DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
The Lexington Convertible Securities Fund's performance rebounded
positively in the last nine months of 1997. This followed a disappointing
negative performance during the initial three months of the year. Comparative
total return performance measurements for the entire year ended December 31,
1997 are:
1 YEAR
--------
Lexington Convertible Securities Fund ......................... +13.16%*
Unmanaged Standard & Poor's 500 Composite Stock Price Index ... +33.36%
Unmanaged Russell 2000 Stock Index ............................ +22.36%
Unmanaged Lehman Gov./Corp. Bond Index ........................ + 9.76%
Performance was impacted by the market's continual obsession for a short
list of very large capitalized stocks driving the S&P 500 Index versus the
relative neglect of middle and small capitalized stocks represented by the
Russell 2000 Index. This factor has been prevalent since early 1994. Further,
those stocks in the Russell 2000 Index with a greater than average earnings
growth orientation have lagged even further (+12.96% return for the subset
Russell 2000 Growth Stock Index).
Looking ahead, there is a very high probability that many of the trends of
the last several years will change. The economy is slowing which will cause the
S&P 500 Index earnings growth to recede markedly. Many earnings disappointments
will occur in the large capitalized, multinational companies. It seems unlikely
that the S&P 500 Index can make much upward progress in this climate.
In contrast, many domestically oriented smaller capitalized growth
companies are actually accelerating their earnings growth. Coupled with the
relative undervaluation, by several measurements comparable to the levels of
1990, a strong case exists for relative outperformance in the Russell 2000
Index, particularly in its Growth Index.
The underlying stocks of our Fund's convertible securities are best
represented by the Russell 2000 Index. These stocks, on average, are estimated
to have earnings growth of +25% next year, and +24% per year for the next five
years. This is compared to the estimated S&P 500 Index earnings growth of +5%
next year and +7% per year for the next five years. Yet, the forward
Price/Earnings Ratios of our stocks average 19x earnings versus 22x earnings for
the S&P 500 Index indicating that our portfolio is filled with bargains. This,
coupled with the relative downside protection inherit in convertible securities,
makes for a compelling opportunity.
1
<PAGE>
We are very excited about our Fund's portfolio and its prospects. We
appreciate your continued support and we always welcome the opportunity to
discuss any questions you may have about your investment.
Sincerely, Sincerely,
/s/ Robert M. DeMichele /s/ Richard B. Russell
- ----------------------- ----------------------
Robert M. DeMichele Richard B. Russell
Chairman of the Board President and Portfolio Manager
February, 1998 February, 1998
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
LEXINGTON CONVERTIBLE SECURITIES FUND,
THE UNMANAGED STANDARD & POOR'S 500 STOCK PRICE INDEX AND
THE UNMANAGED LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
[The following table represents a line graph in the printed report.]
Lexington
Year Convertible S&P 500 LBG/CBI
=============================================
01/20/88 $10,000 $10,000 $10,000
12/31/88 $10,659 $11,863 $10,402
12/31/89 $11,423 $15,616 $11,882
12/31/90 $11,036 $15,132 $12,866
12/31/91 $16,008 $19,732 $14,940
12/31/92 $18,061 $21,234 $16,073
12/31/93 $19,240 $23,370 $17,845
12/31/94 $19,491 $23,676 $17,221
12/31/95 $23,122 $32,574 $20,534
12/31/96 $24,252 $40,056 $21,129
12/31/97 $27,443 $53,422 $23,190
AVERAGE ANNUAL STANDARD TOTAL RETURNS
FOR THE PERIOD ENDED 12/31/97
----------------------------------------------------------------------
SINCE INCEPTION
FUND/INDEX 1 YEAR 5 YEAR (1/20/88)
----------------------------------------------------------------------
LEXINGTON CONVERTIBLE
SECURITIES FUND 13.16% 8.73% 10.68%
----------------------------------------------------------------------
LEHMAN BROTHERS GOVT./
CORPORATE BOND INDEX 9.75% 7.61% 8.83%
----------------------------------------------------------------------
S & P 500 33.37% 20.27% 18.35%
----------------------------------------------------------------------
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") and the Lehman Brothers Government/Corporate Bond Index.
Results for the Fund, the S&P 500 and the Lehman Brothers Government/Corporate
Bond Index include the reinvestment of all dividend and capital gain
distributions. The Fund's inception date was 1/20/88. 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.
- --------------------------------------------------------------------------------
*13.16%, 8.73% and 10.68% are the one year, five year and since commencement
(1/20/88) average annual standard total returns, respectively, for the period
ended December 31, 1997. 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 CONVERTIBLE SECURITIES FUND
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1997
PRINCIPAL VALUE
AMOUNT OR SHARES SECURITY DESCRIPTION (NOTE 1)
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS: 47.6%
BUSINESS SERVICES: 4.0%
$ 500,000 Corestaff, Inc., 2.94%, due 08/15/2004 ...... $ 418,125
-----------
COMPUTER HARDWARE & PERIPHERALS: 4.0 %
400,000 Adaptec, Inc., 4.75%, due 02/01/2004 ........ 412,000
-----------
COMPUTER SOFTWARE & SERVICES: 10.6%
875,000 Automatic Data Processing Services, Inc.
0.00%*, due 02/20/2012 .................... 693,954
-----------
420,000 National Data Corporation,
5.00%, due 11/01/2003 ....................... 405,300
-----------
1,099,254
-----------
DIVERSIFIED COMPANY: 5.1%
420,000 Thermo Electron Corporation,
4.25%, due 01/01/2003 ..................... 527,100
-----------
MEDICAL SERVICES: 7.3%
350,000 FPA Medical Management,
6.50%, due 12/15/2001 ..................... 357,000
410,000 Phycor, Inc.,
4.50%, due 02/15/2003 ..................... 393,600
-----------
750,600
-----------
RETAIL STORES (SPECIAL LINE): 5.9%
450,000 Home Depot, Inc.,
3.25%, due 10/01/2001 ..................... 612,000
-----------
SEMICONDUCTOR: 6.1%
450,000 Analog Devices, Inc.,
3.50%, due 12/01/2000 .................... 631,688
-----------
TELECOMMUNICATIONS SERVICE: 4.6 %
1,300,000 United States Cellular Corporation,
0.00%*, due 06/15/2015 ................... 473,693
-----------
TOTAL CONVERTIBLE BONDS
(cost $4,316,545) ......................... 4,924,460
-----------
CONVERTIBLE PREFERRED STOCK: 3.7%
TELECOMMUNICATION EQUIPMENT
8,000 Qualcomm, Inc. (cost $408,320) .............. 386,000
-----------
COMMON STOCKS: 37.1%
COMPUTER SOFTWARE & SERVICES: 10.5%
16,852 Sterling Commerce, Inc. ..................... 647,749
10,582 Sterling Software, Inc. ..................... 433,862
-----------
1,081,611
-----------
FINANCIAL SERVICES: 4.2%
14,939 First Data Corporation ...................... 436,965
-----------
MANUFACTURED HOUSING: 22.4%
58,590 Clayton Homes, Inc. ......................... 1,054,620
37,994 Oakwood Homes Corporation ................... 1,260,926
-----------
2,315,546
-----------
TOTAL COMMON STOCKS
(cost $956,087) ........................... 3,834,122
-----------
TOTAL LONG-TERM INVESTMENTS ................. 9,144,582
-----------
SHORT-TERM INVESTMENT: 9.7%
U.S. GOVERNMENT AGENCY OBLIGATION
$1,000,000 Federal National Mortgage Association
5.66%, due 01/07/98
(cost $999,057) ........................... 999,057
-----------
TOTAL INVESTMENTS: 98.1%
(cost $6,680,009+) (Note 1) ............... 10,143,639
Other assets in excess of liabilities: 1.9%. 201,551
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $15.08 per share
on 686,124 shares outstanding) ......... $10,345,190
===========
*Zero Coupon Bond.
+Aggregate cost for Federal income tax purposes is identical.
The Notes to Financial Statements are an integral part of this statement.
3
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments, at value (cost $6,680,009) (Note 1) ................................. $10,143,639
Cash ............................................................................. 239,320
Receivable for shares sold ....................................................... 735
Dividends and interest receivable ................................................ 42,521
-----------
Total Assets ........................................................... 10,426,215
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ................................. 8,689
Payable for shares redeemed ...................................................... 5,317
Distributions payable ............................................................ 2,590
Accrued expenses ................................................................. 64,429
-----------
Total Liabilities ...................................................... 81,025
-----------
NET ASSETS (equivalent to $15.08 per share on 686,124 shares outstanding) (Note 4) $10,345,190
===========
NET ASSETS consist of:
Capital stock--authorized 1,000,000,000 shares, $.10 par value per share ......... $ 68,612
Additional paid in capital (Note 1) .............................................. 6,791,036
Undistributed net investment income .............................................. 1,763
Accumulated net realized gain on investments ..................................... 20,149
Unrealized appreciation on investments ........................................... 3,463,630
-----------
TOTAL NET ASSETS ....................................................... $10,345,190
===========
The Notes to Financial Statements are an integral part of this statement.
4
</TABLE>
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
STATEMENT OF OPERATIONS
Year ended December 31, 1997
INVESTMENT INCOME
Dividends ..................... $ 13,428
Interest ...................... 308,722
-------
Total investment income ..... $322,150
Expenses
Investment advisory fee
(Note 2) .................... 101,661
Printing and mailing expenses . 28,090
Distribution expense (Note 3) . 25,415
Registration fees ............. 19,637
Transfer agent and shareholder
servicing expense (Note 2) .. 19,805
Accounting expenses (Note 2) .. 14,910
Professional fees .............. 11,342
Directors' fees and expenses ... 7,695
Computer processing fees ....... 5,288
Custodian expense .............. 1,735
Other expenses ................. 6,415
-------
Total expenses ................ 241,993
--------
Net investment income ...... 80,157
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS (NOTE 5)
Net realized gain on
investments .................. 199,193
Net change in unrealized
appreciation on
investments .................. 914,284
----------
Net realized and unrealized
gain ....................... 1,113,477
----------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................ $1,193,634
==========
LEXINGTON CONVERTIBLE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31, 1997 and 1996
1997 1996
-------- ---------
Net investment income ............ $ 80,157 $ 83,352
Net realized gain from security
transactions .................. 199,193 433,015
Net change in unrealized
appreciation (depreciation)
of investments ................ 914,284 (29,508)
---------- ----------
Increase in net assets
resulting from operations . 1,193,634 486,859
Distributions to shareholders
from net investment income .... (76,039) (87,725)
Distributions to shareholders
from net realized gains on
security transactions ......... (177,060) (432,556)
Decrease in net assets from capital
share transactions (Note 4) ... (1,803,790) (398,694)
---------- ----------
Net decrease
in net assets ............. (863,255) (432,116)
NET ASSETS
Beginning of period ........... 11,208,445 11,640,561
---------- ----------
End of period (including
undistributed net investment
income of $1,763 and
distributions in excess of
net investment income of $2,355,
1997 and 1996, respectively) $10,345,190 $11,208,445
========== ==========
The Notes to Financial Statements are an integral part of this statement.
5
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Lexington Convertible Securities Fund (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 total return which it seeks
to achieve by providing capital appreciation, current income and conservation of
the shareholder's capital. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements:
INVESTMENTS As authorized by the Trustees, securities are valued on the
basis of valuations furnished by a pricing service which determines valuations
based upon market transactions for normal institutional-size trading units of
such securities. Debt securities are valued at the mean between the current bid
and asked price. Equity securities listed on a national securities exchange are
valued at the last reported sales price; if no sales price is reported for that
day the mean between the current 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 securities are
valued by Fund management in good faith under the direction of the Fund's Board
of Trustees. Security transactions are accounted for on the trade date. The Fund
records interest income on the accrual basis. In computing net investment
income, the Fund amortizes premiums and does not accrue discounts on convertible
fixed income securites in the portfolio. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
FEDERAL INCOME TAXES It is the Fund's intention to comply with the
requirements of the Internal Revenue Code applicable to "regulated investment
companies" and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income taxes is required.
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, 1997, reclassifications were
made to the Fund's capital accounts to reflect permanent book/tax differences
and income and gains available for distribution 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 operatons 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 1.00% of the Fund's average daily net assets. In
connection with providing investment advisory services,
6
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 (continued)
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE (CONTINUED)
LMC has entered into a sub-advisory contract with the Fund's former advisor,
Ariston Capital Management Corporation ("Ariston"), under which Ariston provides
the Fund with investment management services. Pursuant to the terms of the
sub-advisory contract between LMC and Ariston, LMC pays Ariston a monthly
sub-advisory fee at the annual rate of 0.75% of the Fund's average daily net
assets up to $7 million and 0.50% of the Fund's average daily net assets in
excess of $7 million.
For 1997, LMC has agreed to voluntarily limit the total expenses of the Fund
(including management fees, but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) to an annual rate of 2.50% of the
Fund's average daily net assets. No reimbursement was required for the year
ended December 31, 1997.
The Fund reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $24,400 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,
1997 were $25,415 and are set forth in the statement of operations.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold .................................... 77,731 $ 1,138,145 171,179 $ 2,414,604
Shares issued on reinvestment of dividends ..... 16,820 247,886 36,510 497,981
----------- ----------- ----------- -----------
94,551 1,386,031 207,689 2,912,585
Shares redeemed ................................ (229,087) (3,189,821) (239,163) (3,311,279)
----------- ----------- ----------- -----------
Net decrease ................................... (134,536) $(1,803,790) (31,474) $ (398,694)
=========== =========== =========== ===========
</TABLE>
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1997, excluding short-term securities, were $2,819,408 and
$2,536,266, respectively.
At December 31, 1997, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$3,584,208 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $120,578.
7
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996 (continued)
6. TAX INFORMATION (UNAUDITED)
The percentage of investment company taxable income eligible for the dividend
received deduction available to certain corporate shareholders with respect to
the year ended December 31, 1997, is 13.6%. Capital gain distributions paid to
shareholders by the Fund during the year ended December 31, 1997, whether taken
in shares or cash:
$177,060 are designated as 28 percent long-term capital gains.
<TABLE>
<CAPTION>
LEXINGTON CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.66 $ 13.66 $ 11.84 $ 14.10 $ 13.80
--------- -------- --------- ------- -------
Income from investment operations:
Net investment income 0.11 0.11 0.15 0.08 --
Net realized and unrealized gain on
investments 1.68 0.55 2.04 0.10 0.89
--------- -------- --------- ------- -------
Total income from investment operations 1.79 0.66 2.19 0.18 0.89
--------- -------- --------- ------- -------
Less distributions:
Distributions from net investment income (0.11) (0.11) (0.15) (0.07) --
Distributions in excess of net investment
income (temporary book-tax difference) -- -- -- (0.05) --
Distributions from net realized gains (0.26) (0.55) (0.22) (2.32) (0.59)
--------- -------- --------- ------- -------
Total distributions (0.37) (0.66) (0.37) (2.44) (0.59)
--------- -------- --------- ------- -------
Net asset value, end of period $ 15.08 $ 13.66 $ 13.66 $ 11.84 $ 14.10
--------- -------- --------- ------- -------
Total return 13.16% 4.89% 18.63% 1.30% 6.53%
Ratio to average net assets:
Expenses, before reimbursement or waivers 2.38% 2.39% 2.52% 2.81% 2.76%
Expenses, net of reimbursement or waivers 2.38% 2.39% 2.52% 2.75% 2.76%
Net investment income (loss), before
reimbursement or waivers 0.79% 0.77% 1.24% 0.50% (0.04%)
Net investment income (loss) 0.79% 0.77% 1.24% 0.56% (0.04%)
Portfolio turnover rate 30.47% 18.45% 11.23% 38.14% 6.53%
Average commission paid on equity
security transactions** $ 0.04 $ 0.04 -- -- --
Net assets, end of period (000's omitted) $ 10,345 $ 11,208 $ 11,641 $ 8,117 $ 8,319
</TABLE>
** In accordance with SEC disclosure guidelines, the average commissions are
calculated for periods beginning with the year ended December 31, 1996, but
not for prior periods.
8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
Lexington Convertible Securities Fund:
We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Convertible
Securities Fund as of December 31, 1997, the related statements 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, 1997 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 Convertible Securities Fund as of December 31, 1997, 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 the five-year period then ended in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
February 12, 1998
9
<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.
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
1-800-526-0057. Read the prospectus carefully before you invest or send money.
*Redemptions on shares of Lexington Troika Dialog Russia Fund, Inc. held less
than 365 days are subject to a redemption fee of 2% of the redemption proceeds.
10
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE>
LEXINGTON
CONVERTIBLE SECURITIES FUND
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
SUB-ADVISER
- --------------------------------------------------------------------------------
ARISTON CAPITAL MANAGEMENT CORPORATION 40 Lake Bellevue Drive--Suite 220
Bellevue, Washington 98005
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 Convertible Securities Fund 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
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LEXINGTON
CONVERTIBLE
SECURITIES
FUND
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The Fund's investment
objective is total return,
which it seeks to achieve
by providing current income,
capital appreciation and
conservation of capital.
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ANNUAL REPORT
DECEMBER 31, 1997
The Lexington Group of
No Load
Investment Companies
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