SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No.__)
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
LEXINGTON SMALLCAP FUND, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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LEXINGTON SMALLCAP FUND, INC.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
1-800-526-0056
December 20, 1999
Dear Shareholder:
At a meeting of the Board of Directors held on November 30, 1999, the
Directors unanimously approved a Plan of Liquidation and Dissolution for
the Lexington SmallCap Fund, Inc. After considering other alternatives,
they concluded that a complete liquidation was in the best interests of the
Lexington SmallCap Fund and its shareholders. The enclosed Notice and
Proxy Statement describe these matters in detail and establish a Special
Meeting of the Shareholders to obtain your approval.
The Lexington SmallCap Fund currently has net assets of approximately $7
million. The continued operation of the Fund at this size is not
economically feasible for Lexington Management Corporation. The Board,
based on Management's recommendation, believes that the continued operation
of the Fund is not in your best interest as shareholders. In spite of our
efforts to sell shares of the Lexington SmallCap Fund, Management
concluded, and the Directors agreed, that further marketing efforts would
not increase the Fund's size sufficiently to make its continued operation
practicable.
We recommend that you approve the Plan of Liquidation and Dissolution.
Lexington Management Corporation is paying all costs associated with
implementing this Plan, except the costs of solicitation which will be
borne by the Fund. Subject to your approval, shareholders remaining in the
Lexington SmallCap Fund will receive a cash distribution as soon as
practicable after the consummation of the sale of all of the Fund's
portfolio securities and the payment of all of the Fund's known liabilities
and obligations as described in the Proxy Statement.
After reading the enclosed material, please complete, sign and return the
proxy card so that your shares will be represented. If you decide to
attend the meeting, you may revoke your proxy at any time and vote your
shares in person. Your vote is extremely important.
If you want additional information concerning this proposal, please call
us at 1-800-526-0056. We will answer your questions, discuss choices and
appropriate alternative Lexington investments.
Thank you for your understanding and your help.
Sincerely,
Robert M. DeMichele, President
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
1-800-526-0056
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
February 11, 2000
Notice is hereby given that a Special Meeting of the Shareholders of the
Lexington SmallCap Fund, Inc. (the "Fund"), a Maryland corporation, will
be held on February 11, 2000 at 10:00 a.m. Eastern time at the offices
of the Fund, Park 80 West Plaza Two, Saddle Brook, New Jersey, for the
following purposes:
I. To approve or disapprove the liquidation of the assets and
dissolution of the Fund pursuant to the provisions of the
Plan of Liquidation and Dissolution as approved by the
Fund's Board of Directors on November 30, 1999; and
II. The transaction of such other business as may be properly
brought before the meeting.
Shareholders of record at the close of business on November 30, 1999 are
entitled to notice of, and to vote at, this meeting or any adjournment
thereof.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING, PLEASE
FILL IN, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE
POSTAGE PAID RETURN ENVELOPE ENCLOSED, SO THAT A QUORUM WILL BE PRESENT
AND A MAXIMUM NUMBER OF SHARES MAY BE VOTED. IT IS MOST IMPORTANT AND
IN YOU INTEREST FOR YOU TO SIGN YOUR PROXY CARD AND RETURN IT. THE
PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
By Order of the Board of
Directors,
Lisa Curcio, Secretary
Dated: December 20, 1999
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
P.O. Box 1515
Park 80 West Plaza Two
Saddle Brook, New Jersey 07663
1-800-526-0056
DEFINITIVE
PROXY STATEMENT
December 20, 1999
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
February 11, 2000
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of the Lexington
SmallCap Fund, Inc. (the "Fund"), a Maryland corporation, for use at a
Special Meeting of Shareholders (the "Meeting") to be held on February
11, 2000 at 10:00 a.m. Eastern time at the offices of the Fund, Park 80
West Plaza Two, Saddle Brook, New Jersey, and at any adjournment
thereof, and was first mailed to shareholders on or about December 20,
1999. Even if you sign and return the accompanying proxy, you may
revoke it by giving written notice of such revocation to the Secretary
of the Fund prior to the Meeting or by delivering a subsequently dated
proxy or by attending and voting at the Meeting in person. Management
expects to solicit proxies principally by mail, but Management or agents
appointed by Management may also solicit proxies by telephone, telegraph
or personal interview. The costs of solicitation will be borne by the
Fund.
The following are the Proposals for the Meeting:
I. Shareholders will be asked to approve the liquidation of the
assets and dissolution of the Fund pursuant to the
provisions of the Plan of Liquidation and Dissolution (the
"Plan") as approved by the Fund's Board of Directors on
November 30, 1999; and
II. Shareholders will be asked to transact such other business
as may be properly brought before the meeting.
The Board of Directors has fixed the close of business on November
30, 1999 as the record date for the determination of the shareholders
entitled to notice of and to vote at the Meeting or any adjournment
thereof. As of that date, there were approximately 675,433 outstanding
shares of the Fund, each share being entitled to one vote on each matter
to come before the Meeting. As of November 18, 1999, the Directors and
executive officers of the Fund as a group beneficially owned less than
1% of all issued and outstanding shares of the Fund. As of November 18,
1999, the following shareholders each beneficially owned 5% or more of
the Fund's shares:
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Number of Percentage of
Name and Address Shares Owned Fund Outstanding
Smith Richardson Foundation* 590,833 87.47%
60 Jessup Road
Westport, CT 06880
*Smith Richardson Foundation (the "Foundation") may be considered to
control the Fund and to be an "affiliated person" of Lexington
Management Corporation (the "Adviser"). The Adviser is a wholly-owned
subsidiary of Lexington Global Asset Managers, Inc., a Delaware
corporation. Descendants of Lundsford Richardson, Sr., their
spouses, trusts, a corporation in which they have interests and
charitable organizations established by such descendants (the
"Richardson Family") have a controlling interest in Lexington Global
Asset Managers, Inc. Two controlling shareholders of the Richardson
Family are Trustees of the Foundation. The Adviser serves as the
adviser for assets of the Foundation and intends to vote the
Foundation's shares in favor of all proposals.
The Fund's Annual Report for the year ended December 31, 1998 and
Semi-Annual Report dated June 29, 1999, including financial statements,
were sent to all shareholders of record on February 28, 1999, and on
August 29, 1999, respectively . The Annual and Semi-Annual Reports do
not, however, form any part of the proxy soliciting material. A copy of
the Fund's Annual and/or Semi-Annual Report may be received, free of
charge, by writing to the Fund at the address listed above or by calling
the Fund, toll free, at 1-800-526-0056.
The favorable vote of the holders of a majority of the issued and
outstanding shares of the Fund entitled to vote at the Meeting is
required for approval of the liquidation of the assets and dissolution
of the Fund pursuant to the provisions of the Plan (Proposal I).
In addition to the solicitation of proxies by mail, the Fund may
utilize the services of officers and employees of the Fund, the Adviser,
and Lexington Funds Distributor, Inc., the Fund's distributor (the
"Distributor"), none of whom receive any compensation therefor, to
solicit proxies by telephone, telegraph and personal interview, and may
also provide shareholders with a procedure for recording their votes by
telegraph, facsimile, telephone or other electronic means. The
estimated costs of solicitation of proxies are expected to be
approximately $20,000 in the aggregate for the Fund and will be borne by
the Fund. The Fund may request brokers, custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of shares
of record. Persons holding shares as nominees will, upon request, be
reimbursed for their reasonable expenses incurred in sending soliciting
material to their principals.
At the Meeting, the presence in person or by proxy of shareholders of
a majority in number of the outstanding shares entitled to vote at the
Meeting shall be necessary and sufficient to constitute a quorum for the
transaction of business. In the event that a quorum of shareholders is
not represented at the Meeting, the shareholders entitled to vote
thereat, present in person or represented by proxy, shall have the power
to adjourn the Meeting to be held within a reasonable time after the
date originally set for the Meeting, without notice other than
announcement at the
<PAGE>
Meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted at the meeting as originally notified.
THE PERSONS NAMED IN THE ACCOMPANYING PROXY WILL VOTE THE NUMBER OF
SHARES REPRESENTED THEREBY AS DIRECTED BY THE PROXY OR, IN THE ABSENCE
OF SUCH DIRECTION, FOR APPROVAL OF EACH OF THE ABOVE PROPOSALS.
PROPOSAL I
PROPOSAL TO LIQUIDATE THE ASSETS
AND DISSOLVE THE FUND PURSUANT
TO THE PROVISIONS OF THE PLAN
OF LIQUIDATION AND DISSOLUTION
The Liquidation in General
The Fund proposes to liquidate the assets and dissolve the Fund
pursuant to the provisions of the Plan as approved by the Fund's Board
of Directors on November 30, 1999. The Plan provides for the complete
liquidation of all of the assets of the Fund. If the Plan is approved,
the Adviser will undertake to liquidate the Fund's assets at market
prices and on such terms and conditions as the Adviser shall determine
to be reasonable and in the best interests of the Fund and its
shareholders. In no event will any of the securities owned by the Fund
be sold at a price which is less than the best price available in the
public market on the date of sale.
At the meeting of the Directors held on November 30, 1999, the
Directors determined that an orderly liquidation of the Fund's assets
was in the best interest of the shareholders. In the event the Plan is
not adopted, the Directors will consider what action, if any, should be
taken, including the suspension of sales.
Reasons for the Liquidation
The Fund is the only series of a Maryland corporation and commenced
operations on January 2, 1996. As of December 31, 1998, the Fund's net
assets were approximately $8,172,488. The Directors determined at a
meeting held on November 30, 1999 that the liquidation and termination
of the Fund was the appropriate course of action. After a discussion of
all available options, the Directors, including all of the Directors who
are not "interested persons" of the Fund (as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act")),
unanimously adopted a resolution declaring the proposed liquidation and
dissolution advisable and directed that it be submitted to the
shareholders for consideration. Several factors, including those
described below, influenced the Directors' determination that the Fund
be liquidated and terminated.
<PAGE>
Prior to their November 30, 1999 meeting, the Directors had been
advised by the Adviser that over the long term, the continued operation
of the Fund at its size was not economically feasible for the Adviser or
the Fund's shareholders. At the November 30, 1999 Board Meeting, the
Adviser stated that it had reviewed the following possible alternatives
for the Fund: (i) continuation of the Fund with increased marketing;
(ii) the merger or sale of the Fund into a similar investment company;
(iii) gradual liquidation of the Fund; and (iv) a prompt liquidation of
the Fund. The Adviser reported to the Directors that it had considered
the viability of each alternative and had concluded that a prompt
liquidation of the Fund was the only viable alternative consistent with
the best interests of the shareholders of the Fund. See "Federal Income
Tax Consequences" below. The Adviser was not confident that further
marketing efforts would increase the Fund's size sufficiently. The
Adviser reported that it found the merger or sale of the Fund into a
similar investment company not to be realistic alternatives because of
the relatively small amount of assets under management in the Fund and
the fact that the Adviser could not assure any potential merging or
acquiring fund that the Fund's assets would remain in the Fund.
Further, the Adviser determined that it would be inappropriate to
terminate its reimbursement of certain Fund expenses or seek to raise
its advisory fees in order to make the Fund more economically attractive
to itself as increased fees would be detrimental to the ability of the
Fund to acquire additional assets under management.
At the November 30, 1999 meeting of the Board of Directors, the
Adviser requested that the Board of Directors consider the liquidation
of the Fund pursuant to the Plan attached to this Proxy Statement as
Exhibit A. In connection with the proposal, the Adviser has agreed to
bear the costs associated with the liquidation of the Fund. Based upon
the Adviser's presentation and recommendation, the Board of Directors
concluded that a liquidation of the Fund was in the best interests of
the Fund and its shareholders.
The liquidation of the assets and termination of the Fund will have
the effect of permitting the Fund's shareholders to invest the
distributions to be received by them upon the Fund's liquidation in
investment vehicles of their own choice. Investors who desire the
continued use of a managed investment such as a money market fund may
obtain a prospectus for the Lexington Money Market Trust by calling,
toll free, 1-800-526-0056.
In the event that the shareholders do not approve the Plan, the
Directors will continue to search for other alternatives for the Fund.
Plan of Liquidation and Dissolution of the Fund
The Plan provides for the complete liquidation of all of the assets
of the Fund. If the Plan is approved, the Adviser will undertake to
liquidate the Fund's assets at market prices and on such terms and
conditions as the Adviser shall determine to be reasonable and in the
best interests of the Fund and its shareholders. In no event will any
of the portfolio securities owned by the Fund be sold at a price which
is less than the best price available in the public market on the time
of the sale.
<PAGE>
At the meeting of the Directors held on November 30, 1999, the
Directors determined that an orderly liquidation of the Fund's holdings
over a reasonable period of time would decrease the probability of
having to sell portfolio securities at unfavorable prices. Thus, the
Directors directed that the Adviser begin to liquidate the Fund's assets
as it deems appropriate and in the best interests of the shareholders of
the Fund.
Liquidation Value
If the Plan is adopted by the Fund's shareholders at the Meeting, as
soon as practicable after the consummation of the sale of all of the
Fund's portfolio securities and the payment of all the Fund's known
liabilities and obligations, the Fund's shareholders will receive a
distribution in an amount equal to the net asset value per share, as
determined in accordance with the Fund's current registration statement
together with accrued and unpaid dividends with respect to each of their
shares of the Fund (the "Liquidation Distribution") by March 31, 2000.
Federal Income Tax Consequences
The following summary provides general information with regard to the
federal income tax consequences to shareholders on receipt of the
Liquidation Distribution from the Fund pursuant to the provisions of the
Plan. This summary also discusses the effect of federal income tax
provisions on the Fund resulting from its liquidation and dissolution;
however, the Fund has not sought a ruling from the Internal Revenue
Service (the "Service") with respect to the liquidation of the Fund.
This summary is based on the tax laws and regulations in effect on the
date of this proxy, all of which are subject to change by legislative or
administrative action, possibly with retroactive effect.
This summary of the federal income tax consequences is generally
applicable to shareholders who are individual United States citizens
(other than dealers in securities) and does not address the particular
federal income tax consequences which may apply to other shareholders,
such as corporations, trusts, estates, tax exempt organizations or non-
resident aliens. This summary does not address state or local tax
consequences. The tax consequences discussed herein may affect
shareholders differently depending upon their particular tax situations
unrelated to the Liquidation Distribution, and accordingly, this summary
is not a substitute for careful tax planning on an individual basis.
SHAREHOLDERS MAY WISH TO CONSULT THEIR PERSONAL TAX ADVISERS CONCERNING
THEIR PARTICULAR TAX SITUATIONS AND THE IMPACT THEREON OF RECEIVING THE
LIQUIDATION DISTRIBUTION AS DISCUSSED HEREIN.
As discussed above, pursuant to the Plan, the Fund will sell its
assets and distribute the proceeds to its shareholders. The Fund
anticipates that it will retain its qualification as a regulated
investment company under the Internal Revenue Code of 1986, as amended
(the "Code"), during the liquidation period and, therefore, will not be
taxed on any of its net income from the sale of its assets.
<PAGE>
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. To the extent the Fund
realizes long-term capital gains in excess of short-term capital losses
(net capital gain) in connection with the sale of its assets prior to
the date of the Liquidation Distribution, it will be necessary for the
Fund to declare a capital gain dividend to avoid paying federal income
taxes on undistributed net capital gain. If net capital gain is
distributed and designated as a capital gain dividend it will be taxable
to shareholders as long-term capital gain, regardless of the length of
time the shareholder has held his shares or whether such gain was
recognized by the Fund prior to the date on which the shareholder
acquired his shares. In addition, it will be necessary for the Fund to
distribute any net short-term capital gains in excess of net long-term
capital losses or ordinary income realized prior to the Liquidation Date
to avoid paying federal income taxes on its investment company taxable
income (net investment income and the excess of net short-term capital
gain over net long-term capital loss). Any distribution of short-term
capital gain or ordinary income realized by the Fund prior to the
Liquidation Date will be taxable to shareholders as ordinary income and
treated as dividends for federal income tax purposes.
A shareholder's receipt of the Liquidation Distribution other than
the distributions described in the immediately preceding paragraph will
be treated as an amount received in exchange for his or her shares of
the Fund. Each shareholder will recognize gain or loss measured by the
difference between the adjusted tax basis in the shares and such amount.
Assuming the shares are held as a capital asset, the gain or loss will
be characterized as a capital gain or loss. Generally, a capital gain
or loss attributable to shares held for more than one year will
constitute a long-term capital gain or loss, while a capital gain or
loss attributable to shares held for not more than one year will
constitute a short-term capital gain or loss.
The receipt of a Liquidation Distribution by an Individual Retirement
Account Plan ("IRA") which holds shares would generally not be viewed as
a taxable event to the beneficiary; however, some IRAs which hold shares
may have been established with custodians who do not possess the power
to reinvest the Liquidation Distribution, but instead must immediately
distribute such amounts to the IRA beneficiary. In this situation, the
amount received by the beneficiary will constitute a taxable
distribution; and if the beneficiary has not attained 59 1/2 years of age,
such distribution will generally constitute a premature distribution
subject to a 10% penalty tax. This penalty tax is in addition to the
beneficiary's regular income tax. Beneficiaries who receive a
distribution from their IRAs on account of the liquidation may be able
to avoid the above-described taxes and characterize the receipt of the
Liquidation Distribution as a tax-free distribution if, within 60 days
of receipt of the Liquidation Distribution, it is "rolled over" into a
new IRA or into an otherwise eligible retirement plan and the
shareholder has not engaged in a rollover from this IRA to another IRA
or otherwise eligible retirement plan during the one year period ending
on the day of receipt of the Liquidation Distribution. Such a rollover
will not generate a deduction for the current year. IRA shareholders
who do not wish to roll over their Liquidation Distribution, or who have
rolled over their IRAs during the one-year period ending on the day of
receipt of the distribution, may contact the Fund's custodian to make
other
<PAGE>
arrangements for the transfer of their IRAs. Tax results will vary
depending upon the status of each beneficiary, and therefore
beneficiaries who receive distributions from an IRA on account of the
liquidation of the Fund must consult with their own tax advisers
regarding their personal tax results in this matter.
The foregoing summary sets forth general information regarding the
anticipated federal income tax consequences to the Fund and to
individual shareholders who are United States citizens of the
liquidation of the Fund, as previously discussed. No tax ruling has
been or will be requested from the Service regarding the payment or
receipt of a Liquidation Distribution. The statements above are,
therefore, not binding on the Service, and there can be no assurance
that the Service will concur with this summary or that the tax
consequences to any shareholder upon receipt of a Liquidation
Distribution will be as set forth above. EACH SHAREHOLDER SHOULD SEEK
INDEPENDENT COUNSEL REGARDING THE POSSIBLE FEDERAL, STATE AND LOCAL
INCOME TAX CONSEQUENCES TO SUCH SHAREHOLDER OF RECEIVING A LIQUIDATION.
Liquidation Distributions
At present, the date or dates on which the Fund will pay Liquidation
Distributions to its shareholders and on which the Fund will be
liquidated are not known to the Fund, but it is anticipated that if the
Plan is adopted by the shareholders such liquidation would occur on or
prior to March 31, 2000. Shareholders will receive their Liquidation
Distribution without any further action on their part.
The right of a shareholder to redeem his or her shares of the Fund at
any time has not been impaired by the adoption of the Plan. Therefore,
a shareholder may redeem shares in accordance with redemption procedure
set forth in the Fund's current prospectus without the necessity of
waiting for the Fund to take any action. The Fund does not impose any
redemption charges.
Conclusion
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSED LIQUIDATION OF ASSETS AND DISSOLUTION OF THE FUND PURSUANT TO
THE PROVISIONS OF THE PLAN OF LIQUIDATION AND DISSOLUTION.
PROPOSAL II
OTHER MATTERS
The Directors do not know of any matters to be presented at the Meeting
other than those set forth in this Proxy Statement. If any other business
should come before the meeting, the persons named in the accompanying proxy
will vote thereon in accordance with their best judgment.
<PAGE>
ADDITIONAL INFORMATION
The Adviser. Lexington Management Corporation, P.O. Box 1515, Park 80
West Plaza Two, Saddle Brook, New Jersey 07663, is the adviser to the Fund.
The Adviser identifies and analyzes possible investments for the Fund,
determines the amount and timing of such investments, and the form of
investment. The Adviser has the responsibility of monitoring and reviewing
the Fund's portfolio, and, on a regular basis, recommending the ultimate
disposition of such investments. It is the Adviser's responsibility to
cause the purchase and sale of securities in the Fund's portfolio, subject
at all times to the policies set forth by the Fund's Board of Directors.
The Adviser also provides certain administrative and managerial services
to the Fund.
The Principal Underwriter. Lexington Funds Distributor, Inc. is the
principal underwriter (or Distributor) of the Fund. The Distributor
promotes the sale and arranges for the sale of shares through its
representatives and to investment dealers. The Adviser and Distributor are
wholly owned subsidiaries of Lexington Global Asset Managers, Inc., a
Delaware corporation, with offices at Park 80 West Plaza Two, Saddle Brook,
New Jersey 07663.
The Administrator. The Adviser also acts as administrator to the Fund
and performs certain administrative and internal accounting services,
including but not limited to, maintaining general ledger accounts,
regulating compliance, preparation of financial information for semi-annual
and annual reports, preparing registration statements, calculating net
asset values, communicating with shareholders, supervising the custodian
and providing facilities for such services.
Voting Information and Discretion of the Persons Named as Proxies.
While the Meeting is called to act upon any other business that may
properly come before it, at the date of this Proxy Statement the only
business which the management intends to present or knows that others will
present is the business mentioned in the Notice of Meeting. If any other
matters lawfully come before the Meeting, and in all procedural matters at
the Meeting, it is the intention that the enclosed proxy shall be voted in
accordance with the best judgment of the attorneys named therein, or their
substitutes, present and acting at the Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT EXPECT
TO ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY AND RETURN IT
IN THE ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO
POSTAGE IS NECESSARY.
December 20, 1999 By Order of the Board of Directors,
Lisa Curcio, Secretary
<PAGE>
EXHIBIT A
PLAN OF LIQUIDATION AND DISSOLUTION
OF
LEXINGTON SMALLCAP FUND, INC.
This Plan of Liquidation and Dissolution (the "Plan") of the
Lexington SmallCap Fund, Inc., a Maryland corporation (the "Fund"), has
been approved by the Board of Directors of the Fund (the "Board") as being
advisable and in the best interests of the Fund and its stockholders. The
Board has directed that this Plan be submitted to the holders of the
outstanding voting shares of the Fund's Common Stock (the "Stockholders")
for their adoption or rejection at a special meeting of stockholders and
has authorized the distribution of a Proxy Statement (the "Proxy
Statement") in connection with the solicitation of proxies for such
meeting. Upon such adoption, the Fund shall voluntarily dissolve and
completely liquidate in accordance with the requirements of the Maryland
General Corporation Law (the "MGCL") and the Internal Revenue Code of 1986,
as amended (the "Code"), as follows:
1. Adoption of Plan. The effective date of the Plan (the
"Effective Date") shall be the date on which the Plan is
adopted by the shareholders.
2. Sale or Distribution of Assets. As soon as practicable after
the Effective Date, but in no event later than March 31, 2000.
(the "Liquidation Period"), the Fund shall have the authority
to engage in such transactions as may be appropriate to its
dissolution and liquidation, including, without limitation, the
consummation of the transactions described in the Proxy
Statement.
3. Provisions for Liabilities. Within the Liquidation Period, the
Fund shall pay or discharge or set aside a reserve fund (the
"Reserve Fund") for, or otherwise provide for the payment or
discharge of, any liabilities and obligations, including,
without limitation, contingent liabilities.
4. Distribution to Stockholders. As soon as practicable after a
vote of approval of this Plan by the shareholders of the Fund,
the Fund shall liquidate and distribute pro rata on the date
of liquidation (the "Liquidation Date") to its shareholders of
record as of the close of business on the Liquidation Date all
of the remaining assets of the Fund in complete cancellation
and redemption of all the outstanding shares of the Fund,
except for cash, bank deposits or cash equivalents in an
estimated amount necessary to (i) discharge any unpaid
liabilities of the Fund on the Fund's books on the Liquidation
Date, including, but not limited to, income dividends and
capital gains distributions, if any, payable for the period
prior to the Liquidation Date, and (ii) pay such contingent
liabilities as the Board shall reasonably deem to exist against
the assets of the Fund on the Fund's books.
5. Notice of Liquidation. As soon as practicable after the
Effective Date but in no event later than 20 days prior to the
filing of Articles of Dissolution as provided in Section
<PAGE>
6 below, the Fund shall mail notice to all its creditors and
employees that this Plan has been approved by the Board and
the shareholders as provided in the MGCL.
6. Articles of Dissolution. Pursuant to the MGCL, the Fund shall
prepare and file Articles of Dissolution (the "Articles") with
and for acceptance by the Maryland State Department of
Assessments and Taxation.
7. Amendment or Abandonment of Plan. The Board may modify or
amend this Plan at any time without shareholder approval if it
determines that such action would be advisable and in the best
interests of the Fund and its shareholders. If any amendment
or modification appears necessary and in the judgment of the
Board will materially and adversely affect the interests of the
shareholders, such an amendment or modification will be
submitted to the shareholders for approval. In addition, the
Board may abandon this Plan without shareholder approval at any
time prior to the filing of the Articles if it determines that
abandonment would be advisable and in the best interests of the
Fund and its shareholders.
8. Powers of Board and Officers. The Board and the officers of
the Fund are authorized to approve such changes to the terms
of any of the transactions referred to herein, to interpret any
of the provisions of this Plan, and to make, execute and
deliver such other agreements, conveyances, assignments,
transfers, certificates and other documents and take such other
action as the Board and the officers of the Fund deem necessary
or desirable in order to carry out the provisions of this Plan
and effect the complete liquidation and dissolution of the Fund
in accordance with the Code and the MGCL including, without
limitation, the filing of a Form N-8F with the Securities and
Exchange Commission and withdrawing any qualification to
conduct business in any state in which the Fund is so
qualified, as well as the preparation and filing of any tax
returns.
9. Termination of Business Operations. As soon as practicable
upon adoption of the Plan, the Fund shall cease to conduct
business except as shall be necessary in connection with the
effectuation of its liquidation.
LEXINGTON SMALLCAP FUND, INC.
Robert M. DeMichele, President
<PAGE>
LEXINGTON SMALLCAP FUND, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS of the Lexington
SmallCap Fund, Inc. (the "Fund"), for use at a Special Meeting of
Shareholders to be held at Park 80 West Plaza Two, Saddle Brook, New
Jersey, on February 11, 2000 at 10 a.m. Eastern time.
The undersigned hereby appoints Richard Lavery and Enrique Faust, and
each of them, with full power of substitution, as proxies of the
undersigned to vote at the above-stated Special Meeting, and at all
adjournments thereof, all shares of stock of the Fund that are held of
record by the undersigned on the record date for the Special Meeting, upon
the following matters:
ITEM 10. Proposal to liquidate the assets and dissolve the Fund pursuant
to the provisions of the Plan of Liquidation and Dissolution.
FOR AGAINST ABSTAIN
ITEM11. The transaction of such other business as may be properly
brought before the meeting.
FOR AGAINST ABSTAIN
Every properly signed proxy will be voted in the manner specified
thereon and, in the absence of specification, will be treated as
GRANTING authority to vote FOR all of the above items.
Receipt of Notice of Special Meeting and Proxy Statement is hereby
acknowledged.
PLEASE SIGN, DATE AND RETURN PROMPTLY.
__________________________________________
Sign here exactly as name(s) appears hereon
__________________________________________
Dated:_____________________________________
IMPORTANT: Joint owners must EACH
sign. When signing as attorney,
executor, administrator, trustee,
guardian or corporate officer,
please give your full title as
such.
