LEXINGTON INTERNATIONAL FUND INC
485APOS, 1999-03-02
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As filed with the Securities and Exchange Commission on March 1, 1999
                                            Registration No. 33-72226
                                                             811-8172

             SECURITIES AND EXCHANGE COMMISSION
                   Washington, D.C.  20549
                                                           
                          FORM N-1A
                                                           
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933               X   
 
  Pre-Effective Amendment No.                                      
                                                    
  Post-Effective Amendment No.      6                                 X   
         and/or
                                                            
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940       X     
                  Amendment No.      8                      
                                                                      X     
              (Check appropriate box or boxes.)

             LEXINGTON INTERNATIONAL FUND, INC.
             ----------------------------------                            
     (Exact name of Registrant as specified in Charter)

                   Park 80 West Plaza Two
               Saddle Brook, New Jersey  07663
               -------------------------------                       
          (Address of principal executive offices)

       Registrant's Telephone Number:  (201) 845-7300

                   Lisa Curcio, Secretary
                Lexington International Fund
   Park 80 West Plaza Two, Saddle Brook, New Jersey  07663
                ----------------------------                 
   
           (Name and address of agent for service)

                       With a copy to:
                    Carl Frischling, Esq.
             Kramer Levin Naftalis & Frankel LLP
            919 Third Avenue, New York, NY 10022
               -----------------------------                     

  It is proposed that this filing will become effective 
60 days after fililng pursuant to Paragraph (a) of Rule 485.
               -----------------------------

The Registrant has registered an indefinite number of shares under the
Securities Act of 1933, pursuant to Section 24(f) of the Investment
Company Act of 1940.  A Rule 24f-2 Notice for Registrant's fiscal year
ended December 31, 1998 will be filed by March 31, 1999.

<PAGE>


                       LEXINGTON INTERNATIONAL FUND
                  REGISTRATION STATEMENT ON FORM N-1A
                         CROSS REFERENCE SHEET
 

                           PART A

Items in Part A                                           Prospectus
of Form N-1A       Prospectus Caption                     Page Number
- -------------      ------------------                     -----------
  1.               Cover Page                             Cover Page

  2.               Synopsis                                    *

  3.               Condensed Financial Information            10

  4.               General Description of Registration         3

  5.               Management of the Fund                     42

  6.               Capital Stock and Other Securities         61

  7.               Purchase of Securities Being Offered       51

  8.               Redemption or Repurchase                   54

  9.               Legal Proceedings                           *


Note * Omitted since answer is negative or inapplicable  

<PAGE>

                   LEXINGTON INTERNATIONAL FUND, INC.


             STATEMENT OF ADDITIONAL               STATEMENT OF ADDITIONAL
PART B       INFORMATION CAPTION                   INFORMATION PAGE NUMBER
- ------       -----------------------               -----------------------
 10.         Cover Page                                   Cover Page
         
 11.         Table of Contents                            Cover Page
         
 12.         General Information and History              61 (Part A)

 13.         Investment Objectives and Policies               2         

 14.         Management of the Registrant                     6

 15.         Control Persons and Principal Holders            9
             of Securities

 16.         Investment Advisory and Other Services           9

 17.         Brokerage Allocation and Other Practices        10

 18.         Capital Stock and Other Securities           61 (Part A)

 19.         Purchase, Redemption and Pricing of          51, 54 (Part A)
             securities being offered

 20.         Tax Status                                      12

 21.         Underwriters                                  9  (Part A)

 22.         Calculation of Yield Quotations on Money        *
             Market Funds

 23.         Financial Statements                            19

PART C
- ------
             Information required to be included in Part C is set forth
             under the appropriate Item, so numbered, in Part C to this
             Registration Statement.







* Not Applicable

<PAGE>



                                    

PROSPECTUS [_______, 1999]


                               THE LEXINGTON FUNDS



Domestic Equity   Lexington SmalllCap    Fixed-Income        Precious Metals
Funds             Fund, Inc.             Funds and Money     Funds
                                         Market Funds

Lexington Growth  International and      Lexington GNMA      Lexington Goldfund,
and Income Fund,  Global Funds           Income Fund, Inc.   Inc.
Inc.
                                                             Lexington Silver
                  Lexington Crosby       Lexington Global    Fund, Inc.
                  Small Cap Asia         Income Fund
                  Growth Fund, Inc.

                  Lexington Global       Lexington Money
                  Corporate Leaders      Market Trust
                  Fund, Inc.

                  Lexington
                  International Fund
                  Inc.

                  Lexington
                  Worldwide
                  Emerging Markets
                  Fund, Inc.

                  Lexington Troika
                  Dialog Russia Fund,
                  Inc.



The Securities  and Exchange  Commission  has not approved nor  disapproved  the
shares of any of the Funds. The Securities and Exchange  Commission also has not
determined whether this Prospectus is accurate or complete. Any person who tells
you that the  Securities  and Exchange  Commission  has made such an approval or
determination is committing a crime.



<PAGE>





                                Table of Contents
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2
<PAGE>




                                Table of Contents
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                                                                               3
<PAGE>


DOMESTIC EQUITY FUNDS

Lexington Growth and Income Fund, Inc.

Risk/Return Summary

Investment Objective

The  Lexington  Growth and  Income  Fund's  principal  investment  objective  is
long-term capital appreciation. Income is a secondary objective.

Investment Strategy

The Lexington Growth and Income Fund, Inc. ("the Fund") will invest at least 65%
of its total assets in common stocks of U.S. companies, which may include senior
securities  convertible into shares of common stock. The Fund seeks to invest in
long-term investments in large, ably managed and well financed companies.

The Fund may invest the  remaining 35% of its assets in foreign  securities  and
smaller capitalization companies.

Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price of
one or  more of the  companies  in the  Fund's  portfolio.  Due to the  inherent
effects  of the stock  market,  the value of the Fund  will  fluctuate  with the
movement of the market as well as in response to the  activities  of  individual
companies in the Fund's portfolio.

For a more detailed risk discussion  involving  investments in this Fund, please
read "Risks of Investing" on page __.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.

[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]


<TABLE>
<CAPTION>
   1989       1990     1991     1992     1993     1994     1995     1996     1997     1998
   ----       ----     ----     ----     ----     ----     ----     ----     ----     ----

<S>        <C>        <C>      <C>      <C>     <C>       <C>      <C>      <C>      <C>
  27.56%   -10.27%    24.87%   12.36%   13.22%  -3.11%    22.57%   26.46%   30.36%   21.42%
</TABLE>


                    Average Annual Returns Through 12/31/98

Growth & Income Fund                        21.42%         18.90%         15.76%


S & P 500                                   28.72%         24.09%         19.22%
- --------------------------------------------------------------------------------
                                            1 Year         5 Year        10 Year

During  the ten year  period  shown in the  above bar graph  chart,  the  fund's
highest  quarterly  return was  21.95%  for the  fourth  quarter in 1998 and the
fund's lowest quarterly return was -14.87% for the third quarter in 1990.
- --------------------------------------------------------------------------------


4
<PAGE>


Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
Shareholder Fees (Paid directly from your investment)
<S>                                                                             <C>    
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)
<S>                                                                            <C>
Management Fees                                                                0.63%
Rule 12b-1 Fees                                                                0.25%
Other Fees                                                                     0.28%
Total Fund Operating Expenses                                                  1.16%
</TABLE>                                                         

Example of Expenses:

This  example is intended to help you compare the cost of investing in Lexington
Growth and Income Fund with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated  and then  redeem all of your shares at the end of those  periods.  It
also assumes that your  investment has a 5% annual return each year and that the
operating expenses remain the same.  Although your actual costs may be higher or
lower, based on these assumptions your costs would be:


                  1 Year      3 Years       5 Years        10 Years
                  ------      -------       -------        --------

                  $118.23     $368.48       $638.31        $1,408.96

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

Lexington SmallCap Fund, Inc.

Risk/Return Summary

Investment Objective

The  Lexington  SmallCap  Fund's  principal  investment  objective  is long-term
capital  appreciation.  The  Lexington  SmallCap  Fund will  seek to obtain  its
objective through  investment in equity securities and equivalents  primarily of
domestic companies having market capitalizations of less than $1 billion.



                                                                               5
<PAGE>


- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

                    1996         1997        1998
                    ----         ----        ----
                   17.50%       10.47%       6.73%


                     Average Annual Returns Through 12/31/98


Small Cap Fund                               6.73%            11.51%

Russell 2000 Index                          -2.55%            11.56%
- --------------------------------------------------------------------------------
                                            1 Year        Since Inception
                                                              (1/2/96)
- --------------------------------------------------------------------------------

During  the three year  period  shown in the above bar graph  chart,  the fund's
highest  quarterly  return was  15.04%  for the  fourth  quarter in 1998 and the
fund's lowest quarterly return was -11.43% for the fourth quarter in 1997.
- --------------------------------------------------------------------------------

Investment Strategy

The Lexington  SmallCap Fund,  Inc. (the "Fund") will invest at least 90% of its
assets in domestic companies having market  capitalizations  between $20 million
and $1 billion at the time of investment.  The Fund may invest the remaining 10%
of its assets in a similar  manner,  or in securities  of companies  with market
capitalizations  below $20 million,  above $1 billion,  foreign  companies  with
dollar  denominated  shares  traded in the United  States,  American  Depository
Shares or Receipts, real estate investment trusts and cash. The Fund will invest
primarily in listed securities or those traded over-the-counter.

In selecting  investments for the Fund, Lexington  Management  Corporation ("the
Manager")   and  the   sub-adviser   have   established   a  universe  of  small
capitalization  stocks that are  screened  using the  sub-adviser's  proprietary
stock  selectivity  model.  Once the stocks are evaluated and ranked by expected
future relative price  performance,  the adviser and sub-adviser  establish both
sector and diversification allocations in building the portfolio.

Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price of
one or  more of the  companies  in the  Fund's  portfolio.  Due to the  inherent
effects  of the stock  market,  the value of the Fund  will  fluctuate  with the
movement of the market as well as in response to the  activities  of  individual
companies in the Fund's  portfolio.  Also,  the Fund's focus on small cap stocks
may expose investors to additional risks.  Smaller companies typically have more
limited product lines,  markets and financial  resources than larger  companies,
and their  securities may trade less  frequently and in more limited volume than
those of larger,  more mature  companies.  As a result,  small cap  stocks,  and
therefore the Fund,  may fluctuate  significantly  more in value than larger cap
stocks and funds that focus on them.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average annual  returns  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.


6
<PAGE>


Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S>                                                                             <C>    
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)*
<S>                                                                            <C>
Management Fees                                                                1.00%
Rule 12b-1 Fees                                                                0.25%
Other Fees                                                                     1.67%
Total Fund Operating Expenses                                                  2.92%
</TABLE>                                                          

* In 1998,  0.33% of the management fee was  voluntarily  waived by the Adviser,
and as a result, net expenses were actually 2.59%.

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year        3 Years         5 Years            10 Years
                  ------        -------         -------            --------

                  $295.04       $903.65         $1,537.84         $3,242.41

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.


INTERNATIONAL FUNDS

Lexington Crosby Small Cap Asia Growth Fund, Inc.

Risk/Return Summary

Investment Objective

The  Lexington  Crosby Small Cap Asia Growth Fund's  investment  objective is to
seek long-term capital appreciation  primarily by investing in equity securities
and equivalents of companies in the Asia Region having market capitalizations of
less than $1 billion.

Investment Strategy

The  Lexington  Crosby  Small Cap Asia Growth Fund (the  "Fund")  will  normally
invest  at least  65% of its  total  assets  in  equity  securities  of  smaller
companies  in the  Asia  Region.  The  Fund  will  primarily  invest  in  listed
securities but may also invest in unlisted securities.


                                                                               7
<PAGE>

The Fund intends to invest primarily in companies which:

     o    have proven management;
     o    are undervalued and under-researched by the investment community;
     o    are within industry sectors with strong growth prospects; and
     o    which have potential investment returns that are superior to the Asian
          market as a whole.

The Fund may invest 35% of its total assets in:

     o    companies with market capitalizations of $1 billion or more;
     o    companies outside the Asia Region (e.g. Australia or New Zealand);
     o    debt securities; and
     o    other investments.

- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

         1995       1996         1997        1998
         ----       ----         ----        ----
        -4.39%     25.50%      -42.32%      -19.41%


                     Average Annual Returns Through 12/31/98


Crosby Small Cap Asia Growth Fund           -19.41%          -14.82%

MSCI All Country Far East ex-Japan          -4.83%           -13.21%

EAFE                                        20.33%            10.24%
- --------------------------------------------------------------------------------
                                            1 Year        Since Inception
                                                              (7/3/95)
- --------------------------------------------------------------------------------

During  the four year  period  shown in the above bar graph  chart,  the fund's
highest  quarterly  return was  23.43%  for the  fourth  quarter in 1998 and the
fund's lowest quarterly return was -41.41% for the fourth quarter in 1997.
- --------------------------------------------------------------------------------

The Fund considers the following countries to be in the Asia Region:(1)

    Bangladesh      India           Malaysia        Singapore      Taiwan
    China           Indonesia       Pakistan        Sri Lanka      Thailand
    Hong  Kong      Korea           The Philippines Vietnam

The Fund will normally  invest in at least three different  countries.  The Fund
does not intend to invest in Japanese securities.

Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price in
one of the  companies  in the Fund's  portfolio.  The Fund's  volatility  may be
increased by its heavy concentration in emerging Asia markets as

8
<PAGE>



they tend to be much more  volatile than the U.S.  market due to their  relative
immaturity  and  instability.   The  economies  of  emerging  countries  may  be
predominately  based on only a few  industries  or on  revenue  from  particular
commodities,  international  aid  and  other  assistance.  Some  emerging  Asian
countries,  such as Malaysia in 1998,  have restricted the flow or money into or
out of the country.  Emerging markets also tend to be less liquid and offer less
regulatory  protection  for  investors.  Since  mid-1997  Asia has faced serious
economic  problems  and  disruptions,   causing   substantial  losses  for  some
investors.  Also,  most  of  the  securities  in  which  the  Fund  invests  are
denominated  in foreign  currencies,  whose values may decline  against the U.S.
dollar.

For a more detailed risk discussion  involving  investments in this Fund, please
read "Risks of Investing" on page __.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S>                                                                             <C>    
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as % of offering price)      None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as % of amount redeemed, if applicable)                         None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None

<CAPTION>
<S>                                                                            <C>
Annual Fund Operating Expenses (Paid from Fund assets)*
Management Fees                                                                1.25%
Rule 12b-1 Fees                                                                 None
Other Fees                                                                     1.61%
Total Fund Operating Expenses                                                  2.86%
</TABLE>                                                                       
                                                                  
*In 1998, 0.36% of the management fee was voluntarily waived by the Adviser,  as
a result net expenses were actually 2.50%.

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

          1 Year         3 Years          5 Years            10 Years
          ------         -------          -------           ---------
          $289.06        $885.87          $1,508.50         $3,185.46


                                                                               9
<PAGE>


See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

Lexington Global Corporate Leaders Fund, Inc.

Risk/Return Summary

Investment Objective

The Lexington Global Corporate  Leaders Fund's  investment  objective is to seek
long-term  growth  of  capital  through  investment  in  equity  securities  and
equivalents of foreign and U.S. companies.

Investment Strategy

The Lexington Global Corporate  Leaders Fund, Inc. (the "Fund") normally invests
at least  65% of its  total  assets  in a  diversified  portfolio  of blue  chip
securities  that the Manager  believes  represent  "corporate  leaders" in their
respective industries.

The Fund may  invest in the  securities  of  companies  and  governments  of the
following regions:

     o    Asia Region (including Japan);
     o    Europe;
     o    Latin America;
     o    Africa;
     o    North America (including U.S. and Canada); and,
     o    Other areas and countries as the Manager may decide from time to time.

The Fund will normally  invest in at least three different  countries.  The Fund
intends to select the  countries,  currencies  and  companies  that  provide the
greatest potential for long-term growth.

The Fund may invest 35% of its total assets in:

     o    securities of smaller capitalization companies;
     o    debt securities; and
     o    other investments.


- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

<TABLE>
<CAPTION>
   1989       1990     1991     1992     1993    1994    1995     1996     1997    1998
   ----       ----     ----     ----     ----    ----    ----     ----     ----    ----
<S>         <C>       <C>     <C>       <C>      <C>    <C>      <C>       <C>    <C>
  18.88%   -16.75%    15.55%  -3.55%    31.88%   1.84%  10.69%   16.43%    6.90%  19.06%
</TABLE>

                    Average Annual Returns Through 12/31/98


Global Corporate Leaders Fund        19.06%        10.81%         9.84%

MSCI-World Index                     24.80%        15.77%        10.70%
- --------------------------------------------------------------------------------
                                     1 Year        5 Year        10 Year

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

During  the ten year  period  shown in the  above bar graph  chart,  the  fund's
highest  quarterly  return was  16.76%  for the  fourth  quarter in 1998 and the
fund's lowest quarterly return was -18.32% for the third quarter in 1990.
- --------------------------------------------------------------------------------


10
<PAGE>



Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price of
one of the  companies in the Fund's  portfolio.  Due to the inherent  effects of
stock  markets,  the value of the Fund will fluctuate with the movements as well
as in  response  to  the  activities  of  individual  companies  in  the  Fund's
portfolio.  By investing in foreign  stocks,  the Fund exposes  shareholders  to
additional  risks.  Some foreign stock markets tend to be more volatile than the
U.S. market due to economic and political  instability and regulatory conditions
in these  countries.  In addition,  most of the foreign  securities in which the
Fund invests are  denominated  in foreign  currencies,  whose values may decline
against the U.S. dollar.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S>                                                                             <C>
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)
<S>                                                                             <C>
Management Fees                                                                 1.00%
Rule 12b-1 Fees                                                                 None
Other Fees                                                                      1.12%
Total Fund Operating Expenses                                                   2.12%
</TABLE>

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year      3 Years       5 Years          10 Years
                  ------      -------       -------         --------

                  $215.05     $663.92       $1,139.01        $2,451.76



                                                                              11
<PAGE>


- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

        1994         1995        1996        1997         1998
        ----         ----        ----        ----         ----
        5.87%        5.77%      13.57%       1.61%       19.02%

                     Average Annual Returns Through 12/31/98

International Fund                 19.02%              9.00%

EAFE                               20.33%              9.25%
- --------------------------------------------------------------------------------
                                   1 Year              5 Year
- --------------------------------------------------------------------------------

During  the five year  period  shown in the above bar graph  chart,  the  fund's
highest  quarterly  return was  17.09%  for the  fourth  quarter in 1998 and the
fund's lowest quarterly return was -10.65% for the fourth quarter in 1997.
- --------------------------------------------------------------------------------

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

Lexington International Fund, Inc.

Risk/Return Summary

Investment Objective

The Lexington  International  Fund's  investment  objective is to seek long-term
growth of capital  through  investment in equity  securities and  equivalents of
companies outside of the U.S.

Investment Strategy

The Lexington  International Fund, Inc. (the "Fund") will invest at least 65% of
its total assets in securities and equivalents of companies  outside of the U.S.
The Fund  generally  invests the  remaining 35% of its total assets in a similar
manner,  but may invest those assets in companies in the United States,  in debt
securities or other investments.

The Fund does not  anticipate  concentrating  its  investments in any particular
region.

Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price of
one or  more of the  companies  in the  Fund's  portfolio.  Due to the  inherent
effects of stock markets, the value of the Fund will fluctuate with the movement
of the markets as well as in response to the activities of individual  companies
in the Fund's  portfolio.  By  investing  in foreign  stocks,  the Fund  exposes
shareholders to additional risks. Foreign stock markets tend to be more volatile
than the U.S.  market due to economic and political  instability  and regulatory
conditions in some  countries.  In addition,  most of the foreign  securities in
which the Fund invests are denominated in foreign  currencies,  whose values may
decline against the U.S. dollar.

For a more detailed risk discussion  involving  investments in this Fund, please
read "Risks of Investing" on page __.


12
<PAGE>


Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<S>                                                                             <C>
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)Exchange Fee           None
30-Day Redemption/Exchange Fe                                                   None
Maximum Account Fee                                                             None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)*
<S>                                                                            <C>
Management Fees                                                                1.00%
Rule 12b-1 Fees                                                                0.25%
Other Fees                                                                     0.50%
Total Fund Operating Expenses                                                  2.25%
</TABLE>

*In 1998, 0.50% of the management fee was voluntarily waived by the Adviser, and
as a result, net expenses were actually 1.75%.

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year      3 Years      5 Years       10 Years
                  ------      -------      -------       --------
                  $228.09     $703.27     $1,204.94     $2,584.93

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.


                                                                              13
<PAGE>


- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]


                           1996         1997        1998
                           ----         ----        ----
                          -9.01%       67.50%     -82.99%




                     Average Annual Returns Through 12/31/98


Troika Dialog Russia Fund        -82.99%        -40.63%

Moscow Times Index               -79.62%        -30.08%

Russian Trading System Index     -85.15%        -41.79%
- --------------------------------------------------------------------------------
                                  1 Year     Since Inception
                                                (7/3/96)

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

During  the three year  period  shown in the above bar graph  chart,  the fund's
highest quarterly return was 46.00% for the first quarter in 1997 and the fund's
lowest quarterly return was -64.89% for the third quarter in 1998.
- --------------------------------------------------------------------------------

Lexington Troika Dialog Russia Fund, Inc.

Risk/Return Summary

Investment Objective

The  Lexington  Troika  Dialog  Russia  Fund's  investment  objective is to seek
long-term capital appreciation through investment primarily in equity securities
of Russian companies.

Investment Strategy

The Lexington  Troika Dialog Russia Fund, Inc. (the "Fund") seeks to achieve its
objective by investing at least 65% of its total assets in equity  securities of
Russian companies. The Fund may invest the other 35% of its total assets in debt
securities  issued by Russian companies and debt securities issued or guaranteed
by the Russian government.  The Fund may also invest in the equity securities of
issuers  outside of Russia which the Fund  believes  will  experience  growth in
revenue and profits from  participation  in the  development of the economics of
the former Soviet Union.

Principal Risks

The Fund's  investments will include  investments in Russian companies that have
characteristics  and  business  relationships  common to  companies  outside  of
Russia,  and as a result,  outside economic forces may cause fluctuations in the
value of securities held by the Fund.

Additional  risks  associated  with  investing in securities of Russian  issuers
include:

     o The lack of  available  reliable  financial  information  which  has been
prepared  and  audited in  accordance  with U.S. or Western  European  generally
accepted accounting principles and auditing standards;

     o The extremely  volatile and often illiquid nature of the secondary market
for Russian securities;

     o A cumbersome share registration system for recording ownership of Russian
Securities which may adversely affect a person's ability to prove ownership.


14
<PAGE>


     o The potential for  unfavorable  action such as  expropriation,  dilution,
devaluation,  default or excessive  taxation by the Russian government or any of
its agencies or political  subdivisions  with respect to  investments in Russian
securities by or for the benefit of foreign entities.

For a more detailed risk discussion  involving  investments in this Fund, please
read "Risks of Investing" on page __.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S>                                                                                 <C>
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)        None
Maximum Deferred Sales Charge (Load)                                                None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions           None
Redemption Fee (as a % of amount redeemed, if applicable)                           2.00%
Exchange Fee                                                                        None
30-Day Redemption/Exchange Fee                                                      None
Maximum Account Fee                                                                 None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)*
<S>                                                                                <C>
Management Fees                                                                    1.25%
Rule 12b-1 Fees                                                                    0.25%
Other Fees                                                                         1.14%
Total Fund Operating Expenses                                                      2.64%
</TABLE>                                                                     


*In 1998,  expenses were reduced by 0.80% as a result of redemption fee proceeds
and a voluntary  waiver of a portion of the management  fee by the Adviser.  Net
expenses were actually 1.84%.

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

            1 Year      3 Years       5 Years       10 Years
            ------      -------       -------       --------
            $471.84     $1,034.90     $1,624.86     $3.225.98

You would pay the following expenses if you did not redeem your shares:

            1 Year      3 Years       5 Years       10 Years
            ------      -------       -------       --------

            $267.12     $820.41       $1,400.12     $2,973.44

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

                                                                              15
<PAGE>


Lexington Worldwide Emerging Markets Fund, Inc.

Risk/Return Summary

Investment Objective

The Lexington Worldwide Emerging Markets Fund's investment  objective is to seek
long-term growth of capital  primarily  through  investment in equity securities
and equivalents of emerging market companies.

Investment Strategy

The Lexington  Worldwide Emerging Markets Fund (the "Fund") will invest at least
65% of its total  assets  according  to its  investment  objective.  The  Fund's
definition of emerging markets includes, but is not limited to, the following:

     o Africa: Botswana,  Egypt, Ghana, Ivory Coast, Kenya, Mauritius,  Morocco,
Namibia, South Africa, Swaziland, Tunisia, Zambia and Zimbabwe;

     o Asia: Bahrain, Bangladesh, China, Hong Kong, India, Indonesia,  Malaysia,
Pakistan,  the  Philippines,  Singapore,  South  Korea,  Sri  Lanka,  Taiwan and
Thailand;

     o Europe:  Croatia,  Cyprus,  Czech  Republic,  Estonia,  Finland,  Greece,
Hungary,  Latvia,  Lithuania,  Poland,  Portugal,  Romania, Russia, Slovakia and
Slovenia;

     o The Middle East: Israel, Jordan, Lebanon, Oman and Turkey;


     o Latin America:  Argentina,  Bolivia,  Brazil, Chile,  Colombia,  Ecuador,
Mexico, Nicaragua, Peru and Venezuela.

The Manager of the Fund considers an emerging  markets company to be any company
domiciled in a country emerging market,  or any company that derives 50% or more
of its total revenue from either goods or services produced or sold in countries
with emerging markets.

The Fund may invest the remaining 35% of its assets in equity securities without
regard to whether the issuer  qualifies  as an  emerging  market  company,  debt
securities  denominated in the currency of an emerging  market country or issued
or guaranteed  by an emerging  market  company or the  government of an emerging
market  country,  short-term or  medium-term  debt  securities or other types of
securities.

Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price of
one of the  companies  in the  Fund's  portfolio.  In  addition,  the  risks  of
investing in emerging markets are  considerable.  Emerging stock markets tend to
be more  volatile  than the U.S.  market  due to the  relative  immaturity,  and
occasional  instability,  of their political and economic  systems.  In the past
many emerging  markets  restricted  the flow of money into or out of their stock
markets,  and some continue to impose  restrictions on foreign investors.  These
markets  tend to be  less  liquid  and  offer  less  regulatory  protection  for
investors.  The economies of emerging  countries may be  predominately  based on
only a few industries or on revenue from particular  commodities,  international
aid and other assistance.  In addition,  most of the foreign securities in which
the Fund invests are denominated in foreign currencies, whose values may decline
against the U.S. dollar.

For a more detailed risk discussion  involving  investments in this Fund, please
read "Risks of Investing" on page __.


16
<PAGE>


- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

 1991    1992     1993      1994     1995    1996      1997      1998
 ----    ----     ----      ----     ----    ----      ----      ----
 1.73%   3.77%   63.37%   -13.81%   -5.93%   7.38%   -11.40%   -29.06%


                    Average Annual Returns Through 12/31/98

Worldwide Emerging Markets             -29.06%        -11.36%       -0.76%

MSCI Emerging Markets Free             -25.34%         -9.27%        4.69%

EAFE                                    20.33%          9.25%        9.67%
- --------------------------------------------------------------------------------
                                       1 Year         5 Year         Since
                                                                   Inception
                                                                   (6/17/91)
- --------------------------------------------------------------------------------

During  the eight year  period  shown in the above bar graph  chart,  the fund's
highest  quarterly  return was  31.81%  for the  fourth  quarter in 1993 and the
fund's lowest quarterly return was -26.18% for the third quarter in 1998.
- --------------------------------------------------------------------------------

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S>                                                                             <C>    
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)
<S>                                                                            <C>
Management Fees                                                                1.00%
Rule 12b-1 Fees                                                                 None
Other Fees                                                                     0.85%
Total Fund Operating Expenses                                                  1.85%
</TABLE>                                                            

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating expenses  remaining the same.  Although your actual costs may
be higher or lower, based on these assumptions your costs would be:


                                                                              17
<PAGE>


            1 Year      3 Years     5 Years       10 Years
            ------      -------     -------       --------

            $187.91     $581.69     $1,000.66     $2,169.16

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

<TABLE>
<CAPTION>
  1989      1990    1991     1992    1993    1994     1995     1996    1997     1998
  ----      ----    ----     ----    ----    ----     ----     ----    ----     ----
<S>         <C>    <C>       <C>     <C>    <C>      <C>       <C>    <C>       <C>
 15.60%     9.23%  15.75%    5.19%   8.06% -2.07%    15.91%    5.71%  10.20%    7.52%
</TABLE>

                    Average Annual Returns Through 12/31/98

GNMA Income Fund                         7.52%         7.29%         8.98%

Lehman Brothers Mortgage
Backed Securities Index                  6.96%         7.23%         9.13%
- --------------------------------------------------------------------------------
                                        1 Year        5 Year        10 Year


During  the ten year  period  shown in the  above bar graph  chart,  the  fund's
highest quarterly return was 8.88% for the second quarter in 1989 and the fund's
lowest quarterly return was -2.42% for the first quarter in 1994.
- --------------------------------------------------------------------------------


18
<PAGE>


FIXED-INCOME FUNDS AND MONEY MARKET FUNDS

Lexington GNMA Income Fund, Inc.

Risk/Return Summary

Investment Objective

The Lexington GNMA Income Fund's investment objective is to seek a high level of
current  income,  consistent  with  liquidity and safety of  principal,  through
investment  primarily in  mortgage-backed  GNMA ("Ginnie Mae") Certificates that
are  guaranteed as to the timely payment of principal and interest by the United
States Government.

Investment Strategies

Under normal conditions, the Lexington GNMA Income Fund (the "Fund") will invest
at least 80% of the value of its total assets in  Government  National  Mortgage
Association   ("GNMA")   mortgage-backed   securities   (also   known  as  "GNMA
Certificates").2  The  remaining  assets of the Fund will be  invested  in other
securities issued or guaranteed by the U.S.
Government, including U.S. Treasury securities.

Principal Risks

Through investment in GNMA securities,  the Fund may expose you to certain risks
which may cause you to lose  money.  Mortgage  prepayments  are  affected by the
level of interest rates and other factors, including general economic conditions
and the  underlying  location  and age of the  mortgage.  In  periods  of rising
interest rates,  the prepayment rate tends to decrease,  lengthening the average
life of a pool of GNMA  securities.  In periods of falling  interest rates,  the
prepayment  rate  tends to  increase,  shortening  the  life of a pool.  Because
prepayments of principal  generally occur when interest rates are declining,  it
is likely that the Fund may have to reinvest  the  proceeds  of  prepayments  at
lower interest rates than those of their previous  investments.  If this occurs,
the Fund's yields will decline correspondingly.

For a more detailed risk discussion  involving  investments in this Fund, please
read "Risks of Investing" on page __.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
Shareholder Fees (Paid directly from your investment)
<S>                                                                             <C>     
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None
</TABLE>


                                                                              19
<PAGE>


<TABLE>
<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)
<S>                                                                    <C>  
Management Fees                                                        0.57%
Rule 12b-1 Fees                                                         None
Other Fees                                                             0.44%
Total Fund Operating Expenses                                          1.01%
</TABLE>
                                                                     
Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year      3 Years     5 Years     10 Years
                  ------      -------     -------     --------

                  $103.01     $321.54     $557.85     $1,236.24

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

Lexington Global Income Fund

Risk/Return Summary

Investment Objective

The Lexington Global Income Fund's investment  objective is to seek high current
income.  Capital  appreciation is a secondary  objective.  The Lexington  Global
Income Fund invests in a combination of foreign and domestic  high-yield,  lower
rated or unrated debt securities.

- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

         1995       1996         1997        1998
         ----       ----         ----        ----
        20.10%     13.33%        5.00%        8.21%

                     Average Annual Returns Through 12/31/98


Global Income Fund                           8.21%            11.51%

Lehman Brothers Global Bond Index           15.33%            10.22%
- --------------------------------------------------------------------------------
                                            1 Year            Since Inception
                                                              (1/3/95)
- --------------------------------------------------------------------------------
During  the four year  period  shown in the above bar graph  chart,  the  fund's
highest quarterly return was 8.76% for the second quarter in 1995 and the fund's
lowest quarterly return was -1.41% for the fourth quarter in 1998.

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


20
<PAGE>


Investment Strategy

The Lexington  Global  Income Fund (the "Fund")  invests in a variety of foreign
and domestic high yield, lower rated or unrated debt securities.

The Fund, under normal  conditions,  invests  substantially all of its assets in
lower rated or unrated  debt  securities  of domestic  companies,  companies  of
developed foreign  countries,  and companies in countries with emerging markets.
The credit quality of the foreign debt securities  which the Fund intends to buy
is generally equal to U.S.  corporate debt securities known as "junk bonds". The
debt  securities in which the Fund invests consist of bonds,  notes,  debentures
and other similar instruments.  The Fund may invest in debt securities issued by
foreign  governments,  their  agencies  and  instrumentalities,  central  banks,
commercial banks and other corporate entities. The Fund may invest up to 100% of
its total assets in domestic and foreign  debt  securities  that are rated below
investment  grade or are of  comparable  quality.  The Fund may also  invest  in
securities that are in default as to payment of principal and/or  interest,  and
bank loan participations and assignments.

Principal Risks

Through  investment in bonds, the Fund may expose you to certain risks which may
cause you to lose money.  Junk bonds have a higher  risk of default,  tend to be
less  liquid,  and may be more  difficult  to value.  The Fund  could lose money
because  of  foreign  government  actions,  political  instability,  or  lack of
adequate and accurate  information.  Currency  and  investment  risks tend to be
higher in emerging markets.

For a more detailed risk discussion  involving  investments in this Fund, please
read "Risks of Investing" on page __.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
Shareholder Fees (Paid directly from your investment)
<S>                                                                             <C>
Maximum Sales Charges (Load) Imposed on Purchases (as % of offering price)      None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as % of amount redeemed, if applicable)                         None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)*3
<S>                                                                             <C>
Management Fees                                                                 1.00%
Rule 12b-1 Fees                                                                 0.25%
Other Fees                                                                      0.64%
Total Fund Operating Expenses                                                   1.89%
</TABLE>

*In 1998, 0.39% of the management fee was voluntarily waived by the Adviser, and
as a result, net expenses were actually 1.50%.

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.


                                                                              21
<PAGE>


This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year      3 Years     5 Years       10 Years
                  ------      -------     -------       --------

                  $191.94     $593.91     $1,021.27     $2,211.54

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

MONEY MARKET FUNDS

Lexington Money Market Trust

Risk/Return Summary

Investment Objective

The Lexington  Money Market  Trust's  investment  objective is to seek as high a
level of current income from  short-term  investments as is consistent  with the
preservation of capital and liquidity. The Lexington Money Market Trust seeks to
maintain a stable net asset value of $1 per share.

Investment Strategy

The Lexington  Money Market Trust (the "Fund") will invest in  short-term  money
market  instruments  that  have  been  rated  in one of the two  highest  rating
categories by both S&P and Moody's, both major rating agencies. The Fund invests
in short-term money market  instruments  (those with a remaining maturity of 397
days or less) that offer attractive  yields and are considered to be undervalued
relative to issues of similar credit quality and interest rate sensitivity.

The Fund will also insure that its money  market  instruments  average  weighted
maturities do not exceed 90 days.

Principal Risks

An investment  in the Fund is not insured or  guaranteed by the Federal  Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.

Mutual Fund Chart and Performance Table

For   information   on  the  Fund's   7-day  yield   please  call  the  Fund  at
1-800-526-0056.  You should remember that past  performance is not an indication
of future performance.

<TABLE>
<S>                                                                             <C>
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None
</TABLE>


22
<PAGE>

<TABLE>
<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)*
<S>                                                            <C>  
Management Fees                                                0.50%
Rule 12b-1 Fees                                                None
Other Fees                                                     0.55%
Total Fund Operating Expenses                                  1.05%
</TABLE>

*In 1998, 0.05% of the management fee was voluntarily waived by the Adviser, and
as a result, net expenses were actually 1.00%.

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year      3 Years     5 Years     10 Years
                  ------      -------     -------     --------

                  $102.00     $318.40     $552.46     $1,224.62

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

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

Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

<TABLE>
<CAPTION>
 1989        1990        1991         1992        1993        1994         1995        1996        1997         1998
 ----        ----        ----         ----        ----        ----         ----        ----        ----         ----
<S>         <C>          <C>         <C>         <C>          <C>          <C>         <C>        <C>           <C>
23.62%     -20.65%      -6.14%      -20.51%      86.96%      -7.28%       -1.89%       7.84%     -42.98%       -6.39%
</TABLE>
- --------------------------------------------------------------------------------

                    Average Annual Returns Through 12/31/98

Goldfund                                -6.39%          -12.14%          -3.28%

Gold Bullion                            -0.83%           -6.02%          -3.50%

S&P 500                                 28.72%           24.09%          19.22%
- --------------------------------------------------------------------------------

                                        1 Year           5 Year          10 Year

During  the ten year  period  shown in the  above bar graph  chart,  the  fund's
highest  quarterly  return was  34.36%  for the  second  quarter in 1993 and the
fund's lowest quarterly return was -29.07% for the fourth quarter in 1997.
- --------------------------------------------------------------------------------


                                                                              23
<PAGE>


PRECIOUS METAL FUNDS

Lexington Goldfund, Inc.

Risk/Return Summary

Investment Objective

The Lexington Goldfund's  investment objective is to attain capital appreciation
and such  hedge  against  the loss of buying  power as may be  obtained  through
investment in gold and  securities of companies  engaged in mining or processing
gold throughout the world.

Investment Strategy

Under normal conditions the Lexington Goldfund, Inc. (the "Fund") will invest at
least 65% of the value of its total assets in gold and the equity  securities of
companies engaged in mining or processing gold ("gold-related securities").  The
Fund may also invest in other precious metals, including platinum, palladium and
silver.  The Fund intends to invest less than half of the value of its assets in
gold and other precious metals.  Gold-related  securities may include securities
of foreign issuers.

Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price in
one of the companies in the Fund's portfolio. Due to the inherent effects of the
stock  market,  the value of the Fund will  fluctuate  with the  movement of the
market as well as in response to the  activities of individual  companies in the
Fund's portfolio.  In addition, the Fund's focus on precious metals and precious
metal stocks may expose the investor to additional risks. The market for gold or
other precious  metals is  concentrated in countries that have the potential for
instability  and the  market  for gold  and  other  precious  metals  is  widely
unregulated.  As a result, the price of precious gold and precious metal stocks,
and therefore the Fund, may fluctuate significantly.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average  annual  return  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
Shareholder Fees (Paid directly from your investment)
<S>                                                                             <C>    
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None

<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)
<S>                                                                             <C>    
Management Fees                                                                0.92%
Rule 12b-1 Fees                                                                0.25%
Other Fees                                                                     0.57%
Total Fund Operating Expenses                                                  1.74%
</TABLE>

                                                                       

24
<PAGE>


Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year      3 Years    5 Years      10 Years
                  ------      -------    -------      --------
                  $176.84     $547.99    $943.74      $2,051.67

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

Lexington Silver Fund, Inc.

Risk/Return Summary

Investment Objective

The investment objective of the Lexington Silver Fund, Inc. is to maximize total
return on its assets from  long-term  growth of capital  and income  principally
through  investment  in a  portfolio  of  securities  which are  engaged  in the
exploration,   mining,   processing,   fabrication  or  distribution  of  silver
("silver-related companies")and in silver bullion .

Investment Strategies

Lexington  Silver Fund,  Inc.  (the  "Fund") will seek to achieve its  objective
through investment in common stocks of established  silver-related companies and
in silver  bullion which have the  potential for long-term  growth of capital or
income, or both. The common stocks of silver-related companies in which the Fund
intends  to invest  may or may not pay  dividends.  The Fund may also  invest in
other types of  securities of  silver-related  companies  including  convertible
securities,  preferred  stocks,  bonds,  notes and  warrants.  When the  Manager
believes that the return on debt  securities  will equal or exceed the return on
common stocks,  the Fund may, in pursuing its objective of maximizing growth and
income, substantially increase its holding in debt securities.

The  securities  in  which  the  Fund  invests  include  issues  of  established
silver-related  companies  domiciled in the United States,  Canada and Mexico as
well as other silver producing  countries  throughout the world. At least 80% of
the Fund's assets will be invested in established silver-related companies which
have been in business more than three years.


                                                                              25
<PAGE>


- --------------------------------------------------------------------------------
Past Fund Performance The chart at the left below shows the risk of investing in
the Fund and how the Fund's total return has varied from year-to-year. The chart
at the right compares the Fund's  performance  with the most commonly used index
for its market segment.  Of course,  past  performance is no guarantee of future
results.
- --------------------------------------------------------------------------------

  [THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]

   1992        1993        1994       1995        1996        1997         1998
   ----        ----        ----       ----        ----        ----         ----
 -19.01%      76.52%      -8.37%     12.37%       2.38%      -8.05%      -29.64%

                    Average Annual Returns Through 12/31/98

Silver Fund                                -29.64%      -7.37%           0.96%

S & P 500                                   28.72%      24.09%          19.51%

Silver Bullion                             -16.51%      -0.43%           3.39%
- --------------------------------------------------------------------------------
                                            1 Year          5 Year       Since
                                                                       Inception
                                                                        (1/2/92)

During  the seven year  period  shown in the above bar graph  chart,  the fund's
highest  quarterly  return was  28.47%  for the  second  quarter in 1993 and the
fund's lowest quarterly return was -18.60% for the fourth quarter in 1994.
- --------------------------------------------------------------------------------

Principal Risks

Through  stock  investment,  the Fund may expose you to common stock risks which
may cause you to lose money if there is a sudden  decline in the share  price in
one of the companies in the Fund's portfolio. Due to the inherent effects of the
stock  market,  the value of the Fund will  fluctuate  with the  movement of the
market as well as in response to the  activities of individual  companies in the
Fund's portfolio.  In addition, the Fund's focus on precious metals and precious
metal stocks may expose the investor to additional  risks. The market for silver
is relatively limited,  the sources of silver are concentrated in countries that
have  the  potential  for  instability  and the  market  for  silver  is  widely
unregulated.  As a result,  the price of silver,  and  therefore  the Fund,  may
fluctuate significantly.

Bar Chart and Performance Table

The bar chart and  performance  table below show the risks of  investing  in the
Fund. The chart shows changes in the  performance  from ______ through  _______.
The table shows how the average annual  returns  compares with the most commonly
used index for its market  segment  for 1, 5 and 10 years (or since  inception).
You  should  remember  that  past  performance  is not an  indication  of future
performance.

Fees and Expenses

This table  describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.

<TABLE>
<S>                                                                             <C>
Shareholder Fees (Paid directly from your investment)
Maximum Sales Charges (Load) Imposed on Purchases (as a % of offering price)    None
Maximum Deferred Sales Charge (Load)                                            None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends/Distributions       None
Redemption Fee (as a % of amount redeemed, if applicable)                       None
Exchange Fee                                                                    None
30-Day Redemption/Exchange Fee                                                  None
Maximum Account Fee                                                             None
</TABLE>


26
<PAGE>



<TABLE>
<CAPTION>
Annual Fund Operating Expenses (Paid from Fund assets)
<S>                                                                      <C>  
Management Fees                                                          1.00%
Rule 12b-1 Fees                                                          0.00%
Other Fees                                                               1.37%
Total Fund Operating Expenses                                            2.37%
</TABLE>

Example of Expenses:

This  example is intended to help you compare the cost of  investing in the Fund
with the cost of investing in other mutual funds.

This example  assumes  that you invest  $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those  periods.  This
example also assumes that your  investment  has a 5% annual return each year and
that the operating  expenses remain the same.  Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

                  1 Year      3 Years     5 Years       10 Years
                  ------      -------     -------       --------
                  $240.12     $739.46     $1,265.42     $2,706.22

See  "Management of the Fund" for more complete  descriptions  of such costs and
expenses.

RISKS OF INVESTING

Risks of Investing in Mutual Funds

The following risks are common to all mutual funds and, therefore,  apply to the
Funds:

     o Market Risk. The market value of a security may go up or down,  sometimes
rapidly and unpredictably.  A decline in market value may cause a security to be
worth  less  than  it was at the  time  of  purchase.  Market  risk  applies  to
individual securities, a particular sector or the entire economy.

     o Manager Risk. Fund management  affects Fund performance.  A Fund may lose
money if the Fund  manager's  investment  strategy  does not  achieve the Fund's
objective or the manager does not implement the strategy properly.

     o Year 2000 Risk. The Fund or its service  providers  could be disrupted by
problems in their computer systems related to the Year 2000.

Risks of Investing in Securities of Small Companies

The following risks apply to all mutual funds that invest in securities of small
companies  (market  value of less  than U.S.  $1  billion)  including  Lexington
SmallCap Fund,  Lexington Crosby Small Cap Asia Growth Fund and Lexington Troika
Dialog Russia Fund.

Investing in small  companies  generally  involve greater risk than investing in
larger companies for the following reasons, among others:

     o limited product lines;

     o limited markets or financial or managerial resources;

     o  their  securities  may be  more  susceptible  to  losses  and  risks  of
bankruptcy;

     o their securities may trade less frequently and with lower volume, leading
to greater price fluctuations; and,

     o  their  securities  are  subject  to  increased  volatility  and  reduced
liquidity due to limited market making and arbitrage activities.



                                                                              27
<PAGE>


Risks of Investing in Foreign Securities

The following risks apply to all mutual funds that invest in foreign  securities
including  Lexington  Crosby  Small Cap Asia Growth  Fund,  Lexington  Goldfund,
Lexington Growth and Income Fund, Lexington International Fund, Lexington Global
Income  Fund,  Lexington  Troika  Dialog  Russia  Fund and  Lexington  Worldwide
Emerging Markets Fund.

     o Legal System and Regulation Risk.  Foreign countries have different legal
systems and different regulations  concerning financial  disclosure,  accounting
and auditing standards.  Corporate financial information that would be disclosed
under U.S. law may not be available.  Foreign  accounting and auditing standards
may render a foreign  corporate  balance sheet more  difficult to understand and
interpret than one subject to U.S. law and standards.  Additionally,  government
oversight  of foreign  stock  exchanges  and  brokerage  industries  may be less
stringent than in the U.S.

     o Currency Risk. Most foreign stocks are denominated in the currency of the
stock exchange where they are traded.  The Fund's Net Asset Value is denominated
in U.S.  dollars.  The exchange  rate  between the U.S.  dollar and most foreign
currencies  fluctuates;  therefore,  the Net  Asset  Value of the  Fund  will be
affected  by a change in the  exchange  rate  between  the U.S.  dollar  and the
currencies in which the Fund's stocks are  denominated.  The Fund may also incur
transaction  costs  associated  with  exchanging  foreign  currencies  into U.S.
dollars.

     o Stock Exchange and Market Risk.  Foreign stock  exchanges  generally have
less volume than U.S. stock  exchanges.  Therefore,  it may be more difficult to
buy or sell shares of foreign  securities,  which  increases  the  volatility of
share prices on such markets. Additionally, trading on foreign stock markets may
involve longer settlement periods and higher transaction costs.

     o  Expropriation  Risk.  Foreign  governments  may  expropriate  the Fund's
investments either directly by restricting the Fund's ability to sell a security
or by imposing  exchange  controls  that  restrict  the sale of a currency or by
taxing the Fund's investments at such high levels as to constitute  confiscation
of the security.  There may be  limitations on the ability of the Fund to pursue
and collect a legal judgment against a foreign government.

Risks of Investing in Lower-Quality Debt Securities

The following risks apply to all mutual funds that invest in lower-quality  debt
securities  commonly  referred to as "junk  bonds"  including  Lexington  Global
Income Fund and Lexington Troika Dialog Russia Fund.

Junk  bonds are highly  speculative.  Changes in  economic  conditions  or other
circumstances are more likely to lead to a weakened capacity of issuers of their
securities to make principal and interest  payments than with  higher-grade debt
securities.

Risks of Investing in Securities of Russian Companies

The  following  risks  apply to all mutual  funds that invest in  securities  of
Russian companies including Lexington Troika Dialog Russia Fund.

Non-diversified Portfolio

The  following  risks  apply  to  all  mutual  funds  that  are  non-diversified
investment  companies  including  Lexington  Goldfund,  Lexington  Silver  Fund,
Lexington Global Income Fund and Lexington Troika Dialog Russia Fund.

These Funds may invest an unlimited proportion of their total assets in a single
company,  which  increases  risk.  However,  these  Funds  intend to comply with
diversification  requirements  of the  federal  tax law to qualify as  regulated
investment  companies.  For more  detailed  information  on the  federal tax law
diversification  requirement,  see the tax  section of the Fund's  Statement  of
Additional Information.

Precious Metals

The  following  risks apply to all mutual  funds that invest in precious  metals
including Lexington


28
<PAGE>

Goldfund and Lexington Strategic Silver Fund.

Precious metal investments have the following characteristics:

     o    earn no income;

     o    transaction and storage costs may be higher; and

     o    the Fund will realize gain only with an increase in the market price.

Temporary Defensive Position

When  the  Funds  anticipate  unusual  market  or  other  conditions,  they  may
temporarily  depart  from their goal and invest  substantially  in  high-quality
short-term investments.  This could help the Fund avoid losses but may mean lost
opportunities.

Management of The Funds

Investment Adviser

Lexington Management  Corporation (LMC), a wholly-owned  subsidiary of Lexington
Global Asset Managers, Inc. ("LGAM"), is the investment adviser to the Lexington
Funds. LMC and its predecessor  companies,  registered investment advisers under
the Investment  Advisers Act of 1940, as amended,  were established in 1938. LMC
is located at P.O. Box 1515,  Park 80 West Plaza Two,  Saddle Brook,  New Jersey
07663. Descendants of Lunsford Richardson,  Sr., their spouses, trusts and other
related entities have a controlling interest in Lexington Global Asset Managers,
Inc.,  a  Delaware  corporation.  LMC  advises  private  clients  as well as the
Lexington  Funds.  LMC supervises  and assists in the overall  management of the
Funds, subject to the oversight by the Board of Directors or Trustees.

Sub- Advisers

Lexington SmallCap Fund. Market Systems Research Advisors, Inc. ("MSR Advisors")
is the  sub-adviser  of Lexington  SmallCap  Fund. MSR Advisors is located at 80
Maiden Lane, New York, NY 10038.  MSR Advisors  provides  investment  advice and
management to Lexington SmallCap Fund. MSR is 65% owned by LGAM and 35% owned by
Frank A. Peluso,  The President and C.E.O.  of MSR  Advisors.  Lexington  Crosby
Small Cap Asia Growth Fund.  Crosby Asset  Management (US) Inc.  (Crosby) is the
sub-adviser  of the  Lexington  Crosby  Small Cap Asia  Growth  Fund.  Crosby is
located at [52/R] Asia Pacific  Finance  Tower,  Citibank  Plaza, 3 Garden Road,
Hong Kong.  [Crosby is a subsidiary of Crosby Group,  Hong Kong.] Crosby manages
assets and provides  day-to-day  investment advice to the Lexington Crosby Small
Cap Asia Growth Fund, subject to oversight by the Board of Directors.

Lexington Troika Dialog Russia Fund.  Troika Dialog Asset  Management  (TDAM) is
the  sub-adviser  of Lexington  Troika  Dialog  Russia Fund.  TDAM is located at
Romanov Pereulok #4, 103875 Moscow,  Russia. TDAM provides investment advice and
management to Lexington  Troika Dialog  Russia Fund.  [TDAM is a majority  owned
subsidiary of The Bank of Moscow.]

Lexington  Worldwide Emerging Markets Fund. Stratos Advisors,  Inc. (Stratos) is
the sub-adviser of Lexington Worldwide Emerging Markets Fund. Stratos is located
at 20  Exchange  Place,  52nd  Floor,  New  York,  NY  10005.  Stratos  provides
investment advice and management to Lexington Worldwide Emerging Markets Fund.

Portfolio Managers

Lexington  Growth and Income Fund
Alan H. Wapnick.  Please see biography under Lexington Global Corporate  Leaders
Fund.

Lexington SmallCap Fund

Robert M. DeMichele.  Mr. DeMichele is one of three lead managers of a portfolio
management  team that manages the  Lexington  SmallCap  Fund.  Mr.  DeMichele is
Chairman  and Chief  Executive  Officer of LMC.  He is also the  Chairman of the
Investment  Strategy  Group.  In addition,  he is President



                                                                              29
<PAGE>

of Lexington Global Asset Managers, Inc., LMC's parent company. He holds similar
offices in other  companies owned by Lexington  Global Asset Managers,  Inc., as
well as the Lexington  Funds.  Prior to joining LMC in 1981, Mr. DeMichele was a
Vice  President  at A.G.  Becker,  Inc.,  the  securities  division  of Warburg,
Paribus,  Becker, an international  investment  banking firm. From 1973 to 1981,
Mr.  DeMichele held several  positions,  the most recent managing A.G.  Becker's
Funds  Evaluation  and Consulting  Group for both the East and West Coasts.  Mr.
DeMichele  graduated from Union College with a B.A. Degree in Economics and from
Cornell University with an M.B.A. in Finance.

Alan H. Wapnick.  Please see biography under Lexington Global Corporate  Leaders
Fund.

Frank A. Peluso.  Mr.  Peluso is the third of three lead managers of a portfolio
management  team that  manages  the  Lexington  SmallCap  Fund.  He has 35 years
investment  experience.  Mr. Peluso is President and Chief Executive  Officer of
MSR, the sub-adviser to the Fund. Mr. Peluso  utilizes a proprietary  analytical
system to identify securities with performance potential which he believes to be
exceptional.  In addition, Mr. Peluso's proprietary data is used by professional
money  managers,  insurance  companies,  brokerage  firms,  banks,  mutual  fund
companies and pension funds. Mr. Peluso graduated from Princeton  University and
completed a year of post-graduate study at Columbia University, and two years of
post-graduate study at Princeton University with a Fellowship in Mathematics.

Lexington Crosby Small Cap Asia Growth Fund
Christina Lam. Ms. Lam is the lead manager on a portfolio  management  team that
manages  the  Lexington  Crosby  Small Cap Asia  Growth  Fund.  Ms.  Lam is Vice
President  and Portfolio  Manager of the Lexington  Crosby Small Cap Asia Growth
Fund. Ms. Lam joined Crosby Asset Management in 1991. She is responsible for the
investment  management of the listed equity  portfolios  under the management of
Crosby Asset  Management.  After  graduating  with a Law Degree with Honors from
Warwick  University,  she qualified as a Barrister from Lincoln's Inn in London.
In 1987 she joined  Schroder  Securities  Limited in Hong Kong as an  investment
analyst,  where her coverage  included  the  utilities,  industrials  and retail
sectors and conglomerates.

Lexington Global Corporate Leaders Fund

Richard T. Saler.  Mr. Saler is a member of an investment  management  team that
manages the Lexington  Global  Corporate  Leaders Fund and  Lexington  Worldwide
Emerging  Markets Fund. He is the lead manager of an investment  management team
for Lexington  International Fund. Mr. Saler is Senior Vice President,  Director
of  International  Investment  Strategy of LMC.  Mr.  Saler is  responsible  for
international investment analysis and portfolio management at LMC. He has twelve
years of investment  experience.  Mr. Saler has focused on international markets
since  first  joining  LMC in  1986.  In 1991 he was a  strategist  with  Nomura
Securities  and  rejoined  LMC in  1992.  Mr.  Saler  graduated  from  New  York
University  with a B.S.  Degree  in  Marketing  and from  New York  University's
Graduate School of Business Administration with an M.B.A. in Finance.

Philip  A.  Schwartz,  CFA.  Mr.  Schwartz  is also a  member  of an  investment
management  team that manages the Lexington  Global  Corporate  Leaders Fund and
Lexington  International  Fund.  Mr.  Schwartz  is a Vice  President  at LMC,  a
Chartered  Financial  Analyst  and a member of the New York  Society of Security
Analysts. He is responsible for international  investment analysis and portfolio
management at LMC, and has nine years of investment experience. Prior to joining
LMC 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.

Alan H. Wapnick.  Mr. Wapnick is a member of an investment  management team that
manages the Lexington Global Corporate Leaders Fund, Inc. and Lexington SmallCap
Fund. Mr. Wapnick is the lead manager for Lexington  Growth and Income Fund. Mr.
Wapnick is Senior Vice President, Director


30
<PAGE>


of Domestic Investment Equity Strategy of LMC. 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  graduated  from
Dartmouth College and received a Master's Degree in Business Administration from
Columbia University.

Lexington International Fund

Richard T. Saler.  Please see biography under Lexington Global Corporate Leaders
Fund.

Phillip A. Schwartz,  CFA. Please see biography under Lexington Global Corporate
Leaders Fund.

Lexington Worldwide Emerging Markets Fund

Richard T. Saler.  Please see biography under Lexington Global Corporate Leaders
Fund.

Alfredo M. Viegas.  Mr. Viegas is a member of the portfolio  management team for
Lexington Worldwide Emerging Markets Fund. Mr. Viegas is Chief Executive Officer
and Senior  Portfolio  Manager of Stratos.  In 1995, Mr. Viegas  established VZB
Partners LLC ("VZB"), an offshore investment manager.  Mr. Viegas is responsible
for corporate analysis and bottom-up research.  He has concentrated on analyzing
equity  opportunities  not only in emerging markets but also in newly developing
or frontier markets where the quality of public available  information is scarce
and direct  research is imperative.  Prior to VZB, Mr. Viegas was Vice President
and Latin American Equity  Strategist for emerging markets with Salomon Brothers
from 1993 to 1995.  From 1991 to 1993,  he was a research  analyst  with  Morgan
Stanley. Mr. Viegas is a graduate of Wesleyan University with a B.A. in Classics
and Medieval History.

Mohammed Zaidi.  Mr. Zaidi is a member of the Portfolio  Management team for the
Lexington  Worldwide  Emerging Markets Fund. Mr. Zaidi is a Portfolio Manager at
Stratos.  Mr. Zaidi is responsible  for  fundamental  corporate  analysis with a
particular focus on Asian and Middle Eastern markets as well as the Risk Control
Officer. Mr. Zaidi has been a Portfolio Manager at VZB since 1997. Mr. Zaidi was
Chief Financial  Officer and a Partner at Paradigm  Software,  Inc. from 1992 to
1995. Mr. Zaidi is a graduate of the University of  Pennsylvania  with a B.S. in
Economics  from the Wharton  School.  Mr. Zaidi also holds an M.B.A.  in Finance
from M.I.T. Sloan School of Management.

Lexington Troika Dialog Russia Fund

Richard M. Hisey,  C.F.A.  Mr. Hisey is Managing  Director  and Chief  Financial
Officer of Lexington  Management  Corporation.  He is also the  Treasurer  and a
member of the Board of Directors of the Lexington  Family of Mutual  Funds.  Mr.
Hisey is  Executive  Vice  President  and Chief  Financial  Officer of Lexington
Global  Assets  Managers,  Inc.,  the  parent  company of  Lexington  Management
Corporation.     He    sits    on    the    Investment    Company    Institute's
Accounting/Treasurers,   International  and  Tax  Committees.  Mr.  Hisey  is  a
portfolio  manager and  investment  strategist  for the Lexington  Troika Dialog
Russia Fund. He is a Chartered Financial Analyst and is a member of the New York
Society of Security Analysts.  Prior to joining Lexington in 1986, Mr. Hisey was
a Senior Financial  Analyst for Richardson  Vicks,  Inc. Mr. Hisey is a graduate
with  Distinction of the  University of  Connecticut  with a Bachelor of Arts in
Soviet and eastern European Studies.  His undergraduate work included studies at
Middlebury College and at Leningrad State University in the former Soviet Union.
He also holds an M.B.A. from the University of Connecticut.

Pavel Teplukhin. Dr. Teplukhin is a member of the portfolio management team that
manages the  Lexington  Troika  Dialog Russia Fund. He is the President of TDAM,
sub-adviser  to the Fund.  Dr.  Teplukhin  received a diploma in Economics and a
Doctorate in Economic Analysis and Statistics from Moscow State  University.  He
also  received a Master of Science in  Economics/Macroeconomics  from the London
School of Economics.  From 1993 to 1996, Dr.  Teplukhin was Economic  Adviser to
the First  Deputy  Prime  Minister  at the  Ministry  of Finance of the  Russian
Federation.

Ruben Vardanian. Mr. Vardanian is a member of the portfolio management team that
manages the Lexington  Troika Dialog Russia Fund.  Mr.  Vardanian is Chairman of
the Board of TDAM. He is Vice


                                                                              31
<PAGE>


Chairman of the Board of Directors of the Depository  Clearing Company.  He is a
member of the Expert Council of the Federal Securities  Commission of Russia and
a Director of the Russian Trading System (RTS). He is also Chairman of the Board
of  Directors  of  the  Russian  capital  markets  self-regulatory  organization
(NAUFOR).  Mr.  Vardanian  received a Masters Degree with  Distinction  from the
Finance  Department  of  Moscow  State  University.  He  received  post-graduate
training  with  Banca CRT in Italy and with the  Emerging  Markets  Division  of
Merrill Lynch in New York.

Board of Advisers.  The Board of Advisers to the Lexington  Troika Dialog Russia
Fund is composed of experts in Russian political and economic affairs. The Board
of Advisers  provides LMC and the Board of Directors  with  periodic  updates on
political and macroeconomic conditions and trends in Russia, and their political
implication for the overall  investment  environment in Russia. As a result, LMC
and the Board of  Directors  will be better  able to oversee and  safeguard  the
assets of Lexington Troika Dialog Russia Fund.

Lexington GNMA Income Fund

Denis P.  Jamison,  CFA. Mr.  Jamison  manages the  Lexington  GNMA Income Fund,
Lexington  Money Market Trust and Lexington  Global Income Fund.  Mr. Jamison is
Senior Vice President and Director of Fixed Income  Strategy of LMC. Mr. Jamison
is responsible for fixed-income portfolio management.  He is a member of the New
York Society of Security  Analysts.  Prior to joining LMC in 1981,  Mr.  Jamison
spent nine years at Arnold  Bernhard & Company,  an  investment  counseling  and
financial  services   organization.   At  Bernhard,  he  was  a  Vice  President
supervising the security analyst staff and managing investment portfolios. He is
a specialist in government, corporate and municipal bonds. Mr. Jamison graduated
from the City College of New York with a B.A. in Economics.

Lexington Global Income Fund

Denis P. Jamison, CFA. Please see biography under Lexington GNMA Income Fund.


Lexington Money Market Trust

Denis P. Jamison, CFA. Please see biography under Lexington GNMA Income Fund.

RoseAnn  McCarthy.  Ms.  McCarthy is a co-manager of the Lexington  Money Market
Trust.  Ms. McCarthy is an Assistant Vice President of LMC. Prior to joining the
Fixed Income  Department  in 1997,  she was Mutual Fund  Marketing  and Research
Coordinator. Prior to 1995, Ms. McCarthy was Fund Statistician and a Shareholder
Service  Representative  for the Lexington  Funds. Ms. McCarthy is a graduate of
Hofstra  University with a B.B.A. in Marketing and has an M.B.A. in Finance from
Seton Hall University.

Lexington Goldfund

James A. Vail,  CFA. Mr. Vail manages the  Lexington  Goldfund and the Lexington
Silver Fund. Mr. Vail is a Vice President of LMC and is responsible for precious
metals  analysis and portfolio  management  at LMC. He is a Chartered  Financial
Analyst,  a member of the New York Society of Security Analysts and has 25 years
of investment experience. Prior to joining LMC in 1991, Mr. Vail held investment
research  positions with Chemical Bank,  Oppenheimer & Co.,  Robert Fleming Inc.
and most  recently,  Beacon  Trust  Company,  where  he was a Senior  Investment
Analyst.  Mr. Vail is a graduate of St. Peter's College with a B.S. and holds an
M.B.A. in Finance from Seton Hall University.

Lexington Silver Fund

James A. Vail, CFA. Please see biography under Lexington Goldfund.


32
<PAGE>


SHAREHOLDER INFORMATION

Investment Options
ice is still under construction and will be available soon.

o    Buy, sell or exchange shares by mail.

     Mail  buy/sell  order(s),  investment or  redemption  instructions  and any
     required payment by check:

     By regular mail:
     State Street Bank and Trust Company
     c/o National Financial Data Services
     Lexington Funds
     1004 Baltimore
     Kansas City, Missouri  64105

o    Buy shares by wiring funds.

     To:  State Street Bank and Trust Company
     ABA #011000028
     Attention:  The Lexington Funds
     For credit to: [shareholder(s) name]
     Shareholder account number:
     [shareholder(s) account number]
     Name of Fund:  [Lexington Fund name]


@(except  Lexington  Troika  Dialog  Russia  Fund) is  $1,000,  and the  minimum
subsequent  investment  is $50. The minimum  initial  investment  for  Lexington
Troika Dialog Russia Fund is $5,000.  The minimum initial investment for IRAs is
$250.  Under certain  conditions we may waive these minimums.  If you buy shares
through a broker or investment advisor,  they may apply different  requirements.
All investments must be made in U.S.  dollars.  We must receive payment from you
within three business days of your purchase.  In addition,  we reserve the right
to reject any purchase.

Becoming a Lexington Shareholder

To open a new account:

o By  Mail.  Send  your  completed  application,  with a  check  payable  to The
Lexington Funds, to the appropriate address.  Your check must be in U.S. dollars
and  drawn  only  on a bank  located  in the  United  States.  We do not  accept
third-party checks, "starter" checks, credit-card checks, instant-loan checks or
cash investments.  We may impose a charge on checks that do not clear. Note that
if you are investing in a Fixed-Income or Money Market Fund,  dividends will not
begin to accrue on your account until your check clears.

o By Wire.  Call us at  800-526-0056 to let us know that you intend to make your
initial investment by wire. Tell us your name and the amount you want to invest.
We will give you further  instructions and a fax number to which you should send
your completed New Account application. To ensure that we handle your investment
accurately, include complete account information in all wire instructions.

     Then request your bank to wire money from your account to the attention of:

     To:  State Street Bank and Trust Company
     ABA #011000028
     Attention:  The Lexington Funds
     For credit to: [shareholder(s) name]
     Shareholder account number:


                                                                              33
<PAGE>

     [shareholder(s) account number]
     Name of Fund:  [Lexington Fund name]

     Please note that your bank may charge a wire transfer fee.

o By Phone. To make an initial investment by phone, you must have been a current
Lexington  shareholder  in  another  fund  for at  least  30  days.  Shares  for
Individual  Retirement  Accounts  (IRAs)  may not be  purchased  by phone.  Your
purchase  of a new Fund must meet its  investment  minimum and is limited to the
total  value of your  existing  accounts or $10,000,  whichever  is greater.  To
complete the transaction, we must receive payment within three business days. We
reserve the right to collect  any losses from your  account if we do not receive
payment within that time.

Buying Additional Shares

o    By Mail.  Complete the form at the bottom of any  Lexington  statement  and
     mail it with your check payable to The Lexington  Funds.  Or mail the check
     with a signed  letter  noting  the  name of the  Fund in which  you want to
     invest, your account number and telephone number.

o    "Lex-O-Matic" the Automatic Investment Plan:

     A shareholder may make additional  purchases of shares  automatically  on a
     monthly  or   quarterly   basis   with  the   automatic   investing   plan,
     "Lex-O-Matic."

     "Lex-O-Matic"  will be established  on existing  accounts only. You may not
     use a "Lex-O-Matic" investment to open a new account. The minimum automatic
     investment amount is $50.

     Your bank must be a member of the Automated Clearing House.

     To  establish  Lex-O-Matic,  attach a voided  check  (checking  account) or
     preprint ed deposit slip  (savings  account) from your bank account to your
     Lexington Account Application or your letter of instruction.

     Investments will  automatically be transferred into your Lexington  Account
     from your checking or savings account.

     Investments may be transferred  either monthly or quarterly on or about the
     15th day of the month.

     You should allow 20 business days for this service to become effective.

     You may cancel your  Lex-O-Matic at any time provided that a letter is sent
     to the Transfer Agent ten days prior to the scheduled investment date. Your
     request will be processed upon receipt.

By  investing in the  Lexington  Funds,  you appoint the Transfer  Agent as your
agent to  establish  an open  account  to which  all  shares  purchased  will be
credited, along with any dividends and capital gain distributions which are paid
in additional  shares (see "Dividends and  Distributions").  Stock  certificates
will be issued,  upon  written  request,  for full  shares of  Lexington  Funds.
Certificates  will not be issued for 30 days unless payment is made by certified
check, cashier's check or federal funds wire. In order to facilitate redemptions
and transfers, most shareholders elect not to receive certificates

You may  purchase  shares  of the  Lexington  Funds  through  broker-dealers  or
financial institutions that have selling agreements with LFD. Broker-dealers and
financial  institutions  that process such orders



34
<PAGE>

for  customers  may charge a fee for their  services.  The fee may be avoided by
purchasing shares directly from the Lexington Funds.

Exchanging Shares

Shares of the Lexington Funds may be exchanged for shares of equivalent value of
any Lexington  Fund. If an exchange  involves  investing in a Lexington Fund not
already owned,  the dollar amount of the exchange must meet the minimum  initial
investment  amount.  An exchange  will result in a  recognized  gain or loss for
income  tax  purposes.  Exchanges  of over  $500,000  will  take  three  days to
complete.

You may make exchange requests in writing or by telephone.  Telephone  exchanges
may only be made if you have completed a Telephone Authorization form. Telephone
exchanges may not be made within 7 days of a previous exchange.

The minimum exchange required is $500 unless a new account is being established.

Telephone  exchanges  may only  involve  shares held on deposit by the  Transfer
Agent, not shares held in certificate form by the shareholder.

Any new account  established  by a  shareholder  will also have the privilege of
exchange  by  telephone  in the  Lexington  Funds.  All  accounts  involved in a
telephonic exchange must have the same dividend option as the account from which
the shares are transferred.

Minimum Account Balances

Due to the costs of maintaining  small accounts,  we require a minimum  combined
account balance of [$1,000]. If your account balance falls below that amount for
any  reason  other  than  market  fluctuations,  we will  ask you to add to your
account.  If your account balance is not brought up to the minimum or you do not
send us  other  instructions,  we will  redeem  your  shares  and  send  you the
proceeds.  We  believe  that  this  policy is in the best  interests  of all our
shareholders.

Redeeming Your Shares

The Funds  will  redeem  all or any  portion  of your  outstanding  shares  upon
request.  Redemptions  can be made on any day that the NYSE is open for trading.
The redemption  price is the net asset value per share next determined after the
shares are validly  tendered for  redemption and such request is received by the
Transfer Agent.  Payment of redemption  proceeds is made promptly  regardless of
when  redemption  occurs and  normally  within  three days after  receipt of all
documents in proper form,  including a written redemption order with appropriate
signature  guarantee.  Redemption proceeds will be mailed or wired in accordance
with  the  shareholder's  instructions.  The  Funds  may  suspend  the  right of
redemption  under certain  extraordinary  circumstances  in accordance  with the
rules of the SEC. In the case of shares  purchased by check and redeemed shortly
after the purchase,  the Transfer Agent will not mail redemption  proceeds until
it has been notified that the monies used for the purchase have been  collected,
which  may take up to 15 days  from  the  purchase  date.  Shares  tendered  for
redemptions  through  brokers or dealers  (other  than the  Distributor)  may be
subject  to a  service  charge  by  such  brokers  or  dealers.  Procedures  for
requesting a redemption are set forth below.

A 2% redemption fee will be charged on the redemption of shares of the Lexington
Troika Dialog Russia Fund held less than 365 days.  The  redemption fee will not
apply to shares  representing  the  reinvestment  of dividends and capital gains
distributions.  The  redemption  fee will be applied  on a share by share  basis
using the "first  shares in, first  shares out" (FIFO)  method.  Therefore,  the
oldest shares are sold first.


                                                                              35
<PAGE>


Redeeming by Written Instruction

Write a letter giving your name, account number, the name of the fund from which
you wish to redeem and the dollar amount or number of shares you wish to redeem.

Signature-guarantee  your letter if you want the redemption  proceeds to go to a
party other than the account owner(s), your predesignated bank account or if the
dollar amount of the redemption  exceeds  $25,000.  Signature  guarantees may be
provided by an eligible guarantor institution such as a commercial bank, an NASD
member firm such as a stockbroker,  a savings association or national securities
exchange. Contact the Transfer Agent for more information.

     If a  redemption  request  is sent to the  Fund in New  Jersey,  it will be
forwarded to the Transfer Agent and the effective date of redemption will be the
date  received  by the  Transfer  Agent.  Checks for  redemption  proceeds  will
normally be mailed within three business days. Shareholders who redeem all their
shares will receive a check  representing  the value of the shares redeemed plus
the accrued dividends through the date of redemption.  Where shareholders redeem
only a portion of their  shares,  all  dividends  declared  but  unpaid  will be
distributed on the next dividend payment date.

Redeeming by Telephone

o    Shares of the Fund may be redeemed by telephone. Call the Fund toll free at
     1-800-526-0056.

o    [A redemption  authorization and signature guarantee must be given before a
     shareholder  may redeem by telephone.  A redemption  authorization  form is
     contained in the New Account  Application  and  authorization  forms may be
     obtained by calling the Funds.]

o    Telephone  redemption  privileges  may  be  cancelled  by  instructing  the
     Transfer Agent in writing. Your request will be processed upon receipt.

o    Exchange by telephone.

Redeeming by Check

o    Check writing is available on the Money Market Trust at no charge.

o    The  minimum  amount per check is $100 or more up to  $500,000.  Checks for
     less than $100 or over $500,000 will not be honored.

o    All checks require only one signature  unless otherwise  indicated.  Checks
     will be returned to you at the end of each month.

o    Redemption  checks are free,  but a charge of $15.00 may be imposed for any
     stop payments requested.

o    Redemption checks should not be used to close your account.

o    Redemption by check are  available for shares for which share  certificates
     have not been  issued,  and may not be used to redeem  shares  purchased by
     check which have been on the books of the Fund for less than 15 days.


36
<PAGE>


Systematic Withdrawal Plan

Under a Systematic  Withdrawal  Plan,  a  shareholder  with an account  value of
$10,000 or more in a fund may receive (or have sent to a third  party)  periodic
payments (by check or wire). If the proceeds are to be mailed to a third party a
signature  guarantee is required.  The minimum  payment amount is $100 from each
fund  account.  Payments  may be made either  monthly or quarterly on the 1st of
each month. Depending on the form of payment requested,  shares will be redeemed
up to five  business  days before the  redemption  proceeds are  scheduled to be
received by the  shareholder.  The redemption  will result in the recognition of
gain or loss for income tax purposes.

How Fund Shares Are Priced

How and when we calculate  the Funds' price or net asset value (NAV)  determines
the price at which you will buy or sell shares. The net asset value of each fund
is  determined  once daily as of 4:00 p.m.,  New York time, on each day that the
NYSE is open for trading.  Per share net asset value is  calculated  by dividing
the value of each  fund's  total net assets by the total  number of that  fund's
shares then outstanding.

As more fully  described in the Statement of Additional  Information,  portfolio
securities are valued using current market valuations:  either the last reported
sales price or, in the case of  securities  for which there is no reported  last
sale and  fixed-income  securities,  the mean  between the closing bid and asked
price. Securities for which market quotations are not readily available or which
are illiquid are valued at their fair values as  determined  in good faith under
the supervision of the Funds'  officers,  and by the Manager and the Boards,  in
accordance  with  methods  that  are  specifically  authorized  by  the  Boards.
Short-term  obligations  with  maturities  of 60  days  or less  are  valued  at
amortized cost as reflecting fair value.

The value of securities  denominated in foreign currencies and traded on foreign
exchanges or in foreign markets will be translated into U.S. dollars at the last
price of their respective currency denomination against U.S. dollars quoted by a
major  bank or,  if no such  quotation  is  available,  at the rate of  exchange
determined in accordance with policies  established in good faith by the Boards.
Because  the value of  securities  denominated  in  foreign  currencies  must be
translated  into U.S.  dollars,  fluctuations in the value of such currencies in
relation  to the U.S.  dollar may affect the net asset value of fund shares even
without  any  change  in  the   foreign-currency   denominated  values  of  such
securities.

Because  foreign  securities  markets may close before the Funds determine their
net asset values,  events affecting the value of portfolio  securities occurring
between the time prices are  determined and the time the Funds  calculate  their
net asset values may not be reflected unless the Manager,  under  supervision of
the Board,  determines that a particular event would materially  affect a fund's
net asset value.

Money Market  Funds.  The price of Money Market Funds is  determined  at 12 noon
Eastern time on most business days. If we receive your order by that time,  your
shares will priced at the NAV  calculated  at noon that day. If we receive  your
order  after 12 noon  Eastern  time,  you will pay the next price we  determined
after receiving your order.

Foreign Funds. Several of our Funds invest in securities  denominated in foreign
currencies and traded on foreign exchanges. To determine their value, we convert
their  foreign-currency  price into U.S. dollars by using the exchange rate last
quoted by a major bank.  Exchange rates fluctuate  frequently and may affect the
U.S.  dollars  value of  foreign-denominated  securities,  even if their  market
prices do not change.  In addition,  some foreign exchanges are open for trading
when the U.S. market is closed.  As a result, a Fund's foreign  securities - and
its price -may  fluctuate  during  periods when you can't buy,  sell or exchange
shares in the Fund.


                                                                              37
<PAGE>


Bank  Holidays.  On bank  holidays  we  will  not  calculate  the  price  of the
Fixed-Income  and Money Market Funds,  even if the NYSE is open that day. Shares
in these Funds will be sold at the next NAV we determine  after  receipt of your
order.

Dividends and Capital Gains Distributions

Each  Fund  distributes  substantially  all its net  investment  income  and net
capital gains to shareholders each year.

o    You are not guaranteed any distributions.

o    The Board of  Directors  has  discretion  in  determining  the  amount  and
     frequency of the dis tributions.

o    Unless you request cash  distributions in writing,  all dividends and other
     distributions  will be reinvested  automatically  in additional  shares and
     credited to the shareholders' account.

Distributions Affect NAV.

o    The Funds will pay distributions as of the record date.

o    Dividends  and capital  gains  waiting  distribution  are  included in each
     Fund's daily NAV.

Buying a Dividend.  If you buy shares of a Fund just before a distribution,  you
will pay the full  price for the shares  and  receive a portion of the  purchase
price back as a taxable distribution when the distribution is made.

Taxes

     Each Fund intends to qualify as a regulated investment company, which means
that  it pays  no  federal  income  tax on the  earnings  or  capital  gains  it
distributes to its shareholders.  The following statements apply with respect to
each Fund:

o    Ordinary  dividends  from the Fund  are  taxable  as  ordinary  income  and
     dividends  from the Fund's  long-term  capital gains are taxable as capital
     gain.

o    Dividends  are treated in the same manner for federal  income tax  purposes
     whether you receive them in the form of cash or additional shares. They may
     also be subject to state and local taxes.

o    Dividends from the Lexington GNMA Income Fund,  Inc. that are  attributable
     to  interest  on certain  U.S.  Government  obligations  may be exempt from
     certain  state  and  local  income  taxes.  the  extent  to which  ordinary
     dividends are attributable to U.S. Government  obligations will be provided
     on the tax tax statements you receive from the Fund.

o    Certain  dividends  paid to you in  January  will be taxable as if they had
     been paid the previous December.

o    We will mail you tax statements annually showing the amounts and tax status
     of the distributions you received.

o    When you sell (redeem) or exchange shares of a Fund, you must recognize any
     gain or loss.  However,  as long as Lexington  Money Market Trust's NAV per
     share does not deviate from $1.00, there will be no gain or loss.

o    Under certain circumstances,  a Fund may be in a position to "pass-through"
     to you the right to a


38
<PAGE>

credit or deduction for foreign taxes paid by the Fund.

oBecause your tax treatment depends on your purchase price and tax position, you
should keep your regular account statements for use in determining your tax.

oYou  should  review  the  more  detailed   discussion  of  federal  income  tax
considerations  in the Statement of Additional  Information,  which is available
for free by calling 1-800-526-0056.

***We  provide this tax  information  for your general  information.  You should
consult  your own tax  adviser  about the tax  consequences  of  investing  in a
Fund.***

DISTRIBUTION OF FUND'S SHARES

Distribution  Plan. The following Funds have adopted a plan under Rule 12b-1 for
the sale and distribution of shares:

o    Lexington Goldfund;
o    Lexington Growth and Income Fund;
o    Lexington International Fund;
o    Lexington Global Income Fund;
o    Lexington SmallCap Fund;
o    Lexington Troika Dialog Russia Fund; and
o    Lexington Worldwide Emerging Markets Fund.

Under the distribution plan, the Funds may pay fees up to 0.25% of their average
daily net assets for distribution services.

Shareholder Servicing Agreements. The Funds may enter into Shareholder Servicing
Agreements  with one or more  Shareholder  Servicing  Agents to provide  various
services to shareholders as follows:

o    Each Agent receives fees up to 0.25% of the average daily net assets of the
     Fund.
o    LMC may pay additional fees from its past profits,  at no additional  costs
     to the Funds.
o    Each Agent may waive all or a portion of the fees.
o    If a Fund has a  distribution  plan,  the Agents will receive fees of up to
     0.25% of the average daily assets from the distribution plan in addition to
     amounts received for shareholder ser vicing.


                                                                              39
<PAGE>


<TABLE>
<CAPTION>
                                                                                                        DOMESTIC EQUITY FUNDS
                                                            ========================================================================
                                                                                     Growth and Income Fund
                                                            ----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                 1998           1997            1996            1995         1994
                                                            ----------------------------------------------------------------------
<S>                                                         <C>            <C>             <C>             <C>            <C>
Net asset value, beginning of period                          $20.27         $18.56          $15.71          $14.36         $16.16
Net investment income (loss)                                    0.01           0.05            0.07            0.22           0.17
Net realized and unrealized gain (loss) from investment
operations                                                      4.29           5.46            4.08            3.00          (0.68)
Total income (loss) from investment operations                  4.30           5.51            4.15            3.22          (0.51)
Less distributions:
         Distributions from net investment income                             (0.07)          (0.13)          (0.22)         (0.16)
         Distribution in excess of net investment income        --             --              --              --             --
         Distributions from net realized gains                 (2.66)         (3.73)          (1.17)          (1.65)         (0.91)
         Distribution in excess of net realized gains           --             --              --              --            (0.22)
Total distributions                                            (2.66)         (3.80)          (1.30)          (1.87)         (1.29)
Net asset value, end of period                                $21.91         $20.27          $18.56          $15.71         $14.36
Total return                                                   21.42%         30.36%          26.46%          22.57%         (3.11)%

Ratios/Supplemental Data
Net asset, end of period (thousands)                        $245,790       $228,037        $200,309        $138,901       $124,829
Ratio of expenses to average net assets, before
reimbursement or waiver                                         1.16%          1.17%           1.13%           1.09%          1.15%
Ratio of expenses to average net assets, net of
reimbursement or waiver                                         1.16%          1.17%           1.13%           1.09%          1.15%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                  0.06%          0.21%           0.43%           1.38%          1.06%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                  0.06%          0.21%           0.43%           1.38%          1.06%
Portfolio Turnover Rate                                        63.20%         88.15%         101.12%         159.94%         63.04%

<CAPTION>

                                                           ===========================================
                                                                        SmallCap Fund
                                                             --------------------------------------
PER SHARE OPERATING PERFORMANCE                               1998          1997          1996(a)
                                                             --------------------------------------
<S>                                                          <C>           <C>           <C>
Net asset value, beginning of period                         $11.39        $11.73        $10.00
Net investment income (loss)                                  (0.02)        (0.19)        (0.18)
Net realized and unrealized gain (loss) from investment
operations                                                     0.75          1.41          1.94
Total income (loss) from investment operations                 0.73          1.22          1.76
Less distributions:
         Distributions from net investment income              --            --            --
         Distribution in excess of net investment income       --            --            --
         Distributions from net realized gains                (0.22)         --            --
         Distribution in excess of net realized gains          --            --            --
Total distributions                                           (0.22)        (1.56)        (0.03)
Net asset value, end of period                               $11.56        $11.39        $11.73
Total return                                                   6.73%        10.47%        17.50%

Ratios/Supplemental Data
Net asset, end of period (thousands)                         $8,172        $9,565        $8,061
Ratio of expenses to average net assets, before
reimbursement or waiver                                        2.92%         2.57%         3.04%
Ratio of expenses to average net assets, net of
reimbursement or waiver                                        2.59%         2.57%         2.48%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                (2.00)%       (1.78)%       (2.34)%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                (1.67)%       (1.78)%       (1.78)%
Portfolio Turnover Rate                                      145.94%        39.09%        60.92%

<CAPTION>
                                                                        GLOBAL AND INTERNATIONAL FUND
                                                           ===========================================================
                                                                           Small Cap Asia Growth Fund
                                                            ---------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                               1998           1997           1996            1995(b)
                                                            ---------------------------------------------------------
<S>                                                         <C>            <C>            <C>              <C>
Net asset value, beginning of period                          $7.06         $12.24          $9.76          $10.00
Net investment income (loss)                                   --            (0.05)         (0.05)           0.02
Net realized and unrealized gain (loss) from investment
operations                                                    (1.37)         (5.13)         (2.54)          (0.24)
Total income (loss) from investment operations                (1.37)         (5.18)          2.49           (0.22)
Less distributions:
         Distributions from net investment income              --             --             --             (0.02)
         Distribution in excess of net investment income       --             --            (0.01)           --
         Distributions from net realized gains                 --             --             --              --
         Distribution in excess of net realized gains          --             --             --              --
Total distributions                                            --             --            (0.01)          (0.02)
Net asset value, end of period                                $5.69          $7.06         $12.24           $9.76
Total return                                                 (19.41)%       (42.32)%        25.50%          (4.39)%*

Ratios/Supplemental Data
Net asset, end of period (thousands)                        $18,278        $13,867        $23,796          $8,936
Ratio of expenses to average net assets, before
reimbursement or waiver                                        2.86%          2.30%          2.64%           3.51%*
Ratio of expenses to average net assets, net of
reimbursement or waiver                                        2.50%          2.30%          2.42%           1.75%*
Ratio of net investment income to average net assets,
before reimbursement or waiver                                (0.57)%        (0.32)%        (0.86)%         (1.24)%*
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                (0.21)%        (0.32)%        (0.64)%          0.52%*
Portfolio Turnover Rate                                      193.48%        187.41%        176.49%          40.22%*
</TABLE>

*    Annualized

(a)  Small Cap Fund commenced operations on January 2, 1996

(b)  Small Cap Asia Growth Fund commenced operations on July 3, 1995

40                                                                            41


<PAGE>



<TABLE>
<CAPTION>
                                                              ======================================================================
                                                                                Global Corporate Leaders Fund
                                                              ---------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                 1998           1997           1996           1995           1994
                                                              ---------------------------------------------------------------------
<S>                                                           <C>            <C>            <C>            <C>            <C>
Net asset value, beginning of period                           $10.59         $11.28         $11.32         $11.17         $13.51
Net investment income (loss)                                     0.99           0.03           0.01           0.09           0.02
Net realized and unrealized gain (loss) from investment
operations                                                       1.02           0.73           1.84           1.10           0.23
Total income (loss) from investment operations                   2.01           0.76           1.85           1.19           0.25
Less distributions:
         Distributions from net investment income               (0.80)         (0.09)         (0.16)         (0.29)          --
         Distributions in excess of net investment income        --             --             --            (0.13)          --
         Distributions from net realized gains                  (2.34)         (1.36)         (1.73)         (0.62)         (2.46)
         Distributions in excess of net realized gains           --             --             --             --            (0.13)
Total distributions                                             (3.14)         (1.45)         (1.89)         (1.04)         (2.59)
Net asset value, end of period                                  $9.46         $10.59         $11.28         $11.32         $11.17
Total return                                                   $19.06%          6.90%         16.43%         10.69%          1.84%

Ratios/Supplemental Data
Net assets, end of period (thousands)                         $17.803        $35,085        $37,223        $53,614        $67,392
Ratio of expenses to average net assets, before
reimbursement or waiver                                          2.12%          1.75%          1.90%          1.67%          1.61%
Ratio of expenses to average net assets, net of
reimbursement or waiver                                          2.12%          1.75%          1.90%          1.67%          1.61%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                  (0.06)%         0.23%          0.11%          0.48%          0.14%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                  (0.06)%         0.23%          0.11%          0.48%          0.14%
Portfolio Turnover Rate                                        137.33%        177.48%        128.05%        166.35%         83.40%

<CAPTION>
                                                           =======================================================================
                                                                                 International Fund
                                                           -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                               1998           1997           1996           1995           1994
                                                           -----------------------------------------------------------------------
<S>                                                         <C>            <C>            <C>            <C>            <C>
Net asset value, beginning of period                         $10.10         $10.86         $10.60         $10.37         $10.000
Net investment income (loss)                                   0.17           0.07          (0.02)         (0.01)         (0.08)
Net realized and unrealized gain (loss) from investment
operations                                                      174           0.10           1.45           0.61           0.67
Total income (loss) from investment operations                 1.91           0.17           1.43           0.60           0.59
Less distributions:
         Distributions from net investment income             (0.06)         (0.13)         (0.20)          --             --
         Distributions in excess of net investment income      --             --             --            (0.35)          --
         Distributions from net realized gains                (0.34)         (0.80)         (0.97)         (0.02)         (0.10)
         Distributions in excess of net realized gains         --             --             --             --            (0.12)
Total distributions                                           (0.40)         (0.93)         (1.17)         (0.37)         (0.22)
Net asset value, end of period                               $11.61         $10.10         $10.86         $10.60         $10.37
Total return                                                  19.02%          1.61%         13.57%          5.77%          5.87%

Ratios/Supplemental Data
Net assets, end of period (thousands)                       $24,000        $19,949        $18,891        $17,855        $17,843
Ratio of expenses to average net assets, before
reimbursement or waiver                                        2.25%          2.15%          2.45%          2.46%          2.39%
Ratio of expenses to average net assets, net of
reimbursement or waiver                                        1.75%          1.75%          2.45%          2.46%          2.39%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                (0.16)%         0.13%         (0.39)%        (0.12)%        (0.94)%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                 0.35%          0.53%         (0.39)%        (0.12)%        (0.94)%
Portfolio Turnover Rate                                     143,67%         122.56%        113.55%        137.72%        100.10%
</TABLE>


42                                                                            43
<PAGE>





<TABLE>
<CAPTION>
                                                             =======================================================================
                                                                                       Global Income Fund
                                                             -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                 1998           1997           1996           1995           1994
                                                             -----------------------------------------------------------------------
<S>                                                           <C>            <C>            <C>            <C>            <C>
Net asset value, beginning of period                           $10.58         $11.22         $10.75          $9.80         $10.95
Net investment income (loss)                                     0.90           1.04           1.01           0.96           0.46
Net realized and unrealized gain (loss) from investment
operations                                                      (0.07)         (0.50)          0.36           0.95          (1.16)
Total income (loss) from investment operations                  (0.83)          0.54           1.37           1.91          (0.70)
Less distributions:
         Distributions from net investment income               (0.87)         (0.91)         (0.86)         (0.96)         (0.45)
         Distributions in excess of net investment income        --             --             --             --             --
         Distributions from net realized gains                  (0.18)         (0.27)         (0.04)          --             --
         Distributions in excess of net realized gains           --             --             --             --             --
Total distributions                                             (1.05)         (1.18)         (0.90)         (0.96)         (0.45)
Net asset value, end of period                                 $10.36         $10.58         $11.22         $10.75          $9.80
Total return                                                     8.21%          5.00%         13.33%         20.10%         (6.52)%

Ratios/Supplemental Data
Net assets, end of period (thousands)                         $36,407        $23,668        $29,110        $12,255        $10,351
Ratio of expenses to average net assets, before
reimbursement or waiver                                          1.89%          2.17%          2.33%          3.07%          1.80%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                   1.50%          1.50%          1.50%          2.75%          1.50%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                  10.99%          8.99%          9.49%          9.48%          4.18%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                  11.38%          9.66%         10.32%          9.80%          4.48%
Portfolio Turnover Rate                                         45.26%        117.94%         71.84%        164.72%         10.20%

<CAPTION>
                                                            ===========================================
                                                                          Russia Fund
                                                            -------------------------------------------
PER SHARE OPERATING PERFORMANCE                                1998            1997           1996(c)
                                                            -------------------------------------------
<S>                                                          <C>            <C>             <C>
Net asset value, beginning of period                          $17.50          $11.24         $12.12
Net investment income (loss)                                    0.15           (0.01)         (0.05)
Net realized and unrealized gain (loss) from investment
operations                                                    (14.70)           7.57          (0.51)
Total income (loss) from investment operations                (14.55)           7.56          (0.56)
Less distributions:
         Distributions from net investment income              (0.07)           --             --
         Distributions in excess of net investment income       --              --             --
         Distributions from net realized gains                 (0.24)          (1.30)         (0.32)
         Distributions in excess of net realized gains          --              --             --
Total distributions                                            (0.31)          (1.30)         (0.32)
Net asset value, end of period                                 $2.64%         $17.50         $11.24
Total return                                                  (82.99%)         67.50%         (9.01)%*

Ratios/Supplemental Data
Net assets, end of period (thousands)                        $19.147        $137,873        $13,846
Ratio of expenses to average net assets, before
reimbursement or waiver                                         2.64%         2.89%#        5.07%*#
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                  1.84%         1.85%#        2.65%*#
Ratio of net investment income to average net assets,
before reimbursement or waiver                                  0.57%       (1.14)%#      (3.69)%*#
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                  1.36%       (0.11)%#      (1.27)%*#
Portfolio Turnover Rate                                        65.76%          66.84%        115.55%

<CAPTION>
                                                            ==========================================================
                                                                         Worldwide Emerging Markets Fund
                                                            ----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                1997            1996            1995            1994
                                                            ----------------------------------------------------------
<S>                                                         <C>             <C>             <C>             <C>
Net asset value, beginning of period                          $11.49          $10.70          $11.47          $13.96
Net investment income (loss)                                    0.01            --              0.08           (0.01)
Net realized and unrealized gain (loss) from investment
operations                                                     (1.32)           0.79           (0.76)          (1.92)
Total income (loss) from investment operations                 (1.31)           0.79           (0.68)          (1.93)
Less distributions:
         Distributions from net investment income               --              --             (0.08)           --
         Distributions in excess of net investment income       --              --             (0.01)           --
         Distributions from net realized gains                  --              --              --             (0.47)
         Distributions in excess of net realized gains          --              --              --             (0.09)
Total distributions                                             --              --             (0.09)          (0.56)
Net asset value, end of period                                $10.18          $11.49          $10.70          $11.47
Total return                                                  (11.40)%          7.38%          (5.93)%        (13.81)%

Ratios/Supplemental Data
Net assets, end of period (thousands)                       $137,686        $254,673        $265,544        $288,581
Ratio of expenses to average net assets, before
reimbursement or waiver                                         1.82%           1.76%           1.88%           1.65%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                  1.82%           1.76%           1.88%           1.65%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                  0.09%          (0.01)%          0.70%          (0.06)%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                  0.09%          (0.01)%          0.70%          (0.06)%
Portfolio Turnover Rate                                       112.05%          86.26%          92.85%          79.56%
</TABLE>

*    Annualized

#    (before, or net of) reinbursement or waiver or redemption fee proceeds.

(c)  The Fund's  commencement of operations was June 3, 1996 with the investment
     of  its  initial  capital.  The  Fund's  registration  statement  with  the
     Securities  and  Exchange  Commission  became  effective  on July 3,  1996.
     Financial  results prior to the effective  date of the Fund's  registration
     statement are not presented in this Financial Highlights Table.



44                                                                            45

<PAGE>


<TABLE>
<CAPTION>
                                                                                      PRECIOUS METALS FUNDS
                                                               ====================================================================
                                                                                            Goldfund
                                                               --------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                 1998           1997            1996            1995            1994
                                                               --------------------------------------------------------------------
<S>                                                           <C>           <C>            <C>             <C>             <C>
Net asset value, beginning of period                           $3.24          $5.97           $6.24           $6.37           $6.90
Net investment income (loss)                                    --             --              0.02            --              0.03
Net realized and unrealized gain (loss) from investment
operations                                                     (0.21)         (2.52)           0.50           (0.12)          (0.53)
Total income (loss) from investment operations                 (0.21)         (2.52)           0.52           (0.12)          (0.50)
Less distributions:
         Distributions from net investment income               --            (0.21)          (0.79)          (0.01)          (0.03)
         Distributions in excess of net investment income                                      --              --              --
         Distributions from net realized gains                  --             --              --              --              --
         Distributions in excess of net realized gains          --             --              --              --              --
Total distributions
Net asset value, end of period                                  3.03          $3.24           $5.97           $6.24           $6.37
Total return                                                   (6.39)%       (42.98)%          7.84%          (1.89)%          7.28%

Ratios/Supplemental Data
Net assets, end of period (thousands)                         50.841        $53,707        $109,287        $135,779        $159,435
Ratio of expenses to average net assets,
 before reimbursement or waiver                                 1.74%          1.65%           1.60%           1.70%           1.54%
Ratio of expenses to average net assets,
 net of reimbursement or waiver                                 1.74%          1.65%           1.60%           1.70%           1.54%
Ratio of net investment income to average net assets
, before reimbursement or waiver                                0.08%          0.17%          (0.32)%          0.07%           0.50%
Ratio of net investment income to average net assets,
 net of reimbursement or waiver                                 0.08%          0.17%          (0.32)%          0.07%           0.50%
Portfolio Turnover Rate                                        28.93%         38.32%          31.04%          40.41%          23.77%

<CAPTION>
                                                                                      PRECIOUS METALS FUNDS
                                                            =======================================================================
                                                                                            Silver Fund
                                                            -----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                 1998(d)     1998(e)      1997(e)     1996(e)     1995(e)   1994(e)
                                                            -----------------------------------------------------------------------
<S>                                                          <C>         <C>          <C>         <C>         <C>       <C>
Net asset value, beginning of period                           $3.26       $3.95        $4.46       $4.00       $3.92     $3.52
Net investment income (loss)                                   (0.01)      (0.02)       (0.04)      (0.03)      (0.03)    (0.02)
Net realized and unrealized gain (loss) from investment
operations                                                     (0.52)      (0.66)       (0.43)       0.51        0.11      0.42
Total income (loss) from investment operations                 (0.53)      (0.68)       (0.47)       0.48        0.08      0.04
Less distributions:
         Distributions from net investment income               --          --           --          --          --        --
         Distributions in excess of net investment income       --         (0.01)       (0.04)      (0.02)       --        --
         Distributions from net realized gains                  --          --           --          --          --        --
         Distributions in excess of net realized gains          --          --           --          --          --        --
Total distributions
Net asset value, end of period                                 $2.73       $3.26        $3.95       $4.46       $4.00     $3.92
Total return                                                  (16.26)%*   (17.32)%     (10.76)%     12.02%       2.04%    11.36%

Ratios/Supplemental Data
Net assets, end of period (thousands)                        $25,560     $34,921      $42,035     $73,945     $65,517   $49,499
Ratio of expenses to average net assets,
 before reimbursement or waiver                                 2.37%*      1.90%        1.96%       1.73%       1.82%     1.84%
Ratio of expenses to average net assets,
 net of reimbursement or waiver                                 2.37%*      1.90%        1.96%       1.73%       1.82%     1.84%
Ratio of net investment income to average net assets
, before reimbursement or waiver                               (0.61)%*    (0.54)%      (0.78)%     (0.72)%     (0.83)%   (0.82)%
Ratio of net investment income to average net assets,
 net of reimbursement or waiver                                (0.61)%*    (0.54)%      (0.78)%     (0.72)%     (0.83)%   (0.82)%
Portfolio Turnover Rate                                         5.68%*     28.78%       18.76%      44.30%      44.22%     5.28%
</TABLE>

*    Annualized

(d)  Six month  period  ended  December  31,  1998.  The Fund changed its fiscal
     year-end from June 30th to December 31st.

(e)  Fiscal year-end June 30th.


46                                                                            47
<PAGE>


<TABLE>
<CAPTION>
                                                                                     FIXED INCOME FUNDS AND
                                                            ======================================================================
                                                                                        GNMA Income Fund
                                                            ----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                  1998          1997            1996            1995          1994
                                                            ----------------------------------------------------------------------
<S>                                                          <C>           <C>             <C>             <C>           <C>
Net asset value, beginning of period                            $8.40         $8.12           $8.19           $7.60         $8.32
Net investment income (loss)                                     0.48          0.51            0.53            0.58          0.55
Net realized and unrealized gain (loss) from investment
operations                                                       0.13          0.29           (0.08)           0.59         (0.72)
Total income (loss) from investment operations                   0.61          0.80            0.45            1.17         (0.17)
Less distributions:
         Distributions from net investment income               (0.48)        (0.52)          (0.52)          (0.58)        (0.55)
         Distributions in excess of net investment income        --            --              --              --            --
         Distributions from net realized gains                   --            --              --              --            --
         Distributions in excess of net realized gains           --            --              --              --            --
Total distributions                                             (0.48)        (0.52)          (0.52)          (0.58)        (0.55)
Net asset value, end of period                                  $8.53         $8.40           $8.12           $8.19         $7.60
Total return                                                     7.52%        10.20%           5.71%          15.91%        (2.07)%

Ratios/Supplemental Data
Net assets, end of period (thousands)                        $273.591      $158,071        $133,777        $130,681      $132,108
Ratio of expenses to average net assets,
before reimbursement or waiver                                   1.01%         1.01%           1.05%           1.01%         0.98%
Ratio of expenses to average net assets,
net of  reimbursement or waiver                                  1.01%         1.01%           1.05%           1.01%         0.98%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                   5.85%         6.28%           6.56%           7.10%         6.90%
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                   5.85%         6.28%           6.56%           7.10%         6.90%
Portfolio Turnover Rate                                         54.47%       134.28%         128.76%          30.69%        37.15%

<CAPTION>
                                                                                       MONEY MARKET FUNDS
                                                            ======================================================================
                                                                                       Money Market Trust
                                                            ----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE                                  1998          1997            1996            1995          1994
                                                            ----------------------------------------------------------------------
<S>                                                          <C>           <C>             <C>             <C>           <C>
Net asset value, beginning of period                             $100         $1.00           $1.00           $1.00         $1.00
Net investment income (loss)                                   0.0455        0.0458          0.0441          0.0495        0.0330
Net realized and unrealized gain (loss) from investment
operations                                                       --            --              --              --            --
Total income (loss) from investment operations                 0.0455        0.0458          0.0441          0.0495        0.0330
Less distributions:
         Distributions from net investment income               0.455        0.0458          0.0441          0.0495        0.0330
         Distributions in excess of net investment income        --            --              --              --            --
         Distributions from net realized gains                   --            --              --              --            --
         Distributions in excess of net realized gains           --            --              --              --            --
Total distributions                                            0.0455        0.0458          0.0441          0.0495        0.0330
Net asset value, end of period                                   $100         $1.00           $1.00           $1.00         $1.00
Total return                                                     4.65%         4.68%           4.50%           5.06%         3.35%

Ratios/Supplemental Data
Net assets, end of period (thousands)                         $87,488       $95,149         $97,526         $88,786      $111,805
Ratio of expenses to average net assets,
before reimbursement or waiver                                   1.05%         1.04%           1.04%           1.08%         1.02%
Ratio of expenses to average net assets,
net of  reimbursement or waiver                                  1.00%         1.00%           1.00%           1.00%         1.00%
Ratio of net investment income to average net assets,
before reimbursement or waiver                                   4.51%         4.55%           4.37%           4.87%         3.30% 
Ratio of net investment income to average net assets,
net of reimbursement or waiver                                   4.56%         4.58%           4.41%           4.95%         3.32%
Portfolio Turnover Rate                                          --            --              --              --            --
</TABLE>


48                                                                            49
<PAGE>


Statement of Additional Information

The  Statement  of  Additional   Information  (SAI)  provides  a  more  complete
discussion  about the Lexington Funds and is  incorporated  by reference,  which
means that it is considered a part of this prospectus.

Annual and Semi-Annual Reports

The annual and semi-annual  reports to shareholders  have more information about
each  Lexington  Fund's  investments,  including a  discussion  about the market
conditions  and investment  strategies  that  significantly  affected the Fund's
performance during its last fiscal year.

Reviewing or Obtaining  Additional  Information You may obtain a copy of the SAI
and the  annual  and  semi-annual  reports  (free of  charge)  by  contacting  a
broker-dealer or other financial  intermediaries  that sell the Fund's shares or
by writing or calling:

                  THE LEXINGTON FUNDS
                  P.O. Box 1515
                  Park 80 West Plaza Two
                  Saddle Brook, New Jersey  07663
                  Attn: Shareholder Services
                  Tel: (800) 526-0056 or (201) 845-7300.

You may also  obtain a copy of the SAI and the  annual and  semi-annual  reports
(for a fee) by  contacting  the  Public  Reference  Room of the  Securities  and
Exchange  Commission,  450  Fifth  Street,  N.W.,  Washington,  D.C.,  telephone
800-SEC-0330.  You may also  obtain  this  information  by  visiting  the  SEC's
Worldwide Website at http://www.sec.gov.

Investment Company Act File No. 811-_______.



50
<PAGE>


<PAGE>
                       LEXINGTON INTERNATIONAL FUND, INC.

                       STATEMENT OF ADDITIONAL INFORMATION

                                   MAY 1, 1999

    This Statement of Additional  Information which is not a prospectus,  should
be read in conjunction  with the current  prospectus of Lexington  International
Fund,  Inc. (the "Fund"),  dated May 1, 1999, 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 Services 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

Risk Considerations                                                            3

Investment Restrictions                                                        4

Management of the Fund                                                         6

Investment Adviser, Distributor and Administrator                              9

Portfolio Transactions and Brokerage Commissions                              10

Determination of Net Asset Value                                              10

Distribution Plan                                                             11

Telephone Exchange Provisions                                                 11

Tax-Sheltered Retirement Plans                                                12

Tax Matters                                                                   14

Performance Calculation                                                       18

Shareholder Reports                                                           19

Other Information                                                             19

Financial Statements                                                          20


                                       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 the  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".

    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 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, for hedging  purposes only, may also enter into forward
foreign  currency  exchange  contracts  to  increase  its  exposure to a foreign
currency  that the  Fund's  investment  adviser  expects  to  increase  in value
relative to the United States dollar.  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.

                                       2
<PAGE>

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  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.

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.  In addition if bankruptcy proceedings are commenced with
respect to the seller,  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 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.

                               RISK CONSIDERATIONS

    Investors should recognize that investing in securities of foreign companies
and in  particular  securities  of companies  domiciled in or doing  business in
emerging markets and emerging  countries  involves certain risk  considerations,
including  those  set  forth  below,  which are not  typically  associated  with
investing in securities of U.S. companies. 

Foreign Currency Considerations

    The Fund's assets will be invested in  securities  of foreign  companies and
substantially  all income will be  received  by the Fund in foreign  currencies.
However,  the Fund will compute and  distribute  its income in dollars,  and the
computation of income will be made on the date of its receipt by the Fund at the
foreign  exchange  rate in effect on that date.  Therefore,  if the value of the
foreign  currencies in which the Fund receives its income falls  relative to the
dollar between receipt of the income and the making of Fund  distributions,  the
Fund will be required to liquidate  securities in order to make distributions if
the Fund has insufficient cash in dollars to meet distribution requirements.

    The  value of the  assets of the Fund as  measured  in  dollars  also may be
affected favorably or unfavorably by fluctuations in currency rates and exchange
control  regulations.  Further,  the Fund may  incur  costs in  connection  with
conversions  between  various  currencies.  Foreign  exchange  dealers realize a
profit based on the  difference  between the prices at which they are buying and
selling various currencies. Thus, a dealer normally will offer to sell a foreign
currency  to the Fund at one rate,  while  offering  a lesser  rate of  exchange
should the Fund desire  immediately  to resell that currency to the dealer.  The
Fund will conduct its foreign currency  exchange  transactions  either on a spot
(i.e.,  cash) basis at the spot rate prevailing in the foreign currency exchange
market,  or through  entering  into forward or futures  contracts to purchase or
sell foreign currencies. 

Investment and Repatriation Restrictions

    Some  foreign  countries  may have  laws  and  regulations  which  currently
preclude  direct  foreign  investment  in the  securities  of  their  companies.
However,  indirect foreign  investment in the securities of companies listed and
traded on the stock exchanges in these countries is permitted by certain foreign
countries through investment funds which have been specifically authorized.  The
Fund may invest in these  investment funds subject to the provisions of the 1940
Act as discussed below under "Investment  Restrictions".  If the Fund invests in
such investment funds, the Fund's

                                       3
<PAGE>

shareholders will bear not only their proportionate share of the expenses of the
Fund (including operating expenses and the fees of the Investment Manager),  but
also will bear indirectly similar expenses of the underlying investment funds.

    In addition to the foregoing  investment  restrictions,  prior  governmental
approval for foreign investments may be required under certain  circumstances in
some  foreign  countries,  while the extent of foreign  investment  in  domestic
companies  may be subject to  limitation  in other  foreign  countries.  Foreign
ownership  limitations  also  may be  imposed  by  the  charters  of  individual
companies in foreign  countries to prevent,  among other concerns,  violation of
foreign investment limitations.

    Repatriation  of  investment  income,  capital and the  proceeds of sales by
foreign investors may require governmental  registration and/or approval in some
foreign  countries.  The Fund  could be  adversely  affected  by  delays in or a
refusal to grant any required governmental approval for such repatriation.

Foreign Securities Markets

    Trading volume on foreign country stock exchanges is substantially less than
that on the  New  York  Stock  Exchange.  Further,  securities  of some  foreign
companies are less liquid and more volatile than  securities of comparable  U.S.
companies.  Similarly,  volume and  liquidity  in most  foreign  bond markets is
substantially less than in the U.S. and,  consequently,  volatility of price can
be greater than in the U.S. Fixed commissions on foreign exchanges are generally
higher  than  negotiated  commissions  on  U.S.  exchanges,  although  the  Fund
endeavors  to  achieve  the  most   favorable   net  results  on  its  portfolio
transactions  and may be able to purchase the  securities  in which the Fund may
invest on other stock exchanges where commissions are negotiable.

    Companies  in  foreign  countries  are  not  generally  subject  to  uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements  comparable to those  applicable to U.S.  companies.  Consequently,
there may be less publicly  available  information  about a foreign company than
about a U.S. company.  Further, there is generally less governmental supervision
and regulation of foreign stock exchanges,  brokers and listed companies than in
the U.S. Further,  these Funds may encounter difficulties or be unable to pursue
legal remedies and obtain  judgments in foreign  courts.  

Economic and Political Risks

    The  economies  of  individual  foreign  countries  may differ  favorably or
unfavorably  from the U.S.  economy in such respects as growth of gross domestic
product, rate of inflation, capital reinvestment,  resource self-sufficiency and
balance of  payments  position.  Further,  the  economies  of foreign  countries
generally are heavily dependent upon international trade and, accordingly,  have
been and may  continue  to be  adversely  affected  by trade  barriers,  managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade.  These economies also have
been and may continue to be  adversely  affected by economic  conditions  in the
countries with which they trade.

    With  respect  to  any  foreign   country,   there  is  the  possibility  of
nationalization,  expropriation  or confiscatory  taxation,  political  changes,
government regulation,  social instability or diplomatic developments (including
war) which could affect  adversely the economies of such countries or the Fund's
investments in those countries.  In addition, it may be more difficult to obtain
a judgement in a court outside of the United States.

                             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.

                                       4
<PAGE>

    (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.

    (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  foreign  government  securities  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, 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.

                                       5
<PAGE>

    (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,  their ages as of the
Fund's most recent fiscal year-end and their principal occupations are set forth
below:

+S.M.S.  CHADHA  (60),  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 (53), 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.

(D)BEVERLEY C. DUER (63), Director,  340 East 72nd Street, New York, N.Y. 10021.
    Private Investor.  Formerly, Manager of Operations Research Department - CPC
    International, Inc.

*(D)BARBARA R. EVANS  (37),  Director.  5 Fernwood  Road,  Summit,  N.J.  07901.
    Private Investor. Prior to May,1989, Assistant Vice President and Securities
    Analyst, Lexington Management Corporation.

*(D)LAWRENCE  KANTOR (50),   Vice  President and Director. P.O. Box 1515, Saddle
    Brook, N.J. 07663. Executive Vice President, Managing Director and Director,
    Lexington Management Corporation; Executive Vice President, Lexington Global
    Asset Managers, Inc.; Executive Vice President and Director, Lexington Funds
    Distributor, Inc.

                                       6
<PAGE>

+JERARD F. MAHER (52), Director. 300 Raritan Center Parkway, Edison, N.J. 08818.
    General Counsel, Federal Business Center; Counsel, Ribis, Graham & Curtin.

+ANDREW M. McCOSH (57), 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.

(D)DONALD B. MILLER (71),  Director.  10725 Quail Covey Road,  Boynton Beach, FL
    33436.  Chairman,  Horizon Media,  Inc.;  Trustee,  Galaxy Funds;  Director,
    Maquire Group of Connecticut; prior to January 1989, President, Director and
    C.E.O., Media General Broadcast Services (advertising firm).

(D)JOHN G. PRESTON (65),  Director. 3 Woodfield Road,  Wellesley,  Massachusetts
    02181.   Associate   Professor   of   Finance,   Boston   College,   Boston,
    Massachusetts.

*(D)RICHARD T. SALER (36), Vice President and Portfolio Manager.  P.O. Box 1515,
    Saddle Brook,  NJ 07663.  Senior Vice President,  Director of  International
    Investment Strategy.  Lexington Management Corporation.  Prior to July 1992,
    Securities  Analyst,  Nomura  Securities,  Inc. Prior to November 1991, Vice
    President, Lexington Management Corporation.

*(D)LISA CURCIO (38), 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.

*(D)RICHARD M. HISEY (39),  Vice  President and Treasurer. P.O. Box 1515, Saddle
    Brook, N.J. 07663. Chief Financial Officer,  Managing Director and Director,
    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,  General
    Manager - Mutual Funds and Chief Financial Officer,  Lexington  Global Asset
    Managers, Inc.

*(D)RICHARD LAVERY (44), 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.

*(D)JANICE  CARNICELLI (38), Vice President.  P.O. Box 1515,  Saddle Brook, N.J.
    07663.

*(D)CHRISTIE  CARR-WALDRON  (30),  Assistant  Treasurer.  P.O. Box 1515,  Saddle
    Brook,  N.J.  07663.  Prior to October 1992,  Senior  Accountant,  KPMG Peat
    Marwick LLP.

*(D)CATHERINE DiFALCO (28),  Assistant  Treasurer.  P.O. Box 1515, Saddle Brook,
    New Jersey 07663. Prior to October 1997, Manager, Fund Accounting.

*(D)SIOBHAN GILFILLAN (34),  Assistant  Treasurer.  P.O. Box 1515, Saddle Brook,
    N.J. 07663.

*(D)JOAN K. LEDERER (31), 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.

*(D)SHERI MOSCA (34),  Assistant  Treasurer.  P.O. Box 1515,  Saddle Brook, N.J.
    07663.

*(D)PETER CORNIOTES (35), Assistant Secretary. P.O. Box 1515, Saddle Brook, N.J.
    07663.  Vice  President  and  Assistant   Secretary,   Lexington  Management
    Corporation. Assistant Secretary, Lexington Funds Distributor, Inc.

*(D)ENRIQUE J. FAUST (37),  Assistant  Secretary.  P.O. Box 1515,  Saddle Brook,
    N.J. 07663. Prior to March 1994, Blue Sky Compliance Coordinator,  Lexington
    Management Corporation.

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

(D)    Messrs.  Chadha,  Corniotes,  DeMichele,  Duer,  Faust,  Hisey,   Kantor,
       Lavery,  Maher,  McCosh,  Miller,  Preston, Saler  and  Stowe  and  Mmes.
       Carnicelli,  Carr, Curcio, DiFalco, Evans, Gilfillan,  Lederer, and Mosca
       hold similar  offices with some or all of the other registered investment
       investment  companies advised and/or distributed by Lexington  Management
       Corporation and Lexington Funds Distributor, Inc.

    The Board of Directors met 5 times during the twelve  months ended  December
31, 1998, and each of the Directors attended at least 75% of those meetings.


                                       7
<PAGE>

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 up to a maximum of $9,000 per
year for  Directors  living  outside the U.S. and $6,000 per year for  Directors
living  within the U.S.  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, 1998 to December 31, 1998 for each Director:

<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------
                           Aggregate           Total Compensation From       Number of Directorships
   Name of Director  Compensation from Fund     Fund and Fund Complex            in Fund Complex
- -----------------------------------------------------------------------------------------------------
<S>                         <C>                        <C>                              <C>
 S.M.S. Chadha              $1,712                     $27,068                          15
- -----------------------------------------------------------------------------------------------------
 Robert M. DeMichele           0                         $0                             16
- -----------------------------------------------------------------------------------------------------
 Beverley C. Duer           $2,045                     $35,518                          16
- -----------------------------------------------------------------------------------------------------
 Barbara R. Evans              0                          0                             15
- -----------------------------------------------------------------------------------------------------
 Richard M. Hisey              0                          0                              5
- -----------------------------------------------------------------------------------------------------
 Lawrence Kantor               0                          0                             15
- -----------------------------------------------------------------------------------------------------
 Jerard F. Maher            $1,712                     $30,518                          16
- -----------------------------------------------------------------------------------------------------
 Andrew M. McCosh           $1,712                     $27,818                          15
- -----------------------------------------------------------------------------------------------------
 Donald B. Miller           $1,712                     $27,818                          15
- -----------------------------------------------------------------------------------------------------
 Francis Olmsted*           $1,400                     $16,800                         N/A
- -----------------------------------------------------------------------------------------------------
 John G. Preston            $1,712                     $27,818                          15
- -----------------------------------------------------------------------------------------------------
 Margaret W. Russell*       $1,456                     $23,228                          15
- -----------------------------------------------------------------------------------------------------
 Philip C. Smith*           $1,280                     $19,200                         N/A
- -----------------------------------------------------------------------------------------------------
 Francis A. Sunderland*     $1,200                     $16,800                         N/A
- -----------------------------------------------------------------------------------------------------
</TABLE>

*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.

                                       8
<PAGE>

    Set forth in the table below are the estimated annual benefits payable to an
eligible  Trustee upon retirement  assuming  various  compensation  and years of
service  classifications.  As of December 31, 1998, the estimated credited years
of service for Directors Chadha, Duer, Maher, McCosh, Miller and Preston  are 3,
20, 3, 3, 24 and 20, 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  December  7,  1993,  (the  "Advisory  Agreement").
Lexington  Funds  Distributor,  Inc.  ("LFD") is the  distributor of Fund shares
pursuant to a Distribution  Agreement dated December 7, 1993, (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 November 30, 1998. LMC makes recommendations to the Fund with
respect to its investments and investment policies.

    LMC  also  acts  as   administrator   to  the  Fund  and  performs   certain
administrative   and  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.

    LMC has  agreed to reduce  its  management  fee if  necessary  to keep total
operating  expenses  at or below 2.50% of the Fund's  average  daily net assets.
Total  annual  operating  expenses  may  also  be  subject  to  state  blue  sky
regulations.  LMC may terminate this  voluntary  reduction at any time. 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.

    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, 1998,
the Fund paid LMC $217,864 in investment advisory fees and LMC reimbursed the 
Fund $109,634.  For the year ended December 31, 1997, the Fund paid LMC $210,897
in  investment  advisory  fees; and for the year ended December 31, 1996,  the 
Fund paid LMC $190,486 in  investment advisory fees.

    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.


                                       9
<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.

    Of the directors,  officers or employees ("affiliated persons") of the Fund,
Messrs. Corniotes,  DeMichele,  Faust, Hisey, Kantor, Lavery and Saler and Mmes.
Carnicelli,  Carr-Waldron,  Curcio, DiFalco,  Gilfillan,  Lederer and Mosca (see
"Management  of the  Fund"),  may also be  deemed  affiliates  of LMC and LFD by
virtue of being officers, directors or employees thereof.

                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 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
              -----------------      ----------------      ------------------
    1996          $180,719                16,748               113.55%
    1997           177,179                20,613               122.56%
    1998          $172,910                                     143.67%


                        DETERMINATION OF NET ASSET VALUE

    The Fund calculates net asset value as of the close of normal trading on the
New York Stock Exchange  (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, Martin Luther King 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.


                                       10
<PAGE>

                                DISTRIBUTION PLAN

    The Fund has adopted a  Distribution  Plan (the "Plan") in  accordance  with
Rule 12b-1 under the  Investment  Company Act of 1940,  which  provides that the
Fund may pay  distribution  fees including  payments to the  Distributor,  at an
annual rate not to exceed 0.25% of its average daily net assets for distribution
services.

    Distribution  payments will be made as follows:  The Fund either directly or
through the adviser, may make payments periodically (i) to the Distributor or to
any  broker-dealer (a "Broker") who is registered under the Securities  Exchange
Act of 1934  and a  member  in good  standing  of the  National  Association  of
Securities  Dealers,  Inc. and who has entered into a Selected Dealer  Agreement
with  the  Distributor,  (ii) to  other  persons  or  organizations  ("Servicing
Agents") who have entered into  shareholder  processing  and service  agreements
with the Adviser or with the  Distributor,  with respect to Fund shares owned by
shareholders  for which  such  Broker is the  dealer or holder of record or such
servicing agent has a servicing  relationship,  or (iii) for expenses associated
with  distribution of Fund shares,  including but not limited to the incremental
costs of printing  prospectuses,  statements of additional  information,  annual
reports  and other  periodic  reports  for  distribution  to persons who are not
shareholders  of the Fund;  the costs of preparing  and  distributing  any other
supplemental sales literature;  costs of radio, television,  newspaper and other
advertising;  telecommunications  expenses,  including  the cost of  telephones,
telephone  lines  and other  communications  equipment,  incurred  by or for the
Distributor in carrying out its obligations under the Distribution Agreement.

    Quarterly,  in each year  that  this Plan  remains  in  effect,  the  Fund's
Treasurer  shall  prepare  and  furnish to the  Directors  of the Fund a written
report, complying with the requirements of Rule 12b-1, setting forth the amounts
expended  by the Fund under the Plan and  purposes  for which such  expenditures
were made.

    The Plan shall  become  effective  upon  approval  of the Plan,  the form of
Selected Dealer Agreement and the form of Shareholder Service Agreement,  by the
majority votes of both (a) the Fund's Directors and the Qualified  Directors (as
defined below),  cast in person at a meeting called for the purpose of voting on
the Plan and (b) the  outstanding  voting  securities of the Fund, as defined in
Section 2(a)(42) of the 1940 Act.

    The Plan shall remain in effect for one year from its adoption  date and may
be continued  thereafter if this Plan and all related agreements are approved at
least  annually  a  majority  vote of the  Directors  of the Fund,  including  a
majority of the Qualified  Directors  cast in person at a meeting called for the
purpose of voting on such Plan and  agreements.  This Plan may not be amended in
order to increase materially the amount to be spent for distribution  assistance
without  shareholder  approval.  All  material  amendments  to this Plan must be
approved by a vote of the Directors of the Fund, and of the Qualified  Directors
(as hereinafter defined),  cast in person at a meeting called for the purpose of
voting thereon.

    The Plan may be  terminated  at any time by a majority vote of the Directors
who are not interested  persons (as defined in Section 2(a)(19) of the 1940 Act)
of the Fund and have no direct or indirect  financial  interest in the operation
of the Plan or in any agreements related to the Plan (the "Qualified Directors")
or by vote of an majority of the outstanding  voting  securities of the Fund, as
defined in Section 2(a)(42) of the 1940 Act.

    While  this  Plan  shall be in  effect,  the  selection  and  nomination  of
the"non-interested"  Directors of the Fund shall be committed to the  discretion
of the Qualified Directors then in office.

                          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
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


                                       11
<PAGE>

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.

    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 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 ("Traditional IRA and ROTH IRA")

What's the Difference between a Traditional IRA and a Roth IRA?

    With a Traditional  IRA, an individual  can contribute up to $2,000 per year
and may be able to deduct the contribution from taxable income,  reducing income
taxes.  Taxes on investment growth and dividends are deferred until the money is
withdrawn.  Withdrawals  are taxed as additional  ordinary income when received.
Non deductible contributions, if any, are withdrawn tax-free. Withdrawals before
age 59-1/2 are  assessed a 10%  penalty in  addition  to income  tax,  unless an
exception applies.

    With a Roth  IRA,  the  contribution  limits  are  essentially  the  same as
Traditional  IRA's,  but  there  is no  tax  deduction  for  contributions.  All
dividends and investment growth in the account are tax-free. Most important with
a Roth IRA: there is no income tax on qualified  withdrawals from your Roth IRA.
Additionally,  unlike a  Traditional  IRA,  there is no  prohibition  on  making
contributions to Roth IRAs after turning age 70-1/2,  and there's no requirement
that you begin making minimum withdrawals at that age.

    The  following  chart  highlights  some of the major  differences  between a
Traditional IRA and a Roth IRA:


                                       12
<PAGE>

<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------
     Characteristics                     Traditional                                Roth
                                             IRA                                    IRA
- -----------------------------------------------------------------------------------------------------------
<S>                           <C>                                   <C>    
Eligibility                   * Individuals (and their spouses)     * Individuals (and their spouses)
                                who receive compensation              who receive compensation
                              * Individuals age 70-1/2 and over     * Individuals age 70-1/2 may con-
                                may not contribute                    tribute
- -----------------------------------------------------------------------------------------------------------
Tax Treatment Contributions   * Subject to limitations, contribu-   * No deduction permitted for
                                tions are deductible                  amounts contributed
- -----------------------------------------------------------------------------------------------------------
Contribution Limits           * Individuals may contribute up to    * Individuals may generally con-
                                $2,000 annually (or 100% of           tribute up to $2,000 (or 100% of 
                                compensation if less)                 compensation, if less)
                              * Deductibility depends on income     * Ability to contribute phases out   
                                level for individuals who are         at income levels of $95,000 to 
                                active participants in an             $110,000 (individual taxpayer) 
                                employer-sponsored retirement         and $150,000 to $160,000 (mar-
                                plan                                  ried taxpayers)

                                                                    * Overall limit for contributions to 
                                                                      all IRA's (Traditional and Roth 
                                                                      combined) is $2,000 annually (or 
                                                                      100% of compensation, if less)
- -----------------------------------------------------------------------------------------------------------
Earnings                      * Earnings and interest are not         * Earnings and interest are not 
                                taxed when received by your IRA         taxed when received by your IRA
- -----------------------------------------------------------------------------------------------------------
Rollover/Conversions          * Individual may rollover amounts       * Rollovers from other Roth IRAs 
                                held in employer-sponsored              or Traditional IRAs only
                                retirement arrangements               * Amounts rolled over (or con-
                                (401(k), SEP IRA, etc.) tax free        verted) from another Traditional 
                                to Traditional IRA                      IRA are subject to income tax in 
                                                                        the year rolled over or converted 
                                                                      * Tax on amounts rolled over or
                                                                        converted in 1998 is spread over 
                                                                        four year period (1998-2001)
- -----------------------------------------------------------------------------------------------------------
Withdrawals                   * Total (principal + earnings) tax-     * Not taxable as long as a qualified 
                                able as income in year                  distribution - generally, account 
                                withdrawn (except for any prior         open for 5 years, and age 59-1/2
                                non-deductible contributions)         * Minimum withdrawals not 
                              * Minimum withdrawals must                required after age 70-1/2
                                begin after age 70-1/2 
- -----------------------------------------------------------------------------------------------------------
</TABLE>

    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  individuals  earned  annual income (as
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 of $12.00 charged by the Agent.



                                       13
<PAGE>

                                   TAX MATTERS

    The  following is only a summary of certain  additional  federal  income 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 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  count
toward satisfaction of the Distribution Requirement.

    In  addition  to  satisfying  the  Distribution  Requirement,   a  regulated
investment  company must 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").

    In general,  gain or loss  recognized by the Fund on the  disposition  of an
asset will be a capital gain or loss. In addition,  gain will be recognized as a
result of certain  constructive sales,  including short sales "against the box."
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.

    Further,  the Code also treats as  ordinary  income a portion of the capital
gain  attributable  to a  transaction  where  substantially  all of  the  return
realized is  attributable  to the time value of a Fund's net  investment  in the
transaction and: (1) the transaction  consists of the acquisition of property by
the Fund and a contemporaneous contract to sell substantially identical property
in the future;  (2) the  transaction is a straddle within the meaning of section
1092 of the Code;  (3) the  transaction  is one that was marketed or sold to the
Fund on the basis that it would have the economic  characteristics of a loan but
the interest-like  return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term,  mid-term, or short-term rate, depending
upon the type of instrument  at issue,  reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion  transaction and (2) the
capital interest on acquisition indebtedness under Code section 263(g). Built-in
losses  will be  preserved  where the Fund has a built-in  loss with  respect to
property that becomes a part of a conversion  transaction.  No authority  exists
that  indicates  that the  converted  character of the income will not be passed
through to the Fund's shareholders.

    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.  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.

                                       14
<PAGE>

    Certain  transactions  that may be engaged in by the Fund (such as regulated
futures  contracts,  certain foreign  currency  contracts,  and options on stock
indexes  and futures  contracts)  will be subject to special  tax  treatment  as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable  year,  even
though a  taxpayer's  obligations  (or  rights)  under such  contracts  have not
terminated  (by  delivery,  exercise,  entering  into a closing  transaction  or
otherwise) as of such date. Any gain or loss  recognized as a consequence of the
year-end deemed  disposition of Section 1256 contracts is taken into account for
that year  together with any other gain or loss that was  previously  recognized
upon the termination of Section 1256 contracts during the year. Any capital gain
or loss for the taxable year with respect to Section 1256  contracts  (including
any capital gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is generally  treated as 60% long-term  capital gain or loss and
40% short-term  capital gain or loss. The Fund,  however,  may elect not to have
this special tax treatment  apply to Section 1256  contracts  that are part of a
"mixed  straddle"  with other  investments of the Fund that are not Section 1256
contracts.

    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 has  three
separate options. First, it may elect to treat the PFIC as a qualifying electing
fund (a "QEF"),  in which case it 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
earnings or capital gains from the PFIC.  Second,  for tax years beginning after
December 31, 1997, the Fund may make a  mark-to-market  election with respect to
its PFIC stock. Pursuant to such an election,  the Fund will include as ordinary
income  any  excess of the fair  market  value of such stock at the close of any
taxable year over its adjusted tax basis in the stock. If the adjusted tax basis
of the PFIC stock  exceeds the fair  market  value of such stock at the end of a
given  taxable  year,  such excess will be  deductible  as ordinary  loss in the
amount   equal  to  the  lesser  of  the  amount  of  such  excess  or  the  net
mark-to-market  gains on the stock that the Fund  included in income in previous
years.  The Fund's  holding period with respect to its PFIC stock subject to the
election will  commence on the first day of the  following  taxable year. If the
Fund makes the  mark-to-market  election in the first taxable year it holds PFIC
stock, it will not incur the tax described below under the third option.

    Finally,  if the Fund does not elect to treat the PFIC as a QEF and does not
make a mark-to-market election, then, in general, (1) any gain recognized by the
Fund upon a sale or other disposition of its interest in the PFIC or any "excess
distribution"  (as defined) received by the Fund from the PFIC will be allocated
ratably  over the Fund's  holding  period in the PFIC stock,  (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,  (i) the amount of gain or excess  distribution  allocated  to such
prior year multiplied by the highest tax rate  (individual or corporate,  as the
case may be) in effect for such prior  year,  plus (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.

    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 (including,  to
the extent provided in Treasury  Regulations,  losses recognized pursuant to the
PFIC  markto-market  election)  incurred  after  October  31 as if it  had  been
incurred in the succeeding year.

    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 its  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 (a
call or a put) with  respect to a security is treated as issued by the issuer of
the security not the issuer of the option.

                                       15
<PAGE>

    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 its
ordinary  taxable  income for the calendar  year and 98% of its 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 and ordinary gains or losses arising as a result of a
PFIC  mark-to-market  election (or upon an actual  disposition of the PFIC stock
subject to such  election)  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   generally   should   not   qualify   for  the  70%
dividendsreceived deduction for corporate shareholders.

    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 that 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 a 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% (58%
for  alternative  minimum tax purposes) 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 such  shareholder
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.

    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,  corporate  shareholders  generally  will be  required to take the full
amount  of  any  dividend  received  from  the  Fund  into  account  (without  a
dividends-received  deduction) in determining  their 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


                                       16
<PAGE>

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 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 realized from a sale of the 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  realized  but
undistributed  income or gain or unrealized  appreciation in the value of assets
held by the  Fund  distributions  of such  amounts  to the  shareholder  will be
taxable in the manner described above,  although  economically they 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  they 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 month will be deemed to have been  received by the
shareholders  (and  made by the  Fund)  on  December  31 of such  calendar  year
provided 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.

    The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions and the proceeds of redemption of shares,  paid to
any shareholder who (1) has failed to provide a correct taxpayer  identification
number,  (2) is subject to backup withholding for failure properly to report the
receipt of interest or dividend income, or (3) 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 a 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.  Long-term  capital gain  recognized  by an individual
shareholder will be taxed at the lowest rates applicable to capital gains if the
holder  has held  such  shares  for more than 18 months at the time of the sale.
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) generally
will apply in determining  the holding  period of shares.  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 foreign shareholder


                                       17
<PAGE>

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. A foreign shareholder  generally would be exempt from
U.S.  federal  income tax on gains realized on a sale or redemption 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 and capital
gain dividends, and any gains realized upon a sale of shares of the Fund will be
subject to U.S. federal income tax at the rates applicable to U.S. taxpayers.

    In the case of a noncorporate foreign shareholder,  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 (or subject to withholding at a reduced treaty
rate) unless the shareholder  furnishes the Fund with proper notification of its
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.

    Rules of state and local  taxation  of  ordinary  income  and  capital  gain
dividends from regulated investment companies may 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 an investment in the Fund.

                             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 timely
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.

                                       18
<PAGE>

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 Fund's  average  annual  standard  total return for the one year and
since  commencement  (1/3/94) periods  ending  December 31, 1998 were 19.02% and
9.00%.

                               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 LLP, the Fund's  independent auditors.

                                OTHER INFORMATION

    As of February 19, 1999, the following  persons are known by Fund management
to  have  owned  beneficially,  directly  or  indirectly,  5%  or  more  of  the
outstanding shares of Lexington  International Fund, Inc.: Piedmont  Associates,
Ltd., P.O. Box 20124, Greensboro,  N.C. 27420, 31%; Smith Richardson Foundation,
P.O.  Box 3265,  Greensboro,  N.C.  27402,  14%;  Hillsdale  Fund,  c/o Piedmont
Financial  Company,  P.O. Box 20124,  Greensboro,  N.C. 27420,  14%; Raritan Bay
Health Services Corporation,  530 New Brunswick Avenue, Perth Amboy, N.J. 08861,
9% and Lexington  Management  Corporation  Retirement Plan Trust c/o Bank of New
York Trust Company, One Wall Street, New York, NY 10005, 5%.







 [1998 Audited Financial Statements and Auditor's Report to be inserted here.]






<PAGE>

PART C.     OTHER INFORMATION
- -------     -----------------
Item 24.  Financial Statements and Exhibits - List
          ----------------------------------------
     The Annual Report for the year ending December 31, 1998 was filed
electronically on February 26, 1999 (as form type N-30D).  Financial
statements from this 1998 Annual Report have been included in the
Statement of Additional Information.

                                                          
                                         Page in the Statement
   (a)   Financial statements:           of Additional Information
         ---------------------           -------------------------
         Report of Independent Auditors               29             
         dated February 8, 1999

         Statement of Net Assets (Including          18-21
         the Portfolio of Investments) as of
         December 31, 1998 (1)

         Statement of Assets and Liabilities          22
         as of December 31, 1998 

         Statement of Operations  - for the           23
         year ended December 31, 1998 (2)

         Statements of Changes in Net Assets for the  24  
         years ended December 31, 1998 and 1997  

         Notes to Financial Statements               25-28    

         Schedules II-VII and other Financial Statements, for
         which provisions are made in the applicable accounting
         regulations of the Securities and Exchange Commission,
         are omitted because they are not required under the
         related instructions, they are inapplicable, or the
         required information is presented in the financial
         statements or notes thereto.

         (1) Includes the information required by Schedule I.

         (2) Includes the information required by the Statement of
             Realized Gain or Loss on Investments.
<PAGE>

ITEM 24. Financial Statements and Exhibits - List
         ----------------------------------------
(b) Exhibits:                                               

1.     Articles of Incorporation - Incorporated by 
       reference - Filed electronically 4/19/96

2.     By-Laws - Incorporated by reference - Filed 
       electronically - 3/3/97

3.     Not Applicable                                      

4.     Rights of Holders - Filed electronically 3/2/98 -
       Incorporated by reference

5.     Investment Advisory Agreement between Registrant
       and Lexington Management Corporation - Incorporated by 
       reference - Filed electronically 4/29/96

6.     Distribution Agreement between Registrant and      
       Lexington Funds Distributor, Inc. - 
       Filed electronically 3/3/97 - Incorporated by reference

7.     Retirement Plan for Eligible Directors - Filed electronically
       3/2/98 - Incorporated by reference

8a.    Custodian Agreement between Registrant and Chase   
       Manhattan Bank, N.A. - Incorporated by reference -
       Filed electronically 4/29/96

8b.    Transfer Agency Agreement between the Registrant 
       and State Street Bank and Trust Company - Incorporated
       by reference - Filed electronically 4/29/96

9.     Form of Administrative Services Agreement between
       Registrant and Lexington Management Corporation - Filed
       electronically 4/29/96 - Incorporated by reference

10.    Opinion of Counsel as to Legality of Securities being
       registered - Filed electronically 3/2/98 - Incorporated
       by reference

11.    Consents
       (a) Consent of Counsel                            Filed electronically
       (b) Consent of Independent Auditors               Filed electronically
                                       
12.    Not Applicable

13.    Not Applicable

14.    Retirement Plans - Incorporated by Reference - 
       Filed electronically 4/29/96

15.    Form of Distribution Plan Under Rule 12b-1 and 
       Related Agreements - Filed electronically 3/3/97 -
       Incorporated by reference

16.    Performance Calculation - Filed electronically 3/2/98 -
       Incorporated by reference

17.    Financial Data Schedule                           Filed electronically

<PAGE>

Item 25. Persons Controlled by or under Common Control with Registrant
         -------------------------------------------------------------
  Furnish a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant and as to each
such person indicate (1) if a company, the state or other sovereign
power under the laws of which it is organized, (2) the percentage of
voting securities owned or other basis of control by the person, if any,
immediately controlling it.

  See "Management of the Fund" in the Prospectus and Statement of
  Additional Information.


Item 26. Number of Holders of Securities
         -------------------------------
  State in substantially the tabular form indicated, as of a
specified date within 90 days prior to the date of filing, the number of
record holders of each class of securities of the Registrant.

  The following information is given as of February 19, 1999:

  Title of Class                           Number of Record Holders
  --------------                           ------------------------
  Capital Stock                                       205
  ($0.001 par value)


Item 27. Indemnification
         ---------------
  State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of
the Registrant is insured or indemnified in any manner against any
liability which may be incurred in such capacity, other than insurance
provided by any director, officer, affiliated person or underwriter for
their own protection.

  Under the terms of the Maryland General Corporation Law and the
Company's By-Laws, the Company may indemnify any person who was or is a
director, officer or employee of the Company to the maximum extent
permitted by the Maryland General Corporation Law; provided, however,
that Company only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances.  Such determination shall be made (i) by the Board of
Directors, by a majority vote of a quorum which consists of directors
who are neither "interested persons" of Company as defined in Section
2(a)(19) of the 1940 Act, nor parties to the proceeding, or (ii) if the
required quorum is not obtainable or if a quorum of such directors so
directs by independent legal counsel in a written opinion.  No
indemnification will be provided by the Company to any director or
officer of the Company for any liability to the Company or Shareholders
to which he would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.

<PAGE>

Item 28. Business and Other Connections of Investment Adviser
         ----------------------------------------------------
  Describe any other business, profession, vocation or employment of
a substantial nature in which the investment adviser of the Registrant,
and each director, officer or partner of any such investment adviser, is
or has been, at any time during the past two fiscal years, engaged for
his own account or in the capacity of director, officer, employee,
partner or trustee.

  See Prospectus Part A and Statement of Additional Information Part
B ("Management of the Fund").


Item 29. Principal Underwriters
         ----------------------
  (a)    Lexington Money Market Trust
         Lexington GNMA Income Fund, Inc.
         Lexington Global Income Fund
         Lexington Worldwide Emerging Markets Fund, Inc.
         Lexington Global Corporate Leaders Fund, Inc.
         Lexington Goldfund, Inc.
         Lexington Growth and Income Fund, Inc.
         Lexington Corporate Leaders Trust Fund
         Lexington Natural Resources Trust
         Lexington Strategic Investments Fund, Inc.
         Lexington Silver Fund, Inc.
         Lexington International Fund, Inc.
         Lexington Convertible Securities Fund
         Lexington Emerging Markets Fund, Inc.
         Lexington Crosby Small Cap Asia Growth Fund, Inc.
         Lexington SmallCap Fund, Inc. 
         Lexington Troika Dialog Russia Fund, Inc.          
  
<PAGE>

29 (b)

                      Position and Offices              Position and
Name and Principal    with Principal                    Offices with
Business Address      Underwriter                       Registrant  
- ------------------    --------------------              -------------

Peter Corniotes*      Assistant Secretary               Assistant Secretary

Lisa Curcio*          Vice President and                Vice President and
                      Secretary                         Secretary

Robert M. DeMichele*  Chief Executive Officer           Chairman of the
                      and Chairman                      Board and President

Richard M. Hisey*     Chief Financial Officer,          Vice President and
                      Vice President & Director         Treasurer

Lawrence Kantor*      Executive Vice President          Director & Vice
                      and Director                      President

Richard Lavery*       Vice President                    Vice President

Janice McInerney*     Assistant Treasurer               None


(c)
Not Applicable.
                           
*P.O. Box 1515
 Saddle Brook, New Jersey  07663

<PAGE>

Item 30. Location of Accounts and Records
         --------------------------------
     With respect to each account, book or other document required
to be maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR
270, 31a-1 to 31a-3) promulgated thereunder, furnish the name and address
of each person maintaining physical possession of each such account, book
or other document.

     The Registrant, Lexington International Fund, Park 80 West -Plaza Two, 
Saddle Brook, New Jersey  07663 will maintain physical possession of each such 
account, book or other document of the Company, except for those maintained by 
the Registrant's Custodian, Chase Manhattan Bank, N.A., 121 Sixth Avenue, New 
York, New York  10036, or Transfer Agent, State Street Bank and Trust Company,
c/o National Financial Data Services, 1004 Baltimore, Kansas City, Missouri
64105.


Item 31. Management Services
         -------------------
     Furnish a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B of this
Form (because the contract was not believed to be material to a purchaser
of securities of the Registrant) under which services are provided to the
Registrant, indicating the parties to the contract, the total dollars paid
and by whom for the last three fiscal years.

     None.


Item 32. Undertakings 
         ------------
     The Registrant, Lexington International Fund, Inc., undertakes
     to furnish a copy of the Fund's latest annual report, upon
     request and without charge, to every person to whom a
     prospectus is delivered.

     The Registrant will hold a meeting of its public shareholders,
     if requested to do so by the holders of at least 10 percent of
     the Registrant's outstanding shares, to call a meeting of
     shareholders for the purpose of voting upon the question of
     removal of a director or directors and to assist in
     communications with other shareholders.

<PAGE>







                                   Registration No. 33-72226
     

             Securities and Exchange Commission

                   Washington, D.C.  20549

                                               

                          Exhibits

                         Filed With

                          Form N-1A
                              
                                               

     
                LEXINGTON INTERNATIONAL FUND

<PAGE>
                        EXHIBIT INDEX


The following documents are being filed electronically as exhibits to this
filing:

Consent of Counsel

Consent of Independent Auditors

Financial Data Schedule

Cover

<PAGE>

                         SIGNATURES


     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this
Registration statement to be signed on its behalf by the Undersigned,
thereunto duly authorized in the City of Saddle Brook and State of New
Jersey, on the 1st day of March, 1999.


                              LEXINGTON INTERNATIONAL FUND, INC.


                              /s/ Robert M. DeMichele
                             ________________________________
                              By Robert M. DeMichele
                                 Chairman of the Board


     Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.


Signature                    Title                            Date

/s/ Robert M. DeMichele     
__________________________   Chairman of the Board       March 1, 1999
Robert M. DeMichele          Principal Executive
                             Officer

/s/ Richard M. Hisey    
__________________________   Principal Financial         March 1, 1999
Richard M. Hisey             and Accounting Officer


/s/ Lisa Curcio
__________________________   Principal Compliance        March 1, 1999
Lisa Curcio                  Officer


*SMS Chadha                  Director                     March 1, 1999
__________________________
 SMS Chadha


*Beverley C. Duer, P.E.      Director                     March 1, 1999
__________________________
 Beverley C. Duer, P.E.

<PAGE>

Signature                    Title                               Date


*Barbara R. Evans            Director                     March 1, 1999
__________________________
Barbara R. Evans


*Jerard F. Maher             Director                     March 1, 1999
__________________________
 Jerard F. Maher


*Andrew M. McCosh            Director                     March 1, 1999
__________________________
 Andrew M. McCosh


*Lawrence Kantor             Director                     March 1, 1999
__________________________
 Lawrence Kantor


*Donald B.Miller             Director                     March 1, 1999
__________________________
 Donald B. Miller


*John G. Preston             Director                     March 1, 1999 
__________________________
 John G. Preston



     /s/ Lisa Curcio
*By: ______________________
     Lisa Curcio
     Attorney-in-Fact


                    Kramer Levin Naftalis & Frankel LLP
                       9 1 9  T H I R D  A V E N U E
                       NEW YORK, N.Y. 10022 B 3852
                            (212) 715 B 9100
                                                          FACSIMILE
                                                          (212) 715-8000
                                                          ______
                                                          WRITER'S
                                                          DIRECT NUMBER
                                                          
                                                          (212) 715-9100
                                                          
                                                          
                                February 26, 1999
     
     
     The Lexington Funds
     Park 80 West Plaza Two
     Saddlebrook, New Jersey  07662
     
               Re:  Lexington International Fund, Inc.
                    Registration No. 33-72226
                    to Registration Statement on Forum
                    N-1A  
                    
     Dear Gentlemen:
     
               We hereby consent to the reference of our firm as
     counsel in Post-Effective Amendment No. 8 to the Registration
     Statement on Form N-1A.
     
                               Very truly yours,
                   
                             /s/ Kramer Levin Naftalis and Frankel LLP









               Independent Auditors' Consent



To the Board of Directors and Shareholders
Lexington International Fund, Inc.:

We consent to the use of our report dated February 8, 1999 included in
this Registration Statement on Form N-1A of the Lexington International
Fund, Inc. dated March 1, 1999 and to the references to our firm under
the headings "Financial Highlights" in the Prospectus and "Shareholder
Reports" in the Statement of Additional Information.






                                                                  KPMG LLP    

New York, New York
March 1, 1999

<TABLE> <S> <C>

<ARTICLE> 6
<LEGEND>
The Schedule contains summary financial information extracted from annual
audited financial statements dated December 31, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-END>                               DEC-31-1998
<INVESTMENTS-AT-COST>                       21,429,937
<INVESTMENTS-AT-VALUE>                      23,932,660
<RECEIVABLES>                                   11,621
<ASSETS-OTHER>                                 475,532
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                              24,419,813
<PAYABLE-FOR-SECURITIES>                        64,200
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                      355,898
<TOTAL-LIABILITIES>                            420,098
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                    21,130,491
<SHARES-COMMON-STOCK>                        2,067,783
<SHARES-COMMON-PRIOR>                        1,975,043
<ACCUMULATED-NII-CURRENT>                      154,188
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                        376,139
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                     2,338,897
<NET-ASSETS>                                23,999,715
<DIVIDEND-INCOME>                              412,745
<INTEREST-INCOME>                              101,131
<OTHER-INCOME>                                (56,705)
<EXPENSES-NET>                               (381,412)
<NET-INVESTMENT-INCOME>                         75,759
<REALIZED-GAINS-CURRENT>                     1,374,765
<APPREC-INCREASE-CURRENT>                    2,145,676
<NET-CHANGE-FROM-OPS>                        3,596,200
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                    (116,960)
<DISTRIBUTIONS-OF-GAINS>                     (695,462)
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                      1,005,127
<NUMBER-OF-SHARES-REDEEMED>                  (970,855)
<SHARES-REINVESTED>                             58,468
<NET-CHANGE-IN-ASSETS>                       1,266,820
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                    (144,602)
<OVERDISTRIB-NII-PRIOR>                       (81,791)
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                          217,864
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                                491,046
<AVERAGE-NET-ASSETS>                        21,786,459
<PER-SHARE-NAV-BEGIN>                            10.10
<PER-SHARE-NII>                                   0.17
<PER-SHARE-GAIN-APPREC>                           1.74
<PER-SHARE-DIVIDEND>                            (0.06)
<PER-SHARE-DISTRIBUTIONS>                       (0.34)
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                              11.61
<EXPENSE-RATIO>                                   1.75
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>



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