LEXINGTON GLOBAL FUND INC, 497, 1997-05-13

LEXINGTON GLOBAL FUND INC
497, 1997-05-13

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PROSPECTUS
May 1, 1997

Lexington Global Fund, Inc.

P.O. Box 1515 / Park 80 West Plaza Two, Saddle Brook, New Jersey 07663
Toll Free: Service- 1-800-526-0056
Institutional/Financial Adviser Services- 1-800-367-9160
24 Hour Account Information- 1-800-526-0052

A NO-LOAD MUTUAL FUND WHOSE INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF
CAPITAL THROUGH INVESTMENT IN COMPANIES DOMICILED IN FOREIGN COUNTRIES
AND THE UNITED STATES.

- --------------------------------------------------------------------------------

Lexington Global Fund, Inc. (the "Fund") is a no-load open-end
diversified management investment company. The Fund's investment
objective is to seek long-term growth of capital primarily through
investment in common stocks of companies domiciled in foreign countries
and the United States.

Lexington Management Corporation ("LMC") is the Fund's investment
adviser. Lexington Funds Distributor, Inc. ("LFD") is the distributor of
Fund shares.

This Prospectus sets forth information about the Fund you should
know before investing. It should be read and retained for future
reference.

A Statement of Additional Information dated May 1, 1997, which
provides a further discussion of certain matters in this Prospectus and
other matters that may be of interest to some investors, has been filed
with the Securities and Exchange Commission and is incorporated herein
by reference. For a free copy, call the appropriate telephone number
above or write to the address listed above.

Mutual fund shares are not deposits or obligations of (or endorsed
or guaranteed by) any bank, nor are they federally insured or otherwise
protected by the Federal Deposit Insurance Corporation ("FDIC"), the
Federal Reserve Board or any other agency. Investing in mutual funds
involves investment risks, including the possible loss of principal, and
their value and return will fluctuate.

- --------------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

Investors Should Read and Retain this Prospectus for Future Reference

<PAGE>

FEE TABLE

Annual Fund Operating Expenses: (as a percentage of average net assets):
Management fees ....................................................... 1.00%
Other fees ............................................................ 0.90%
-----
Total Fund Operating Expenses ...................................... 1.90%
=====

Example: 1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at
the end of each period $19.29 $59.70 $102.64 $222.21
------ ------ ------- -------

The purpose of the foregoing table is to assist an investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
and indirectly. Shareholder Servicing Agents acting as agents for their
customers may provide administrative and recordkeeping services on behalf of the
Fund. For these services, each Shareholder Servicing Agent receives fees, which
may be paid periodically, provided that such fees will not exceed, on an annual
basis, 0.25% of the average daily net assets of the Fund represented by shares
owned during the period for which payment is made. Each Shareholder Servicing
Agent may, from time to time, voluntarily waive all or a portion of the fees
payable to it. (For more complete descriptions of the various costs and
expenses, see "Management of the Fund" below.) The Expenses and Example
appearing in the table above are based on the Fund's expenses for the period
from January 1, 1996 to December 31, 1996. The Example shown in the table above
should not be considered a representation of past or future expenses and actual
expenses may be greater or less than those shown.

FINANCIAL HIGHLIGHTS

The following Per Share Income and Capital Changes Information for each of
the years in the five year period ended December 31, 1996 has been audited by
KPMG Peat Marwick LLP, Independent Auditors, whose report thereon appears in the
Statement of Additional Information. This information should be read in
conjunction with the financial statements and related notes thereto included in
the Statement of Additional Information. The Fund's annual report, which
contains additional performance information, is available upon request and
without charge.

- --------------------------------------------------------------------------------

Selected Per Share Data for a share outstanding throughout the period

Period from
March 27, 1987
(commencement
Year ended December 31, of operations) to
------------------------------------------------------------------------------- December 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net asset value, beginning
of period ..................... $11.62 $11.17 $13.51 $11.09 $11.57 $10.26 $12.83 $10.89 $ 9.89 $9.50
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income (loss) from investment
operations:
Net investment income ......... 0.01 0.09 0.02 0.06 0.06 0.09 0.11 0.01 0.02 0.01
Net realized and unrealized
gain (loss) on investments .. 1.84 1.10 0.23 3.47 (0.47) 1.50 (2.25) 2.72 1.56 0.38
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total income (loss) from
investment operations ......... 1.85 1.19 0.25 3.53 (0.41) 1.59 (2.14) 2.73 1.58 0.39
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Less distributions:
Dividends from net investment
income ...................... 0.16 (0.29) - (0.06) (0.07) (0.08) (0.11) (0.02) (0.02) -
Distributions in excess of
net investments income
(temporary book-tax
difference) ................. - (0.13) - - - - - - - -
Distributions from net
realized capital gains ...... (1.73) (0.62) (2.46) (1.05) - (0.20) (0.32) (0.77) (0.56) -
Distributions in excess of
net realized capital gains
(temporary book-tax
difference) ................. - - (0.13) - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total distributions ............. (1.39) (1.04) (2.59) (1.11) (0.07) (0.28) (0.43) (0.79) (0.58) -
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net asset value, end of period .. $11.23 $11.32 $11.17 $13.51 $11.09 $11.57 $10.26 $12.83 $10.89 $9.89
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total return .................... 16.43% 10.69% 1.84% 31.88% (3.55%) 15.55% (16.75%) 25.10% 15.99% 5.47%*
Ratio to average net assets:
Expenses ...................... 1.90% 1.67% 1.61% 1.49% 1.52% 1.57% 1.59% 1.64% 1.80% 1.20%*
Net investment income ......... 0.11% 0.48% 0.14% 0.52% 0.55% 0.79% 0.99% 0.13% 0.12% 0.19%*
Portfolio turnover .............. 128.03% 166.35% 83.40% 84.61% 81.38% 75.71% 81.88% 113.58% 96.90% 95.66%*
Average commission paid on
equity security
transactions .................. 0.03
Net assets, end of period
(000's omitted) ............. $437,223 $53,614 $67,392 $87,313 $50,298 $53,886 $50,501 $57,008 $38,150 $31,250
<FN>
*Annualized
In accordance with recent SEC disclosure guidelines, average commissions are calculated for the current period and not for price
periods.
</FN>
</TABLE>

2
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

Lexington Global Fund, Inc., (the "Fund"), a Maryland corporation, is an
open-end, diversified management investment company. The Fund's investment
objective is to seek long-term growth of capital primarily through investment in
common stocks and equivalents of companies domiciled in foreign countries and
the United States.

The Fund will seek to achieve its objective through investment in a
diversified portfolio of securities that will consist primarily of all types of
common stocks and equivalents (the following constitute equivalents: convertible
debt securities, warrants and options). The Fund may also invest in preferred
stocks, bonds and other debt obligations, which consist of money market
instruments of foreign and domestic companies and U.S. government and foreign
governments, governmental agencies and international organizations. There can be
no assurance that the Fund will be able to achieve its investment objective.

The Fund will at all times invest at least 65% or more of its assets in at
least three countries, one of which may be the United States. The Fund is not
required to maintain any particular geographic or currency mix of its
investments, nor is it required to maintain any particular proportion of stocks,
bonds or other securities in its portfolio. The Fund may, however, invest
substantially or primarily in foreign debt securities when it appears that the
capital appreciation available from investments in such securities will equal or
exceed the capital appreciation available from investments in equity securities.
Because the market value of debt obligations can be expected to vary inversely
to changes in prevailing interest rates, investing in debt obligations may
provide an opportunity for capital appreciation when interest rates are expected
to decline. A defensive position would exist when in the judgment of Lexington
Management Corporation conditions in the securities market would make pursuing
the Fund's basic investment strategy inconsistent with the best interests of the
shareholders. At such time, the Fund may temporarily invest up to 100% of its
assets in debt obligations, which consist of repurchase agreements, money market
instruments of foreign or domestic companies and U.S. Government and foreign
governments, governmental and international organizations.

The Fund intends to provide investors with the opportunity to invest in a
portfolio of securities of companies and governments located throughout the
world. In making the allocation of assets among the various countries and
geographic regions, LMC ordinarily considers such factors as prospects for
relative economic growth between the U.S. and other countries; expected levels
of inflation and interest rates; government policies influencing business
conditions; the range of investment opportunities available to international
investors; and other pertinent financial, tax, social, political and national
factors-all in relation to the prevailing prices of the securities in each
country or region.

Investments may be made in companies based in (or governments of or within)
Asia (mainly Japan, Australia, Singapore, Malaysia, Hong Kong, Thailand,
Indonesia and Israel), Europe (mainly the United Kingdom, Germany, Poland,
Switzerland, the Netherlands, France, Sweden, Spain, Italy, Austria, Belgium,
Norway and Denmark), Latin America (mainly Mexico and Chile), as well as the
United States, Canada, Australia and such other areas and countries as LMC may
determine from time to time. The Fund may invest in companies located in
developing countries without limitation. Such countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets which trade a small number of companies. Prices on these exchanges tend
to be volatile and in the past these exchanges have offered greater potential
for gain, as well as loss, than exchanges in developed countries. While the Fund
invests only in countries that it considers as having relatively stable and
friendly governments it is possible that certain Fund investments could be
subject to foreign expropriation or exchange control restrictions. See "Risk
Considerations" on Page 5.

Although the Fund does not intend to invest for the purpose of seeking
short-term profits, the Fund's investments may be changed whenever the adviser
deems it appropriate to do so, without regard to the length of time a particular
security has been held. It is expected that the Fund will have an annual
portfolio turnover rate that will generally not exceed 100%. A 100% turnover
rate would occur if all the Fund's portfolio investments were sold and either
repurchased or replaced within a year. For the period ending December 31, 1996,
the portfolio turnover rate for the Fund was 128.05%.

Certain Investment Methods: The Fund may from time to time engage in the
following investment practices:

Settlement Transactions-The Fund may, for a fixed amount of United States
dollars, enter into a forward foreign exchange contract for the purchase or sale
of the amount of foreign currency involved in the underlying securities
transaction. In so doing, the Fund will

3
<PAGE>

attempt to insulate itself against possible losses and gains resulting from
a change in the relationship between the United States dollar and the
foreign currency during the period between the date a security is purchased
or sold and the date on which payment is made or received. This process is
known as "transaction hedging".

To effect the translation of the amount of foreign currencies involved in
the purchase and sale of foreign securities and to effect the "transaction
hedging" described above, the Fund may purchase or sell foreign currencies on a
"spot" (i.e. cash) basis or on a forward basis whereby the Fund purchases or
sells a specific amount of foreign currency, at a price set at the time of the
contract, for receipt of delivery at a specified date which may be any fixed
number of days in the future.

Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign currency when foreign securities are
purchased or sold for settlement beyond customary settlement time (as described
below). Neither type of foreign currency transaction will eliminate fluctuations
in the prices of the Fund's portfolio or securities or prevent loss if the price
of such securities should decline.

Portfolio Hedging-When, in the opinion of LMC, it is desirable to limit or
reduce exposure in a foreign currency in order to moderate potential changes in
the United States dollar value of the portfolio, the Fund may enter into a
forward foreign currency exchange contract by which the United States dollar
value of the underlying foreign portfolio securities can be approximately
matched by an equivalent United States dollar liability. The Fund may also enter
into forward currency exchange contracts to increase its exposure to a foreign
currency that LMC expects to increase in value relative to the United States
dollar. The Fund will not attempt to hedge all of its portfolio positions and
will enter into such transactions only to the extent, if any, deemed appropriate
by the investment adviser. Hedging against a decline in the value of currency
does not eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. The Fund will not enter into
forward foreign currency exchange transactions for speculative purposes. The
Fund intends to limit such transactions to not more than 70% of total Fund
assets.

Forward Commitments-The Fund may make contracts to purchase securities for a
fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors, such as the Fund, on that basis. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in value of the
Fund's other assets. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to settlement if the investment adviser deems it appropriate to do so. The
Fund may realize short-term profits or losses upon the sale of forward
commitments.

Covered Call Options-The Fund may seek to preserve capital by writing covered
call options on securities which it owns. Such an option on an underlying
security would obligate the Fund to sell, and give the purchaser of the option
the right to buy, that security at a stated exercise price at any time until a
stated expiration date of the option. The premium paid by the purchaser of an
option will be income to the Fund.

Repurchase Agreements-A repurchase agreement is a contract under which the Fund
would acquire a security for a relatively short period (usually not more than 7
days) subject to the obligations of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the Fund's cost
plus interest). Although the Fund may enter into repurchase agreements with
respect to any portfolio securities which it may acquire consistent with its
investment policies and restrictions, it is the Fund's present intention to
enter into repurchase agreements only with respect to obligations of the United
States government or its agencies or instrumentalities to meet anticipated
redemptions or pending investments or reinvestment of Fund assets in portfolio
securities. The Fund will enter into repurchase agreements only with member
banks of the Federal Reserve System and with "primary dealers" in United States
government securities. Repurchase agreements will be fully collateralized
including interest earned thereon during the entire term of the agreement. If
the institution defaults on the repurchase agreement, the Fund will retain
possession of the underlying securities. In addition if bankruptcy proceedings
are commenced with respect to the seller, realization on the collateral by the
Fund may be delayed or limited and the Fund may incur additional costs. In such
case the Fund will be subject to risks associated with changes in market value
of the collateral securities. The Fund intends to limit repurchase agreements to
institutions believed by LMC to present minimal credit risk. The Fund will not
enter into repurchase agreements maturing in more than seven days if the
aggregate

4
<PAGE>

of such repurchase agreements and all other illiquid securities when taken
together would exceed 15% of the total assets of the Fund.

Except as otherwise specifically noted, the Fund's investment objective and
its investment restrictions are fundamental and may not be changed without the
approval of a majority of the outstanding voting securities of the Fund. The
Statement of Additional Information contains a complete description of the
Fund's restrictions and additional information on policies relating to the
investment of its assets and its activities.

Portfolio Transactions

The primary consideration in placing security transactions is execution at
the most favorable prices, consistent with best execution. See the Statement of
Additional Information for a further discussion of brokerage allocation. For the
period ending December 31, 1996, the Fund paid $424,440 in brokerage
commissions.

Risk Considerations

Investments in foreign securities may involve risks and considerations not
present in domestic investments. Since foreign securities generally are
denominated and pay interest or dividends in foreign currencies, the value of
the assets of the Fund as measured in United States dollars will be affected
favorably or unfavorably by changes in the relationship of the United States
dollar and other currency rates. The Fund may incur costs in connection with the
conversion or transfer of foreign currencies. In addition, there may be less
publicly available information about foreign companies than United States
companies. Foreign companies may not be subject to accounting, auditing, and
financial reporting standards, practices and requirements comparable to those
applicable to United States companies. Foreign securities markets, while growing
in volume, have for the most part substantially less volume than United States
securities markets and securities of foreign companies are generally less liquid
and at times their prices may be more volatile than securities of comparable
United States companies. Foreign stock exchanges, brokers and listed companies
are generally subject to less government supervision and regulation than in the
United States. The customary settlement time for foreign securities may be
longer than the 5 day customary settlement time for United States securities.
Although the Fund will try to invest in companies and governments of countries
having stable political environments, there is the possibility of expropriation
or confiscatory taxation, seizure or nationalization or foreign government
restrictions or other adverse political, social or diplomatic developments that
could affect investment in these nations.

Income from foreign securities held by the Fund may, and in some cases will
be reduced by a withholding tax at the source or other foreign taxes. A
shareholder of the Fund will, subject to certain restrictions, be entitled to
claim a credit or deduction for United States Federal income tax purposes for
the shareholder's pro rata share of such foreign taxes paid by the Fund. (See
Tax Matters.)

INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in certain types of securities or engaging in
certain transactions. The most significant of these restrictions provide that:

(1) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may
enter into commitments to purchase securities in accordance with the
Fund's investment program, including delayed delivery and when-issued
securities and reverse repurchase agreements; (c) for temporary
emergency purposes, the Fund may borrow money in amounts not exceeding
5% of the value of its total assets at the time when the loan is made;
(d) the Fund may pledge its portfolio securities or receivables or
transfer or assign or otherwise encumber them in an amount not exceeding
one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its
custodian bank), only if, immediately after such borrowing, the value of
the Fund's assets, including the amount borrowed, less its liabilities,
is equal to at least 300% of the amount borrowed, plus all outstanding
borrowings. If at any time, the value of the Fund's assets fails to meet
the 300% asset coverage requirement relative only to leveraging, the
Fund will, within three days (not including Sundays and holidays),
reduce its borrowings to the extent necessary to meet the 300% test.

(2) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds,
debentures or other debt securities, including short-term obligations,
(b) enter into repurchase

5
<PAGE>

transactions and (c) lend portfolio securities provided that the value
of such loaned securities does not exceed one-third of the Fund's
total assets.

(3) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in
securities issued by companies principally engaged in any one industry.
The Fund considers securities of individual foreign governments,
companies and supranational organizations to be industries. This
limitation, however, will not apply to securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities.

(4) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would at the time be
invested in the securities of such issuer, except that such restriction
shall not apply to securities issued or guaranteed by the United States
government or its agencies or instrumentalities or, with respect to 25%
of the Fund's total assets, to securities issued or guaranteed by the
government of any country other than the United States which is a member
of the Organization for Economic Cooperation and Development ("OECD").
The member countries of OECD are at present: Australia, Austria,
Belgium, Canada, Denmark, Germany, Finland, France, Greece, Iceland,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the
United States; or (b) such purchases would at the time result in more
than 10% of the outstanding voting securities of such issuer being held
by the Fund.

The foregoing investment restrictions (as well as certain others set forth
in the Statement of Additional Information) are matters of fundamental policy
which may not be changed without the affirmative vote of the majority of the
shareholders of the Fund.

The investment policies described below are non-fundamental, therefore,
changes to such policies may be made in the future by the Board of Directors
without the approval of the shareholders of the Fund:

(1) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures
market prices of financial instruments required to be delivered and
purchased under open futures contracts shall not exceed 30% of the
Fund's total assets, at market value; and (b) no more than 5% of the
assets, at market value at the time of entering into a contract, shall
be committed to margin deposits in relation to futures contracts.

(2) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced price.
Such securities include, but are not limited to, time deposits and
repurchase agreements with maturities longer than seven days. Securities
that may be resold under Rule 144A or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended, shall not be
deemed illiquid solely by reason of being unregistered. The Investment
Adviser shall determine whether a particular security is deemed to be
liquid based on the trading markets for the specific security and other
factors.

MANAGEMENT OF THE FUND

The Fund has a Board of Directors which establishes the Fund's policies and
supervises and reviews the operations and management of the Fund. Lexington
Management Corporation ("LMC"), P.O. Box 1515 Park 80 West Plaza Two, Saddle
Brook, New Jersey 07663, is the investment adviser of shares of the Fund. For
its investment management services to the Fund, LMC will receive a monthly fee
at the annual rate of 1% of the Fund's average daily net assets which is higher
than that paid by most other investment companies. However, it is not
necessarily greater than the management fee of other investment companies with
objectives and policies similar to this Fund. For the period ending December 31,
1996, LMC earned $393,512 in management fees from the Fund. Lexington Funds
Distributor, Inc. ("LFD"), a registered broker-dealer, is the Fund's
distributor. LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides

6
<PAGE>

facilities for such services. The Fund shall reimburse LMC for its actual cost
in providing such services, facilities and expenses. The operating expenses of
the Fund can be expected to be higher than that of an investment company
investing exclusively in United States securities.

LMC was established in 1938 and currently manages over $3.3 billion in
assets. LMC serves as investment adviser to other investment companies and
private and institutional investment accounts. Included among these clients are
persons and organizations that own significant amounts of capital stock of LMC's
parent, Lexington Global Asset Managers, Inc. The clients pay fees that LMC
considers comparable to the fees paid by similarly served clients.

LMC and LFD are wholly-owned subsidiaries of Lexington Global Asset
Managers, Inc., a Delaware corporation with offices at Park 80 West Plaza Two,
Saddle Brook, New Jersey 07663. Descendants of Lunsford Richardson, Sr., their
spouses, trusts and other related entities are the beneficial owners of a
majority of the shares of Lexington Global Asset Managers, Inc. common stock.
See "Investment Adviser and Distributor" in the Statement of Additional
Information.

PORTFOLIO MANAGERS

The Fund is managed by Richard T. Saler, Philip Schwartz and Alan H.
Wapnick.

Mr. Saler is Senior Vice President, Director of International Investment
Strategy at LMC. Mr. Saler is responsible for international investment analysis
and portfolio management at LMC. He has ten years of investment experience. Mr.
Saler has focused on international markets since first joining LMC in 1986. Most
recently he was a strategist with Nomura Securities and rejoined LMC in 1992.
Mr. Saler is a graduate of New York University with a B.S. Degree in Marketing
and an M.B.A. in Finance from New York University's Graduate School of Business
Administration.

Mr. Schwartz is a Vice President, Chartered Financial Analyst and member of
the New York Security Analysts Association. He is responsible for international
investment analysis and portfolio management, and has eight years investment
experience. Prior to joining Lexington in 1993, Mr. Schwartz was Vice President
of European Research Sales with Cheuvreux De Virieu in Paris and New York,
serving the institutional market. Prior to Cheuvreux, he was affiliated with
Olde and Co. and Kidder, Peabody as a stockbroker. Mr. Schwartz earned his B.A.
and M.A. degrees from Boston University.

Mr. Wapnick is Senior Vice President, Director of Domestic Investment Equity
Strategy at LMC. Mr. Wapnick is responsible for domestic investment analysis and
portfolio management at LMC. He has 26 years investment experience. Prior to
joining LMC in 1986, Mr. Wapnick was an equity analyst with Merrill Lynch, J.&W.
Seligman, Dean Witter and most recently Union Carbide Corporation. Mr. Wapnick
is a graduate of Dartmouth College and received a Master's Degree in Business
Administration from Columbia University.

HOW TO PURCHASE SHARES

Initial Investment-Minimum $1,000. By Mail: Send a check payable to Lexington
Global Fund, Inc., along with a completed New Account Application to State
Street Bank and Trust Company (the "Agent").

Subsequent Investments-Minimum $50. By Mail: Send a check payable to Lexington
Global Fund, Inc., to the Agent, accompanied by either the detachable form which
is part of the confirmation of a prior transaction or a letter indicating the
dollar amount of the investment and identifying the Fund, account number and
registration. The Fund does not accept third party checks or cash investments.
Third party checks are defined as checks made payable to someone other than the
Fund. Checks must be in U.S. dollars, and to avoid fees and delays, drawn only
on banks located in the U.S.

Broker-Dealers: You may invest in shares of the Fund through broker-dealers who
are members of the National Association of Securities Dealers, Inc., and other
financial institutions and who have selling agreements with LFD. Broker-dealers
and financial institutions who process such purchase and sale transactions for
their customers may charge a transaction fee for these services. The fee may be
avoided by purchasing shares directly from the Fund.

7
<PAGE>

The Open Account: By investing in the Fund, a shareholder appoints the Agent, as
his agent, to establish an open account to which all shares purchased will be
credited, together with any dividends and capital gain distributions which are
paid in additional shares. Stock certificates will be issued for full shares
only when requested in writing. Unless payment for shares is made by certified
or cashier's check or federal funds wire, certificates will not be issued for 30
days. In order to facilitate redemptions and transfers, most shareholders elect
not to receive certificates.

Automatic Investing Plan with "Lex-0-Matic". A shareholder may arrange to make
additional purchases of shares automatically on a monthly or quarterly basis.
The investments of $50 or more are automatically deducted from a checking
account on or about the 15th day of each month. The institution must be an
Automated Clearing House (ACH) member. Should an order to purchase shares of a
fund be canceled because your automated transfer does not clear, you will be
responsible for any resulting loss incurred by that fund. The shareholder
reserves the right to discontinue the Lex-O-Matic program provided written
notice is given ten days prior to the scheduled investment date. Further
information regarding this service can be obtained from Lexington by calling
1-800-526-0056.

After an Open Account is established, payments can be provided for by
"Lex-O-Matic" or other authorized automatic bank check program accounts (checks
drawn on the investor's bank periodically for investment in the Fund).

On payroll deduction accounts administered by an employer and on payments
into qualified pension or profit sharing plans and other continuing purchase
programs, there are no minimum purchase requirements.

Determination of Net Asset Value: The net asset value of the shares of the Fund
is determined close of trading on each day the New York Stock Exchange is open,
by dividing the value of the Fund's securities plus any cash and other assets
(including accrued dividends and interest) less all liabilities (including
accrued expenses) by the number of shares outstanding, the result being adjusted
to the nearest whole cent. A security listed or traded on a recognized stock
exchange is valued at the last sale price prior to the time when assets are
valued on the principal exchange on which the security is traded. If no sale is
reported at that time, the mean between the current bid and asked price will be
used. However, when LMC deems it appropriate, prices for the day of valuation
from a third party pricing service will be used. For over-the-counter securities
the mean between the bid and asked prices is used. Short-term securities having
maturity of 60 days or less are valued at cost when it is determined by the
Fund's Board of Directors that amortized cost reflects the fair value of such
securities. Securities for which market quotations are not readily available and
other assets shall be valued by the Fund's management in good faith under the
direction of the Fund's Board of Directors.

Generally, trading in foreign securities markets is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the New York Stock Exchange (the "Exchange"). Foreign currency exchange
rates are also generally determined prior to the close of the Exchange.
Occasionally, events affecting the value of such securities and such exchange
rates may occur between the times at which they are determined and the close of
the Exchange, which will not be reflected in the computation of net asset value.
If during such periods, events occur which materially affect the value of such
securities, the securities will be valued at their fair market value as
determined by LMC and approved in good faith by the Board of Directors.

For purposes of determining the net asset value per share of the Fund all
assets and liabilities initially expressed in foreign currencies will be
converted into United States dollars at the mean between the bid and offer
prices of such currencies against United States dollars quoted by any major
bank.

Terms of Offering: If an order to purchase shares is cancelled because the
investor's check does not clear, the purchaser will be responsible for any loss
incurred by the Fund. To recover any such loss the Fund reserves the right to
redeem shares owned by the purchaser, seek reimbursement directly from the
purchaser and may prohibit or restrict the purchaser in placing future orders in
any of the Lexington Funds.

The Fund reserves the right to reject any order, and to waive or lower the
investment minimums with respect to any person or class of persons, including
shareholders of the Fund's special investment programs. An order to purchase
shares is not binding on the Fund until it has been confirmed by the Agent.

8
<PAGE>

Shareholder Servicing Agents: The Fund may enter into Shareholder Servicing
Agreements with one or more Shareholder Servicing Agents. The Shareholder
Servicing Agent may, as agent for its customers, among other things: answer
customer inquiries regarding account status, account history and purchase and
redemption procedures; assist shareholders in designating and changing dividend
options, account designations and addresses; provide necessary personnel and
facilities to establish and maintain shareholder accounts and records; assist in
processing purchase and redemption transactions; arrange for the wiring of
funds; transmit and receive funds in connection with customer orders to purchase
or redeem shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish monthly and year-end statements and confirmations of purchases and
redemptions; transmit, on behalf of the Fund, proxy statements, annual reports,
updated prospectuses and other communications to shareholders of the Fund;
receive, tabulate and transmit to the Fund proxies executed by shareholders with
respect to meetings of shareholders of the Fund; and provide such other related
services as the Fund or a shareholder may request. For these services, each
Shareholder Servicing Agent receives fees, which may be paid periodically,
provided that such fees will not exceed, on an annual basis, 0.25% of the
average daily net assets of the Fund represented by shares owned during the
period for which payment is made. LMC, at no cost to the Fund, may pay
additional amounts from its past profits to Shareholder Servicing Agents for
administrative services. Each Shareholder Servicing Agent may, from time to
time, voluntarily waive all or a portion of the fees payable to it.

Account Statements: The Agent will send shareholders either purchasing or
redeeming shares of the Fund, a confirmation of the transaction indicating the
date the purchase or redemption was accepted, the number of shares purchased or
redeemed, the purchase or redemption price per share, and the amount purchased
or redemption proceeds. A statement is also sent to shareholders whenever a
distribution is paid, or when a change in the registration, address, or dividend
option occurs. Shareholders are urged to retain their account statements for tax
purposes.

HOW TO REDEEM SHARES

By Mail: Send to the Agent: (1) a written request for redemption, signed by each
registered owner exactly as the shares are registered including the name of the
Fund, account number and exact registration; (2) stock certificates for any
shares to be redeemed which are held by the shareholder; (3) signature
guarantees, when required, and (4) the additional documents required for
redemptions by corporations, executors, administrators, trustees, and guardians.
Redemptions by mail will not become effective until all documents in proper form
have been received by the Agent. If a shareholder has any questions regarding
the requirements for redeeming shares, he should call the Fund at the toll free
number on the back cover prior to submitting a redemption request. If a
redemption request is sent to the Fund in New Jersey, it will be forwarded to
the Agent and the effective date of redemption will be the date received by the
Agent.

Checks for redemption proceeds will normally be mailed within three business
days, but will not be mailed until all checks in payment for the shares to be
redeemed have been cleared.

Signature Guarantee: Signature guarantees are required in connection with (a)
redemptions by mail involving $25,000 or more; (b) all redemptions by mail,
regardless of the amount involved, when the proceeds are to be paid to someone
other than the registered owners; (c) changes in instructions as to where the
proceeds of redemptions are to be sent, and (d) share transfer requests.

The Agent requires that the guarantor be either a commercial bank which is a
member of the Federal Deposit Insurance Corporation, a trust company, a savings
and loan association, a savings bank, a credit union, a member firm of a
domestic stock exchange, or a foreign branch of any of the foregoing. A notary
public is not an acceptable guarantor.

With respect to redemption requests submitted by mail, the signature
guarantees must appear either: (a) on the written request for redemption, (b) on
a separate instrument of assignment ("stock power") specifying the total number
of shares to be redeemed, or (c) on all stock certificates tendered for
redemption and, if shares held by the Agent are also being redeemed, on the
letter or stock power.

Redemption Price: The redemption price will be the net asset value per share of
the Fund next determined after receipt by the Agent of a redemption request in
proper form (see "Determination of Net Asset Value" in the Statement of
Additional Information).

9
<PAGE>

The right of redemption may be suspended (a) for any period during which the
New York Stock Exchange is closed or the Securities and Exchange Commission
("SEC") determines that trading on the Exchange is restricted, (b) when there is
an emergency as determined by the SEC as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (c) for such other periods as the SEC may
by order permit for the protection of shareholders of the Fund. Due to the
proportionately high cost of maintaining smaller accounts, the Fund reserves the
right to redeem all shares in an account with a value of less than $500 (except
retirement plan accounts) for reasons other than market fluctuations and mail
the proceeds to the shareholder. Shareholders will be notified before these
redemptions are to be made and will have 30 days to make an additional
investment to bring their accounts up to the required minimum.

SHAREHOLDER SERVICES

Transfer: Shares of the Fund may be transferred to another owner. A signature
guarantee of the registered owner is required on the letter of instruction or
accompanying stock power.

Systematic Withdrawal Plan: Shareholders may elect to withdraw cash in fixed
amounts from their accounts at regular intervals. The minimum investment to
establish a Systematic Withdrawal Plan is $10,000. If the proceeds are to be
mailed to someone other than the registered owner, a signature guarantee is
required.

Group Sub-Accounting: To minimize recordkeeping by fiduciaries, corporations and
certain other investors, the minimum initial investment may be waived.

EXCHANGE PRIVILEGE

Shares of the Fund may be exchanged for shares of the following Lexington
Funds on the basis of relative net asset value per share, next determined at the
time of the exchange. In the event shares of one or more of these funds being
exchanged by a single investor have a value in excess of $500,000, the shares of
the Fund will not be purchased until the third business day following the
redemption of the shares being exchanged in order to enable the redeeming fund
to utilize normal securities settlement procedures in transferring the proceeds
of the redemption to the Fund. Exchanges may not be made until all checks in
payment for the shares to be exchanged have been cleared.

The Lexington Funds currently available for exchange are:

LEXINGTON WORLDWIDE EMERGING MARKETS FUND, INC. (NASDAQ Symbol: LEXGX)/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. (NASDAQ Symbol: LXGLX)/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. (NASDAQ Symbol: LEXIX)/Seeks long term growth
of capital through investment in common stocks of companies domiciled in foreign
countries.

LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND, INC. (NASDAQ Symbol: LXCAX)/Seeks
long-term capital appreciation through investment in companies domiciled in the
Asia Region with a market capitalization of less than $1 billion.

LEXINGTON TROIKA DIALOG RUSSIA FUND, INC. (NASDAQ Symbol: LETRX)/Seeks long-term
capital appreciation through investment primarily in the equity of Russian
companies. The Fund has a $5,000 minimum investment.

LEXINGTON RAMIREZ GLOBAL INCOME FUND (NASDAQ Symbol: LEBDX)/Seeks high current
income. Capital appreciation is a secondary objective.

LEXINGTON SMALLCAP VALUE FUND, INC. (NASDAQ Symbol: LESVX)/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.

10
<PAGE>

LEXINGTON GOLDFUND, INC. (NASDAQ Symbol: LEXMX)/Seeks capital appreciation and
such hedge against loss of buying power as may be obtained through investment in
gold bullion and equity securities of companies engaged in mining or processing
gold throughout the world.

LEXINGTON CORPORATE LEADERS TRUST FUND (NASDAQ Symbol: LEXCX)/Seeks long-term
capital growth and income through investment in an equal number of shares of the
common stocks of a fixed list of American blue chip corporations.

LEXINGTON GROWTH AND INCOME FUND, INC. (NASDAQ Symbol: LEXRX)/Seeks long-term
capital appreciation through investments in stocks of large, ably managed and
well financed companies. Income is a secondary objective.

LEXINGTON CONVERTIBLE SECURITIES FUND (NASDAQ Symbol: CNCVX)/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. (NASDAQ Symbol: LEXNX)/Seeks a high level of
current income, consistent with liquidity and safety of principal, through
investment primarily in mortgage-backed GNMA Certificates.

LEXINGTON MONEY MARKET TRUST (NASDAQ Symbol: LMMXX)/Seeks a high level of
current income consistent with preservation of capital and liquidity through
investments in interest bearing short term money market instruments.

LEXINGTON TAX FREE MONEY FUND, INC. (NASDAQ Symbol: LTFXX)/Seeks current income
exempt from Federal income taxes while maintaining liquidity and stability of
principal through investment in short term municipal securities.

Shareholders in any of these funds may exchange all or part of their shares
for shares of one or more of the other funds, subject to the conditions
described herein. The Exchange Privilege enables a shareholder in any of these
funds to acquire shares in a fund with a different investment objective when the
shareholder believes that a shift between funds is an appropriate investment
decision. Shareholders contemplating an exchange should obtain and review the
prospectus of the fund to be acquired. If an exchange involves investing in a
Lexington Fund not already owned and a new account has to be established, the
dollar amount exchanged must meet the minimum initial investment of the fund
being purchased. If, however, an account already exists in the fund being
bought, there is a $500 minimum exchange required. Shareholders must provide the
account number of the existing account. Any exchange between mutual funds is, in
effect, a redemption of shares in one fund and a purchase in the other fund.
Shareholders should consider the possible tax effects of an exchange.

TELEPHONE EXCHANGE PROVISIONS-Exchange instructions may be given in writing or
by telephone. Telephone exchanges may only be made if a Telephone Authorization
form has been previously executed and filed with LFD. Telephone exchanges are
permitted only after a minimum of 7 days have elapsed from the date of a
previous exchange. Exchanges may not be made until all checks in payment for the
shares to be exchanged have been cleared.

Telephonic exchanges can only involve shares held on deposit at the Agent;
shares held in certificate form by the shareholder cannot be included. However,
outstanding certificates can be returned to the Agent and qualify for these
services. Any new account established with the same registration will also have
the privilege of exchange by telephone in the Lexington Funds. All accounts
involved in a telephonic exchange must have the same registration and dividend
option as the account from which the shares were transferred and will also have
the privilege of exchange by telephone in the Lexington Funds in which these
services are available.

11
<PAGE>

by imposters or persons otherwise unauthorized to act on behalf of the account.
LFD, the Agent and the Fund, will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine and if they do not employ
reasonable procedures they may be liable for any losses due to unauthorized or
fraudulent instructions. The following identification procedures may include,
but are not limited to, the following: account number, registration and address,
taxpayer identification number and other information particular to the account.
In addition, all exchange transactions will take place on recorded telephone
lines and each transaction will be confirmed in writing by the Fund. LFD
reserves the right to cease to act as agent subject to the above appointment
upon thirty (30) days written notice to the address of record. If the
shareholder is an entity other than an individual, such entity may be required
to certify that certain persons have been duly elected and are now legally
holding the titles given and that the said corporation, trust, unincorporated
association, etc. is duly organized and existing and has the power to take
action called for by this continuing authorization.

Exchange Authorization forms, Telephone Authorization forms and prospectuses
of the other funds may be obtained from LFD.

This exchange offer is available only in states where shares of the Fund
being acquired may legally be sold and may be modified or terminated at any time
by the Fund. Broker-dealers who process exchange orders on behalf of their
customers may charge a fee for their services. Such fee may be avoided by making
requests for exchange directly to the Fund or Agent.

TAX-SHELTERED RETIREMENT PLANS

The Fund offers a Prototype Pension and Profit Sharing Plan, including a
Keogh Plan, IRA's, SEP-IRA's and IRA Rollover Accounts, 401(k) Salary Reduction
Plans, Section 457 Deferred Compensation Plans and 403(b)(7) Plans. Plan support
services are available through the Shareholder Services Department of LMC. For
further information call 1-800-526-0056. (See "Tax Sheltered Retirement Plans"
in the Statement of Additional Information.)

PERFORMANCE CALCULATION

The Fund will calculate performance on a total return basis for various
periods. The total return basis combines changes in principal and dividends for
the periods shown. Principal changes are based on the difference between the
beginning and closing net asset value for the period and assumes reinvestment of
dividends paid by the Fund. Dividends are comprised of net investment income and
net realized capital gains, respectively.

Performance will vary from time to time and past results are not necessarily
representative of future results. A shareholder should remember that performance
is a function of portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses.

Comparative performance information may be used from time to time in
advertising or marketing of the Fund's shares, including data from Lipper
Analytical Services, Inc. or major market indices such as the Dow Jones
Industrial Average Index, Standard & Poor's 500 Composite Stock Price Index and
Morgan Stanley Capital International World Index. Such comparative performance
information will be stated in the same terms in which the comparative data and
indices are stated. Further information about the Fund's performance is
contained in the annual report, which may be obtained without charge.

DIVIDEND, DISTRIBUTION AND REINVESTMENT POLICY

The Fund intends to pay dividends annually from investment income if earned
and as declared by its Board of Directors.

The Fund intends to declare or distribute a dividend from its net investment
income and/or net capital gain income in December.

Any dividends and distribution payments will be reinvested at net asset
value, without sales charge, in additional full and fractional shares of the
Fund unless and until the shareholder notifies the Agent in writing that he
wants to receive his payments in cash. This request must be received by the
Agent at least seven days before the dividend record date. Upon receipt by the
Agent of such written notice, all further payments will be made in cash until
written notice to the contrary is received. An account of such

12
<PAGE>

shares owned by each shareholder will be maintained by the Agent. Shareholders
whose accounts are maintained by the Agent will have the same rights as other
shareholders with respect to shares so registered (see "How to Purchase
Shares-The Open Account").

TAX MATTERS

The Fund intends to qualify as a regulated investment company by satisfying
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), including requirements with respect to diversification of
assets, distribution of income and sources of income. It is the Fund's policy to
distribute to shareholders all of its investment income (net of expenses) and
any capital gains (net of capital losses) so that, in addition to satisfying the
distribution requirement of Subchapter M, the Fund will not be subject to
federal income tax or the 4% excise tax.

Distributions by the Fund of its net investment income (which includes
certain foreign currency gains and losses) and the excess, if any, of its net
short-term capital gain over its net long-term capital loss are taxable to
shareholders as ordinary income. These distributions are treated as dividends
for federal income tax purposes, but in any year only a portion thereof (which
cannot exceed the aggregate amount of qualifying dividends from domestic
corporations received by the Fund during the year) may qualify for the 70%
dividends-received deduction for corporate shareholders. Because the Fund's
investment income will include dividends from foreign corporations and the Fund
may have interest income and short-term capital gains, substantially less than
100% of the ordinary income dividends paid by the Fund may qualify for the
dividends-received deduction. Distributions by the Fund of the excess, if any,
of its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder held
his shares.

Under certain circumstances, the Fund may elect to "pass-through" to its
shareholders the income or other taxes paid by the Fund to foreign governments
during a year. Each shareholder will be required to include his pro rata portion
of these foreign taxes in his gross income, but will be able to deduct or
(subject to various limitations) claim a foreign tax credit for such amount.

Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by the
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made or deemed made
during the year, including any amount of foreign taxes "passed-through", will be
sent to shareholders promptly after the end of each year. Shareholders
purchasing shares of the Fund just prior to the ex-dividend date will be taxed
on the entire amount of the dividend received, even though the net asset value
per share on the date of such purchase reflected the amount of such dividend.

Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as long-term capital loss to the
extent of any capital gain dividends received on such shares. All or a portion
of any loss realized upon a taxable disposition of shares of the Fund may be
disallowed if other shares of the Fund are purchased within 30 days before or
after such disposition.

Under the back-up withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on ordinary income dividends,
capital gain dividends and redemption payments made by the Fund. In order to
avoid this back-up withholding, a shareholder must provide the Fund with a
correct taxpayer identification number (which for most individuals is their
Social Security number) or certify that it is a corporation or otherwise exempt
from or not subject to back-up withholding. The new account application included
with this Prospectus provides for shareholder compliance with these
certification requirements.

The foregoing discussion of federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus, and is subject to
change by legislative or administrative action. As the foregoing discussion is
for general information only, a prospective shareholder should also review the
more detailed discussion of federal income tax considerations relevant to the
Fund that is contained in the Statement of Additional Information. In addition,
each prospective shareholder should consult with his own tax adviser as to the
tax consequences of investments in the Fund, including the application of state
and local taxes which may differ from the federal income tax consequences
described above.

13
<PAGE>

ORGANIZATION AND DESCRIPTION OF COMMON STOCK

The Fund is an open-end, diversified management investment company organized
as a corporation under the laws of the State of Maryland on March 24, 1987, and
has authorized capital of 1,000,000,000 shares of a single class of common
stock, par value $.001. Each share of common stock has one vote and shares
equally in dividends and distributions when and if declared by the Fund and in
the Fund's net assets upon liquidation. All shares, when issued, are fully paid
and non-assessable. There are no preemptive, conversion or exchange rights. Fund
shares do not have cumulative voting rights and, as such, holders of at least
50% of the shares voting for Directors can elect all Directors and the remaining
shareholders would not be able to elect any Directors.

The Fund will not normally hold annual shareholder meetings except as
required by Maryland General Corporation Law or the Investment Company Act of
1940. However, meetings of shareholders may be called at any time by the
Secretary upon the written request of shareholders holding in the aggregate not
less than 25% of the outstanding shares, such request specifying the purposes
for which such meeting is to be called. In addition, the Directors will promptly
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested to do so in writing by the recordholders
of not less than 10% of the Fund's outstanding shares. The Fund will assist
shareholders in any such communication between shareholders and Directors.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Chase Manhattan Bank, N.A., 1211 Avenue of the Americas, New York, New York
10036 has been retained to act as custodian for the Fund's portfolio securities
including those to be held by foreign banks and foreign securities depositories
that qualify as eligible foreign custodians under the rules adopted by the SEC
and for the Fund's domestic securities and other assets. State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, has been
retained to act as the transfer agent and dividend disbursing agent for the
Fund. State Street Bank and Trust Company and Chase Manhattan Bank, N.A. have no
part in determining the investment policies of the Fund or in determining which
portfolio securities are to be purchased or sold by the Fund or in the
declaration of dividends and distributions.

COUNSEL AND INDEPENDENT AUDITORS

Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, New York
10022 will pass upon legal matters for the Fund in connection with the shares
offered by this Prospectus. KPMG Peat Marwick LLP, 345 Park Avenue, New York,
New York 10154, has been selected as independent auditors for the Fund for the
fiscal year ending December 31, 1997.

OTHER INFORMATION

This prospectus omits certain information contained in the registration
statement filed with the SEC. Copies of the registration statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. The Statement of Additional
Information included in such registration statement may be obtained without
charge from the Fund.

The Code of Ethics adopted by each of the Adviser and the Fund prohibits all
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of the Fund's planned portfolio
transactions. The objective of each Code of Ethics is that the operations of the
Adviser and Fund be carried out for the exclusive benefit of the Fund's
shareholders. All organizations maintain careful monitoring of compliance with
the Code of Ethics.

No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus, and information or
representations not herein contained, if given or made, must not be relied upon
as having been authorized by the Fund. This Prospectus does not constitute an
offer or solicitation in any jurisdiction in which such offering may not
lawfully be made.

14
<PAGE>

(LEFT COLUMN)

Investment Adviser
- --------------------------------------------------------------------------------
LEXINGTON MANAGEMENT CORPORATION
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 07663

Distributor
- --------------------------------------------------------------------------------
LEXINGTON FUNDS DISTRIBUTOR, INC.
P.O. Box 1515/Park 80 West Plaza Two
Saddle Brook, N.J. 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
Lexington Funds
1004 Baltimore
Kansas City, Missouri 64105

Or call toll free:
Shareholder Service: 1-800-526-0056
Institutional/Financial Adviser Services: 1-800-367-9160
24 Hour Account Information: 1-800-526-0052

Table of Contents Page
- --------------------------------------------------------------------------------
Fee Table ................................................................... 2
Financial Highlights ........................................................ 2
Investment Objective and Policies ........................................... 3
Investment Restrictions ..................................................... 5
Management of the Fund ...................................................... 6
Portfolio Managers .......................................................... 7
How to Purchase Shares ...................................................... 7
How to Redeem Shares ........................................................ 9
Shareholder Services ........................................................ 10
Exchange Privilege .......................................................... 10
Tax-Sheltered Retirement Plans .............................................. 12
Performance Calculation ..................................................... 12
Dividend, Distribution and Reinvestment Policy .............................. 12
Tax Matters ................................................................. 13
Organization and Description of Common Stock ................................ 14
Custodian, Transfer Agent and Dividend Disbursing Agent ..................... 14
Counsel and Independent Auditors ............................................ 14
Other Information ........................................................... 14

(RIGHT COLUMN)

LEXINGTON
-------------------------------------
LEXINGTON
GLOBAL
FUND, INC.
------x-----
x Worldwide
diversification
x Free telephone
exchange privilege
x No sales charge
x No redemption fee
-------x-----

The Lexington Group
of
No-Load
Investment Companies
------------------------------------

PROSPECTUS

MAY 1, 1997

<PAGE>

LEXINGTON GLOBAL FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

MAY 1, 1997

This Statement of Additional Information which is not a prospectus, should
be read in conjunction with the current prospectus of Lexington Global Fund,
Inc. (the "Fund"), dated May 1, 1997, and as it may be revised from time to
time. To obtain a copy of the Fund's prospectus at no charge, please write to
the Fund at P.O. Box 1515/Park 80 West-Plaza Two, Saddle Brook, New Jersey 07663
or call the following toll-free numbers:

Shareholder Service Information:-1-800-526-0056
Institutional/Financial Adviser Services:-1-800-367-9160
24 Hour Account Information:-1-800-526-0052

Lexington Management Corporation is the Fund's investment adviser. Lexington
Funds Distributor, Inc. is the Fund's distributor.

TABLE OF CONTENTS

Page

Investment Objective and Policies .......................................... 2

Investment Restrictions .................................................... 3

Management of the Fund ..................................................... 4

Investment Adviser, Distributor and Administrator .......................... 7

Portfolio Transactions and Brokerage Commissions ........................... 8

Determination of Net Asset Value ........................................... 8

Telephone Exchange Provisions .............................................. 8

Tax Sheltered Retirement Plans ............................................. 9

Tax Matters ................................................................ 10

Performance Calculation .................................................... 15

Shareholder Reports ........................................................ 15

Other Information .......................................................... 15

Financial Statements ....................................................... 16

1
<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

For a full description of the Fund's investment objective and policies, see
the Prospectus under "Investment Objective and Policies".

Certain Investment Methods

Settlement Transactions-When the Fund enters into contracts for purchase or sale
of a portfolio security denominated in a foreign currency, it may be required to
settle a purchase transaction in the relevant foreign currency or receive the
proceeds of a sale in that currency. In either event, the Fund will be obligated
to acquire or dispose of such foreign currency as is represented by the
transaction by selling or buying an equivalent amount of United States dollars.
Furthermore, the Fund may wish to "lock in" the United States dollar value of
the transaction at or near the time of a purchase or sale of portfolio
securities at the exchange rate or rates then prevailing between the United
States dollar and the currency in which the foreign security is denominated.
Therefore, the Fund may, for a fixed amount of United States dollars, enter into
a forward foreign exchange contract for the purchase or sale of the amount of
foreign currency involved in the underlying securities transaction. In so doing,
the Fund will attempt to insulate itself against possible losses and gains
resulting from a change in the relationship between the United States dollar and
the foreign currency during the period between the date a security is purchased
or sold and the date on which payment is made or received. This process is known
as "transaction hedging".

Such spot and forward foreign exchange transactions may also be utilized to
reduce the risk inherent in fluctuations in the exchange rate between the United
States dollar and the relevant foreign dollar and the relevant foreign currency
when foreign securities are purchased or sold for settlement beyond customary
settlement time (as described below). Neither type of foreign currency
transaction will eliminate fluctuations in the prices of the Fund's portfolio or
securities or prevent loss if the price of such securities should decline.

Portfolio Hedging-Some or all of the Fund's portfolio will be denominated in
foreign currencies. As a result, in addition to the risk of change in the market
value of portfolio securities, the value of the portfolio in United States
dollars is subject to fluctuations in the exchange rate between such foreign
currencies and the United States dollar. When, in the opinion of LMC, it is
desirable to limit or reduce exposure in a foreign currency in order to moderate
potential changes in the United States dollar value of the portfolio, the Fund
may enter into a forward foreign currency exchange contract by which the United
States dollar value of the underlying foreign portfolio securities can be
approximately matched by an equivalent United States dollar liability. This
technique is known as "portfolio hedging" and moderates or reduces the risk of
change in the United States dollar value of the Fund's portfolio only during the
period before the maturity of the forward contract (which will not be in excess
of one year). The Fund will not attempt to hedge all of its foreign portfolio
positions and will enter into such transactions only to the extent, if any,
deemed appropriate by the investment adviser. Hedging against a decline in the
value of currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities decline. The Fund
will not enter into forward foreign currency exchange transactions for
speculative purposes. The Fund intends to limit transactions as described in
this paragraph to not more than 70% of the total Fund assets.

Forward Commitments - The Fund may make contracts to purchase securities for
a fixed price at a future date beyond customary settlement time ("forward
commitments") because new issues of securities are typically offered to
investors, such as the Fund, on that basis. Forward commitments involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. This risk is in addition to the risk of decline in value of the
Fund's other assets. Although the Fund will enter into such contracts with the
intention of acquiring the securities, the Fund may dispose of a commitment
prior to settlement if the investment adviser deems it appropriate to do so. The
Fund may realize short-term profits or losses upon the sale of forward
commitments.

Covered Call Options-Call options may also be used as a means of participating
in an anticipated price increase of a security on a more limited basis than
would be possible if the security itself were purchased. The Fund may write only
covered call options. Since it can be expected that a call option will be
exercised if the market value of the underlying security increases to a level
greater than the exercise price, this strategy will generally be used when the
investment adviser believes that the call premium received by the Fund plus
anticipated appreciation in the price of the underlying

2
<PAGE>

security, up to the exercise price of the call, will be greater than the
appreciation in the price of the security. The Fund intends to limit
transactions as described in this paragraph to less than 5% of total Fund
assets. The Fund will not purchase put and call options written by others. Also,
the Fund will not write any put options.

INVESTMENT RESTRICTIONS

The Fund's investment objective, as described under "investment policy" and
the following investment restrictions are matters or fundamental policy which
may not be changed without the affirmative vote of the lesser of (a) 67% or more
of the shares of the Fund present at a shareholders' meeting at which more than
50% of the outstanding shares are present or represented by proxy or (b) more
than 50% of the outstanding shares. Under these investment restrictions:

(1) The Fund will not issue any senior security (as defined in the 1940
Act), except that (a) the Fund may enter into commitments to purchase securities
in accordance with the Fund's investment program, including reverse repurchase
agreements, foreign exchange contracts, delayed delivery and when-issued
securities, which may be considered the issuance of senior securities; (b) the
Fund may engage in transactions that may result in the issuance of a senior
security to the extent permitted under applicable regulations, interpretation of
the 1940 Act or an exemptive order; (c) the Fund may engage in short sales of
securities to the extent permitted in its investment program and other
restrictions; (d) the purchase or sale of futures contracts and related options
shall not be considered to involve the issuance of senior securities; and (e)
subject to fundamental restrictions, the Fund may borrow money as authorized by
the 1940 Act.

(2) The Fund will not borrow money, except that (a) the Fund may enter into
certain futures contracts and options related thereto; (b) the Fund may enter
into commitments to purchase securities in accordance with the Fund's investment
program, including delayed delivery and when-issued securities and reverse
repurchase agreements; (c) for temporary emergency purposes, the Fund may borrow
money in amounts not exceeding 5% of the value of its total assets at the time
when the loan is made; (d) the Fund may pledge its portfolio securities or
receivables or transfer or assign or otherwise encumber them in an amount not
exceeding one-third of the value of its total assets; and (e) for purposes of
leveraging, the Fund may borrow money from banks (including its custodian bank),
only if, immediately after such borrowing, the value of the Fund's assets,
including the amount borrowed, less its liabilities, is equal to at least 300%
of the amount borrowed, plus all outstanding borrowings. If at any time, the
value of the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not including
Sundays and holidays), reduce its borrowings to the extent necessary to meet the
300% test. The Fund will only invest in reverse repurchase agreements up to 5%
of the Fund's total assets.

(3) The Fund will not act as an underwriter of securities except to the
extent that, in connection with the disposition of portfolio securities by the
Fund, the Fund may be deemed to be an underwriter under the provisions of the
1933 Act.

(4) The Fund will not purchase real estate, interests in real estate or real
estate limited partnership interests except that, to the extent appropriate
under its investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which deal in real estate or interests therein.

(5) The Fund will not make loans, except that, to the extent appropriate
under its investment program, the Fund may (a) purchase bonds, debentures or
other debt securities, including short-term obligations, (b) enter into
repurchase transactions and (c) lend portfolio securities provided that the
value of such loaned securities does not exceed one-third of the Fund's total
assets.

(6)The Fund will not invest in commodity contracts, except that the Fund
may, to the extent appropriate under its investment program, purchase securities
of companies engaged in such activities, may enter into transactions in
financial and index futures contracts and related options, may engage in
transactions on a when-issued or forward commitment basis, and may enter into
forward currency contracts.

(7) The Fund will not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total assets in securities
issued by companies principally engaged in any one industry. The Fund considers
securities of individual foreign governments, companies and supranational
organizations to be industries. This limitation, however, will not apply to
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities.

(8) The Fund will not purchase securities of an issuer, if (a) more than 5%
of the Fund's total assets taken at market value would at the time be invested
in the securities of such issuer, except that such restriction shall not apply
to securities issued or guaranteed by the United States government or its
agencies or instrumentalities or, with respect to 25% of the Fund's total
assets, to securities issued or guaranteed by the government of any country
other than the United States which is a member of the Organization for Economic
Cooperation and Development ("OECD"). The member countries of OECD are at
present: Australia, Austria, Belgium, Canada, Denmark, Germany, Finland, France,
Greece,

3
<PAGE>

Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand,
Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the
United States; or (b) such purchases would at the time result in more than 10%
of the outstanding voting securities of such issuer being held by the Fund.

In addition to the above fundamental restrictions, the Fund has undertaken
the following non fundamental restrictions, which may be changed in the future
by the Board of Directors, without a vote of the shareholders of the Fund:

(1) The Fund will not participate on a joint or joint-and-several basis in
any securities trading account. The "bunching" of orders for the sale or
purchase of marketable portfolio securities with other accounts under the
management of the investment adviser to save commissions or to average prices
among them is not deemed to result in a securities trading account.

(2) The Fund may purchase and sell futures contracts and related options
under the following conditions: (a) the then-current aggregate futures market
prices of financial instruments required to be delivered and purchased under
open futures contracts shall not exceed 30% of the Fund's total assets, at
market value; and (b) no more than 5% of the assets, at market value at the time
of entering into a contract, shall be committed to margin deposits in relation
to futures contracts.

(3) The Fund will not make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for short-term
credits necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures contracts
and related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of the Fund.

(4) The Fund will not purchase the securities of any other investment
company, except as permitted under the 1940 Act.

(5) The Fund will not invest for the purpose of exercising control over or
management of any company.

(6) The Fund will not purchase warrants except in units with other
securities in original issuance thereof or attached to other securities, if at
the time of the purchase, the Fund's investment in warrants, valued at the lower
of cost or market, would exceed 5% of the Fund's total assets. For these
purposes, warrants attached to units or other securities shall be deemed to be
without value.

(7) The Fund will not invest more than 15% of its total assets in illiquid
securities. Illiquid securities are securities that are not readily marketable
or cannot be disposed of promptly within seven days and in the usual course of
business without taking a materially reduced price. Such securities include, but
are not limited to, time deposits and repurchase agreements with maturities
longer than seven days. Securities that may be resold under Rule 144A or
securities offered pursuant to Section 4(2) of the Securities Act of 1933, as
amended, shall not be deemed illiquid solely by reason of being unregistered.
The Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and other
factors.

The percentage restrictions referred to above are to be adhered to at the
time of investment and are not applicable to a later increase or decrease in
percentage beyond the specified limit resulting from change in values or net
assets.

MANAGEMENT OF THE FUND

The Directors and executive officers of the Fund and their principal
occupations are set forth below:

*+S.M.S. CHADHA (59), Director. 3/16 Shanti Niketan, New Delhi 21, India.
Secretary, Ministry of External Affairs, New Delhi, India; Head of Foreign
Service Institute, New Delhi, India; Special Envoy of the Government of
India; Director, Special Unit for Technical Cooperation among Developing
Countries, United Nations Development Program, New York.

*+ROBERT M. DEMICHELE (52), President and Chairman. P.O. Box 1515, Saddle Brook,
N.J. 07663. Chairman and Chief Executive Officer, Lexington Management
Corporation; President and Director, Lexington Global Asset Managers, Inc.;
Chairman and Chief Executive Officer, Lexington Funds Distributor, Inc.;
Chairman of the Board, Market Systems Research, Inc. and Market Systems
Research Advisors, Inc.; Director, Chartwell Re Corporation, Claredon
National Insurance Company, The Navigator's Group, Inc., Unione Italiana
Reinsurance, Vanguard Cellular Systems, Inc. and Weeden & Co.; Vice Chairman
of the Board of Trustees, Union College and Trustee, Smith Richardson
Foundation.

*+BEVERLEY C. DUER (67), Director, 340 East 72nd Street, New York, N.Y. 10021.
Private Investor. Formerly, Manager of Operations Research Department, CPC
International, Inc.

4
<PAGE>

*+BARBARA R. EVANS (36), Director. 5 Fernwood Road, Summit, N.J. 07901. Private
Investor. Prior to May, 1989, Assistant Vice President and Securities
Analyst, Lexington Management Corporation.

*+LAWRENCE KANTOR (49), Vice President and Director. P.O. Box 1515, Saddle
Brook, N.J. 07663. Executive Vice President, General Manager and Director,
Lexington Management Corporation; Executive Vice President and Director,
Lexington Funds Distributor, Inc.; Executive Vice President and General
Manager-Mutual Funds, Lexington Global Asset Managers, Inc.

*+JERARD F. MAHER (50), Director. 300 Raritan Center Parkway, Edison, N.J.
08818. General Counsel, Federal Business Center; Counsel, Ribis, Graham &
Curtin.

*+ANDREW M. McCOSH (56), Director. 12 Wyvern Park, Edinburgh EH 92 JY, Scotland,
U.K. Professor of the Organisation of Industry and Commerce, Department of
Business Studies, The University of Edinburgh, Scotland.

*+DONALD B. MILLER (70), Director. 10725 Quail Covey Road, Boynton Beach, FL
33436. Chairman, Horizon Media, Inc.; Trustee Galaxy Funds; Director,
Maguire Group of Connecticut; prior to January 1989, President, Director and
C.E.O., Media General Broadcast Services (advertising firm).

*+JOHN G. PRESTON (64), Director. 3 Woodfield Road, Wellesley, Massachusetts
02181. Associate Professor of Finance, Boston College, Massachusetts.

*+MARGARET RUSSELL (76), Director. 55 North Mountain Avenue, Montclair, N.J.
07042. Private Investor; formerly, Community Affairs Director, Union Camp
Corporation.

*+RICHARD T. SALER (35), Vice President and Co-Portfolio Manager. P.O. Box 1515,
Saddle Brook, N.J. 07663. Senior Vice President, Director of International
Equity Investment Strategy, Lexington Management Corporation. Prior to July
1992, Securities Analyst, Nomura Securities, Inc. Prior to November 1991,
Vice President, Lexington Management Corporation.

*+ALAN H. WAPNICK (50), Vice President and Co-Portfolio Manager. P.O. 1515,
Saddle Brook, N.J. 07663.

*+LISA CURCIO (37), Vice President and Secretary. P.O. Box 1515, Saddle Brook,
N.J. 07663. Senior Vice President and Secretary, Lexington Management
Corporation; Vice President and Secretary, Lexington Funds Distributor,
Inc.; Secretary, Lexington Global Asset Managers, Inc.

*+RICHARD M. HISEY (38), Vice President and Treasurer. P.O. Box 1515, Saddle
Brook, N.J. 07663. Managing Director, Director and Chief Financial Officer,
Lexington Management Corporation; Chief Financial Officer, Vice President
and Director, Lexington Funds Distributor, Inc.; Chief Financial Officer,
Market Systems Research Advisors, Inc.; Executive Vice President and Chief
Financial Officer, Lexington Global Asset Managers, Inc.

*+RICHARD LAVERY (42), CLU ChFC, Vice President. P.O. Box 1515, Saddle Brook,
N.J. 07663. Senior Vice President, Lexington Management Corporation; Vice
President, Lexington Funds Distributor, Inc.

*+JANICE CARNICELLI (37), Vice President. P.O. Box 1515, Saddle Brook, N.J.
07663.

*+CHRISTIE CARR (29), Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to October 1992, Senior Accountant, KPMG Peat Marwick LLP.

*+SIOBHAN GILFILLAN (33), Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.

*+JOAN K. LEDERER (30), Assistant Treasurer. P.O. Box 1515 Saddle Brook, N.J.
07663. Prior to April 1997, Director of Investment Accounting, Diversified
Investment Advisors, Inc. Prior to April 1996, Assistant Vice President,
PIMCO.

*+THOMAS LUEHS (34), Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to November, 1993, Supervisor Investment Accounting, Alliance
Capital Management, Inc.

*+SHERI MOSCA (33), Assistant Treasurer. P.O. Box 1515, Saddle Brook, N.J.
07663.

*+PETER CORNIOTES (34), Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Assistant Vice President and Assistant Secretary, Lexington
Management Corporation. Assistant Secretary, Lexington Funds Distributor,
Inc.

*+ENRIQUE J. FAUST (36), Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
07663. Prior to March 1994, Blue Sky Compliance Coordinator, Lexington Group
of Investment Companies.

*"Interested person" and/or "Affiliated person" of LMC as defined in the
Investment Company Act of 1940, as amended.

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<PAGE>

+Messrs. Chadha, Corniotes, DeMichele, Duer, Faust, Hisey, Kantor, Lavery,
Luehs, Maher, McCosh, Miller, Preston, Saler, and Wapnick and Mmes. Carnicelli,
Carr, Curcio, Evans, Gilfillan, Lederer, Mosca, and Russell hold similar
officers with some or all of the other investment companies advised and/or
distributed by LMC and LFD.

The Board of Trustees met 5 times during the twelve months ended December
31, 1996, and each of the Directors attended at least 75% of those meetings.

Remuneration of Directors and Certain Executive Officers

Each Director is reimbursed for expenses incurred in attending each meeting
of the Board of Directors or any committee thereof. Each Director who is not an
affiliate of the advisor is compensated for his or her services according to a
fee schedule which recognizes the fact that each Director also serves as a
Director of other investment companies advised by LMC. Each Director receives a
fee, allocated among all investment companies for which the Director serves.
Effective September 12, 1995 each Director receives annual compensation of
$24,000. Prior to September 12, 1995, the Directors who were not employed by the
Fund or its affiliates received annual compensation of $16,000.

Set forth below is information regarding compensation paid or accrued during
the period January 1, 1996 to December 31, 1996 for each Director:

- --------------------------------------------------------------------------------
Aggregate Total Compensation From Number of
Name of Director Compensation from Fund and Fund Complex Directorships
Fund in Fund Complex
- --------------------------------------------------------------------------------
S.M.S. Chadha $856 $13,696 16
- --------------------------------------------------------------------------------
Robert M. DeMichele 0 $0 17
- --------------------------------------------------------------------------------
Beverley C. Duer $1,712 $29,110 17
- --------------------------------------------------------------------------------
Barbara R. Evans 0 0 16
- --------------------------------------------------------------------------------
Lawrence Kantor 0 0 16
- --------------------------------------------------------------------------------
Jerard F. Maher $856 $16,046 17
- --------------------------------------------------------------------------------
Andrew M. McCosh $856 $13,696 16
- --------------------------------------------------------------------------------
Donald B. Miller $1,712 $26,760 16
- --------------------------------------------------------------------------------
Francis Olmsted* $1,068 $16,800 N/A
- --------------------------------------------------------------------------------
John G. Preston $1,712 $26,760 16
- --------------------------------------------------------------------------------
Margaret W. Russell $1,712 $25,048 16
- --------------------------------------------------------------------------------
Philip C. Smith $1,600 $25,080 16
- --------------------------------------------------------------------------------
Francis A. Sunderland* $744 $10,528 N/A
- --------------------------------------------------------------------------------

*Retired

Retirement Plan for Eligible Directors/Trustees

Effective September 12, 1995, the Directors instituted a Retirement Plan for
Eligible Directors/Trustees (the "Plan") pursuant to which each Director/Trustee
(who is not an employee of any of the Funds, the Advisor, Administrator or
Distributor or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Director/Trustee has attained age 65 and has
completed at least ten years of continuous and non-forfeited service with one or
more of the investment companies advised by LMC (or its affiliates)
(collectively, the "Covered Funds"). Each eligible Director/Trustee is entitled
to receive from the Covered Fund an annual benefit commencing on the first day
of the calendar quarter coincident with or next following his date of retirement
equal to 5% of his compensation multiplied by the number of such
Director/Trustee's years of service (not in excess of 15 years) completed with
respect to any of the Covered Portfolios. Such benefit is payable to each
eligible Director in quarterly installments for ten years following the date of
retirement or the life of the Director/Trustee. The Plan establishes age 72 as a
mandatory retirement age for Directors/Trustees; however, Director/Trustees
serving the Funds as of September 12, 1995 are not subject to such mandatory
retirement. Directors/Trustees serving the Funds as of September 12, 1995 who
elect retirement under the Plan prior to September 12, 1996 will receive an
annual retirement benefit at any increased compensation level if compensation is
increased prior to September 12, 1997 and receive spousal benefits (i.e., in the
event the Director/Trustee dies prior to receiving full benefits under the Plan,
the Director/Trustee's spouse (if any) will be entitled to receive the
retirement benefit within the 10 year period.)

Retiring Directors will be eligible to serve as Honorary Directors for one
year after retirement and will be entitled to be reimbursed for travel expenses
to attend a maximum of two meetings.

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<PAGE>

Set forth in the table below are the estimated annual benefits payable to an
eligible Director upon retirement assuming various compensation and years of
service classifications. As of December 31, 1996, the estimated credited years
of service for Directors Chadha, Duer, Maher, McCosh, Miller, Preston and
Russell are 1, 18, 1, 1, 22, 18 and 15, respectively.

Highest Annual Compensation Paid by All Funds
---------------------------------------------

$20,000 $25,000 $30,000 $35,000
Years of
Service Estimated Annual Benefit Upon Retirement
- ------- ----------------------------------------
15 $15,000 $18,750 $22,500 $26,250
14 14,000 17,500 21,000 24,500
13 13,000 16,250 19,500 22,750
12 12,000 15,000 18,000 21,000
11 11,000 13,750 16,500 19,250
10 10,000 12,500 15,000 17,500

INVESTMENT ADVISER, DISTRIBUTOR AND ADMINISTRATOR

Lexington Management Corporation ("LMC"), P.O. Box 1515, Saddle Brook, New
Jersey 07663 is the investment adviser to the Fund pursuant to an Investment
Management Agreement dated February 24, 1987, (the "Advisory Agreement").
Lexington Funds Distributor, Inc. ("LFD") is the distributor of Fund shares
pursuant to a Distribution Agreement dated August 21, 1990 (the "Distribution
Agreement"). Both of these agreements were approved by the Fund's Board of
Directors (including a majority of the Directors who were not parties to either
the Advisory Agreement or the Distribution Agreement or "interested persons" of
any such party) on December 5, 1994. LMC makes recommendations to the Fund with
respect to its investments and investment policies.

LMC's fee will be reduced for any fiscal year by any amount necessary to
prevent Fund expenses from exceeding the most restrictive expense limitations
imposed by the securities laws or regulations of those states or jurisdictions
in which the Fund's shares are registered or qualified for sale. Currently, the
most restrictive of such expense limitation would require LMC to reduce its fee
so that ordinary expenses (excluding interest, taxes, brokerage commissions and
extraordinary expenses) for any fiscal year do not exceed 2.5% of the first $30
million of the Fund's average daily net assets, plus 2.0% of the next $70
million, plus 1.5% of the Fund's average daily net assets in excess of $100
million. LFD pays the advertising and sales expenses of the continuous offering
of Fund shares, including the cost of printing prospectuses, proxies and
shareholder reports for persons other than existing shareholders. The Fund
furnishes LFD, at printer's overrun cost paid by LFD, such copies of its
prospectus and annual, semi-annual and other reports and shareholder
communications as may reasonably be required for sales purposes.

LMC also acts as administrator to the Fund and performs certain
administrative and internal accounting services, including but not limited to,
maintaining general ledger accounts, regulatory compliance, preparation of
financial information for semiannual and annual reports, preparing registration
statements, calculating net asset values, shareholder communications and
supervision of the custodian, transfer agent and provides facilities for such
services. The Fund shall reimburse LMC for its actual cost in providing such
services, facilities and expenses.

The Advisory Agreement, the Distribution Agreement and the Administrative
Services Agreement are subject to annual approval by the Fund's Board of
Directors and by the affirmative vote, cast in person at a meeting called for
such purpose, of a majority of the Directors who are not parties either to the
Advisory Agreement or the Distribution Agreement, as the case may be, or
"interested persons" of any such party. Either the Fund or LMC may terminate the
Advisory Agreement and the Fund or LFD may terminate the Distribution Agreement
on 60 days' written notice without penalty. The Advisory Agreement terminates
automatically in the event of assignment, as defined in the Investment Company
Act of 1940. LMC is paid an investment advisory fee at the annual rate of 1.00%
of the Fund's average daily net assets. For the year ended December 31, 1996,
LMC earned $393,512 in management fees from the Fund; for the year ended
December 31, 1995, LMC earned $590,198 in management fees from the Fund and for
the year ended December 31, 1994, LMC earned $798,119 in management fees from
the Fund.

LMC shall not be liable to the Fund or its shareholders for any act or
omission by LMC, its officers, directors or employees or any loss sustained by
the Fund or its shareholders except in the case of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty.

7
<PAGE>

LMC and LFD are wholly owned subsidiaries of Lexington Global Asset
Managers, Inc. a publicly traded corporation. Descendants of Lunsford
Richardson, Sr., their spouses, trusts and other related entities have a
majority voting control of outstanding shares of Lexington Global Asset
Managers, Inc.

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

The Fund's primary policy is to execute all purchases and sales of portfolio
instruments at the most favorable prices consistent with best execution,
considering all of the costs of the transaction including brokerage commissions.
This policy governs the selection of brokers and dealers and the market in which
a transaction is executed. Consistent with this policy, the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and such other
policies as the Directors may determine, LMC may consider sales of shares of the
Fund and of the other Lexington Funds as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions. However, pursuant
to the Fund's investment management agreement, management consideration may be
given in the selection of broker-dealers to research provided and payment may be
made of a commission higher than that charged by another broker-dealer which
does not furnish research services or which furnishes research services deemed
to be a lesser value, so long as the criteria of Section 28(e) of the Securities
Exchange Act of 1934 are met. Section 28 (e) of the Securities Exchange Act of
1934 was adopted in 1975 and specifies that a person with investment discretion
shall not be "deemed to have acted unlawfully or to have breached a fiduciary
duty" solely because such person has caused the account to pay higher commission
than the lowest available under certain circumstances, provided that the person
so exercising investment discretion makes a good faith determination that the
person so commissions paid are "reasonable in the relation to the value of the
brokerage and research services provided...viewed in terms of either that
particular transaction or his overall responsibilities with respect to the
accounts as to which he exercises investment discretion."

Currently, it is not possible to determine the extent to which commissions
that reflect an element of value for research services ("soft dollars") might
exceed commissions that would be payable for executions services alone. Nor
generally can the value of research services to the Fund be measured. Research
services furnished might be useful and of value to LMC and its affiliates, in
serving other clients as well as the Fund. On the other hand, any research
services obtained by LMC or its affiliates from the placement of portfolio
brokerage of other clients might be useful and of value to LMC in carrying out
its obligations to the Fund.

The Fund anticipates that its brokerage transactions involving securities of
companies domiciled in countries other than the United States will normally be
conducted on the principal stock exchanges of those countries. Fixed commissions
of foreign stock exchange transactions are generally higher than the negotiated
commission rates available in the United States. There is generally less
government supervision and regulation of foreign stock exchanges and
broker-dealers than in the United States.

The Fund paid brokerage commissions and portfolio turnover rates are as follows:

Total Brokerage Soft Dollar Portfolio Turnover
Commissions Paid Commissions Paid Rate
---------------- ---------------- ------------------
1994 $523,335 $ 51,935 83.40%
1995 568,882 106,489 166.35%
1996 424,440 45,589 128.39%

DETERMINATION OF NET ASSET VALUE

The Fund calculates net asset value as of the close of normal trading on the
NYSE (currently 4:00 p.m. Eastern time, unless weather, equipment failure or
other factors contribute to an earlier closing time) each business day. It is
expected that the New York Stock Exchange will be closed on Saturdays and
Sundays and on New Year's day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. See the
Prospectus for the further discussion of net asset value.

TELEPHONE EXCHANGE PROVISIONS

Exchange instructions may be given in writing or by telephone. Telephone
exchanges may only be made if a Telephone Authorization form has been previously
executed and filed with LFD. Telephone exchanges are permitted only after a
minimum of seven (7) days have elapsed from the date of a previous exchange.
Exchanges may not be made until all checks in payment for the shares to be
exchanged have been cleared.

Telephonic exchanges can only involve shares held on deposit at State Street
Bank and Trust Company (the "Agent"); shares held in certificate form by the
shareholder cannot be included. However, outstanding certificates can be

8
<PAGE>

returned to the Agent and qualify for these services. Any new account
established with the same registration will also have the privilege of exchange
by telephone in the Lexington Funds. All accounts involved in a telephonic
exchange must have the same registration and dividend option as the account from
which the shares were transferred and will also have the privilege of exchange
by telephone in the Lexington Funds in which these services are available.

By checking the box on the New Account Application authorizing telephone
exchange services, a shareholder constitutes and appoints LFD, distributor of
the Lexington Group of Mutual Funds, as the true and lawful attorney to
surrender for redemption or exchange any and all non-certificate shares held by
the Agent in account(s) designated, or in any other account with the Lexington
Funds, present or future which has the identical registration, with full power
of substitution in the premises, authorizes and directs LFD to act upon any
instruction from any person by telephone for exchange of shares held in any of
these accounts, to purchase shares of any other Lexington Fund that is
available, provided the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed, and
agrees that neither LFD, the Agent, or the Fund(s) will be liable for any loss,
expense or cost arising out of any requests effected in accordance with this
authorization which would include requests effected by impostors or persons
otherwise unauthorized to act on behalf of the account. LFD reserves the right
to cease to act as agent subject to the above appointment upon thirty (30) days
written notice to the address of record. If the shareholder is an entity other
than an individual, such entity may be required to certify that certain persons
have been duly elected and are now legally holding the titles given and that the
said corporation, trust, unincorporated association, etc. is duly organized and
existing and has the power to take action called for by this continuing
authorization.

Exchange Authorizations forms, Telephone Authorization forms and
prospectuses of the other funds may be obtained from LFD.

LFD has made arrangements with certain dealers to accept instructions by
telephone to exchange shares of the Fund or shares of one of the other Lexington
Funds at net asset value as described above. Under this procedure, the dealer
must agree to indemnify LFD and the funds from any loss or liability that any of
them might incur as a result of the acceptance of such telephone exchange
orders. A properly signed Exchange Authorization must be received by LFD within
5 days of the exchange request. LFD reserves the right to reject any telephone
exchange request. In each such exchange, the registration of the shares of the
Fund being acquired must be identical to the registration of the shares of the
Fund being exchanged. Any telephone exchange orders so rejected may be processed
by mail.

TAX-SHELTERED RETIREMENT PLANS

The Fund makes available a variety of Prototype Pension and Profit Sharing
plans including a 401(k) Salary Reduction Plan and a 403(b)(7) Plan. Plan
services are available by contacting the Shareholder Services Department of the
Distributor at 1-800-526-0056.

INDIVIDUAL RETIREMENT ACCOUNT ("IRA"): Individuals may make tax deductible
contributions to their own Individual Retirement Accounts established under
Section 408 of the Internal Revenue Code (the "Code"). Married investors filing
a joint return neither of whom is an active participant in an employer sponsored
retirement plan, or who have an adjusted gross income of $40,000 of less
($25,000 or less for single taxpayers) may make a $2,000 annual deductible IRA
contribution. For adjusted gross incomes above $40,000 ($25,000 for single
taxpayers, the IRA deduction limit is generally phased out ratably over the next
$10,000 of adjusted gross income, subject to a minimum $200 deductible
contribution. Investors who are not able to deduct a full $2,000 IRA
contribution because of the limitations may make a nondeductible contribution to
their IRA to the extent a deductible contribution is not allowed. Federal income
tax on accumulations earned on nondeductible contributions is deferred until
such time as these amounts are deemed distributed to an investor. Rollovers are
also permitted under the Plan. The disclosure statement required by the Internal
Revenue Service ("IRS") is provided by the Fund.

The minimum initial investment to establish a tax-sheltered plan is $250.
Subsequent investments are subject to a minimum of $50 for each account.

SELF-EMPLOYED RETIREMENT PLAN (HR-10): Self-employed individuals may make tax
deductible contributions to a prototype defined contribution pension plan or
profit sharing plan. There are, however, a number of special rules which apply
when self-employed individuals participate in such plans. Currently purchase
payments under a self-employed plan are deductible only to the extent of the
lesser of (i) $30,000 or (ii) 25% of the individual's earned annual income (as

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<PAGE>

defined in the Code) and in applying these limitations not more than $150,000 of
"earned income" may be taken into account.

CORPORATE PENSION AND PROFIT SHARING PLANS: The Fund makes available a Prototype
Defined Contribution Pension Plan and a Prototype Profit Sharing Plan.

All purchases and redemptions of Fund shares pursuant to any one of the
Fund's tax sheltered plans must be carried out in accordance with the provisions
of the Plan. Accordingly, all plan documents should be reviewed carefully before
adopting or enrolling in the Plan. Investors should especially note that a
penalty tax of 10% may be imposed by the IRS on early withdrawals under
corporate, Keogh or IRA plans. It is recommended by the IRS that an investor
consult a tax adviser before investing in the Fund through any of these plans.

An investor participating in any of the Fund's special plans has no
obligation to continue to invest in the Fund and may terminate the Plan with the
Fund at any time. Except for expenses of sales and promotion, executive and
administrative personnel, and certain services which are furnished by LMC, the
cost of the plans generally is borne by the Fund; however, each IRA Plan account
is subject to an annual maintenance fee to $12.00 charged by the Agent.

TAX MATTERS

The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussions here and in the
Prospectus are not intended as substitutes for careful tax planning.

Qualification as a Regulated Investment Company

The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and will therefore satisfy the Distribution Requirement.

In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from such sale or other disposition of securities for this purpose.

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<PAGE>

In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256 (unless the Fund
elects otherwise), will generally be treated as ordinary income or loss.

In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and the Fund grants
a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.

Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.

The Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the Fund invests in a PFIC, it may elect to
treat the PFIC as a qualified electing fund (a "QEF"), in which event the Fund
will each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro rata
share of the PFIC's net capital gain for the year, regardless of whether the
Fund receives distributions of any such ordinary earning or capital gain from
the PFIC. If the Fund does not elect to treat the PFIC as a QEF, then, in
general, (1) any gain recognized by the Fund upon sale or other disposition of
its interest in the PFIC or any excess distribution received by the Fund from
the PFIC will be allocated ratably over the Fund's holding period of its
interest in the PFIC, (2) the portion of such gain or excess distribution so
allocated to the year in which the gain is recognized or the excess distribution
is received shall be included in the Fund's gross income for such year as
ordinary income (and the distribution of such portion by the Fund to
shareholders will be taxable as an ordinary income dividend, but such portion
will not be subject to tax at the Fund level), (3) the Fund shall be liable for
tax on the portions of such gain or excess distribution so allocated to prior
years in an amount equal to, for each such prior year, the sum of (i) the amount
of gain or excess distribution allocated to such prior year multiplied by the
highest tax rate (individual or corporate) in effect for such prior year and
(ii) interest on the amount determined under clause (i) for the period from the
due date for filing a return for such prior year until the date for filing a
return for the year in which the gain is recognized or the excess distribution
is received at the rates and methods applicable to underpayments of tax for such
period, and (4) the distribution by the Fund to shareholders of the portions of
such gain or excess distribution so allocated to prior years (net of the tax
payable by the Fund thereon) will again be taxable to the shareholders as an
ordinary income dividend.

Under proposed Treasury Regulations the Fund can elect to recognize as gain
the excess, as of the last day of its taxable year, of the fair market value of
each share of PFIC stock over the Fund's adjusted tax basis in that share ("mark
to market gain"). Such mark to market gain will constitute ordinary income and
will not be subject to the Short-Short Gain Test, and the Fund's holding period
with respect to such PFIC stock will commence on the first day of the next
taxable year. If the Fund makes such election in the first taxable year it holds
PFIC stock, it will not incur the tax described in the preceding paragraph.

Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.

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<PAGE>

In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to each of which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument.

If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.

Excise Tax on Regulated Investment Companies

A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.

For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year; and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).

The Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.

Fund Distributions

The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends-received deduction for
corporate shareholders only to the extent discussed below.

The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. Net capital gain t hat is distributed and designated as a capital gain
dividend will be taxable to shareholders as long-term capital gain, regardless
of the length of time the shareholder has held his shares or whether such gain
was recognized by the Fund prior to the date on which the shareholder acquired
his shares. The Code provides, however, that under certain conditions only 50%
of the capital gain recognized upon the Fund's disposition of domestic "small
business" stock will be subject to tax.

Conversely, if the Fund elects to retain its net capital gain, the Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If the Fund elects to retain its net capital
gain, it is expected that the Fund also will elect to have shareholders of
record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.

Ordinary income dividends paid by the Fund with respect to a taxable year
will qualify for the 70% dividends-received deduction generally available to
corporations (other than corporations, such as S corporations, which are not

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<PAGE>

eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (1)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3) and (4):
(i) any day more than 45 days (or 90 days in the case of certain preferred
stock) after the date on which the stock becomes ex-dividend and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy, or has otherwise
diminished its risk of loss by holding other positions with respect to, such (or
substantially identical) stock; (2) to the extent that the Fund is under an
obligation (pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property; or (3) to the
extent the stock on which the dividend is paid is treated as debt-financed under
the rules of Code Section 246A. Moreover, the dividends-received deduction for a
corporate shareholder may be disallowed or reduced (1) if the corporate
shareholder fails to satisfy the foregoing requirements with respect to its
shares of the Fund or (2) by application of Code Section 246(b) which in general
limits the dividends-received deduction to 70% of the shareholder's taxable
income (determined without regard to the dividends-received deduction and
certain other items).

Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate of
28% for noncorporate taxpayers and 20% for corporate taxpayers on the excess of
the taxpayer's alternative minimum taxable income ("AMTI") over an exemption
amount. For purposes of the corporate AMT the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMTI.
However, a corporate shareholder will generally be required to take the full
amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.

Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax adviser regarding the
potential application of foreign tax credits.

Distributions by the Fund that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.

Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although they economically constitute a return of capital to the shareholder.

Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.

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<PAGE>

The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has provided
either an incorrect tax identification number or no number at all, (2) who is
subject to backup withholding for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to the Fund that it
is not subject to backup withholding or that it is an "exempt recipient" (such
as a corporation).

Sale or Redemption of Shares

A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of shares. Long-term capital gains of noncorporate taxpayers are
currently taxed at a maximum rate 11.6% lower than the maximum rate applicable
to ordinary income. Capital losses in any year are deductible only to the extent
of capital gains plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.

Foreign Shareholders

Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.

If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower applicable treaty rate) upon the gross amount of the dividend.
Furthermore, such a foreign shareholder may be subject to U.S. withholding tax
at the rate of 30% (or lower applicable treaty rate) on the gross income
resulting from the Fund's election to treat any foreign taxes paid by it as paid
by its shareholders, but may not be allowed a deduction against this gross
income or a credit against this U.S. withholding tax for the foreign
shareholder's pro rata share of such foreign taxes which it is treated as having
paid. Such a foreign shareholder would generally be exempt from U.S. federal
income tax on gains realized on the sale of shares of the Fund, capital gain
dividends and amounts retained by the Fund that are designated as undistributed
capital gains.

If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.

In the case of foreign noncorporate shareholders, the Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.

The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in the Fund, including
the applicability of foreign taxes.

Effect of Future Legislation; Local Tax Considerations

The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect on
the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.

Rules of state and local taxation of ordinary income dividends,
exempt-interest dividends and capital gain dividends from regulated investment
companies often differ from the rules for U.S. federal income taxation described
above. Shareholders are urged to consult their tax advisers as to the
consequences of these and other state and local tax rules affecting investment
in the Fund.

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<PAGE>

PERFORMANCE CALCULATION

For the purpose of quoting and comparing the performance of the Fund to that
of other mutual funds and to other relevant market indices in advertisements or
in reports to shareholders, performance may be stated in terms of total return.
Under the rules of the Securities and Exchange Commission ("SEC rules"), funds
advertising performance must include total return quotes calculated according to
the following formula:

P(l+T)n = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years (1, 5 or 10)

ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10 year periods or at the end of the 1, 5 or
10 year periods (or fractional portion thereof).

Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one, five and ten year periods or a shorter period dating from the effectiveness
of the Fund's Registration Statement. In calculating the ending redeemable
value, all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the prospectus on the reinvestment
dates during the period. Total return, or "T" in the formula above, is computed
by finding the average annual compounded rates of return over the 1, 5 and 10
year periods (or fractional portion thereof) that would equate the initial
amount invested to the ending redeemable value. Any recurring account charges
that might in the future be imposed by the Fund would be included at that time.

The Fund may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Fund with other measures
of investment return. For example, in comparing the Fund's total return with
data published by Lipper Analytical Services, Inc., or with the performance of
the Standard and Poor's 500 Stock Index or the Dow Jones Industrial Average, the
Fund calculates its aggregate total return for the specified periods of time
assuming the investment of $10,000 in Fund shares and assuming the reinvestment
of each dividend or other distribution at net asset value on the reinvestment
date. Percentage increases are determined by subtracting the initial value of
the investment from the ending value and by dividing the remainder by the
beginning value. The Lexington Global Fund, Inc.'s average annual standard total
return for the one and five year and since commencement (3/27/87) ended December
31, 1996 was as follows:

Average Annual
Period Total Return
------ --------------
1 year ended December 31, 1996 ..................... 16.43%
5 years ended December 31, 1996 .................... 10.80%
Since commencement period ended December 31, 1996 .. 9.51%

SHAREHOLDER REPORTS

Shareholders will receive reports at least semi-annually showing the Fund's
holdings and other information. In addition, shareholders will receive annual
financial statements audited by KPMG Peat Marwick LLP, the Fund's independent
auditors.

OTHER INFORMATION

As of February 21, 1997, the following persons were known by Fund management
to have owned beneficially, directly or indirectly, 5% or more of the
outstanding shares of the Lexington Global Fund, Inc.: Piedmont Associates, P.O.
20124, Greensboro, NC 27420, 29%; Center for Creative Leadership, One Leadership
Place, Greensboro, NC 27438-6300, 19% and Southeastern Associates, P.O. Box
20124, Greensboro, NC 27402, 5%.

15
<PAGE>

(LEFT COLUMN)

Lexington Global Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996

Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS: 97.7%
Australia: 1.1%
77,875 QBE Insurance Group, Ltd. ..................... $ 410,082
-----------
Austria: 2.0%
7,100 Bank Austria AG (Preferred shares) ............ 275,104
2,400 Wienerberger Baustoffindustrie AG ............. 464,964
-----------
740,068
-----------
Belgium: 1.0%
1,400 Credit Communal Holding/Dexia2 ................ 127,595
2,700 Credit Communal Holding/Dexia1,2 .............. 246,077
-----------
373,672
-----------
Brazil: 0.8%
36,000 Aracruz Celulose S.A. (ADR) ................... 297,000
-----------
Canada: 1.4%
13,100 Jetform Corporation2 .......................... 237,438
42,600 Noranda Forest, Inc. .......................... 289,045
-----------
526,483
-----------
Chile: 2.2%
36,700 Antofagasta Holdings Plc ...................... 213,536
24,400 Banco Santander (ADR) ......................... 366,000
18,100 Maderas y Sinteticos Sociedad
Anonima S.A. (ADR) .......................... 253,400
-----------
832,936
-----------
Finland: 1.0%
21,500 Valmet Corporation ............................ 375,048
-----------
France: 5.7%
4,880 Alcatel Alsthom ............................... 391,246
8,500 Elf Aquitaine S.A. (ADR) ...................... 384,625
9,300 Lafarge ....................................... 556,883
3,190 SGS-Thomson Microelectronics N.V.2 ............ 225,195
4,830 Sidel ......................................... 331,679
2,240 Societe Generale de Surveillance
Holding S.A. "B" ............................ 241,720
-----------
2,131,348
-----------
Germany: 4.5%
13,900 Continental AG ................................ 249,840
4,600 Daimler-Benz AG2 .............................. 316,396
7,800 Deutsche Bank AG .............................. 363,907
7,000 Hoechst AG .................................... 330,217
854 Sto AG (Preferred shares) ..................... 401,756
-----------
1,662,116
-----------
Greece: 1.4%
4,200 Ergo Bank S.A. ................................ 212,885
17,900 Hellenic Tellecommunication
Organization S.A. ........................... 305,818
-----------
518,703
-----------

(RIGHT COLUMN)

Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
Hong Kong: 4.1%
66,000 Citic Pacific, Ltd. ........................... $ 383,116
576,000 Guangdong Investments ......................... 554,777
396,000 National Mutual Asia, Ltd. .................... 376,290
132,000 Peregrine Investment Holdings, Ltd. ........... 226,115
-----------
1,540,298
-----------
Hungary: 0.6%
3,900 Pick Szeged Rt. ............................... 230,888
-----------
Indonesia: 1.1%
62,000 PT Semen Cibinong ............................. 174,518
122,000 PT Tambang Timah .............................. 222,053
-----------
396,571
-----------
Ireland: 2.8%
45,800 Allied Irish Banks Plc ........................ 306,968
236,200 Jefferson Smurfit Group ....................... 717,590
-----------
1,024,558
-----------
Italy: 2.6%
10,000 Bulgari S.p.A ................................. 202,565
43,800 Istituto Mobiliare Italiano S.p.A. ............ 372,754
85,900 Stet Societa' Finanziara Tlefonica S.p.A. ..... 389,417
-----------
964,736
-----------
Japan: 8.5%
5,980 Amway Japan, Ltd. ............................. 191,657
11,000 Canon, Inc. ................................... 242,612
28,000 Citizen Watch Company, Ltd. ................... 200,224
300 H.I.S. Company, Ltd. .......................... 14,474
3,300 Maruco Company, Ltd. .......................... 110,597
18,000 Matsushita Electric Industrial Company, Ltd. .. 293,099
13,000 Nitto Denko Corporation ....................... 190,402
18,000 Nomura Securities Company, Ltd. ............... 269,837
110 NTT Data Communications Systems Corporation ... 321,272
22,000 Sodick2 ....................................... 181,959
6,100 Sony Corporation .............................. 398,889
8,000 Tokyo Electron, Ltd. .......................... 244,680
11,000 Toyota Motor Corporation ...................... 315,585
21,000 Yamato Kogyo Company, Ltd. .................... 193,590
-----------
3,168,877
-----------
Malaysia: 4.6%
42,000 Arab Malaysian Finance Bhd .................... 234,488
4,000 Berjaya Sports Toto Bhd ....................... 19,956
41,000 Hong Kong Credit Bhd .......................... 258,126
140,000 Magnum Corporation Bhd ........................ 271,629
161,000 MBF Capital Bhd ............................... 261,373
49,000 Sime Darby Bhd ................................ 193,050
32,000 Sime Darby Bhd1 ............................... 126,074
89,000 Tanjong Plc ................................... 355,929
-----------
1,720,625
-----------

16
<PAGE>

(LEFT COLUMN)

Lexington Global Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996 (continued)

Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
Mexico: 1.0%
23,600 Tubos De Acero De Mexico S.A. (ADR) ...........
-----------
Netherlands: 0.7%
6,120 Philips Electronics N.V. ...................... 247,668
-----------
New Zealand: 3.2%
300,900 Brierley Investments, Ltd. .................... 278,501
129,200 Carter Holt Harvey, Ltd. ...................... 293,023
62,100 Fisher & Paykel Industries, Ltd. .............. 243,511
127,200 Fletcher Challenge Building ................... 390,940
-----------
1,205,975
-----------
Norway: 2.0%
55,600 Fokus Banken AS2 .............................. 381,384
21,200 Saga Petroleum AS ............................. 355,249
-----------
736,633
-----------
Philippines: 2.1%
635,500 C & P Homes, Inc. ............................. 326,207
414,500 Filinvest Land, Inc.2 ......................... 129,236
38,000 Manila Electric Company "B" ................... 310,646
-----------
766,089
-----------
Poland: 1.9%
7,550 Debica S.A.2 .................................. 168,921
16,411 Elektrim Towarzystwo Handlowe S.A. ............ 149,164
6,436 Wedel S.A. .................................... 317,242
1,649 Zaklady Piwowarski w Zywcu S.A. ............... 76,670
-----------
711,997
-----------
Portugal: 0.8%
4,700 Telecel-Communicacaoes Pessoais, S.A.2 ........ 299,710
-----------
Russia: 1.0%
7,700 LUKoil Holdings of Russia (ADR) ............... 358,666
-----------
Singapore: 4.1%
34,000 City Develoments, Ltd. ........................ 306,258
70,300 Clipsal Industries, Ltd. ...................... 255,892
84,000 DBS Land, Ltd. ................................ 309,261
65,000 Inchcape Bhd .................................. 225,833
69,000 Jardine Strategic Holdings, Ltd. .............. 249,780
63,000 Want Want Holdings2 ........................... 165,690
-----------
1,512,714
-----------
Spain: 2.7%
1,600 Banco Popular Espanol S.A. .................... 313,665
5,800 Banco Santander S.A. .......................... 370,540
8,800 Repsol S.A. ................................... 336,913
-----------
1,021,118
-----------

(RIGHT COLUMN)

Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
Sweden: 1.6%
3,400 Astra AB ...................................... $ 167,808
25,200 Skandinaviska Enskilda Banken ................. 258,347
6,400 Svenska Handelsbanken ......................... 183,713
-----------
609,868
-----------
Switzerland: 3.8%
240 ABB AG ........................................ 297,605
380 Nestle S.A. ................................... 406,682
58 Roche Holdings AG ............................. 449,885
470 Winterthur Scheizerische
Versicherungs-Gesellschaft .................. 270,927
-----------
1,425,099
-----------
Thailand: 0.4%
15,000 BEC World Public Company, Ltd.2 ............... 135,725
13,600 Property Perfect Public Company, Ltd. ......... 14,056
-----------
149,781
-----------
United Kingdom: 8.1%
285,300 Aegis Group Plc2 .............................. 297,823
47,800 British Telecommunications Plc ................ 322,702
33,600 D.F.S. Furniture Company Plc .................. 347,010
107,400 Grand Metropolitan Plc ........................ 843,613
15,300 RTZ Corporation Plc ........................... 245,203
141,900 Tomkins Plc ................................... 652,008
71,100 Vodafone Group Plc ............................ 299,925
-----------
3,008,284
-----------
United States: 18.9%
2,700 Abbott Laboratories ........................... 137,025
2,100 Ace, Ltd. ..................................... 126,262
2,600 AlliedSignal, Inc. ............................ 174,200
1,600 American International Group .................. 173,200
2,400 Aon Corporation ............................... 149,100
3,800 Avery-Dennison Corporation .................... 134,425
4,200 Becton, Dickinson & Company ................... 182,175
1,900 Boeing Company ................................ 202,113
4,300 Borders Group, Inc.2 .......................... 154,262
8,300 Calpine Corporation2 .......................... 166,000
1,300 Citicorp ...................................... 133,900
2,250 Computer Associates International, Inc. ....... 111,938
4,400 Conseco, Inc. ................................. 280,500
1,800 CPC International, Inc. ....................... 139,500
3,000 Crown Cork & Seal Company, Inc. ............... 163,125
2,600 Diamond Offshore Drilling, Inc.2 .............. 148,200

17
<PAGE>

(LEFT COLUMN)

Lexington Global Fund, Inc.
Statement of Net Assets
(Including the Portfolio of Investments)
December 31, 1996 (continued)

Number of Value
Shares Security (Note 1)
- --------------------------------------------------------------------------------
United States (continued)
3,400 Dover Corporation ............................. $ 170,850
3,600 Ecolab, Inc. .................................. 135,450
3,700 Federal National Mortgage Association ......... 137,825
5,700 Gap, Inc. ..................................... 171,712
3,400 Hasbro, Inc. .................................. 132,175
4,200 Hershey Foods Corporation ..................... 183,750
3,000 Honeywell, Inc. ............................... 197,250
3,400 Ingersoll-Rand Company ........................ 151,300
2,800 Johnson & Johnson ............................. 139,300
2,000 Lockheed Martin Corporation ................... 183,000
1,300 Mobil Corporation ............................. 158,925
4,400 Monsanto Company .............................. 171,050
3,600 NAC Re Corporation ............................ 121,950
1,900 NationsBank Corporation ....................... 185,725
3,300 Newmont Gold Company .......................... 144,375
2,800 Nike, Inc. .................................... 167,300
3,500 Norwest Corporation ........................... 152,250
800 PacifiCare Health Systems, Inc.2 .............. 68,100
2,600 Parker Hannifin Corporation ................... 100,750
1,600 Procter & Gamble Company ...................... 172,000
5,400 Safeway, Inc.2 ................................ 230,850
1,800 Schlumberger, Ltd. ............................ 179,775
5,400 Service Corporation International ............. 151,200
2,300 Union Pacific Corporation ..................... 138,288
5,047 Union Pacific Resources Group, Inc. ........... 147,625
1,900 United Healthcare Corporation ................. 85,500
3,000 Warner-Lambert Company ........................ 225,000
3,000 Williams Companies, Inc. ...................... 112,500
4,000 WMX Technologies, Inc. ........................ 130,500
-----------
7,022,200
-----------
Total Common Stocks
(cost $32,521,014) .......................... $36,364,461
-----------

(RIGHT COLUMN)

Number of
Shares or
Principal Value
Amount Security (Note 1)
- --------------------------------------------------------------------------------
Foreign Government Obligation: 1.7%
Germany: 1.7%
$1,000,000 German Treasury Bill, due 04/18/97
(cost $642,250) ............................. $ 643,036
-----------
Total Investments: 99.4%
(cost $33,163,264\'86) (Note 1) ............... 37,007,497
Other assets in excess of liabilites: 0.6% .... 215,986
-----------
Total Net Assets: 100.0%
(equivalent to $11.28 per share on
3,299,680 shares outstanding) ............... $37,223,483
===========

1Restricted securities (Note 7).
jhdADR - American Depository Receipt.
+Aggregate cost for Federal income tax purposes is $33,259,775.

----------------------------------------

At December 31, 1996, the composition of the Fund's net assets by industry was
as follows:

Banking ............................. 11.0%
Capital Equipment ................... 6.5%
Chemicals ........................... 0.5%
Construction & Housing ............. 0.9%
Consumer durable ................... 7.5%
Consumer non-durable ................ 8.1%
Electrical & Electronics ............ 4.1%
Energy Sources ..................... 5.4%
Financial Services .................. 12.3%
Foreign Government Obligation ..... 1.7%
Health & Personal Care .............. 3.9%
Materials ........................... 14.0%
Merchandising ....................... 2.5%
Multi-industry ...................... 7.5%
Real Estate ......................... 2.0%
Services ............................ 5.5%
Telecommunications .................. 4.4%
Trade ............................... 0.4%
Transportation ...................... 0.4%
Utilities ........................... 0.8%
Other Assets ........................ 0.6%
-------
100.0%

The Notes to Financial Statements are an integral part of this statement.

18
<PAGE>

Lexington Global Fund, Inc.
Statement of Assets and Liabilities
December 31, 1996

Assets

Investments, at value (cost $33,163,264) (Note 1) ................ $37,007,497
Cash ............................................................. 917,219
Receivable for investment securities sold ........................ 856,537
Receivable for shares sold ....................................... 5,500
Dividends and interest receivable ................................ 28,933
Foreign taxes recoverable ........................................ 21,816
-----------
Total Assets ............................................... 38,837,502
-----------
Liabilities
Due to Lexington Management Corporation (Note 2) ................. 30,354
Payable for investment securities purchased ...................... 1,195,188
Payable for shares redeemed ...................................... 6,827
Distributions payable ............................................ 311,800
Accrued expenses ................................................. 51,507
Unrealized loss on open forward contracts (Note 6) ............... 18,343
-----------
Total Liabilities .......................................... 1,614,019
-----------
Net Assets (equivalent to $11.28 per share on 3,299,680
shares outstanding) (Note 3) ................................... $37,223,483
-----------
Net Assets consist of:
Capital stock-authorized 1,000,000,000 shares,
$.001 par value per share ...................................... $ 3,300
Additional paid-in capital (Note 1) .............................. 33,683,879
Distributions in excess of net investment income (Note 1) ........ (14,783)
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) ................................. (273,232)
Unrealized appreciation of investments and foreign
currency transactions .......................................... 3,824,319
-----------
Total Net Assets ................................................. $37,223,483
===========

The Notes to Financial Statements are an integral part of this statement.

19
<PAGE>

Lexington Global Fund, Inc.
Statement of Operations
Year ended December 31, 1996

Investment Income
Dividends ......................................... $ 716,467
Interest .......................................... 155,261
----------
.................................................. 871,728
Less: Foreign tax expense ......................... 81,330
----------
Total Investment income ..................... $ 790,398
Expenses
Investment advisory fee (Note 2) .................. 393,512
Custodian fees .................................... 112,967
Transfer agent and shareholder servicing
expense (Note 2) ............................... 63,772
Printing and mailing expenses ..................... 50,648
Accounting expenses (Note 2) ...................... 36,753
Professional fees ................................. 24,715
Registration fees ................................. 20,694
Directors' fees and expenses ...................... 15,769
Computer processing fees .......................... 10,524
Other expenses .................................... 17,796
----------
Total expenses ................................. 747,150
---------
Net investment income ....................... 43,248
Realized and Unrealized Gain (Loss)
on Investments (Note 4)
Net realized gain on:
Investments ................................... 4,838,386
Foreign currency transactions ................. 1,197,910
----------
Net realized gain ........................... 6,036,296
Net change in unrealized appreciation on:
Investments ................................... (86,094)
Foreign currency translations of other
assets and liabilities ...................... 1,570
----------
Net change in unrealized appreciation ......... (84,524)
---------
Net realized and unrealized gain ............ 5,951,772
---------
Increase in Net Assets Resulting from Operations .. $5,995,020
=========

The Notes to Financial Statements are an integral part of this statement.

20
<PAGE>

Lexington Global Fund, Inc.
Statements of Changes in Net Assets
Years ended December 31, 1996 and 1995

1996 1995
----------- -----------
Net investment income ........................... $ 43,248 $ 280,577
Net realized gain from investments and
foreign currency transactions ................. 6,036,296 3,775,954
Net change in unrealized appreciation of
investments and foreign currency translations . (84,524) 1,614,187
----------- -----------
Increase in net assets resulting from operations 5,995,020 5,670,718
Distributions to shareholders from net
investment income ............................. (457,395) (1,284,116)
Distributions to shareholders in excess of
net investment income (Note 1) ................ - (576,895)
Distributions to shareholders from net realized
gains from security transactions .............. (4,924,188) (2,751,490)
Decrease in net assets from capital
share transactions (Note 3) ................... (17,004,160) (14,836,260)
----------- -----------
Net decrease in net assets ...................... (16,390,723) (13,778,043)

Net Assets:
Beginning of period ............................. 53,614,206 67,392,249
----------- -----------
End of period (including distributions in
excess of net investment income of $14,783
and $534,709, respectively) ................... $37,223,483 $53,614,206
=========== ===========

The Notes to Financial Statements are an integral part of these statements.

21
<PAGE>

Lexington Global Fund, Inc.
Notes to Financial Statements
December 31, 1996 and 1995

1. Significant Accounting Policies

Lexington Global 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 to seek long-term growth of
capital primarily through investment in common stock of companies domiciled in
foreign countries and the United States. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements:

Investments Security transactions are accounted for on a trade date basis.
Realized gains and losses from investment transactions are reported on the
identified cost basis. Securities traded on a recognized stock exchange are
valued at the last sales price reported by the exchange on which the securities
are traded. If no sales price is recorded, the mean between the last bid and
asked price is used. Securities traded on the over-the-counter market are valued
at the mean between the last current bid and asked price. Short-term securities
having a maturity of 60 days or less are stated at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available and other assets are valued by Fund management in good faith
under the direction of the Fund's Board of Directors. All investments quoted in
foreign currencies are valued in U.S. dollars on the basis of the foreign
currency exchange rates prevailing at the close of business. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income, adjusted for amortization of premiums and accretion of discounts, is
accrued as earned.

Foreign Currency Transactions Foreign currencies (and receivables and
payables denominated in foreign currencies) are translated into U.S. dollar
amounts at current exchange rates. Translation gains or losses resulting from
changes in exchange rates and realized gains and losses on the settlement of
foreign currency transactions are reported in the statement of operations. In
addition, the Fund may enter into forward foreign exchange contracts in order to
hedge against foreign currency risk in the purchase or sale of securities
denominated in foreign currency. The Fund may also enter into such contracts to
hedge against changes in foreign currency exchange rates on portfolio positions.
These contracts are marked to market daily, by recognizing the difference
between the contract exchange rate and the current market rate as unrealized
gains or losses. Realized gains or losses are recognized when contracts are
closed and are reported in the statement of operations.

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 and net realized capital
gains are normally declared and paid annually, but the Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. The character of income and gains to
be distributed are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. At December 31, 1996,
reclassifications were made to the Fund's capital accounts to reflect permanent
book/tax differences and income and gains available for distributions under
income tax regulations. Net investment income, net realized gains and net assets
were not affected by this change.

22
<PAGE>

Lexington Global Fund, Inc.
Notes to Financial Statements
December 31, 1996 and 1995 (continued)

Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results may 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. The
investment advisory contract provides that the total annual expenses of the Fund
(including management fees, but excluding interest, taxes, brokerage commissions
and extraordinary expenses) will not exceed the level of expenses which the Fund
is permitted to bear under the most restrictive expense limitation imposed by
any state in which shares of the Fund are offered for sale. No reimbursement was
required for the year ended December 31, 1996.

The Fund also reimbursed LMC for certain expenses, including accounting and
shareholder servicing costs of $74,809 which were incurred by the Fund, but paid
by LMC.

3. Capital Stock

Transactions in capital stock were as follows:

Year ended Year ended
December 31, 1996 December 31, 1995
-------------------- --------------------
Shares Amount Shares Amount
--------- ------------ --------- ------------
Shares sold .................... 639,550 $ 7,983,790 357,460 $ 4,001,451
Shares issued to shareholders
on reinvestment of dividends . 452,255 5,069,783 326,079 3,690,927
--------- ------------ --------- ------------
1,091,805 13,053,573 683,539 7,692,378

Shares redeemed ............. (2,526,528) (30,057,733)(1,984,366) (22,528,638)
--------- ------------ --------- ------------
Net decrease ................ (1,434,723) $(17,004,160)(1,300,827) $(14,836,260)
--------- ------------ --------- ------------

4. Purchases and Sales of Investment Securities

The cost of purchases and proceeds from sales of securities for the year
ended December 31, 1996, excluding short-term securities, were $46,860,395 and
$68,465,916 respectively.

At December 31, 1996, the aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost amounted to
$4,543,992 and aggregate gross unrealized depreciation for all securities in
which there is an excess of tax cost over value amounted to $816,184.

23
<PAGE>

Lexington Global Fund, Inc.
Notes to Financial Statements
December 31, 1996 and 1995 (continued)

5. Investment and Concentration Risks

The Fund's investments 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.

In addition to the risks described above, risks may arise from forward
foreign currency contracts as a result of the potential inability of
counterparties to meet the terms of their contracts.

6. Forward Foreign Exchange Contracts

At December 31, 1996, the Fund was committed to sell foreign currency under
the following forward foreign exchange contract:

Unrealized
Settlement Contract Contract Current Loss at
Security Date Amount Rate Rate 12/31/96
-------- ---------- -------- -------- ------- ----------
New Zealand Dollar . 04/01/97 $731,074 0.6859 0.7031 ($18,343)
--------

7. Restricted Securities

The following securities were purchased under Rule 144A of the Securities
Act of 1933 and, unless registered under the Act or exempted from registration,
may be sold only to qualified institutional investors.

Acquisition Average Cost Market % of Net
Security Date Shares Per Share Value Assets
-------- ---------- -------- -------- ------- ----------
Credit Communal
Holding/Dexia ... 11/20/96 2,700 $84.51 $246,077 0.66%
Sime Darby Bhd .... 11/26/96 32,000 3.72 126,074 0.34%
-------- -----
$372,151 1.00%
-------- -----

Pursuant to guidelines adopted by the Fund's Board of Directors, these
unregistered securities have been deemed to be illiquid. The Fund currently
limits investment in illiquid securities to 15% of the Fund's net assets, at
market value, at the time of purchase.

24
<PAGE>

Lexington Global Fund, Inc.
Financial Highlights
Selected per share data for a share outstanding throughout the period:

Years ended December 31,
------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Net asset value,
beginning of period $11.32 $11.17 $13.51 $11.09 $11.57
------- ------- ------- ------- -------
Income (loss) from investment
operations:
Net investment income 0.01 0.09 0.02 0.06 0.06
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 1.84 1.10 0.23 3.47 (0.47)
------- ------- ------- ------- -------
Total income (loss) from
investment operations 1.85 1.19 0.25 3.53 (0.41)
------- ------- ------- ------- -------
Less distributions:
Distributions from net
investment income (0.16) (0.29) - (0.06) (0.07)
Distributions in excess of
net investment income
(temporary book-tax
difference) - (0.13) - - -
Distributions from net
realized gains (1.73) (0.62) (2.46) (1.05) -
Distributions in excess of
net realized gains
(temporary book-tax
difference) - - (0.13) - -
------- ------- ------- ------- -------
Total distributions (1.89) (1.04) (2.59) (1.11) (.07)
------- ------- ------- ------- -------
Net asset value, end of period $11.28 $11.32 $11.17 $13.51 $11.09
======= ======= ======= ======= =======
Total return 16.43% 10.69% 1.84% 31.88% (3.55%)
Ratio to average net assets:
Expenses 1.90% 1.67% 1.61% 1.49% 1.52%
Net investment income 0.11% 0.48% 0.14% 0.52% 0.55%
Portfolio turnover rate 128.05% 166.35% 83.40% 84.61% 81.38%
Average commision paid on
equity security
transactions* $ 0.03 - - - -
Net assets at end of period $37,223 $53,614 $67,392 $87,313 $50,298

*In accordance with recent SEC disclosure guidelines, average commissions are
calculated for the current period and not for prior periods.

25
<PAGE>

Independent Auditors' Report
The Board of Directors and Shareholders
Lexington Global Fund, Inc.:

We have audited the accompanying statements of net assets (including the
portfolio of investments) and assets and liabilities of Lexington Global Fund,
Inc. as of December 31, 1996, the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian. As to securities
purchased and sold but not received or delivered, we performed other appropriate
auditing procedures. 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 Global Fund, Inc. as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP

New York, New York
February 10, 1997