. Hisey and Accounting Officer

/s/ Lisa Curcio
__________________________ Principal Compliance April 28, 2000
Lisa Curcio Officer

*SMS Chadha Director April 28, 2000
__________________________
SMS Chadha

*Beverley C. Duer, P.E. Director April 28, 2000
__________________________
Beverley C. Duer, P.E.

*Barbara R. Evans Director April 28, 2000
__________________________
Barbara R. Evans
<PAGE>

Signature Title Date

*Jerard F. Maher Director April 28, 2000
_________________________
Jerard F. Maher

*Andrew M. McCosh Director April 28, 2000
_________________________
Andrew M. McCosh

*Donald B. Miller Director April 28, 2000
_________________________
Donald B. Miller

*Allen H. Stowe Director April 28, 2000
_________________________
Allen H. Stowe

/s/ Lisa Curcio
*By: ______________________
Lisa Curcio
Attorney-in-Fact

Kramer Levin Naftalis & Frankel LLP
9 1 9 T H I R D A V E N U E
NEW YORK, N.Y. 10022 B 3852
(212) 715 B 9100
FACSIMILE
(212) 715-8000
______
WRITER'S
DIRECT NUMBER

(212) 715-9100

April 25, 2000

Lexington Goldfund, Inc.
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663

Re: Lexington Goldfund, Inc.
File No. 2-72428; 811-2881
Registration Statement on Form N-1A

Dear Ladies and Gentlemen:

We hereby consent to the reference to our firm as Counsel in Post-
Effective Amendment No. 23 to the Registration Statement on Form N-1A filed
under Rule 485(b) of the Securities Act of 1933.

Very truly yours,

/s/ Kramer Levin Naftalis and Frankel LLP

Independent Auditors' Consent

To the Board of Directors and Shareholders of:
Lexington Growth & Income Fund, Inc.
Lexington Global Corporate Leaders Fund, Inc.
Lexington International Fund, Inc.
Lexington Worldwide Emerging Markets Fund, Inc.
Lexington Global Technology Fund, Inc.
Lexington Small Cap Asia Growth Fund, Inc.
Lexington Troika Dialog Russia Fund, Inc.
Lexington GNMA Income Fund, Inc.
Lexington Goldfund, Inc.
Lexington Silver Fund, Inc.

We consent to the use of our report dated February 7, 2000 incorporated
herein by reference and to the references to our firm under the
headings "Financial Highlights" in the Prospectus and "Counsel and
Independent Auditors" in the Statement of Additional Information.

KPMG LLP

New York, New York
April 25, 2000