DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
During 1998, our Fund was buffeted by the wide swings in performance,
volatility, and liquidity of financial securities. Listed below are some
comparative total return performance measurements for the year ended December
31, 1998:
1 Year
----------
Lexington Convertible Securities Fund +2.09%*
Unmanaged Standard & Poor's 500 Stock Price Index +28.72%
Unmanaged Russell 2000 Stock Index (2.55)%
Unmanaged Lehman Gov./Corp. Bond Index + 9.47%
Stocks, in particular, had a roller coaster year, advancing in the first
few months, trading sideways for several more months, then plummeting. After
bottoming out in early October, a new strong advance got underway in the final
months of the year. The average stock, from peak to trough, fell 37%, the same
as during the 1990 and 1987 bear markets. For the year as a whole, the market
again rewarded only a handful of the largest companies, driving their
valuations to historic extremes. Only 50 out of the 500 stocks in the S&P 500
accounted for 94% of the Index's gain. While mid and small capitalized
companies have, over time, produced larger earnings gains than this selective
group of very large companies, their stocks and convertible securities were
essentially unchanged for the year, producing the largest valuation discrepancy
in the last quarter century. Over time, investors value stocks on their
companies' earnings, thus it is inevitable that this wide imbalance in
valuation will be corrected.
Despite our disappointment in last year's performance, we are very excited
about our Fund's prospects going forward for several reasons:
1. Our stock market composite risk forecasting model turned extremely
bullish last fall for the first time since the start of the bull market in
1990. It continues bullish indicating a positive environment for stocks and
convertible securities in general.
2. Investors, sooner or later, will value a dollar of future earnings for
mid and small capitalized companies at about the same ratio as they do for the
very large companies, closing the valuation gap.
3. We have and continue to emphasize convertible securities of high
quality, niche growth companies with superior businesses at significant
valuation discounts. These companies are leaders in high growth industries and
exhibit solid and predictable earnings growth that is, on average, about three
times faster than the earnings growth of the stock market overall. These are
some of the best businesses in the world and their stocks and convertible
securities are bargains.
1
<PAGE>
We appreciate your continued support. We always welcome the opportunity to
discuss any questions you may have about your investment.
Sincerely,
/S/ RICHARD B. RUSSELL /S/ ROBERT M. DEMICHELE
------------------------------- -----------------------
Richard B. Russell Robert M. DeMichele
President and Portfolio Manager Chairman of the Board
February, 1999 February, 1999
- --------------------------------------------------------------------------------
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.]
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
LEXINGTON CONVERTIBLE SECURITIES FUND, INC., AND
THE UNMANAGED LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX
Year Lexington
Convertible S & P 500 LBG/CBI
=========================================================
12/31/88 $10,000 $10,000 $10,000
12/31/89 $10,716 $13,164 $11,423
12/31/90 $10,353 $12,756 $12,369
12/31/91 $15,018 $16,634 $14,363
12/31/92 $16,944 $17,900 $15,451
12/30/93 $18,050 $19,700 $17,156
12/31/94 $19,491 $19,958 $16,555
12/31/95 $21,692 $27,459 $19,740
12/30/96 $22,752 $33,766 $20,313
12/31/97 $25,746 $45,034 $22,293
12/31/98 $26,285 $57,967 $24,405
AVERAGE ANNUAL STANDARD TOTAL RETURNS
FOR THE PERIOD ENDED 12/31/98
----------------------------------------------------------------------
SINCE INCEPTION
FUND/INDEX 1 YEAR 5 YEAR (1/20/88)
----------------------------------------------------------------------
LEXINGTON CONVERTIBLE
SECURITIES FUND 2.09% 7.81% 10.15%
----------------------------------------------------------------------
LEHMAN BROTHERS GOVT./
CORPORATE BOND INDEX 9.47% 7.30% 9.33%
----------------------------------------------------------------------
S & P 500 28.72% 24.09% 19.21%
----------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
*2.09%, 7.81% and 10.15% 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 CONVERTIBLE SECURITIES FUND
STATEMENT OF NET ASSETS
(INCLUDING THE PORTFOLIO OF INVESTMENTS)
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT SECURITY DESCRIPTION (NOTE 1)
=========== ========================================= ============
<S> <C> <C>
CONVERTIBLE BONDS: 57.5%
BUSINESS SERVICES: 3.9%
$500,000 Metamor Worldwide, Inc.,
2.94%, due 08/15/2004 ................... $ 402,500
---------
COMPUTER SOFTWARE & SERVICES: 13.0%
875,000 Automatic Data Processing Services, Inc.,
0.00%*, due 02/20/2012 .................. 906,658
420,000 National Data Corporation,
5.00%, due 11/01/2003 ................... 447,825
---------
1,354,483
---------
LEISURE: 4.3%
475,000 Action Performance Companies, Inc.,
4.75%, due 01/01/2005 ................... 449,469
---------
PHARMACEUTICALS: 12.6%
330,000 Chiron Corporation (Cetus),
5.25%, due 5/21/2002 .................... 336,188
420,000 Elan Plc, (Athena Neuroscience),
4.74%, due 11/15/2004 ................... 493,500
335,000 Genzyme Corporation,
5.25%, due 06/01/2005 ................... 475,280
---------
1,304,968
---------
RETAIL STORES (SPECIAL LINE): 11.5%
450,000 Home Depot, Inc.,
3.25%, due 10/01/2001 ................... 1,194,980
---------
SEMICONDUCTOR: 12.2%
450,000 Analog Devices, Inc.,
3.50%*, due 12/01/2000 .................. 678,937
390,000 Level One Communications, Inc.,
4.00%, due 09/01/2004 ................... 583,050
---------
1,261,987
---------
TOTAL CONVERTIBLE BONDS
(cost $4,231,356) ....................... 5,968,387
---------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES SECURITY DESCRIPTION (NOTE 1)
========== ============================================= ==============
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS: 10.2%
CONSUMER PRODUCTS: 3.4%
6,700 Newell Companies ............................ $ 355,100
-----------
TELECOMMUNICATION EQUIPMENT: 6.8%
6,500 Loral Space and Commincation, Inc. .......... 347,750
8,000 Qualcomm, Inc. .............................. 358,000
-----------
705,750
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $1,266,890)........................... 1,060,850
-----------
COMMON STOCKS: 28.1%
COMPUTER SOFTWARE & SERVICES: 12.8%
16,852 Sterling Commerce, Inc. ..................... 758,340
21,164 Sterling Software, Inc. ..................... 572,751
-----------
1,331,091
-----------
MANUFACTURED HOUSING: 15.3%
73,237 Clayton Homes, Inc. ......................... 1,011,586
37,994 Oakwood Homes Corporation ................... 577,034
-----------
1,588,620
-----------
TOTAL COMMON STOCKS
(cost $628,380)............................. 2,919,711
-----------
TOTAL INVESTMENTS: 95.8%
(cost $6,126,626+) (Note 1) ................. 9,948,948
Other assets in excess of liabilities: 4.2% 436,358
-----------
TOTAL NET ASSETS: 100.0%
(equivalent to $15.36 per share
on 676,173 shares outstanding) ............. $10,385,306
===========
</TABLE>
* 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, 1998
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $6,126,626) (Note 1) ................................... $ 9,948,948
Cash ............................................................................... 371,786
Receivable for shares sold ......................................................... 100,000
Dividends and interest receivable .................................................. 50,408
-----------
Total Assets ................................................................... 10,471,142
-----------
LIABILITIES
Due to Lexington Management Corporation (Note 2) ................................... 8,183
Payable for shares redeemed ........................................................ 20,851
Accrued expenses ................................................................... 56,802
-----------
Total Liabilities .............................................................. 85,836
-----------
NET ASSETS (equivalent to $15.36 per share on 676,173 shares outstanding) (Note 4) . $10,385,306
===========
NET ASSETS consist of:
Capital stock-authorized 1,000,000,000 shares, $.10 par value per share ............ $ 67,617
Additional paid-in capital ......................................................... 6,766,881
Accumulated net realized loss of investments (Notes 1 and 6) ....................... (271,514)
Unrealized appreciation of investments ............................................. 3,822,322
-----------
TOTAL NET ASSETS ............................................................... $10,385,306
===========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
4
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends .............................. $ 52,626
Interest ............................... 176,102
--------
Total investment income ............... $228,728
Expenses
Investment advisory fee
(Note 2) .............................. 104,455
Printing and mailing expenses .......... 31,885
Transfer agent and shareholder
servicing expenses (Note 2) ........... 21,918
Professional fees ...................... 19,453
Registration fees ...................... 18,875
Accounting expenses (Note 2) ........... 12,200
Distribution expenses (Note 3) ......... 10,739
Directors' fees and expenses ........... 8,759
Computer processing fees ............... 5,840
Custodian expenses ..................... 1,563
Other expenses ......................... 6,174
--------
Total expenses ........................ 241,861
--------
Net investment loss .................. (13,133)
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 5)
Net realized loss on
investments ........................... (271,514)
Net change in unrealized
appreciation of
investments ........................... 358,692
--------
Net realized and unrealized
gain ................................. 87,178
--------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................ $74,045
========
</TABLE>
LEXINGTON CONVERTIBLE SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
<S> <C> <C>
Net investment income (loss) ........... $ (13,133) $ 80,157
Net realized gain (loss) from
security transactions ............... (271,514) 199,193
Net change in unrealized
appreciation of investments ......... 358,692 914,284
----------- -----------
Increase in net assets
resulting from operations ......... 74,045 1,193,634
Distributions to shareholders
from net investment income .......... - (76,039)
Distributions to shareholders
from net realized gains on
security transactions ............... (21,464) (177,060)
Decrease from capital
share transactions (Note 4) ......... (12,465) (1,803,790)
----------- -----------
Net increase (decrease)
in net assets ..................... 40,116 (863,255)
NET ASSETS
Beginning of period ................. 10,345,190 11,208,445
----------- -----------
End of period (including
undistributed net investment
income of $0 and $1,763 in
1998 and 1997, respectively) ...... $10,385,306 $10,345,190
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
5
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
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 prices. 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 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
securities are valued by Fund management in good faith under the direction of
the Fund's Board of Trustees.
Securities 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 securities 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, 1998,
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 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 1.00% of the Fund's average daily net assets. In
connection with providing investment advisory services, LMC has entered into a
sub-advisory contract with the Fund's former advisor, Ariston Capital
Management
6
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATE (continued)
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 1998, 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, 1998.
The Fund reimburses LMC for certain expenses, including accounting and
shareholder servicing costs of $23,318 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 $10,739 and are set forth in the statement of operations.
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 ........................................ 191,038 $ 2,959,165 77,731 $ 1,138,145
Shares issued on reinvestment of dividends ......... 1,486 19,824 16,820 247,886
-------- ------------ -------- -------------
192,524 2,978,989 94,551 1,386,031
Shares redeemed .................................... (202,476) (2,991,454) (229,087) (3,189,821)
-------- ------------ -------- -------------
Net decrease ....................................... (9,952) $ (12,465) (134,536) $ (1,803,790)
======== ============ ======== =============
</TABLE>
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
The cost of purchases and proceeds from sales of securities for the year ended
December 31, 1998, excluding short-term securities, were $3,380,690 and
$2,628,133, 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
$4,031,991and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $209,669.
7
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997 (continued)
6. FEDERAL INCOME TAXES - CAPITAL LOSS CARRYFORWARDS
Capital loss carryforwards1 available for federal income tax purposes as of
December 31,1998 are $119,731 expiring in 2006.
To the extent any future capital gains are offset by these losses, such gains
may not be distributed to shareholders.
1Temporary book-tax differences of $151,783 are the result of deferred
post-October losses.
7. TAX INFORMATION (UNAUDITED)
The following information represents the designation of the various tax
benefits relating to year ended December 31, 1998:
The percentage of ordinary income dividends paid by the Fund derived from
agency and direct obligations of the United States government were as follows:
U.S. Treasury...................................... 20.60%
Federal National Mortgage Association............... 0.91
The Fund designates $1,834, whether taken in shares or in cash, as 20%
long-term capital gain distributions.
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, 1998, is 13.6%.
8
<PAGE>
LEXINGTON CONVERTIBLE SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected per share data for a share outstanding throughout the period:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 15.08 $ 13.66 $ 13.66 $ 11.84 $ 14.10
------- ------- -------- -------- --------
Income from investment operations:
Net investment income (loss) .................. - 0.11 0.11 0.15 0.08
Net realized and unrealized gain on
investments ................................. 0.31 1.68 0.55 2.04 0.10
------- ------- -------- -------- --------
Total income from investment operations ........ 0.31 1.79 0.66 2.19 0.18
------- ------- -------- -------- --------
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 ......... (0.03) (0.26) (0.55) (0.22) (2.32)
------- ------- -------- -------- --------
Total distributions ............................ (0.03) (0.37) (0.66) (0.37) (2.44)
------- ------- -------- -------- --------
Net asset value, end of period ................. $ 15.36 $ 15.08 $ 13.66 $ 13.66 $ 11.84
======= ======= ======== ======== ========
Total return ................................... 2.09% 13.16% 4.89% 18.63% 1.30%
Ratio to average net assets:
Expenses, before reimbursement or waivers...... 2.32% 2.38% 2.39% 2.52% 2.81%
Expenses, net of reimbursement or waivers ..... 2.32% 2.38% 2.39% 2.52% 2.75%
Net investment income (loss), before
reimbursement or waivers .................... (0.13)% 0.79% 0.77% 1.24% 0.50%
Net investment income (loss) .................. (0.13)% 0.79% 0.77% 1.24% 0.56%
Portfolio turnover rate ........................ 27.79% 30.47% 18.45% 11.23% 38.14%
Net assets, end of period (000's omitted) ...... $10,385 $10,345 $ 11,208 $ 11,641 $ 8,117
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
9
<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, 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 Convertible Securities Fund 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 the five-year period then ended in conformity with
generally accepted accounting principles.
KPMGLLP
New York, New York
February 19, 1999
10
<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 permits 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 CORPORATE LEADERS 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 the 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 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.
11
<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
- -------------------------------------------------------------------
LEXINGTON CAPITAL MANAGEMENT CORPORATION
40 Lake Bellevue Drive--Suite 220
Bellevue, Washington 98005
DISTRIBUTOR
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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
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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
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(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
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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.
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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, 1998
The Lexington Group
of No Load
Investment Companies
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