As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 2-48906
811-2401
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. 34 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 21 X
(Check appropriate box or boxes.)
LEXINGTON GNMA INCOME FUND, 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 GNMA Income Fund, 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.
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 the stock market, the value of
the Fund will fluctuate with the movement of the market
as well as in response to the activities of individual
companies in the Fund's portfolio.
For a more detailed risk discussion involving
investments in this Fund, please read "Risks of
Investing" on page 26.
2
- --
<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.
<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 0.62%
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.
3
-
<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.
4
- --
<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.
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>
[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.
5
-
<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.
6
- --
<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.
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>
[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.
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>
$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.
7
-
<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.
8
- --
<PAGE>
INTERNATIONAL FUNDS
Bar Chart and Performance Table
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 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.
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>
[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.
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>
$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.
9
-
<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
10
- --
<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.
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
- -----------------------------------------------------
<S> <C>
$253.13 $778.52
</TABLE>
See "Management of the Fund" for more complete
descriptions of such costs and expenses.
11
-
<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.
12
- --
<PAGE>
INTERNATIONAL FUNDS
Bar Chart and Performance Table
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance 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.
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>
[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.
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>
$ 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.
13
-
<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.
14
- --
<PAGE>
INTERNATIONAL FUNDS
Bar Chart and Performance Table
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance since inception (07/03/96)
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.
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>
[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.
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>
$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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$334.79 $1,021.33 $1,731.14 $3,612.67
</TABLE>
See "Management of the Fund" for more complete
descriptions of such costs and expenses.
15
-
<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.
16
- --
<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.
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>
[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.
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>
$100.98 $ 315.27 $ 547.08 $ 1,213.00
</TABLE>
See "Management of the Fund" for more complete
descriptions of such costs and expenses.
17
-
<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.
18
- --
<PAGE>
FIXED-INCOME FUNDS AND MONEY MARKET FUNDS
Bar Chart and Performance Table
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 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.
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>
[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.
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>
$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.
19
-
<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.
20
- --
<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.
This example assumes that you invest $10,000 in
the Fund for the time periods indicated and then
redeem all of your shares at the end of those
periods. This example also assumes that your
investment has a 5% annual return each year and
that the operating expenses remain the same.
Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------
<S> <C> <C> <C>
$102.00 $318.40 $552.46 $1,224.62
</TABLE>
See "Management of the Fund" for more complete
descriptions of such costs and expenses.
21
-
<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.
22
- --
<PAGE>
PRECIOUS METAL FUNDS
Bar Chart and Performance Table
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance from 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>
[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.
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>
$196.97 $ 609.17 $ 1,046.99 $ 2,264.27
</TABLE>
See "Management of the Fund" for more complete
descriptions of such costs and expenses.
23
-
<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.
24
- --
<PAGE>
PRECIOUS METAL FUNDS
Bar Chart and Performance Table
The bar chart and performance table below show the risks of investing in the
Fund. The chart shows changes in the performance 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.
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>
[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.
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>
$214.05 $660.88 $1,133.92 $2,441.44
</TABLE>
See "Management of the Fund" for more complete
descriptions of such costs and expenses.
25
-
<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.
26
- --
<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-
27
-
<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.
28
- --
<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.
29
-
<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.
30
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<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
31
-
<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.
32
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<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.
33
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<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.
34
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<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
35
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<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.
36
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<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.
37
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<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.
38
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<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.
39
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<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.
40
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<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.***
41
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<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.
42
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<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.
43
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<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.
44
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<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>
45
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<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.
46
- --
<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>
47
<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.
(c) Six month period ended December 31, 1998.
The Fund changed its fiscal year-end from
June 30th to December 31st.
(d) Fiscal year-end June 30th.
48
- --
<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>
49
-
<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>
50
- --
<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>
51
-
<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 GNMA INCOME FUND, 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 GNMA Income
Fund (the "Fund"), dated May 1, 2000, and 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:
<TABLE>
<CAPTION>
<S> <C>
Shareholder Services Information: 1-800-526-0056
Institutional/Financial Adviser Services: 1-800-367-9160
24 Hour Account Information: 1-800-526-0052
</TABLE>
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....................................... 1
Investment Strategies and Risks of the Fund............... 1
Investment Policies and Restrictions...................... 6
Portfolio Transactions and Turnover....................... 7
Management of the Fund.................................... 8
Control Persons and Principal Holders of Securities....... 13
Investment Adviser, Administrator and Distributor......... 13
Determination of Net Asset Value.......................... 15
Telephone Exchange Provisions............................. 16
Tax Sheltered Retirement Plans............................ 17
Capital Stock of the Fund................................. 18
Tax Matters............................................... 19
Calculation of Performance Data........................... 24
Custodian, Transfer Agent and Dividend Disbursing Agent... 25
Counsel and Independent Auditors.......................... 25
Financial Statement....................................... 26
</TABLE>
<PAGE>
HISTORY OF THE FUND
Lexington GNMA Income Fund, Inc. (the "Fund") is a corporation organized
under the laws of the State of Maryland on August 15, 1973. The Fund is a
diversified open-end management investment company.
INVESTMENT STRATEGIES AND RISKS OF THE FUND
GNMA Certificates are Government National Mortgage Association ("GNMA")
mortgage-backed securities representing part ownership of a pool of mortgage
loans. GNMA is a U.S. Government corporation within the Department of Housing
and Urban Development. Such loans are initially made by lenders such as mortgage
bankers, commercial banks and savings and loan associations and are either
insured by the Federal Housing Administration (FHA) or Farmers' Home
Administration (FMHA) or guaranteed by the Veterans Administration (VA). A GNMA
Certificate represents an interest in a specific pool of such mortgages which,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal on
each certificate is guaranteed by the full faith and credit of the United States
Government.
GNMA Certificates differ from bonds in that principal is scheduled to be
paid back by the borrower over the length of the loan rather than returned in a
lump sum at maturity. The Fund will purchase "modified pass through" type GNMA
Certificates, which entitle the holder to receive all interest and principal
payments owed on the mortgages in the pool (net of issuers' and GNMA fees),
regardless of whether or not the mortgagor has made such payment. The Fund will
use principal payments to purchase additional GNMA Certificates or other
government guaranteed securities. The balance of the Fund's assets will be
invested in other securities issued or guaranteed by the U.S. Government,
including U.S. Treasury bills, note or bonds. The Fund may also invest in
repurchase agreements secured by such U.S. Government securities or GNMA
Certificates.
GNMA Certificates are created by an "issuer", which is an FHA approved
mortgage banker who also meets criteria imposed by GNMA. The issuer assembles a
pool of FHA, FmHA, or VA insured or guaranteed mortgages which are homogeneous
as to interest rate, maturity and type of dwelling. Upon application by the
issuer, and after approval by GNMA of the pool, GNMA provides its commitment to
guarantee timely payment of principal and interest on the GNMA Certificates
backed by the mortgages included inthe pool. The GNMA Certificates, endorsed by
GNMA, are then sold by the issuer through securities dealers.
GNMA is authorized under the Federal National Housing Act to guarantee
timely payment of principal and interest on GNMA Certificates. This guarantee is
backed by the full faith and credit of the United States. GNMA may borrow U.S.
Treasury funds to the extent needed to make payments under its guarantee. When
mortgages in the pool underlying a GNMA Certificates are prepaid by mortgagors
or by result of foreclosure, such principal payments are passed through to the
certificate holders. Accordingly, the life of the GNMA Certificate is likely to
be substantially shorter than the stated maturity of the mortgages in the
underlying pool. Because of such variation in prepayment rates, it is not
possible to predict the life of a particular GNMA certificate but FHA statistics
indicate that 25 to 30 year single family dwelling mortgages have an average
life of approximately 12 years. The majority of GNMA certificates are backed by
mortgages of this type, and accordingly the generally accepted practice has
developed to treat GNMA certificates as 30 year securities which prepay fully in
the 12th year.
GNMA certificates bear a nominal "coupon rate" which represents the
effective FHA-VA mortgage rate at the time of issuance, less 0.5% which
constitutes the GNMA and issuer's fees. For providing its guarantees, GNMA
receives an annual fee of 0.06% of the outstanding principal on certificates
backed by single family dwelling mortgages, and the issuer receives an annual
fee of 0.44% for assembling the pool and for passing through monthly payments of
interest and principal.
1
<PAGE>
Payments to holders of GNMA certificates consist of the monthly
distributions of interest and principal less the GNMA and issuer's fees. The
actual yield to be earned by a holder of a GNMA certificate is calculated by
dividing such payments by the purchase price paid for the GNMA certificate
(which may be at a premium or a discount from the face value of the
certificate). Monthly distributions of interest, as contrasted to semi-annual
distributions which are common for other fixed interest investments, have the
effect of compounding and thereby raising the effective annual yield earned on
GNMA certificates. Because of the variation in the life of the pools of
mortgages which back various GNMA certificates, and because it is impossible to
anticipate the rate of interest at which future principal payments may be
reinvested, the actual yield earned from a portfolio of GNMA certificates, such
as that in which the Fund is invested, will differ significantly from the yield
estimated by using an assumption of a 12 year life for each GNMA certificate
included in such a portfolio as described.
The actual rate of prepayment for any GNMA certificate does not lend itself
to advance determination, although regional and other characteristics of a given
mortgage pool may provide some guidance for investment analysis. Also, secondary
market trading of outstanding GNMA certificates tends to be concentrated in
issues bearing the current coupon rate.
The Fund may purchase construction loan securities which are issued to
finance building costs. The funds are disbursed as needed or in accordance with
a prearranged plan. The securities provide for the timely payment to the
registered holder of interest at the specified rate plus scheduled installments
of principal. Upon completion of the construction phase, the construction loan
securities are terminated, and project loan securities are issued. It is the
Fund's policy to record these GNMA certificates on trade date, and to segregate
assets to cover its commitments on trade date as well.
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 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.
The Fund's investment portfolio may include repurchase agreements
("repos")with banks and dealers in U.S. Government securities. A repurchase
agreement involves the purchase by the Fund of an investment contract from a
bank or a dealer in U.S. Government securities which contract is secured by debt
securities whose value is equal to or greater than the value of the repurchase
agreement including the agreed upon interest. The agreement provides that the
institution will repurchase the underlying securities at an agreed upon time and
price. 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 total amount
received on repurchase would exceed the price paid by the Fund, reflecting an
agreed upon rate of interest for the period from the date of the repurchase
agreement to the settlement date, and would not be related to the interest rate
on the underlying securities. The difference
2
<PAGE>
between the total amount to be received upon the repurchase of the securities
and the price paid by the Fund upon their acquisition is accrued daily as
interest. If the institution defaults on the repurchase agreement, the Fund will
retain possession of the underlying securities. In addition, if bankruptcy
proceedings are commenced with respect to the seller, realization on the
collateral by the Fund may be delayed or limited and the Fund may incur
additional costs. In such case the Fund will be subject to risks associated with
changes in the market value of the collateral securities. The Fund intends to
limit repurchase agreements to transactions with institutions believed by LMC to
present minimal credit risk.
Portfolio Hedging- The Fund may hedge against changes in financial markets
and interest rates. The Fund may hedge with "derivatives." Derivatives are
instruments whose value is linked to, or derived from, another instrument, like
an index or a commodity. Hedging transactions involve certain risks. Although
the Fund may benefit from hedging, unanticipated changes in interest rates or
securities prices may result in greater losses for the Fund than if it did not
hedge. If the Fund does not correctly predict a hedge, it may lose money. In
addition, the Fund pays commissions and other costs in connection with hedging
transactions.
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
would exceed 10% of the total assets of the Fund.
When-Issued and Delayed Delivery Transactions - GNMA Certificates may at
times be purchased or sold on a delayed delivery basis or on a when-issued
basis. These transactions arise when GNMA Certificates are purchased or sold by
the Fund with payment and delivery taking place in the future, in order to
secure what is considered to be an advantageous price and yield to the Fund. No
payment is made until delivery is due, often a month or more after the purchase.
The Settlement date on such transactions will take place no more than 120 days
from the trade date. When the Fund engages in when-issued and delayed delivery
transactions, the Fund relies on the buyer or seller, as the case may be, to
consummate the sale. Failure of the buyer or seller to do so may result in the
Fund missing the opportunity of obtaining a price considered to be advantageous.
While when-issued GNMA Certificates may be sold prior to the settlement date,
the Fund intends to purchase such securities with the purpose of actually
acquiring them unless a sale appears desirable for investment reasons. At the
time the Fund makes the commitment to purchase a GNMA Certificate on a when-
issued basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The Fund does not believe that its
net asset value or income will be adversely affected by its purchase of GNMA
Certificates on a when-issued basis. The Fund may invest in when-issued
securities without other conditions. Such securities either will mature or be
sold on or about the settlement date. The Fund may earn interest on such account
or securities for the benefit of shareholders.
3
<PAGE>
INVESTMENT RESTRICTIONS
The following investment restrictions are matters of 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, the Fund will not :
(1) issue senior securities;
(2) borrow money;
(3) underwrite securities of other issuers;
(4) concentrate its investments in a particular industry to an extent
greater than 25% of its total assets, provided that such limitation
shall not apply to securities issued or guaranteed by the U.S.
Government or its agencies;
(5) purchase or sell real estate, commodity contracts or commodities
(however, the Fund may purchase interests in GNMA mortgage-backed
certificates);
(6) make loans to other persons except: (a) through the purchase of a
portion or portions of an issue or issues of securities issued or
guaranteed by the U.S. Government or its agencies, or (b) through
investments in "repurchase agreements" (which are arrangements under
which the Fund acquires a debt security subject to an obligation of
the seller to repurchase it at a fixed price within a short period),
provided that no more than 10% of the Fund's assets may be invested
in repurchase agreements which mature in more than seven days;
(7) purchase the securities of another investment company or investment
trust, except in open market and then only if no profit, other than
the customary broker's commission, results to a sponsor or dealer,
or by merger or other reorganization;
(8) purchase any security on margin or effect a short sale of a
security;
(9) buy securities from or sell securities (other to any of its
officers, directors or its than securities issued by the Fund)
investment adviser, as principal;
(10) contract to sell any security or evidence that the same shall be
owned by the Fund; ofinterest therein, except to the extent
(11) purchase or retain securities of an issuer when one or more of the
officers and directors of the Fund or of the LMC, or a person owning
more than 10% of the stock of either, own beneficially more than 1/2
of 1% of the securities of such issuer and such persons owning more
than 1/2 of 1% of such securities together own beneficially more
than 5% of the securities of such issuer;
(12) invest more than 5% of its total assets in the securities of one
issuer (except securities issued or guaranteed by the U.S.
Government or its agencies), except that such restriction shall not
apply to 25% of the securities of such issuer;
(13) purchase any securities if such purchase of purchase more than 10%
of the would cause the Fund to own at the time outstanding voting
securities of any one issuer;
4
<PAGE>
(14) purchase any security restricted as to disposition under Federal
securities laws;
(15) invest in interests in oil, gas or other mineral exploration or
development programs; or
(16) buy or sell puts, calls or other options.
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) invest in real estate limited partnership interests, oil, gas or
mineral leases, as well as exploration or development programs; or
(2) purchase warrants except in units with other securities in original
issuance thereof or attached to other securities, if at the time of
purchase, the Fund's investment in warrants, valued at the lower of
cost or market, would exceed 5% of the Fund's total assets. Warrants
which are not listed on the New York or American stock exchanges
shall not exceed 2% of the Fund's net assets. Shares of the Fund
will not be issued for consideration other than cash
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.
PORTFOLIO TRANSACTIONS AND TURNOVER
Portfolio securities are purchased directly from dealers acting as
principal underwriters or market makers for GNMA certificates or government
securities. Such transactions are usually conducted on a net basis and
accordingly no brokerage commissions are paid by the Fund. The Fund may also
execute transactions through broker-dealers on a commission basis.
The Fund's primary policy is to execute all purchases and sales of
portfolio instruments at the most favorable prices consistent with best
execution, considering all of the costs of the transaction including brokerage
commissions. This policy governs the selection of brokers and dealers and the
market in which a transaction is executed. Consistent with this policy, the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
and such other policies as the Directors may determine, LMC may consider sales
of shares of the Fund and of the other Lexington Funds as a factor in the
selection of brokers and dealers and the market in which a transaction is
executed. However, pursuant to the Fund's investment management agreement,
management consideration may be given in the selection of broker-dealers to
research provided and payment may be made of a commission higher than that
charged by another broker-dealer which does not furnish research services or
which furnishes research services deemed to be a 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 higher commission than the lowest available
under certain circumstances, provided that the person so exercising investment
discretion makes a good faith determination that the person so commissions paid
are "reasonable in the 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 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
5
<PAGE>
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.
For the fiscal years ended December 31, 1997, 1998 and 1999 the Fund paid
brokerage commissions of $40,646, $34,516, and $60,939 respectively. The Fund's
portfolio turnover rate for the fiscal years ending December 31, 1997, 1998, and
1999 were 134.28%, 54.47% and 25.10%, respectively.
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> <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.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name Title Experience Over Past 5 Years
<S> <C> <C> <C>
*+ RICHARD M. HISEY (41) DIRECTOR & Executive Vice President (Mutual Funds),
P.O. Box 1515 VICE PRES. 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.
+ 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.
+ 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
*+ DENIS JAMISON (52) VICE PRES. Senior Vice President, Director of Fixed
P.O. BOX 1515 AND Income Investment Strategy,
Saddle Brook, NJ 07663 PORTFOLIO Lexington Management
MANAGER Corporation.
*+ 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, VICE PRESIDENT Senior Vice President, Lexington
ChFC (46) Management Corporation; Vice
P.O. BOX 1515 President, Lexington Funds Distributor,
Saddle Brook, NJ 07663 Inc.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name Title Experience Over Past 5 Years
<S> <C> <C> <C>
*+ JANICE CARNICELLI (40) VICE PRESIDENT Vice President, Lexington Funds
P.O. BOX 1515
Saddle Brook, NJ 07663
*+ CHRISTIE CARR-WALDRON (32) TREASURER Treasurer, Lexington Funds
P.O. BOX 1515
Saddle Brook, NJ 07663
*+ CHRISTINE SPELLMAN (33) ASSISTANT Assistant Vice President, Lexington
P.O. BOX 1515 VICE PRESIDENT Funds. Prior to 1999, Manager of
Saddle Brook, NJ 07663 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, Jamison,
Lavery, Maher, McCosh, Miller and Stowe, 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. 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.
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:
8
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Aggregate Total Compensation Number of
Compensation from from Fund and Directorships in
Name of Director Fund Fund Complex Fund Complex
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
S.M.S. Chadha $1,600 $24,006 15
- -------------------------------------------------------------------------------------------
Robert M.DeMichele 0 0 15
- -------------------------------------------------------------------------------------------
Beverly C. Duer $1,946 $29,656 15
- -------------------------------------------------------------------------------------------
Barbara R. Evans 0 0 15
- -------------------------------------------------------------------------------------------
Richard M. Hisey 0 0 8
- -------------------------------------------------------------------------------------------
Jerard F. Maher $1,488 $22,976 15
- -------------------------------------------------------------------------------------------
Andrew M. McCosh $1,600 $24,006 15
- -------------------------------------------------------------------------------------------
Donald B. Miller $1,600 $24,006 15
- -------------------------------------------------------------------------------------------
Frances Olmsted* $1,463 $16,800 N/A
- -------------------------------------------------------------------------------------------
John G. Preston $1,600 $24,006 15
- -------------------------------------------------------------------------------------------
Margaret W. Russell* $1,243 $18,000 N/A
- -------------------------------------------------------------------------------------------
Philip C. Smith* $1,326 $19,200 N/A
- -------------------------------------------------------------------------------------------
Allen H. Stowe $1.600 $12,712 15
- -------------------------------------------------------------------------------------------
Frances A. Sunderland* $1,247 $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 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
9
<PAGE>
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
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT UPON RETIREMENT
15 $15,000 $18,750 $22,500 $26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of 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 GNMA Income Fund, 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 pursuant to an Investment
Management Agreement dated February 9, 1982 (the "Advisory Agreement").
Lexington Funds Distributor, Inc. ("LFD") is the distributor of Fund shares
pursuant to a Distribution Agreement dated August 21, 1990 (the "Distribution
Agreement"). LMC advises and makes recommendations to the Fund with respect to
its investments and investment policies. These agreements were approved by the
Fund's Board of Directors (including a majority of the Directors who were not
parties to either the Advisory Agreement or the Distribution Agreement or
"interested persons" of any such party) on November 29, 1999.
Under the terms of the advisory agreement LMC also 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 also employees of LMC or its affiliates in
carrying out its duties under the investment advisory 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 director's fees, and
furnishes LFD, at printer's overrun cost paid by LFD, such copies of its
prospectus and annual, semi-annual and other reports and shareholder
communications as may reasonably be required for sales purposes.
Pursuant to an investment advisory agreement the Fund pays LMC an
investment advisory fee at the annual rate of 0.60% of its average daily net
assets up to $150 million; 0.50% of such value in excess of $150 million up to
$400 million; 0.45% of such value in excess of $400 million up to
10
<PAGE>
$800 million; and 0.40% of such value in excess of $800 million; after deduction
of Fund expenses, if any, in excess of the expense limitations set forth below.
The fee is computed on the basis of current net assets at the end of each
business day and is payable at the end of each month.
LMC must also reimburse the Fund to the extent that all of the Fund's other
expenses (including the investment advisory fee) exclusive of interest and taxes
exceed 1.5% of the Fund's net assets up to $30 million and 1% of the net assets
in excess of $30 million during any fiscal year calculated by averaging such net
assets daily. In the event that the Fund's expenses exceed such limitation at
any month end, the investment advisory fee paid by the Fund for such month is
reduced accordingly. In addition to the provisions of the advisory agreement, in
order to comply with the securities regulations of certain states the adviser
has agreed to remit to the Fund the amount that the ordinary business expenses
of the Fund, including the advisory fee but excluding interest, taxes, brokerage
commissions and extraordinary expenses such as litigation exceed, for any fiscal
year, 1.5% of the average net assets of the Fund.
Advisory fees paid to LMC by the Fund for the last three fiscal years are
as follows: December 31, 1997, $859,774, December 31, 1998, $1,224,048, and
December 31, 1999, $1,844,256. LFD pays the advertising and sales expenses
related to the continuous offering of Fund shares, including the cost of
printing prospectuses, proxies and shareholder reports for persons other than
existing shareholders. The Fund furnishes LFD, at printer's overrun cost paid
by LFD, such copies of its prospectus and annual, semi-annual and other reports
and shareholder communications as may reasonably be required for sales purposes.
LMC shall not be liable to the Fund or its shareholders for any act or
omission by LMC, its officers, directors or employees or any loss sustained by
the Fund or its shareholders except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty.
LMC also acts as administrator to the Fund and performs certain
administrative and accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.
The Advisory Agreement, the Distribution Agreement and the Administrative
Services Agreement are subject to annual approval by the Fund's Board of
Directors and by the affirmative vote, cast in person at a meeting called
for such purpose, of a majority of the Directors who are not parties either
to the Advisory Agreement or the Distribution Agreement, as the case may be, or
"interested persons" of any such party. Either the Fund or LMC may terminate
the Advisory Agreement and the Fund or LFD may terminate the Distribution
Agreement on 60 days' written notice without penalty. The Advisory Agreement
terminates automatically in the event of assignment, as defined in the
Investment Company Act of 1940, as amended.
LMC serves as investment adviser to other investment companies (see
"Exchange Privilege" in the Prospectus) as well as private and institutional
investment clients. Included among these clients are persons and organizations
which own significant amounts of capital stock of LMC's parent company (see
below). These clients pay fees which LMC considers comparable to the fee levels
for similarly served clients.
LMC's accounts are managed independently with reference to applicable
investment objectives and current security holdings, but on occasion more than
one fund or counsel account may seek to engage in transactions in the same
security at the same time. To the extent practicable, such transactions will be
effected on a pro rata basis in proportion to the respective amounts of
securities to be bought and sold for each portfolio, and the allocated
transactions will be averaged as to price. While this procedure may adversely
affect the price or volume of a given Fund transaction, the ability
11
<PAGE>
of the Fund to participate in combined transactions may generally produce better
overall executions.
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.
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.
Of the directors, officers or employees ("affiliated persons") of the Fund,
Messrs. Corniotes, DeMichele, Faust, Hisey, Jamison and Lavery, and Mmes.
Carnicelli, Carr-Waldron, Curcio, DiFalco, Gilfillan, Mosca and Spellman (see
"Management of the Fund"), may also be deemed affiliates of LMC and LFD by
virtue of being officers, directors or employees thereof.
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, President's Day, King Holiday, 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 Fund's 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.
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
12
<PAGE>
telephone in the Lexington Funds. All accounts involved in a telephonic exchange
must have the same registration and dividend option as the account from which
the shares were transferred and will also have the privilege of exchange by
telephone in the Lexington Funds in which these services are available.
By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD as the true and
lawful attorney to surrender for redemption or exchange any and all non-
certificate shares held by the Agent in account(s) designated, or in any other
account with the Lexington Funds, present or future which has the identical
registration, with full power of substitution in the premises. This selection
also authorizes and directs LFD to act upon any instruction from any person by
telephone for exchange of shares held in any of these accounts. In acting on a
request to exchange, LFD is authorized to purchase shares of any other Lexington
Fund that is available, provided the registration and mailing address of the
shares to be purchased are identical to the registration of the shares being
redeemed. The shareholder also agrees that neither LFD, the Agent, or the
Fund(s) will be liable for any loss, expense or cost arising out of any requests
effected in accordance with this authorization which would include requests
effected by impostors or persons otherwise unauthorized to act on behalf of the
account. LFD, the Agent, and the Fund will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine and if they do
not employ reasonable procedures they may be liable for any losses due to
unauthorized or fraudulent instructions. The following identification
procedures may include, but are not limited to, the following: account number,
registration and address, taxpayer identification number and other information
particular to the account. In addition, all telephone exchange and telephone
redemption transactions will take place on recorded telephone lines and each
transaction will be confirmed in writing by the Fund. If the shareholder is an
entity other than an individual, it may be required to certify that certain
persons have been duly elected and are now legally holding the titles given and
that the said corporation, trust, unincorporated association, etc. is duly
organized and existing and has the power to take action called for by this
continuing authorization. LFD reserves the right to cease to act as attorney
subject to the above appointment upon thirty (30) days written notice to the
address of record.
Exchange Authorizations forms, Telephone Authorization forms and
prospectuses of the other funds may be obtained from LFD.
LFD has made arrangements with certain dealers to accept instructions by
telephone to exchange shares of the Fund or shares of one of the other Lexington
Funds at net asset value as described above. Under this procedure, the dealer
must agree to indemnify LFD and the funds from any loss or liability that any of
them might incur as a result of the acceptance of such telephone exchange
orders. A properly signed Exchange Authorization must be received by LFD within
5 days of the exchange request. LFD reserves the right to reject any telephone
exchange request. In each such exchange, the registration of the shares of the
Fund being acquired must be identical to the registration of the shares of the
Fund being exchanged. Any telephone exchange orders so rejected may be
processed by mail.
This exchange offer is available only in states where shares of the Fund
being acquired may legally be sold and may be modified or terminated at any time
by the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent.
TAX SHELTERED RETIREMENT PLANS
The Fund makes available a variety of Prototype Pension and Profit Sharing
Plans including a 401(k) Salary Reduction Plan and a 403(b)(7) Plan. Plan
services are available by contacting the Shareholder Services Department of the
Distributor at 1-800-526-0056.
13
<PAGE>
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 both IRA: there is no income tax on qualified
withdrawals. In addition, unlike a Traditional IRA, there is no prohibition on
making contributionns 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 whih 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 reurns may not contribute to a Roth IRA in a year in
whih his or her adjusted gross income is $10,000 or more (the allowed
contribution amount is phased out ratably over the first $10,000 of this
investor's adjusted gross income). The Disclosure statement required by the IRS
is provided by the Fund upon opening a Roth IRA.
The minimum initial investment to establish a tax-sheltered plan through
the Fund is $250 for both Keogh Plans and IRA Plans. Subsequent investments
are subject to a minimum of $50 for each account.
Self-Employed Retirement Plan (HR-10): Self-employed individuals may make
tax deductible contributions to a prototype defined contribution pension plan or
profit sharing plan. There are, however, a number of special rules which apply
when self-employed individuals participate in such plans. Currently purchase
payments under a self-employed plan are deductible only to the extent of the
lesser of (i) $30,000 or (ii) 25% of the individual's earned annual income (as
defined in the Code) and in applying these limitations not more than $150,000 of
"earned income" may be taken into account.
Corporate Pension and Profit Sharing Plans: The Fund makes available a
Prototype Defined Contribution Pension Plan and a Prototype Profit Sharing Plan.
All purchases and redemptions of Fund shares pursuant to any one of
the Fund's tax sheltered plans must be carried out in accordance with the
provisions of the Plan. Accordingly, all plan documents should be reviewed
carefully before adopting or enrolling in the plan. Investors should
especially note that a penalty tax of 10% may be imposed by the IRS on
early withdrawals under corporate, Keogh or IRA Plans. It is recommended
by the IRS that an investor consult a tax adviser before investing in the Fund
through any of these plans.
14
<PAGE>
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 monthly dividends from investment income, if
earned and as declared by its Board of Directors. The Fund intends to declare or
distribute a dividend from capital gain income, if any, in December in order to
comply with the distribution requirements of the 1986 Tax Reform Act to avoid
the imposition of a 4% excise tax. The Fund adopted a fiscal year ending on
December 31.
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 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 for
federal income tax purposes under Subchapter M of 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
15
<PAGE>
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., the 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 years. As of December 31,
1999, the Fund has capital loss carryforwards of $1,054,628, $89,699 and
$1,753,409 which expire in 2003, 2006, and 2007, respectively. Under Code
Section 382, if the Fund has an "ownership change," 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 highest
adjusted long-term tax-exempt rate (which is published monthly by the
Internal Revenue Service (the "IRS")) in effect for any month in the 3-
calendar-month period ending with the calendar 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 of the Fund,
there can be no assurance that the Fund will not have, or has not already
had, an ownership change. If the Fund has or has had an ownership change,
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. 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 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 and options on futures contracts) will be subject to special
tax treatment as "Section 1256 contracts." Section 1256 contracts are treated as
if they are sold for their fair market value on the last business day of the
taxable year, even though a taxpayer's obligations (or rights) under such
contracts have not
16
<PAGE>
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section 1256
contracts (including any capital gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. The 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.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it made a taxable year election for excise tax purposes
as discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss incurred after October
31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the 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'
taxable year, at least 50% of the value of the Fund' 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 the Fund' 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 (call
or put) with respect to a security is treated as issued by the issuer of the
security, not the issuer of the option. However, with regard to forward
currency contracts, there does not appear to be any formal or informal authority
which identifies the issuer of such instrument. For purposes of asset
diversification testing, obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government such as the Government National
Mortgage Corporation, the Federal Agricultural Mortgage Corporation, the Farm
Credit System Financial Assistance Corporation, a Federal Home Loan Bank, the
Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, and the Student Loan Marketing Association are treated as U.S.
Government securities.
If for any taxable year the 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' current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain
17
<PAGE>
net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year; and (2) exclude foreign currency gains and
losses incurred after October 31 of any year (or after the end of its taxable
year if it has made a taxable year election) in determining the amount of
ordinary taxable income for the current calendar year (and, instead, include
such gains and losses in determining ordinary taxable income for the succeeding
calendar year).
The 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 not qualify for the 70% dividends-received
deduction for corporate shareholders.
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 the 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.
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 the
assets held by the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which they are made. However, dividends declared in
October, November or December of any year and payable to shareholders of record
on a specified date in such a month will be deemed to have been received by the
shareholders (and made by the 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) to them during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has failed
to provide a correct taxpayer identification number, (2) who is subject to
backup withholding for failure properly to report the receipt of interest or
dividend income, or (3) who has failed to certify to the Fund that it is not
subject to backup withholding or that it is an "exempt recipient" (such as a
corporation).
18
<PAGE>
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the 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.
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 the shareholder will be subject to U.S. withholding tax at the rate of 30%
(or lower applicable treaty rate) on the gross amount of the dividend. Such a
foreign shareholder would generally be exempt from U.S. federal income tax on
gains realized on the sale or redemption of shares of the 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 carried on by a foreign shareholder, then ordinary income and capital
gain dividends received in respect of, and any gains realized upon the sale of,
shares of the 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 Treasury Regulations issued thereunder as in effect on the
date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies may differ from the rules for
U.S. federal income taxation described above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Fund.
19
<PAGE>
CALCULATION OF PERFORMANCE DATA
For the purpose 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(l + 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 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.
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., the Fund calculates its
aggregate total return for the specified periods of time 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
average annual standard total return for the one, five and ten year periods
ending December 31, 1999 was 0.58%, 7.87% and 7.47%.
In addition to the total return quotations discussed above, the Fund may
advertise its yield based on a 30-day (or one month) period ended on the date of
the most recent balance sheet included in the Fund's Registration Statement,
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
a-b
YIELD = 2[(cd + 1)6-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
20
<PAGE>
Under this formula, interest earned on debt obligations for the purposes of
"a" above, is calculated by (l) computing the yield to maturity of each
obligation (including actual accrued interest) at the close of business on the
last day of each month, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest), (2) dividing that
figure by 360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest as referred to above) to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is in the Fund's portfolio (assuming a month of 30 days) and (3)
computing the total of the interest earned on all debt obligations and all
dividends accrued on all equity securities during the 30-day or one month
period. For mortgage or other receivables backed security subject to regular
paydowns (e.g. GNMA's), interest is calculated using the coupon rate and the
outstanding participant amount for one monthly paydown. For these types of
securities, interest income is also adjusted for the gain or loss or the monthly
paydown. In computing dividends accrued, dividend income is recognized by
accruing 1/360 of the stated dividend rate of a security each day that the
security is in a Fund's portfolio.
The Fund may also from time to time advertise its yield based on a 90-day
period ended on the date of the most recent balance sheet included with the
Funds' Registration Statement, computed in accordance with the yield formula
described above, as adjusted to conform with the differing period for which the
yield computation is based.
Any quotation of performance stated in terms of yield (whether based on a
30-day or 90-day period) will be given no greater prominence than the
information prescribed under SEC rules. In addition, all advertisements
containing performance data of any kind will include a legend disclosing that
such performance data represents past performance and that the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as the Custodian for the Fund's portfolio
securities including those to be held by foreign banks and foreign securities
depositories which qualify as eligible foreign custodians under the rules
adopted by the S.E.C. and for the Fund's domestic securities and other assets.
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02181, has been retained to act as the transfer agent and dividend disbursing
agent. Neither Chase Manhattan Bank, N.A. nor State Street Bank and Trust
Company have any part in determining the investment policies of the Fund or in
determining which portfolio securities are to be purchased or sold by the Fund
or in the declaration of dividends and distributions.
COUNSEL AND INDEPENDENT AUDITORS
Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New York
10022 will pass upon legal matters for the Fund in connection with the offering
of its shares. KPMG LLP, 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.
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<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. Form of Custodian Agreement between
Registrant and Chase Manhattan Bank, N.A. - Filed
electronically 4/28/95 - 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 Administrative Services Agreement
between Registrant and Lexington Management
Corporation - Filed electronically 4/28/95 -
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. Not Applicable
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 5,887
($0.01 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 of any liability
to 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
(c)
Not Applicable.
*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 GNMA Income Fund, Inc., Park 80 West
- - Plaza Two, Saddle Brook, New Jersey 07663 will maintain physical
possession of each such account, book or other document of the Company,
except for those maintained by the Registrant's Custodian, Chase Manhattan
Bank, N.A., 1211 Avenue of the Americas, New York, New York 10036, 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 GNMA Income Fund, 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. 2-48906
Securities and Exchange Commission
Washington, D.C. 20549
Exhibits
Filed With
Form N-1A
LEXINGTON GNMA INCOME FUND, 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 GNMA INCOME FUND, 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
and Director
/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 GNMA Income Fund, Inc.
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
Re: Lexington GNMA Income Fund, Inc.
File No. 2-48906; 811-2401
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. 34 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