DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
The Lexington Growth and Income Fund appreciated by 26.46%* for the year
ended December 31, 1996. This compares to a 20.78% return for the average growth
and income fund monitored by Lipper Analytical Services, Inc. during the period.
Contributing to the Fund's above average performance during the year were
significant weightings in the energy, financial and pharmaceutical sectors. Also
contributing were positions in selected technology and consumer growth stocks.
Our analysis led us to investments in several companies that were undergoing
major restructurings. These benefitted the Fund and remain a significant part of
our investment process.
The positive economic forces that serve as a backdrop for the financial
markets have not changed materially over the course of the past year. A year ago
we discussed the favorable environment for stocks based on: moderate economic
growth, low inflation, a benign interest rate environment, positive earnings
growth, and a favorable supply/demand dynamic for stocks. Although the
perception of these issues varied considerably during the year contributing to
some volatility in the bond market, by year end rates were 60 basis points
higher (6.6% vs. 6.0%), and the unmanaged Standard and Poor's 500 Stock Price
Index provided a total return of nearly 23%. Helping fuel that rise was the
strong cash flow into equity mutual funds while corporations continued to be
aggressive buyers of their own stock. Earnings provided modest support for
higher stock prices rising 8%.
As 1997 begins we see more similarities to last year than differences.The
U.S. economy appears to be on a continued moderate growth curve, inflation has
yet to show up in the commonly watched statistics, earnings should be able to
grow 7-10%, and money flows into equity mutual funds appear strong. Much like
last year, we expect that changes in perceptions as to these issues will cause
some volatility in the markets, but at the end of the day we expect this
scenario to result in a bond market that does not move significantly in either
direction, and a stock market that can generate a total return of 8 to 12%.
Although the differences between the current environment and that of early
1995 may be few, they can be significant. 1) Stock valuations are less
attractive. The price earnings multiple for the unmanaged Standard and Poor's
500 StockPrice Index entering 1996 was 15.5 times estimated earnings, and
currently stands at 17.5 times 1997 estimated earnings. At current interest rate
and inflation levels, that valuation level does not appear excessive, however,
there is less margin for error. 2) While reported inflation remains benign,
pressures are building.Wages have been rising for sometime, with corporations
able to offset these increases with increased productivity and aggressive
control of benefit costs. As the economic expansion matures, these become more
difficult to sustain. Additionally, energy and food costs have been rising and
although the markets have so far ignored them, further upward pressure would
force the markets to pay attention. 3) Estimates of only moderate earnings
growth do not permit much room for disappointment which can come from several
directions: The previously discussed wage pressures, strong dollar, higher
energy costs, and less than expected demand either domestically, or from
overseas.
Thus, despite our generally positive outlook for stocks this year, market
risks have clearly increased. We have taken some initial steps in moving the
Fund to a slightly defensive posture by eliminating positions where valuations
appeared extreme and increasing our exposure to more attractively valued stocks,
particularly in the insurance sector. This strategy had a negative effect on the
Fund's performance in the fourth quarter as the market rose sharply, but we
expect it to be a positive contributor as we move forward.
1
<PAGE>
We appreciate your continued support and welcome the opportunity to
discuss any questions you may have about your investment.
Sincerely,
/s/ Alan H. Wapnick /s/ Robert M. DeMichele
- -------------------- -----------------------
Alan H. Wapnick Robert M. DeMichele
Portfolio Manager President
February, 1997 February, 1997
CHART/BEGIN
Printed version of this shareholder report contains a
graphic chart indicating the comparison of change in
value of a $10,000 investment in Lexington Growth and
Income Fund, Inc., and the unmanaged Standard & Poor's
500 Stock Price Index form 12/31/86 through 12/31/96
CHART/END
* 26.46%, 13.82% and 11.58% are the one, five and ten year average annual
standard total returns, respectively, for the period ended December 31, 1996.
Investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed may be worth more or less than their
original cost. Total return represents past performance and are not predictive
of future results.
2
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1996
NUMBER VALUE
OF SHARES SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
COMMON STOCKS: 96.4%
BANKING: 1.9%
36,000 Citicorp ............................... $3,708,000
----------
CAPITAL EQUIPMENT: 5.8%
37,300 Boeing Company ......................... 3,967,787
90,400 Ingersoll-Rand Company ................. 4,022,800
38,600 Lockheed Martin Corporation ............ 3,531,900
----------
11,522,487
----------
CHEMICALS: 1.9%
97,000 Monsanto Company ....................... 3,770,875
----------
CONSUMER-DURABLE GOODS: 2.2%
74,200 Nike, Inc. ............................. 4,433,450
----------
CONSUMER-NON DURABLE GOODS: 7.6%
46,200 CPC International, Inc. ................ 3,580,500
77,400 Crown Cork & Seal Company, Inc. ........ 4,208,625
100,000 Hasbro, Inc. ........................... 3,887,500
82,000 Hershey Foods Corporation .............. 3,587,500
----------
15,264,125
----------
DRUGS: 1.7%
40,000 Pfizer, Inc. ........................... 3,315,000
----------
ELECTRICAL AND ELECTRONICS: 3.7%
270,000 Data General Corporation1 .............. 3,915,000
51,900 Honeywell, Inc. ........................ 3,412,425
----------
7,327,425
----------
ENERGY SOURCES: 9.6%
222,200 Calpine Corporation1 ................... 4,444,000
80,700 Diamond Offshore Drilling, Inc.1 ....... 4,599,900
25,900 Mobil Corporation ...................... 3,166,275
33,000 Texaco, Inc. ........................... 3,238,125
101,850 Williams Companies, Inc. ............... 3,819,375
----------
19,267,675
----------
FINANCIAL SERVICES: 16.9%
63,000 Ace, Ltd. .............................. 3,787,875
30,000 American International Group ........... 3,247,500
63,800 Aon Corporation ........................ 3,963,575
86,000 Conseco, Inc. .......................... 5,482,500
97,000 Federal National Mortgage Association .. 3,613,250
59,000 Foremost Corporation of America ........ 3,540,000
88,800 NAC Re Corporation ..................... 3,008,100
37,000 NationsBank Corporation ................ 3,616,750
84,000 Norwest Corporation .................... 3,654,000
----------
33,913,550
----------
HEALTH & PERSONAL CARE: 9.4%
74,000 Abbott Laboratories .................... 3,755,500
76,700 Becton, Dickinson & Company ............ 3,326,862
17,900 PacifiCare Health Systems, Inc.1 ....... 1,523,737
53,400 SmithKline Beecham Plc (ADR) ........... 3,631,200
56,000 United Healthcare Corporation .......... 2,520,000
55,200 Warner-Lambert Company ................. 4,140,000
----------
18,897,299
----------
HOUSEHOLD PRODUCTS: 1.9%
35,100 Procter & Gamble Company ............... 3,773,250
----------
MACHINERY: 1.9%
76,200 Dover Corporation ...................... 3,829,050
----------
MATERIALS: 7.7%
118,000 Avery-Dennison Corporation ............. 4,174,250
150,000 Canadian Pacific, Ltd. ................. 3,975,000
78,600 Newmont Gold Company ................... 3,438,750
85,000 Praxair, Inc. .......................... 3,920,625
----------
15,508,625
----------
MEDICAL PRODUCTS & SUPPLIES: 1.7%
67,800 Johnson & Johnson ...................... 3,373,050
----------
MERCHANDISING: 5.9%
105,600 Borders Group, Inc.1 ................... 3,788,400
124,000 GAP, INC ............................... 3,735,500
100,000 Safeway, Inc.1 ......................... 4,275,000
----------
11,798,900
----------
3
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1996 (continued)
NUMBER VALUE
OF SHARES SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
MULTI-INDUSTRY: 3.7%
50,800 AlliedSignal, Inc. ..................... $3,403,600
76,500 Tyco International, Ltd. ............... 4,044,937
------------
7,448,537
------------
SERVICES: 8.6%
67,800 Computer Associates International, Inc. 3,373,050
92,900 Ecolab, Inc. ........................... 3,495,363
37,100 Schlumberger, Ltd. ..................... 3,705,363
126,200 Service Corporation International ...... 3,533,600
98,100 WMX Technologies, Inc. ................. 3,200,513
------------
17,307,889
------------
TRANSPORTATION: 4.3%
69,300 Union Pacific Corporation .............. 4,166,663
148,565 Union Pacific Resources Group, Inc. .... 4,345,526
------------
8,512,189
------------
TOTAL COMMON STOCKS
(cost $159,279,756) 192,971,376
------------
PRINCIPAL AMOUNT
- ----------------
SHORT-TERM INVESTMENTS: 4.2%
$5,500,000 Federal Home Loan
Mortgage Corporation
5.4%, due 01/02/97 5,499,175
1,700,000 United States Treasury Bill
5.22%, due 01/02/97 1,699,694
1,300,000 United States Treasury Bill
5.36%, due 08/21/97 1,256,996
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $8,455,381) 8,455,865
------------
TOTAL INVESTMENTS: 100.6%
(cost $ 167,735,137+)(Note 1) 201,427,241
Liabilities in excess of other assets:
(0.6%) (1,118,173)
------------
TOTAL NET ASSETS: 100.0%
(equivalent to $18.56 per share on
10,790,208 shares outstanding) $200,309,068
============
- ----------
1 Non-income producing security.
ADR--American Depository Receipt.
+ Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
ASSETS
Investments, at value
(cost $167,735,137) (Note 1) ........................ $201,427,241
Cash .................................................. 106,257
Receivable for shares sold ............................ 280,630
Dividends and interest receivable ..................... 187,553
------------
Total Assets ........................................ $202,001,681
------------
LIABILITIES
Due to Lexington Management Corporation
(Note 2) ............................................ 96,234
Payable for shares redeemed ........................... 77,365
Distributions payable ................................. 1,328,178
Accrued expenses ...................................... 190,836
------------
Total Liabilities ................................... 1,692,613
------------
NET ASSETS (equivalent to $18.56 per share on
10,790,208 shares outstanding) (Note 4) ............. $200,309,068
============
NET ASSETS consist of:
Capital stock--authorized 1,000,000,000
shares, $.001 par value per share ................... $10,790
Additional paid-in capital (Note 1) ................... 163,523,343
Accumulated net realized gain on
investments (Note 1) ................................ 3,082,831
Unrealized appreciation of investments ................ 33,692,104
------------
TOTAL NET ASSETS .................................... $200,309,068
============
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
Year ended December 31, 1996
INVESTMENT INCOME
Dividends ...................... $2,208,019
Interest ....................... 367,074
----------
2,575,093
Less: foreign tax expense ........ 6,755
----------
Total investment income .................. $ 2,568,338
EXPENSES
Investment advisory fee (Note 2) 1,118,691
Distribution expense (Note 3) .. 224,986
Transfer agent and shareholder
servicing expense (Note 2) ... 159,069
Accounting expenses (Note 2) ... 108,905
Printing and mailing expenses .. 64,312
Registration fees .............. 37,449
Professional fees .............. 36,585
Custodian expense .............. 22,189
Computer processing fees ....... 21,657
Directors' fees and expenses ... 17,190
Other expenses ................. 44,378
---------
Total expenses ....................... 1,855,411
-----------
Net investment income ................ 712,927
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(NOTE 5)
Net realized gain on
investments ................................ 14,853,714
Net change in unrealized appreciation on
investments ................................ 22,564,960
-----------
Net realized and unrealized gain on
investments ................................ 37,418,674
-----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................ $38,131,601
===========
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31, 1996 and 1995
1996 1995
------------ ------------
Net investment income $ 712,927 $ 1,804,733
Net realized gain on investments 14,853,714 15,931,202
Net change in unrealized
appreciation of investments 22,564,960 9,051,101
------------ ------------
Net increase in net assets
resulting from operations 38,131,601 26,787,036
Distributions to shareholders from
net investment income (1,197,624) (1,809,688)
Distributions to shareholders from
net realized gains on investments (11,924,849) (13,290,821)
Increase in net assets from
capital share transactions
(Note 4) 36,399,400 2,925,345
------------ ------------
Net increase in net assets 61,408,528 14,611,872
NET ASSETS:
Beginning of period 138,900,540 124,288,668
------------ ------------
End of period (including undistributed
net investment income of $0 and
$695,588, respectively)(Note 1) $200,309,068 $138,900,540
============ ============
The Notes to Financial Statements are an integral part of these statements.
LEXINGTON GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington Growth and Income Fund, Inc. (the "Fund") is an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended. The Fund's investment objective is long-term appreciation of
capital. Income is a secondary objective. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements:
INVESTMENTS Security transactions are accounted for on a trade date basis.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Securities traded on a recognized stock exchange are
valued at the last sales price reported by the exchange on which the securities
are traded. If no sales price is recorded, the mean between the last bid and
asked price is used. Securities traded on the over-the-counter market are valued
at the mean between the last current bid and asked price. Short-term securities
having a maturity of 60 days or less are stated at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available and other assets are valued by Fund management in good faith
under the direction of the Fund's Board of Directors. All investments quoted in
foreign currencies are valued in U.S. dollars on the basis of the foreign
currency exchange rates prevailing at the close of business. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income, adjusted for amortization of premiums and accretion of discounts, is
accrued as earned.
FEDERAL INCOME TAXES It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes is required.
DISTRIBUTIONS Dividends from net investment income are normally declared
and paid quarterly and dividends from net realized capital gains are normally
declared and paid annually. However, the Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Internal
Revenue Code. The character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. At December 31, 1996, reclassifications were
made to the Fund's capital accounts to reflect permanent book/tax differences
and income and gains available for distributions under income tax regulations.
Net investment income, net realized gains and net assets were not affected by
this change.
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
2. INVESTMENT ADVISORY FEE AND OTHER
TRANSACTIONS WITH AFFILIATE
The Fund pays an investment advisory fee to Lexington Management Corporation
("LMC") at an annual rate of 0.75% of the Fund's average daily net assets up to
$100 million and in decreasing stages to 0.40% of average daily net assets in
excess of $250 million. The investment advisory contract provides that the total
annual expenses of the Fund (including management fees, but excluding interest,
taxes, brokerage commissions and extraordinary expenses) will not exceed the
level of expenses which the Fund is permitted to bear under the most restrictive
expense limitation imposed by any state in which shares of the Fund are offered
for sale. No reimbursement was required for the year ended December 31, 1996.
The Fund also reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $231,009 which were incurred by the Fund, but
paid by LMC.
6
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995 (continued)
3. DISTRIBUTION PLAN
The Fund has a Distribution Plan (the "Plan") which allows payments to finance
activities associated with the distribution of the Fund's shares. The Plan
provides that the Fund may pay distribution fees on a reimbursement basis,
including payments to Lexington Funds Distributor, Inc. ("LFD"), the Fund's
distributor, in amounts not exceeding 0.25% per annum of the Fund's average
daily net assets. Total distribution expenses for the year ended December 31,
1996 were $224,986 and are set forth in the statement of operations.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
Year ended
December 31, 1996 December 31, 1995
-------------------------- ------------------------
Shares Amount Shares Amount
--------- ----------- ------- ----------
Shares sold .... 3,754,824 $69,417,382 423,165 $6,632,289
Shares issued on
reinvestment of
dividends ...... 615,141 11,475,109 854,913 13,393,562
--------- ----------- ------- ----------
4,369,965 80,892,491 1,278,078 20,025,851
Shares redeemed (2,423,985) (44,493,091) (1,087,805) (17,100,506)
--------- ----------- ------- ----------
Net increase ... 1,945,980 $36,399,400 190,273 $2,925,345
========= =========== ======= ==========
5. PURCHASES AND SALES OF INVESTMENT SECURITIES The cost of securities purchased
and proceeds from sales of securities for the year ended December 31, 1996,
excluding short-term securities, were $178,329,101 and $161,371,526,
respectively. At December 31, 1996, the aggregate gross unrealized appreciation
for all securities in which there is an excess of value over tax cost amounted
to $34,857,952 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $1,165,848.
6. INVESTMENT AND CONCENTRATION RISKS
The Fund's ability to invest in foreign securities may involve risks not present
in domestic investments. Since foreign securities may be denominated in a
foreign currency and involve settlement and pay interest or dividends in foreign
currencies, changes in the relationship of these foreign currencies to the U.S.
dollar can significantly affect the value of the investments and earnings of the
Fund. Foreign investments may also subject the Fund to foreign government
exchange restrictions, expropriation, taxation or other political, social or
economic developments, all of which could affect the market and/or credit risk
of the investments.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $15.71 $14.36 $16.16 $16.25 $16.39
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ...................................... 0.07 0.22 0.17 0.21 0.23
Net realized and unrealized gain (loss) on investments ..... 4.08 3.00 (.68) 1.94 1.79
------ ------ ------ ------ ------
Total income (loss) from investment operations ............... 4.15 3.22 (.51) 2.15 2.02
Less distributions:
Dividends from net investment income ....................... (0.13) (0.22) (0.16) (0.21) (0.32)
Distributions from net realized gains ...................... (1.17) (1.65) (0.91) (2.03) (1.84)
Distributions in excess of net realized gains (temporary
book-tax difference) .................................... -- -- (.22) -- --
------ ------ ------ ------ ------
Total distributions .......................................... (1.30) (1.87) (1.29) (2.24) (2.16)
------ ------ ------ ------ ------
Net asset value, end of period ............................... $18.56 $15.71 $14.36 $16.16 $16.25
====== ====== ====== ====== ======
Total return ................................................. 26.46% 22.57% (3.11%) 13.22% 12.36%
Ratios to average net assets:
Expenses ................................................... 1.13% 1.09% 1.15% 1.29% 1.20%
Net investment income ...................................... 0.43% 1.38% 1.06% 1.20% 2.57%
Portfolio turnover ........................................... 101.12% 159.94% 63.04% 93.90% 88.13
Average commissions paid per share on equity securities
transactions* .............................................. $0.07 -- -- -- --
Net assets at end of period (000's omitted) .................. $200,309 $138,901 $124,289 $134,508 $126,241
</TABLE>
*In accordance with recent SEC disclosure guidelines, the average commission is
calculated for the current period, but not for prior periods.
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Lexington Growth and Income Fund, Inc.:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Growth and
Income Fund, Inc. as of December 31, 1996, the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Growth and Income Fund, Inc. as of December 31, 1996, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 14, 1997
8
<PAGE>
- --------------------------------------------------------------------------------
LEXINGTON
- --------------------------------------------------------------------------------
LEXINGTON
GROWTH
AND
INCOME
FUND, INC.
- --------------------------------------------------------------------------------
Seeks capital appreciation over the
long term through investments in
the stocks of large, ably managed
and well financed companies.
- --------------------------------------------------------------------------------
ANNUAL REPORT
DECEMBER 31, 1996
The Lexington Group
of NO LOAD
Investment Companies
LEXINGTON
GROWTH AND INCOME FUND, INC.
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
DISTRIBUTOR
- --------------------------------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
- --------------------------------------------------------------------------------
ALL SHAREHOLDER REQUESTS FOR SERVICES OF
ANY KIND SHOULD BE SENT TO:
TRANSFER AGENT
- --------------------------------------------------------------------------------
STATE STREET BANK AND
TRUST COMPANY
c/o National Financial Data Services
1004 Baltimore
Kansas City, Missouri 64105
OR CALL TOLL FREE:
SERVICE AND SALES: 1-800-526-0056
24 HOUR ACCOUNT INFORMATION:
1-800-526-0052
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(800) 526-0052
"LEXLINE"
24 hour toll-free telephone access to your
Lexington Fund account
Price/Yield o Account Balances o Exchanges o
Last Transactions o Total Return o Duplicate Statements
- --------------------------------------------------------------------------------
This report has been prepared for the information of the shareholders of
Lexington Growth and Income Fund, Inc. and is authorized for distribution to the
public only if it is accompanied or preceded by a currently effective prospectus
which sets forth expenses and other material information.
<PAGE>
LEXINGTON
INVESTOR SERVICES
- --------------------------------------------------------------------------------
AS A LEXINGTON SHAREHOLDER, YOU SHOULD BE AWARE OF THE MANY SERVICES
AVAILABLE TO YOU.
NO LOAD--The Lexington Funds are no load funds. That is, investments and
redemptions are made without any sales charges, commissions or redemption fees.
----------
FREE TELEPHONE EXCHANGE--Investments in the Lexington Funds may be exchanged for
shares of a different Lexington Fund at any time.
----------
CHECK WRITING PRIVILEGES--Lexington Money Market Trust and Lexington Tax Free
Money Fund permit investors immediate access to their funds with check writing
for withdrawals from their account.
----------
TAX SHELTERED PLANS--IRA, Keogh, Pension, and Profit Sharing Prototype Plans are
available to qualified individuals. These plans offer investment flexibility
through the Share Exchange Service, simplified record keeping, convenience and
investment supervision.
----------
CUSTODIAL ACCOUNTS FOR MINORS--Investments may be made on behalf of minors under
the Uniform Gifts to Minors Act currently in effect in all states.
----------
SYSTEMATIC WITHDRAWAL PLAN--An investor may elect to receive a fixed amount from
his or her account each month or quarter, subject to certain minimums.
----------
COMPLETE RECORD KEEPING--A statement is provided for every transaction in
addition to a year-end statement with tax information.
THE LEXINGTON GROUP OF
NO LOAD INVESTMENT COMPANIES
LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC.--Seeks long-term growth of
capital primarily through investment in equity securities of companies domiciled
in, or doing business in, emerging countries and emerging markets.
LEXINGTON GLOBAL FUND, INC.--Seeks long-term growth of capital primarily through
investment in common stocks of companies domiciled in foreign countries and the
United States.
LEXINGTON INTERNATIONAL FUND, INC.--Seeks long-term growth of capital through
investment in companies domiciled in foreign countries.
LEXINGTON TROIKA DIALOG RUSSIA FUND, INC.--Seeks long term capital appreciation
through investments primarily in equity securities of Russian companies.
LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC. --Seeks long-term capital
appreciation through investment in companies domiciled in the Asia Region with a
market capitalization of less than $1 billion.
LEXINGTON RAMIREZ GLOBAL INCOME FUND--Seeks high current income. Capital
appreciation is a secondary objective. The Fund invests in a combination of
foreign and domestic high-yield, lower rated debt securities.
LEXINGTON GOLDFUND, INC.--Seeks capital appreciation through investment in gold
bullion and shares of gold mining companies.
LEXINGTON GROWTH AND INCOME FUND, INC.--Seeks capital appreciation over the
long-term through investments in the stocks of large, ably managed and well
financed companies.
LEXINGTON CORPORATE LEADERS TRUST FUND--Seeks capital growth and reasonable
income through investment in an equal number of shares of an established list of
American blue chip corporations.
LEXINGTON SMALLCAP VALUE FUND, INC.--Seeks long-term capital appreciation
through investment in common stocks of companies domiciled in the United States
with a market capitalization of less than $1 billion.
LEXINGTON CONVERTIBLE SECURITIES FUND--Seeks total return by providing capital
appreciation, current income and conservation of capital through investments in
a diversified portfolio of securities convertible into shares of common stock.
LEXINGTON GNMA INCOME FUND, INC.--Seeks to achieve a high level of current
income, consistent with liquidity and safety of principal, through investment
primarily in mortgage-backed GNMA ("Ginnie Mae") certificates that are
guaranteed as to the timely payment of principal and interest by the United
States Government.
LEXINGTON MONEY MARKET TRUST--Seeks a high level of current income consistent
with preservation of capital and liquidity through investments in interest
bearing short-term money market instruments.
LEXINGTON TAX FREE MONEY FUND, INC.--Seeks current income exempt from Federal
income taxes while maintaining stability of principal, liquidity and
preservation of capital.
For more complete information about any of the Lexington Funds and a prospectus
which includes management fee and expenses call the distributor toll-free at
1-800-526-0056. Read the prospectus carefully before you invest or send money.
