DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
The Lexington Growth and Income Fund appreciated by 21.42%* for the year
ended December 31, 1998. This compares to a 15.6% return for the average growth
and income fund monitored by Lipper, Inc. during the period.
Stocks turned in another record performance in 1998, with the Dow Jones
Industrial Average rising 18.1% after three consecutive years of 20%+ returns.
The gains were not achieved in a straight line as the market dropped 12% in the
third quarter, its worst quarterly performance since 1990. Behind the drop was
the growing concern that the U.S. would finally begin to feel the effects of the
spreading currency and economic crisis that began in Asia in 1997. Liquidity
problems at several large hedge funds together with the deterioration of the
financial system in Russia raised the specter of a global financial crisis.
Central Banks around the world, including the U.S. Federal Reserve, responded
aggressively, lowering interest rates and helping to restore confidence. Stocks
responded in kind with a strong year-end rally.
The U.S. economy continues to defy gravity. Despite widespread predictions
that the economic problems in many emerging economies would drive the U.S. into
a sharp slowdown, if not a full-blown recession, growth has remained strong.
Third quarter Gross Domestic Product rose 3.7%, and it appears that fourth
quarter growth could approach 4%. While manufacturing activity has slowed
significantly in response to global conditions, consumers have continued
spending, reflecting continued strong income growth, high confidence levels, and
the support of a strong stock market. Thus, the U.S. continues to enjoy the best
of all worlds-strong overall growth, low interest rates and low inflation. The
economic problems that began in Asia are now being felt in Latin America, a
region that ranks as a more important trading partner to the U.S. than the
emerging economies of Asia, and should therefore have a greater impact on our
economy. A domestic slowdown would appear to be inevitable, although we believe
the economy remains fundamentally sound. Should the economy sustain its current
strength, it could result in a change in policy by the Federal Reserve, which in
recent months has already reduced interest rates three times.
The larger issue for investors will be the corporate earnings environment.
Slowing demand overseas, a lack of pricing power, and pressure from rising wage
costs has resulted in virtually no earnings growth in 1998. The outlook is for
more of the same, at least through the first half of this year with the prospect
of a return to moderate growth in the second half. Analyst estimates appear too
optimistic and stock prices will be fighting a steady stream of estimate
reductions in early 1999. The key to investment performance in this environment
will be avoiding significant earnings disappointments.
Our investment approach continues to focus on finding high quality stocks
with good earnings and price momentum, and which sell at attractive valuations.
This strategy led to significant weightings in the pharmaceutical, financial and
domestically oriented consumer sectors early in the year. As the financial
crisis continued we decreased our exposure to the banking industry, increasing
our investments in the domestically oriented consumer sector. We were also able
to
1
<PAGE>
take advantage of the summer correction in the markets to increase the Fund's
exposure to the technology sector at attractive prices. These were the principal
drivers of the Fund's above average performance.
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, 1999 February, 1999
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
LEXINGTON GROWTH AND INCOME FUND, INC. AND
THE UNMANAGED STANDARD & POOR'S 500 STOCK PRICE INDEX
[THE FOLLOWING TABLE REPRESENTS A CHART IN THE PRINTED REPORT]
Year Growth and Income S&P 500
12/31/88 $10,000 $10,000
12/31/89 $12,756 $13,164
12/31/90 $11,446 $12,756
12/31/91 $14,293 $16,634
12/31/92 $16,060 $17,900
12/31/93 $18,183 $19,700
12/31/94 $17,617 $19,958
12/31/95 $21,593 $27,459
12/31/96 $27,306 $33,766
12/31/97 $35,595 $45,034
12/31/98 $43,218 $57,967
AVERAGE ANNUAL STANDARD TOTAL RETURNS
FOR THE PERIOD ENDED 12/31/98
FUND/INDEX 1 YEAR 5 YEAR 10 YEAR
- ---------- ------ ------ -------
LEXINGTON GROWTH
AND INCOME FUND 21.42% 18.90% 15.76%
S & P 500 28.72% 24.09% 19.22%
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund with a similar investment in the Standard & Poor's 500
Stock Index ("S&P 500"). Results for the Fund, and the S&P 500 include the
reinvestment of all dividend and capital gain distributions. 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 at their original cost. Total
return represents past performance and it is not predictive of future results.
- --------------------------------------------------------------------------------
*21.42%, 18.90% and 15.76% are the one, five and ten year average annual
standard total returns, respectively, for the period ended December 31, 1998.
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 at their
original cost. Total return represents past performance and is not predictive of
future results.
2
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998
NUMBER VALUE
OF SHARES SECURITY (NOTE 1)
================================================================================
COMMON STOCKS: 99.5%
BANKING: 1.5%
80,400 Union Planters Corporation ..................... $3,643,125
----------
CAPITAL EQUIPMENT: 1.3%
54,000 Federal-Mogul Corporation ...................... 3,213,000
----------
COMPUTERS: 1.8%
105,000 Compaq Computer Corporation .................... 4,403,438
----------
CONSUMER DURABLE GOODS: 2.5%
73,700 EMC Corporation1 ............................... 6,264,500
----------
CONSUMER NONDURABLE GOODS: 9.1%
69,500 Anheuser-Busch Companies ....................... 4,560,937
63,000 Dole Food Company, Inc. ........................ 1,890,000
80,700 Philip Morris Companies, Inc. .................. 4,317,450
108,000 Saks, Inc. ..................................... 3,408,750
140,600 Sara Lee Corporation ........................... 3,963,162
50,800 Unilever NV .................................... 4,213,225
----------
22,353,524
----------
DRUGS: 2.2%
43,700 Pfizer, Inc. ................................... 5,481,619
----------
ELECTRICAL & ELECTRONICS: 3.2%
81,800 BMC Software, Inc.1 ............................ 3,647,769
68,200 Motorola, Inc. ................................. 4,164,462
----------
7,812,231
----------
ENERGY SOURCES: 8.3%
35,000 Chevron Corporation ............................ 2,902,812
136,000 Conoco, Inc. "A"1 .............................. 2,839,000
67,000 Dominion Resources, Inc. ....................... 3,132,250
60,500 Exxon Corporation .............................. 4,424,062
64,600 Texaco, Inc. ................................... 3,415,725
114,500 The Williams Companies, Inc. ................... 3,570,969
----------
20,284,818
----------
FINANCIAL SERVICES: 12.5%
177,700 Ace, Ltd. ...................................... 6,119,544
69,600 BankAmerica Corporation ........................ 4,184,700
91,200 Federal National Mortgage Association .......... 6,748,800
194,600 Foremost Corporation of America ................ 4,086,600
70,000 Morgan Stanley Dean Witter
and Company .................................... 4,970,000
95,900 NAC Re Corporation ............................. 4,501,306
----------
30,610,950
----------
HEALTH & PERSONAL CARE: 9.9%
38,500 Bristol-Myers Squibb Company ................... 5,151,781
93,000 Cardinal Health, Inc. .......................... 7,056,375
50,700 Johnson and Johnson ............................ 4,252,462
105,300 Medtronic, Inc. ................................ 7,818,525
----------
24,279,143
----------
NUMBER
OF SHARES
OR PRINCIPAL VALUE
AMOUNT SECURITY (NOTE 1)
- --------------------------------------------------------------------------------
HOUSHOLD PRODUCTS: 2.5%
66,000 Procter & Gamble Company .................... $ 6,026,625
------------
INSURANCE: 1.9%
62,700 EXCEL, Ltd. ................................. 4,702,500
------------
MATERIALS: 4.1%
107,200 Fort James Corporation ...................... 4,288,000
94,900 Martin Marietta Materials, Inc. ............. 5,901,594
------------
10,189,594
------------
MERCHANDISING: 16.0%
83,900 Costco Companies, Inc.1 ..................... 6,069,641
116,100 Gap, Inc. ................................... 6,530,625
86,000 Rite Aid Corporaton ......................... 4,262,375
139,100 Safeway, Inc. ............................... 8,476,406
143,800 The Home Depot, Inc. ........................ 8,798,762
176,100 The TJX Companies, Inc. ..................... 5,106,900
------------
39,244,709
------------
MULTI-INDUSTRY: 3.2%
104,300 Tyco International, Ltd. .................... 7,868,131
------------
SERVICES: 13.2%
76,000 Computer Associates International, Inc. ..... 3,239,500
115,300 Ecolab, Inc. ................................ 4,172,419
157,700 HBO and Company ............................. 4,528,947
78,800 Network Associates, Inc.1 ................... 5,227,888
86,900 Pitney Bowes, Inc. .......................... 5,740,831
144,100 Sungard Data Systems, Inc.1 ................. 5,718,969
63,000 Time Warner, Inc. ........................... 3,909,938
------------
32,538,492
------------
TELECOMMUNICATIONS: 6.3%
105,700 Comcast Corporation ......................... 6,206,572
45,900 Lucent Technologies, Inc. ................... 5,049,000
74,050 Marsh & McLennan Companies, Inc. ............ 4,327,297
------------
15,582,869
------------
TOTAL COMMON STOCKS
(cost $169,807,585).......................... 244,499,268
------------
SHORT-TERM INVESTMENT: 1.8%
U.S. GOVERNMENT AGENCY OBLIGATION
$4,400,000 Federal Home Loan Mortgage
Corporation 4.5%, due 01/04/99
(cost $4,398,442)............................ 4,398,442
------------
TOTAL INVESTMENTS: 101.3%
(cost $174,206,027+)(Note 1)................. 248,897,710
Liabilities in excess of other assets: (1.3%) (3,107,949)
------------
TOTAL NET ASSETS: 100.0%
(equivalent to $21.91 per share on
11,218,224 shares outstanding) .............. $245,789,761
============
- ---------------------
1 Non-income producing security.
+ Aggregate cost for Federal income purposes is $174,216,429.
The Notes to Financial Statements are an integral part of this statement.
3
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS
Investments, at value
(cost $174,206,027) (Note1)......................... $248,897,710
Cash .................................................. 80,848
Receivable for shares sold ............................ 137,333
Dividends and interest receivable. .................... 103,502
------------
Total Assets ....................................... 249,219,393
------------
LIABILITIES
Due to Lexington Management Corporation
(Note 2) ........................................... 124,823
Payable for shares redeemed ........................... 71,990
Distributions payable ................................. 3,064,834
Accrued expenses ...................................... 167,985
------------
Total Liabilities .................................. 3,429,632
------------
NET ASSETS (equivalent to $21.91 per share on
11,218,224 shares outstanding) (Note 4) ............ $245,789,761
============
NET ASSETS consist of:
Capital stock-authorized 1,000,000,000 shares,
$.001 par value per share........................... $ 11,218
Additional paid-in capital ............................ 170,728,173
Accumulated net realized gain on investments (Note 1) 358,687
Unrealized appreciation of investments ................ 74,691,683
------------
TOTAL NET ASSETS ................................... $245,789,761
============
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENT OF OPERATIONS
Year ended December 31, 1998
INVESTMENT INCOME
Dividends ................................... $2,289,170
Interest .................................... 565,365
----------
2,854,535
Less: foreign tax expense ................... 6,400
----------
Total investment income ................................ $ 2,848,135
EXPENSES
Investment advisory fee (Note 2). ......... 1,466,333
Distribution expenses (Note 3) ............ 517,576
Transfer agent and shareholder
servicing expenses (Note 2) .............. 284,970
Accounting expenses (Note 2).. ............ 192,926
Printing and mailing expenses. ............ 53,153
Professional fees ......................... 43,287
Custodian expenses ........................ 29,823
Registration fees ......................... 21,925
Computer processing fees .................. 18,956
Directors' fees and expenses .............. 17,573
Other expenses ............................ 64,566
----------
Total expenses ......................................... 2,711,088
-----------
Net investment income .................................. 137,047
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 5)
Net realized gain on investments ............ 25,439,329
Net change in unrealized appreciation
of investments ............................. 20,019,331
----------
Net realized and unrealized gain on
investments .............................................. 45,458,660
-----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ............................................... $45,595,707
===========
The Notes to Financial Statements are an integral part of these statements.
4
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
<S> <C> <C>
Net investment income .......................... $ 137,047 $ 467,120
Net realized gain from investment
transactions ................................. 25,439,329 35,330,683
Net change in unrealized appreciation of
investments .................................. 20,019,331 20,980,248
------------ ------------
Net increase in net assets resulting
from operations ............................ 45,595,707 56,778,051
Distributions to shareholders from net
invesment income (Note 1) .................... (13,349) (691,040)
Distributions to shareholders from net
realized gains from security transactions
(Note 1) ..................................... (27,112,974) (36,280,960)
Increase (decrease) in net assets from
capital share transactions (Note 4) .......... (716,787) 7,922,045
------------ ------------
Net increase in net assets ..................... 17,752,597 27,728,096
NET ASSETS:
Beginning of period ............................ 228,037,164 200,309,068
------------ ------------
End of period (including undistributed net
investment income of $0 and $0 in 1998
and 1997, respectively) (Note 1) ............. $245,789,761 $228,037,164
============ ============
</TABLE>
LEXINGTON GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
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 Securities 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 prices is used. Securities traded on the over-the-counter market are
valued at the mean between the last current bid and asked prices. 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 semi-annually and dividends from 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, 1998, 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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE
The 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. For 1998, LMC has agreed to voluntarily limit the total
expenses of the Fund (excluding interest, taxes, brokerage commissions, 12B-1
fees and extraordinary expenses but including management fee, and operating
expenses) to an annual rate of 2.50% of the Fund's average net assets. No
reimbursement was required for the year ended December 31, 1998. The Fund also
reimburses LMC for certain expenses, including accounting and shareholder
servicing costs of $435,270 which are incurred by the Fund, but paid by LMC.
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,
1998 were $517,576 and are set forth in the statement of operations.
5
<PAGE>
LEXINGTON GROWTH AND INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year ended
December 31, 1998 December 31, 1997
-------------------------------- ------------------------------
Shares Amount Shares Amount
--------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Shares sold ......... 840,489 $ 18,202,069 1,769,495 $ 37,859,449
Shares issued on
reinvestment of
dividends ......... 1,097,314 23,855,594 1,653,833 32,896,215
--------- ------------- --------- ------------
1,937,803 42,057,663 3,423,328 70,755,664
Shares redeemed ..... (1,967,968) (42,774,450) (2,965,147) (62,833,619)
---------- ------------- ---------- ------------
Net increase
(decrease) ........ (30,165) $ (716,787) 458,181 $ 7,922,045
========== ============= ========== ============
</TABLE>
5. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1998, excluding short-term securities, were $141,747,402 and
$163,885,528, respectively. At December 31, 1998, the aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax
cost amounted to $76,987,286 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over value amounted to
$2,306,005.
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.
7. TAXATION INFORMATION (UNAUDITED)
The following tax information represents the designation of various tax benefits
relating to the year ended December 31, 1998:
The percentage of investment company taxable income eligible for the dividends
received deduction available to certain corporate shareholders with respect to
the year ended December 31, 1998, is 100%.
For the year ended December 31, 1998, the percentage of ordinary income
distributions paid by the Fund derived from agency and direct obligations of the
United States government were as follows.
<TABLE>
<S> <C>
U.S. Treasury ......................... 0.03%
Federal Home Loan Bank ................ 6.51
Federal Home Loan Mortgage Corporation 6.73
Federal National Mortgage Association . 0.05
</TABLE>
The Fund designates $27,112,974, whether taken in shares or cash, as 20%
long-term capital gain distributions.
================================================================================
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Net asset value, beginning of period ..................................... $ 20.27 $ 18.56
------- -------
Income (loss) from investment operations:
Net investment income ................................................... -- 0.05
Net realized and unrealized gain (loss) on investments .................. 4.30 5.46
------- -------
Total income (loss) from investment operations ........................... 4.30 5.51
------- -------
Less distributions:
Distributions from net investment income ................................ -- (0.07)
Distributions from net realized gains ................................... (2.66) (3.73)
Distributions in excess of net realized gains (temporary book-tax difference) -- --
-------- --------
Total distributions ...................................................... (2.66) ( 3.80)
-------- --------
Net asset value, end of period ........................................... $ 21.91 $ 20.27
======== ========
Total return ............................................................. 21.42% 30.36%
Ratio to average net assets:
Expenses ................................................................ 1.16% 1.17%
Net investment income ................................................... 0.06% 0.21%
Portfolio turnover rate .................................................. 63.20% 88.15%
Net assets, end of period (000's omitted) ................................ $245,790 $228,037
<CAPTION>
Year ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period ..................................... $ 15.71 $ 14.36 $ 16.16
------- ------- -------
Income (loss) from investment operations:
Net investment income ................................................... 0.07 0.22 0.17
Net realized and unrealized gain (loss) on investments .................. 4.08 3.00 (0.68)
------ ------- -------
Total income (loss) from investment operations ........................... 4.15 3.22 (0.51)
------ ------- -------
Less distributions:
Distributions from net investment income ................................ (0.13) (0.22) (0.16)
Distributions from net realized gains ................................... (1.17) (1.65) (0.91)
Distributions in excess of net realized gains (temporary book-tax differen -- -- (0.22)
------- -------- -------
Total distributions ...................................................... (1.30) (1.87) (1.29)
------- -------- -------
Net asset value, end of period ........................................... $ 18.56 $ 15.71 $ 14.36
======= ======== =======
Total return ............................................................. 26.46% 22.57% (3.11)%
Ratio to average net assets:
Expenses ................................................................ 1.13% 1.09% 1.15%
Net investment income ................................................... 0.43% 1.38% 1.06%
Portfolio turnover rate .................................................. 101.12% 159.94% 63.04%
Net assets, end of period (000's omitted) ................................ $200,309 $138,901 $124,829
</TABLE>
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Lexington Growth and Income Fund, Inc.:
We have audited the accompanying statement of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Growth and
Income Fund, Inc. as of December 31, 1998, the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Lexington Growth and Income Fund, Inc. as of December 31, 1998, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
New York, New York
February 8, 1999
7
<PAGE>
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.
--------------------------------------
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, 1998
The Lexington Group
of No Load
Investment Companies
